EXHIBIT 2.1
EXECUTION COPY
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AGREEMENT AND PLAN OF MERGER
Among
Zonagen, Inc.,
Lavipharm Corp.,
Lavipharm S.A.
and
Lavipharm Group Holding S.A.
Dated as of October 30, 2002
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TABLE OF CONTENTS
PAGE
ARTICLE I
THE MERGER
SECTION 1.01 The Merger............................................................................2
SECTION 1.02 Effective Time; Closing...............................................................2
SECTION 1.03 Effect of the Merger..................................................................2
SECTION 1.04 Certificate of Incorporation; By-laws.................................................2
ARTICLE II
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
SECTION 2.01 Conversion of Securities..............................................................3
SECTION 2.02 Exchange of Certificates..............................................................4
SECTION 2.03 Stock Transfer Books..................................................................5
SECTION 2.04 Company Options.......................................................................5
SECTION 2.05 Parent Rights Plan....................................................................6
SECTION 2.06 Additional Payments...................................................................6
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND
THE COMPANY STOCKHOLDER
SECTION 3.01 Incorporation and Authority of Each of the Company Stockholders.......................9
SECTION 3.02 Corporate Organization................................................................9
SECTION 3.03 Certificate of Incorporation and By-laws.............................................10
SECTION 3.04 Capitalization.......................................................................10
SECTION 3.05 Authority Relative to this Agreement.................................................10
SECTION 3.06 No Conflict; Required Filings and Consents...........................................10
SECTION 3.07 Permits; Compliance..................................................................11
SECTION 3.08 Financial Information................................................................12
SECTION 3.09 Absence of Certain Changes or Events.................................................12
SECTION 3.10 Absence of Litigation................................................................12
SECTION 3.11 Vote Required........................................................................13
SECTION 3.12 Intellectual Property................................................................13
SECTION 3.13 Employee Benefit Matters.............................................................13
SECTION 3.14 Key Employees........................................................................16
SECTION 3.15 Tax Matters..........................................................................17
SECTION 3.16 Brokers..............................................................................17
SECTION 3.17 Subsidiaries.........................................................................17
SECTION 3.18 Material Misstatements or Omissions..................................................18
SECTION 3.19 No Undisclosed Liabilities...........................................................18
SECTION 3.20 Title to Properties; Absence of Liens; Entire Assets.................................18
SECTION 3.21 Material Contracts...................................................................18
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SECTION 3.22 Books and Records....................................................................20
SECTION 3.23 Real Property........................................................................20
SECTION 3.24 Insurance............................................................................20
SECTION 3.25 Environmental Matters................................................................20
SECTION 3.26 Status of Company Stockholders Receiving Parent Common Stock.........................21
SECTION 3.27 Transactions with Directors and Officers.............................................21
SECTION 3.28 Absence of Restriction on Business Activities........................................21
SECTION 3.29 Certain Business Practices...........................................................22
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT
SECTION 4.01 Corporate Organization...............................................................22
SECTION 4.02 Certificate of Incorporation and By-laws.............................................22
SECTION 4.03 Capitalization.......................................................................23
SECTION 4.04 Authority Relative to this Agreement.................................................23
SECTION 4.05 No Conflict; Required Filings and Consents...........................................23
SECTION 4.06 Permits; Compliance..................................................................24
SECTION 4.07 SEC Filings; Financial Statements....................................................24
SECTION 4.08 Absence of Certain Changes or Events.................................................25
SECTION 4.09 Absence of Litigation................................................................25
SECTION 4.10 Vote Required........................................................................26
SECTION 4.11 Intellectual Property................................................................26
SECTION 4.12 Employee Benefit Matters.............................................................26
SECTION 4.13 Key Employees........................................................................28
SECTION 4.14 Tax Matters..........................................................................29
SECTION 4.15 Opinion of Financial Advisor.........................................................30
SECTION 4.16 Brokers..............................................................................30
SECTION 4.17 Parent Rights Agreement..............................................................30
SECTION 4.18 Investment Company Act...............................................................30
SECTION 4.19 Subsidiaries.........................................................................30
SECTION 4.20 No Undisclosed Liabilities...........................................................30
SECTION 4.21 Title to Properties; Absence of Liens; Entire Assets.................................31
SECTION 4.22 Books and Records....................................................................31
SECTION 4.23 Real Property........................................................................31
SECTION 4.24 Insurance............................................................................31
SECTION 4.25 Environmental Matters................................................................32
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 5.01 Conduct of Business by the Company Pending the Merger................................32
SECTION 5.02 Conduct of Business by Parent Pending the Merger.....................................34
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ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01 Company Stockholders' Approval.......................................................36
SECTION 6.02 Parent Proxy Statement...............................................................37
SECTION 6.03 Parent Stockholders' Meeting.........................................................38
SECTION 6.04 Access to Information; Confidentiality...............................................38
SECTION 6.05 No Solicitation of Transactions......................................................38
SECTION 6.06 Employee Benefits Matters............................................................40
SECTION 6.07 Notification of Certain Matters......................................................41
SECTION 6.08 Further Action; Reasonable Best Efforts..............................................41
SECTION 6.09 Plan of Reorganization...............................................................42
SECTION 6.10 Nasdaq Quotation.....................................................................42
SECTION 6.11 Delisting from Pacific Stock Exchange................................................43
SECTION 6.12 Public Announcements.................................................................43
SECTION 6.13 Surviving Corporation Board; Management..............................................43
SECTION 6.14 Conveyance Matters...................................................................43
SECTION 6.15 Registration.........................................................................43
SECTION 6.16 Available Cash of Parent.............................................................44
SECTION 6.17 Interested Transactions..............................................................44
SECTION 6.18 Post-Closing Headquarters............................................................44
SECTION 6.19 Directors' and Officers' Indemnification and Insurance...............................44
SECTION 6.20 Company Indebtedness.................................................................45
SECTION 6.21 Cancellation of Indebtedness.........................................................45
SECTION 6.22 Product Liabilities Insurance........................................................45
ARTICLE VII
CONDITIONS TO THE MERGER
SECTION 7.01 Conditions to the Obligations of Each Party..........................................45
SECTION 7.02 Conditions to the Obligations of Parent..............................................46
SECTION 7.03 Conditions to the Obligations of the Company and the Company Stockholders............47
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01 Termination..........................................................................48
SECTION 8.02 Effect of Termination................................................................50
SECTION 8.03 Fees and Expenses....................................................................50
SECTION 8.04 Amendment............................................................................51
SECTION 8.05 Waiver...............................................................................51
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01 Survival of Representations, Warranties and Agreements...............................52
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SECTION 9.02 Indemnification......................................................................52
SECTION 9.03 Exclusive Remedies...................................................................55
SECTION 9.04 Notices..............................................................................55
SECTION 9.05 Certain Definitions..................................................................57
SECTION 9.06 Severability.........................................................................64
SECTION 9.07 Entire Agreement; Assignment.........................................................64
SECTION 9.08 Parties in Interest..................................................................64
SECTION 9.09 Specific Performance.................................................................64
SECTION 9.10 Governing Law........................................................................64
SECTION 9.11 Headings.............................................................................65
SECTION 9.12 Counterparts.........................................................................65
EXHIBIT A Directors and Officers of Parent Party to the Parent Voting Agreement
EXHIBIT B-1 Form of Company Tax Officer's Certificate
EXHIBIT B-2 Form of Parent Officer's Tax Certificate
EXHIBIT C Directors of Surviving Corporation Following the Merger
EXHIBIT D Senior Management of Surviving Corporation Following the Merger
EXHIBIT E Form of Stockholders Agreement/Registration Rights Agreement
EXHIBIT F Form of Legal Opinion of Counsel to Parent
EXHIBIT G Form of FIRPTA Certificate
EXHIBIT H Form of Legal Opinion of Company Counsel
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AGREEMENT AND PLAN OF MERGER, dated as of October 30, 2002
(this "Agreement"), among Zonagen, Inc., a Delaware corporation ("Parent"),
Lavipharm Corp., a Delaware corporation (the "Company"), Lavipharm S.A., a Greek
corporation ("L-S.A."), and Lavipharm Group Holding S.A., a Luxembourg
corporation ("LGH", and each of L-S.A. and LGH being a "Company Stockholder" and
together, the "Company Stockholders").
WHEREAS, upon the terms and subject to the conditions of this
Agreement and in accordance with the General Corporation Law of the State of
Delaware (the "DGCL"), the parties will enter into a business combination
transaction pursuant to which the Company will merge with and into Parent (the
"Merger");
WHEREAS, the Board of Directors of Parent (the "Parent Board")
has: (i) determined that the Merger is consistent with and in furtherance of the
long-term business strategy of Parent and fair to, and in the best interests of,
Parent and its stockholders and has approved and adopted this Agreement and
declared its advisability, and approved the Merger and the other transactions
contemplated by this Agreement and (ii) unanimously recommended that the
stockholders of Parent approve and adopt this Agreement, the issuance of shares
of Parent Common Stock contemplated hereby and the Certificate Amendments;
WHEREAS, the Board of Directors of the Company (the "Company
Board") has: (i) determined that the Merger is consistent with and in
furtherance of the long-term business strategy of the Company and fair to, and
in the best interests of, the Company and its stockholders and has approved and
adopted this Agreement and declared its advisability, and approved the Merger
and the other transactions contemplated by this Agreement and (ii) unanimously
recommended that the stockholders of the Company approve and adopt this
Agreement;
WHEREAS, concurrently with the execution of this Agreement and
as a condition and an inducement to the Company to enter into this Agreement,
the Company and the directors and executive officers of Parent set forth on
Exhibit A hereof have entered into a Voting Agreement, dated as of the date
hereof (the "Parent Voting Agreement") providing that, among other things, such
stockholders of Parent will vote their shares of Parent Common Stock in favor of
this Agreement, the Merger and the other transactions contemplated by this
Agreement;
WHEREAS, concurrently with the execution of this Agreement and
as a condition and an inducement to Parent to enter into this Agreement, Parent,
each of the Company Stockholders, Technopharm S.a.r.l., a Luxembourg limited
liability company, the Chairman of the Company Board, and the President and
Chief Executive Officer of the Company have entered into a Voting Agreement (the
"Company Voting Agreement") providing that, among other things, each such
stockholder of the Company grants an irrevocable proxy to a specified officer of
the Company to vote all its shares of Company Common Stock in favor of this
Agreement, the Merger and the other transactions contemplated by this Agreement;
and
WHEREAS, for United States federal income tax purposes, the
Merger is intended to qualify as a reorganization under the provisions of
Section 368(a) of the United States Internal Revenue Code of 1986, as amended
(the "Code");
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements herein contained, and intending to be legally
bound hereby, Parent, the Company and each of the Company Stockholders hereby
agree as follows:
ARTICLE I
THE MERGER
SECTION 1.01 The Merger. Upon the terms and subject to the
conditions set forth in Article VII and in accordance with the DGCL, at the
Effective Time (as defined in Section 1.02), the Company shall be merged with
and into Parent. As a result of the Merger, the separate corporate existence of
the Company shall cease and Parent shall continue as the surviving corporation
of the Merger (the "Surviving Corporation").
SECTION 1.02 Effective Time; Closing. As promptly as
practicable after the satisfaction of the conditions set forth in Article VII,
the parties shall cause the Merger to be consummated by filing a certificate of
merger (the "Certificate of Merger") with the Secretary of State of the State of
Delaware, in such form as is required by, and executed in accordance with, the
relevant provisions of the DGCL (the date and time of such filing of the
Certificate of Merger being the "Effective Time"). Immediately prior to such
filing of the Certificate of Merger, a closing (the "Closing") shall be held at
the offices of Shearman & Sterling, 599 Lexington Avenue, New York, New York, or
such other place as the parties shall agree, for the purpose of confirming the
satisfaction of the conditions set forth in Article VII.
SECTION 1.03 Effect of the Merger. At the Effective Time, the
effect of the Merger shall be as provided in the applicable provisions of the
DGCL. Without limiting the generality of the foregoing, and subject thereto, at
the Effective Time, all the property, rights, privileges, powers and franchises
of the Company and Parent shall vest in the Surviving Corporation, and all
Liabilities, restrictions and duties of each of the Company and Parent shall
become the Liabilities, restrictions and duties of the Surviving Corporation.
SECTION 1.04 Certificate of Incorporation; By-laws. (a) At the
Effective Time, the Certificate of Incorporation of Parent, as in effect
immediately prior to the Effective Time shall be amended to give effect to the
Certificate Amendments, and as so amended shall be the Certificate of
Incorporation of the Surviving Corporation until thereafter amended as provided
by law.
(b) At the Effective Time, the By-laws of Parent, as in effect
immediately prior to the Effective Time, shall be the By-laws of the Surviving
Corporation until thereafter amended as provided by law.
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ARTICLE II
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
SECTION 2.01 Conversion of Securities. At the Effective Time,
by virtue of the Merger and without any action on the part of Parent, the
Company or the holders of any of the following securities:
(a) each share of common stock, par value $0.01 per share (the
"Company Common Stock"), and each share of Series A convertible
preferred stock, par value $0.01 per share (the "Company Series A
Preferred Stock"), of the Company (all issued and outstanding shares of
Company Common Stock, Company Series A Preferred Stock and Company
Series B Preferred Stock (as defined below) being hereinafter
collectively referred to as the "Shares") issued and outstanding
immediately prior to the Effective Time (other than any Shares to be
canceled pursuant to Section 2.01(c)) shall be canceled and shall be
converted automatically, subject to Section 2.02, into the right to
receive a pro rata number of the shares of common stock, par value
$0.001 per share ("Parent Common Stock"), of Parent issuable at the
Closing, payable upon surrender, in the manner provided in Section
2.02, of the certificate that formerly evidenced such Share; provided,
however, that if there are any Company Warrants outstanding as of the
second Business Day prior to Closing, for purposes of the Exchange
Ratio calculation only, the shares of Company Common Stock issuable
upon exercise of such Company Warrants shall be deemed to be issued and
outstanding as of the date of Closing for purposes of this Section
2.01(a). The aggregate number of shares of Parent Common Stock issuable
at the Closing pursuant to this Section 2.01(a) (the "Aggregate Closing
Shares") shall be equal to the difference of (i)(A) the total number of
shares of Parent Common Stock outstanding immediately prior to the
Effective Time (the "Outstanding Parent Common Stock") divided by (B)
60%, less (ii) the total number of shares of Outstanding Parent Common
Stock. The shares of Parent Common Stock issuable in exchange for each
share of Company Common Stock and Company Series A Preferred Stock (the
"Exchange Ratio"), and the shares of Parent Common Stock issuable
pursuant to Section 2.01(b) for each share of Company Series B
Preferred Stock, together with any cash paid in lieu of any fractional
shares pursuant to Section 2.02(c), are referred to as the "Merger
Consideration";
(b) each share of Series B preferred stock, par value $0.01
per share (the "Company Series B Preferred Stock"), of the Company
issued and outstanding immediately prior to the Effective Time shall be
canceled and shall be converted automatically, subject to Section 2.02,
into the right to receive a number of shares of Parent Common Stock
equal to (i) 2,000,000 divided by (ii) the number of outstanding shares
of Company Series B Preferred Stock (the "Series B Preferred Stock
Exchange Ratio"). The Parent Common Stock issued pursuant to this
Section 2.01(b) shall not be deemed to be issuable and outstanding for
purposes of calculating the number of shares of Outstanding Parent
Common Stock pursuant to Section 2.01(a); and
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(c) each Share held in the treasury of the Company immediately
prior to the Effective Time shall be canceled and extinguished without
any conversion thereof and no payment or distribution shall be made
with respect thereto.
If, during the period between the date hereof and the
Effective Time, any change in the capital stock of Parent shall occur by reason
of any reclassification, recapitalization, stock split or combination, exchange
or readjustment of shares, or any stock dividend thereon with a record date
during such period or any similar event, the Merger Consideration, the Exchange
Ratio and the Series B Preferred Stock Exchange Ratio and their determination
shall be appropriately adjusted.
SECTION 2.02 Exchange of Certificates. (a) Exchange
Procedures. At the Closing, each stockholder of the Company shall surrender to
Parent all of the certificates formerly representing the Shares (the
"Certificates") held by such stockholder of the Company, together with any stock
transfer tax stamps required by reason of the payment of the Merger
Consideration to a person other than the registered holder of the Certificate
surrendered and such other customary documents as may reasonably be required by
Parent, in exchange for the Merger Consideration payable to such stockholder of
the Company. Immediately following the Effective Time, all Certificates
surrendered to Parent shall be canceled.
(b) No Further Rights in Company Common Stock. All shares of
Parent Common Stock issued upon conversion of the Shares in accordance with the
terms hereof (including any cash paid pursuant to Section 2.02(c)) shall be
deemed to have been issued in full satisfaction of all rights pertaining to such
Shares.
(c) No Fractional Shares. No certificates or scrip
representing fractional shares of Parent Common Stock shall be issued upon the
surrender for exchange of Certificates, and such fractional share interests will
not entitle the owner thereof to vote or to any other rights of a stockholder of
Parent. Each holder of a fractional share interest shall be paid an amount in
cash (without interest) equal to the product obtained by multiplying (i) such
fractional share interest to which such holder (after taking into account all
fractional share interests then held by such holder) would otherwise be entitled
by (ii) the average of the per share closing prices on The Nasdaq National
Market (the "Nasdaq") of shares of Parent Common Stock during the ten
consecutive trading days ending on (and including) the trading day immediately
preceding the date of the Effective Time.
(d) Withholding Rights. The Surviving Corporation shall be
entitled to deduct and withhold from the consideration otherwise payable
pursuant to this Agreement to any holder of Shares such amounts as it is
required to deduct and withhold with respect to the making of such payment under
the Code, or any provision of state, local or foreign Tax law. The Surviving
Corporation shall report any such withheld amounts to the appropriate
Governmental Authority on a timely basis. To the extent that amounts are so
withheld by the Surviving Corporation, such withheld amounts shall be treated
for all purposes of this Agreement as having been paid to the holder of the
Shares in respect of which such deduction and withholding was made by the
Surviving Corporation.
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(e) Lost Certificates. If any Certificate shall have been
lost, stolen or destroyed, upon the making of an affidavit of that fact by the
person claiming such Certificate to be lost, stolen or destroyed and, if
required by the Surviving Corporation, the posting by such person of a bond, in
such reasonable amount as the Surviving Corporation may direct, as indemnity
against any claim that may be made against it with respect to such Certificate,
the Surviving Corporation shall issue in exchange for such lost, stolen or
destroyed Certificate, the appropriate number of shares of Parent Common Stock
for the applicable Merger Consideration payable for such Certificate.
SECTION 2.03 Stock Transfer Books. At the Effective Time, the
stock transfer books of the Company shall be closed and there shall be no
further registration of transfers of Shares thereafter on the records of the
Company. From and after the Effective Time, the holders of Certificates
representing Shares outstanding immediately prior to the Effective Time shall
cease to have any rights with respect to such Shares, except as otherwise
provided in this Agreement or by Law.
SECTION 2.04 Company Options. (a) Prior to the Effective Time,
Parent and the Company shall take such action as may be necessary to cause each
unexpired and unexercised option, whether vested or unvested, to purchase shares
of Company Common Stock (a "Company Option") under the Company's Equity Plan
(the "Company's Equity Plan") to be automatically converted at the Effective
Time into an option (a "Substituted Option") to purchase a number of shares of
Parent Common Stock equal to the product of (i) the Exchange Ratio and (ii) the
number of shares of Company Common Stock subject to the Company Option (rounded
down to the nearest whole number of shares of Parent Common Stock) at a price
per share of Parent Common Stock equal to the per-share option exercise price
specified in the Company Option divided by the Exchange Ratio (rounded up to the
nearest whole cent). Each Substituted Option shall otherwise be subject to the
identical terms and conditions as its corresponding Company Option, including,
without limitation, terms and conditions with respect to vesting,
exercisability, change in control benefits, cash-out triggers, and adjustments
upon changes in Parent Common Stock. In addition, and notwithstanding the
foregoing, the terms of each Substituted Option shall provide each option holder
with identical benefits (economic or otherwise) as those included in the
corresponding Company Option. The date of grant of the Substituted Option shall
be the date on which the corresponding Company Option was granted. At the
Effective Time, (i) all references in the Company's Equity Plan and the related
stock option agreements to the Company shall be deemed to refer to the Surviving
Corporation and (ii) the Surviving Corporation shall assume all of the Company's
obligations with respect to the Company Options as so amended. If necessary,
Parent shall amend its stock option plan or take any other steps that are
appropriate to permit compliance with the terms of this Section 2.04.
(b) In respect of each Substituted Option, and the shares of
Parent Common Stock underlying such Substituted Option, Parent shall, as of the
Effective Time, file and the Surviving Corporation shall keep current a Form S-8
or other appropriate registration statement, which registration statement shall
be effective for so long as Substituted Options remain outstanding.
(c) Simultaneously with the Effective Time, the Surviving
Corporation shall distribute to each holder of an outstanding Company Option an
appropriate notice setting forth
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such holder's rights pursuant thereto and such Company Option shall continue in
effect on the same terms and conditions (including any antidilution provisions,
and subject to the adjustments required by this Section 2.04 after giving effect
to the Merger). The Surviving Corporation shall take all corporate action
necessary to reserve for issuance a sufficient number of shares of Parent Common
Stock for delivery upon exercise of Substituted Options pursuant to the terms
set forth in this Section 2.04.
(d) Parent shall take such steps as may be required to cause,
to the extent possible, the transactions contemplated in this Section 2.04 and
any other disposition and/or acquisition of Parent equity securities in
connection with this Agreement or the transactions contemplated hereby by an
individual who is a director or officer of the Company, to be exempt under Rule
16b-3 promulgated under the Exchange Act, such steps to be taken in accordance
with the interpretive letter, dated January 12, 1999 issued by the SEC to
Skadden, Arps, Slate, Meagher & Flom LLP.
Parent Rights Plan. Each person entitled to receive shares of
Parent Common Stock pursuant to this Article II shall receive together with such
shares of Parent Common Stock the number of Parent preferred share purchase
rights (pursuant to the Rights Agreement dated as of September 1, 1999 between
Parent and Computershare Investor Services LLC, as amended by the First
Amendment to Rights Agreement dated as of September 6, 2002 by and between
Parent, Computershare Investor Services LLC and Harris Trust and Savings Bank
(as so amended, the "Parent Rights Agreement")) per share of Parent Common Stock
equal to the number of Parent preferred share purchase rights associated with
one share of Parent Common Stock at the Effective Time.
SECTION 2.06 Additional Payments. (a) Parent or the Surviving
Corporation, as the case may be, shall issue and deliver to the stockholders of
the Company set forth on Section 2.06(a) of the Company Disclosure Schedule (the
"Earn-Out Stockholders") additional shares of Parent Common Stock (the "Earn-Out
Shares") upon the occurrence of certain milestones before the close of business
on December 31, 2003 (the "Earn-Out Period"), in accordance with the terms and
conditions of this Section 2.06. So long as a Milestone occurs within the
Earn-Out Period, the Earn-Out Shares will be issued to the Earn-Out Stockholders
regardless of whether the applicable Milestone Determination Date approving the
Milestone occurs during or after the Earn-Out Period.
(b) Within ten business days after a Milestone Determination
Date, Parent or the Surviving Corporation, as the case may be, shall issue and
deliver to the Earn-Out Stockholders in the proportion set forth on Section
2.06(a) of the Company Disclosure Schedule the number of Earn-Out Shares equal
to the aggregate number of shares resulting from the following calculation:
y = T (PS) - (ACS + AMS)
--------------------
(1 - T)
y = Earn-Out Shares to be issued at each such Milestone
Determination Date.
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T = The Target Percentage (as defined below) of
outstanding shares of Parent Common Stock. The
"Target Percentage" for a particular Primary or
Secondary Milestone shall be as follows:
o 45%, assuming one Secondary Milestone has
occurred and no Primary Milestone has
occurred;
o 50%, assuming both Secondary Milestones have
occurred and no Primary Milestone has
occurred;
o 50%, assuming the Primary Milestone has
occurred and no Secondary Milestone has
occurred;
o 55%, assuming the Primary Milestone has
occurred and one Secondary Milestone has
occurred; and
o 60%, assuming the Primary Milestone has
occurred and both Secondary Milestones have
occurred.
PS = The sum of (i) the number of shares of Outstanding
Parent Common Stock, (ii) the Aggregate Closing
Shares and (iii) the aggregate number of Earn-Out
Shares issued prior to such Milestone Determination
Date.
ACS = Aggregate Closing Shares.
AMS = Aggregate number of Earn-Out Shares issued prior to
each such Milestone Determination Date.
(c) If any of the Milestones occur prior to the Effective
Time, the appropriate number of Earn-Out Shares pursuant to this Section 2.06
shall be delivered to the Earn-Out Stockholders at the Closing.
(d) Promptly after the occurrence of a Primary or Secondary
Milestone, either of the Company Stockholders shall notify Parent or the
Surviving Corporation, as the case may be, in writing of such occurrence. If
Parent receives such notice prior to the Closing, the Parent Board shall review
such notice and make a determination as to whether the applicable agreement
meets the requirements of such Primary or Secondary Milestone, as applicable. If
the Surviving Corporation receives such notice after the Closing, the audit
committee of the Surviving Corporation Board shall review such notice and make
such determination. The Parent Board or the audit committee, as applicable,
shall make such determination promptly, but in no event later than 20 business
days after receipt of such notice from the Earn-Out Stockholders. If the Parent
Board or the audit committee of the Surviving Corporation Board, as the case may
be, determines that a Primary or Secondary Milestone has occurred, the date of
such determination shall be deemed the "Board Milestone Determination Date" for
such Primary or Secondary Milestone, and the Parent Board or audit committee, as
applicable, shall deliver a written notice of such determination to the Company
Stockholders. If the Parent Board or the audit committee, as the case may be,
determines that a Primary or Secondary Milestone has not occurred, it shall
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deliver a written notice of such determination to the Company Stockholders. If
the Parent Board or the audit committee, as the case may be, fails to deliver a
written notice within 20 business days after receipt of the notice from the
Earn-Out Stockholders, then the Parent Board or audit committee, as applicable,
shall be deemed to have determined that the applicable event meets the
requirements to have approved such Milestone, and such twentieth business day
shall be deemed the "Board Milestone Determination Date".
(e) If the Parent Board or the audit committee, as applicable,
shall have determined that a Primary or Secondary Milestone has not occurred,
the Company Stockholders, acting together, may dispute such determination. Such
dispute shall be settled by arbitration in accordance with the Commercial
Arbitration Rules of the American Arbitration Association upon notice (the
"Arbitration Notice") of submission given by the Earn-Out Stockholders to Parent
or the Surviving Corporation, as the case may be, and judgment upon the
determination rendered by the arbitrators may be entered in any court having
jurisdiction thereof. The arbitration shall be held in New York County, New York
or in such other location as the parties may mutually agree upon. The
arbitration will be conducted before a panel of three arbitrators, with one
arbitrator named by each party within 15 days of receipt of the Arbitration
Notice by Parent or the Surviving Corporation, as the case may be, and the third
named by the two party-appointed arbitrators, or (if they should fail to agree
on the third within 15 days after the two party-appointed arbitrators have been
named) by the American Arbitration Association. The parties shall use reasonable
best efforts to cause the arbitrators to reach a determination regarding the
occurrence of the applicable Milestone within six months of their appointment.
The arbitrators shall have no power to award punitive damages or any other
damages not measured by the prevailing party's actual damages. The decision of
the arbitrators shall be made in writing. Such written determination shall be
delivered to Parent, or the Surviving Corporation, as the case may be, and the
Company Stockholders and shall be final and binding upon the parties hereto;
provided, however, that the judgment of the arbitrators shall have no binding or
precedential effect with respect to any other controversy not before the
arbitrators, whether or not similar to or related to the specific controversy
decided by the arbitrators. All aspects of the arbitration shall be treated as
confidential. Neither the parties nor the arbitrators may disclose the
existence, content or results of the arbitration, except as necessary to comply
with legal or regulatory requirements. Before making any such disclosure, a
party shall give written notice to all other parties and shall afford such
parties a reasonable opportunity to protect their interests. The expenses of
arbitration, including reasonable compensation to the arbitrators, shall be
borne one-half by Parent or the Surviving Corporation, as the case may be, and
one-half by the Earn-Out Stockholders, except that each party shall bear the
compensation and expenses of its own counsel and employees. If the arbitrators
determine that a Primary or Secondary Milestone has occurred pursuant to the
provisions of this Section 2.06(e), the date of such determination shall be
deemed an "Arbitrator Milestone Determination Date". A "Milestone Determination
Date" for any particular Primary or Secondary Milestone shall be the earlier to
occur of a Board Milestone Determination Date or an Arbitrator Milestone
Determination Date. If both the Parent Board or audit committee, as applicable,
and the arbitrators determine that an event about which Parent or the Surviving
Corporation, as the case may be, was notified by the Company Stockholders
pursuant to Section 2.06(d) hereof does not constitute an occurrence of a
Primary or Secondary Milestone, and if each delivers the applicable written
notice of determination to the Company Stockholders as required under this
Section 2.06, such event shall be deemed to not be either a Primary or Secondary
Milestone, notwithstanding the provision of notice by the
8
Company Stockholders to Parent or the Surviving Corporation, as the case may be,
under Section 2.06(d) hereof, and as a result, no Earn-Out Shares shall be
issued with respect to such event.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND
THE COMPANY STOCKHOLDERS
As an inducement to Parent to enter into this Agreement, the
Company and each of the Company Stockholders hereby represents and warrants to
Parent that, except as disclosed in the disclosure schedule delivered by the
Company concurrently with the execution of this Agreement (the "Company
Disclosure Schedule") (it being agreed that: (i) disclosure under any particular
section of the Company Disclosure Schedule shall be deemed adequate for all
sections of the Company Disclosure Schedule where disclosure would be applicable
and (ii) only the Company Stockholders shall make the representations and
warranties set forth in Sections 3.01 and 3.26):
SECTION 3.01 Incorporation and Authority of Each of the
Company Stockholders. Each of the Company Stockholders is a corporation duly
incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation and has all necessary corporate power and
authority to enter into this Agreement, to carry out its obligations hereunder
and to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement by each of the Company Stockholders and the
consummation by each of the Company Stockholders of the transactions
contemplated hereby have been duly authorized by all necessary corporate actions
on the part of each of the Company Stockholders, and no other corporate
proceedings on the part of either of the Company Stockholders are necessary to
authorize this Agreement or to consummate the transactions contemplated hereby.
This Agreement has been duly executed and delivered by each of the Company
Stockholders and, assuming due authorization, execution and delivery by Parent,
this Agreement constitutes a legal, valid and binding obligation of the Company
Stockholder enforceable against each of the Company Stockholders in accordance
with its terms.
SECTION 3.02 Corporate Organization. Each of the Company and
its subsidiaries is duly organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation or organization and has the
requisite corporate power and authority and all necessary governmental approvals
to own, lease and operate its properties and to carry on its business as it is
now being conducted, except where the failure to be so organized, existing or in
good standing or to have such power, authority and governmental approvals would
not prevent or materially delay consummation of the Merger and would not have a
Company Material Adverse Effect. Each of the Company and its subsidiaries is
duly qualified or licensed to do business and is in good standing in each
jurisdiction in which the nature of its business or the ownership, leasing or
operation of its properties makes such qualification or licensing necessary,
except for those jurisdictions in which the failure to be so qualified or
licensed or to be in good standing individually or in the aggregate would not
have a Company Material Adverse Effect.
9
SECTION 3.03 Certificate of Incorporation and By-laws. The
Company has heretofore furnished to Parent a complete and correct copy of the
Certificate of Incorporation and the By-laws (or similar corporate documents for
jurisdictions other than Delaware) of the Company and each of its subsidiaries,
as amended to the date of this Agreement (the "Charter Documents"). Except as
would not have a Company Material Adverse Effect, such Charter Documents are in
full force and effect. Neither the Company nor any of its subsidiaries is in
violation of any of the provisions of their respective Charter Documents.
SECTION 3.04 Capitalization. The authorized capital stock of
the Company consists of (i) 16,000,000 shares of Company Common Stock and (ii)
1,000,000 shares of preferred stock, par value $.01 per share, of the Company.
As of the date of this Agreement, (A) 10,600,000 shares of Company Common Stock
are issued and outstanding, all of which are validly issued, fully paid and
non-assessable, (B) 254,000 shares of Company Common Stock are held in the
treasury of the Company, (C) no shares of Company Common Stock are held by
subsidiaries of the Company, (D) 990,000 shares of Company Series A Preferred
Stock are issued and outstanding, all of which are validly issued, fully paid
and non-assessable, and (E) 3,554,000 shares of Company Common Stock are
reserved for future issuance pursuant to stock options and 990,000 shares of
Company Common Stock would be issued upon conversion of the Company Series A
Preferred Stock. Except for (i) stock options to acquire 1,853,863 shares of
Company Common Stock granted pursuant to the Company's Equity Plan and (ii) the
Company Series A Preferred Stock, there are no options, warrants or other
rights, agreements, arrangements or commitments of any character relating to the
issued or unissued capital stock of the Company or obligating the Company to
issue or sell any shares of capital stock of, or other equity interests in, the
Company. All shares of Company Common Stock subject to issuance as aforesaid,
upon issuance on the terms and conditions specified in the instruments pursuant
to which they are issuable, will be duly authorized, validly issued, fully paid
and non-assessable. There are no outstanding contractual obligations of the
Company to repurchase, redeem or otherwise acquire any shares of Company Common
Stock. There are no outstanding contractual obligations of the Company to
provide funds to, or make any investment (in the form of a loan, capital
contribution or otherwise) in any person.
SECTION 3.05 Authority Relative to this Agreement. The Company
has all necessary corporate power and authority to execute and deliver this
Agreement and, subject to obtaining the necessary approvals of the stockholders
of the Company, to perform its obligations hereunder and to consummate the
transactions contemplated by this Agreement (the "Transactions"). The execution
and delivery of this Agreement by the Company and the consummation by the
Company of the Transactions have been duly and validly authorized by all
necessary corporate action, and no other corporate proceedings on the part of
the Company are necessary to authorize this Agreement or to consummate the
Transactions (other than, with respect to the Merger, the necessary approvals of
the stockholders of the Company and the filing and recordation of appropriate
merger documents as required by the DGCL). This Agreement has been duly and
validly executed and delivered by the Company and, assuming the due
authorization, execution and delivery by Parent, constitutes a legal, valid and
binding obligation of the Company, enforceable against the Company in accordance
with its terms.
SECTION 3.06 No Conflict; Required Filings and Consents. (a)
The execution and delivery of this Agreement by the Company do not, and the
performance of this
10
Agreement by the Company will not, (i) conflict with or violate the Certificate
of Incorporation or By-laws of the Company, (ii) assuming that all consents,
approvals, authorizations and other actions described in Section 3.06(a) of the
Company Disclosure Schedule have been obtained and all filings and obligations
described in Section 3.06(a) of the Company Disclosure Schedule have been made,
conflict with or violate any foreign or domestic law, statute, ordinance, rule,
regulation, order, judgment or decree ("Law") applicable to the Company or by
which any property or asset of it is bound or affected or (iii) result in any
breach of, or constitute a default (or an event which, with notice or lapse of
time or both, would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or other encumbrance on any property or asset of the Company
pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to which the
Company is a party or by which the Company or any property or asset of it is
bound or affected, except, with respect to clauses (ii) and (iii), for any such
conflicts, violations, breaches, defaults or other occurrences which would not
prevent or materially delay consummation of the Transactions and would not have
a Company Material Adverse Effect.
(b) The execution and delivery of this Agreement by the
Company do not, and the performance of this Agreement by the Company will not,
require any consent, approval, authorization or permit of, or filing with or
notification to, any domestic or foreign governmental or regulatory authority
("Governmental Authority"), except: (i) for applicable requirements, if any, of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), state
securities or "blue sky" Laws ("Blue Sky Laws") and state takeover laws, the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules
and regulations thereunder (the "HSR Act"), the mandatory pre-merger
notification requirements, if any, of competition authorities located outside
the United States, and filing and recordation of appropriate merger documents as
required by the DGCL, (ii) for applicable requirements of the New Jersey
Industrial Site Recovery Act with respect to the Company's sale of the Company's
owned New Jersey property to L-S.A., (iii) consents, approvals, authorizations,
permits, filings or notifications required by the stockholders of the Company
and (iv) where the failure to obtain such consents, approvals, authorizations or
permits, or to make such filings or notifications, would not prevent or
materially delay consummation of the Merger, or otherwise prevent the Company
from performing its material obligations under this Agreement.
SECTION 3.07 Permits; Compliance. Each of the Company and its
subsidiaries is in possession of all franchises, grants, authorizations,
licenses, permits, easements, variances, exceptions, consents, certificates,
approvals and orders of any Governmental Authority necessary for each of the
Company and its subsidiaries to own, lease and operate its properties or to
carry on its business as it is now being conducted (the "Company Permits"),
except where the failure to have, or the suspension or cancellation of, any of
the Company Permits would not prevent or materially delay consummation of the
Merger and would not have a Company Material Adverse Effect. As of the date of
this Agreement, no suspension or cancellation of any of the Company Permits is
pending or, to the knowledge of the Company, threatened, except where the
failure to have, or the suspension or cancellation of, any of the Company
Permits would not prevent or materially delay consummation of the Merger and
would not have a Company Material Adverse Effect. None of the Company or its
subsidiaries is in conflict with, or in default, breach or violation of, (a) any
Law applicable to it or by which any
11
property or asset of any of the Company or its subsidiaries is bound or
affected, or (b) any note, bond, mortgage, indenture, contract, agreement,
lease, license, Company Permit, franchise or other instrument or obligation to
which any of the Company or its subsidiaries is a party or by which any of the
Company or its subsidiaries or any property or asset of any of the Company or
its subsidiaries is bound, except for any such conflicts, defaults, breaches or
violations that would not prevent or materially delay consummation of the Merger
and would not have a Company Material Adverse Effect.
SECTION 3.08 Financial Information. True and complete copies
of (i) the audited consolidated balance sheets of the Company for each of the
three fiscal years ended as of December 31, 2001, December 31, 2000 and December
31, 1999 and the related audited consolidated statements of earnings,
stockholders' equity and cash flows for each of the fiscal years in the
three-year period ended December 31, 2001 of the Company, together with all
related notes thereto, accompanied by the reports thereon of the Company's
accountants (collectively referred to herein as the "Financial Statements") and
(ii) the unaudited consolidated and consolidating balance sheet of the Company
as of June 30, 2002 (the "Company Balance Sheet"), and the related consolidated
statements of earnings and stockholders' equity of the Company (collectively
referred to herein as the "Interim Financial Statements") are attached hereto as
Section 3.08 of the Company Disclosure Schedule. The Financial Statements and
the Interim Financial Statements (i) were prepared in accordance with the books
of account and other financial records of the Company, (ii) present fairly the
financial condition, results of operations and cash flows of the Company and its
subsidiaries as of the dates thereof or for the periods covered thereby, (iii)
have been prepared in accordance with U.S. generally accepted accounting
principles ("GAAP") applied on a basis consistent with the past practices of the
Company except, in the case of the Interim Financial Statements, that such
statements do not contain footnotes and are subject to normal recurring year-end
adjustments and (iv) include all adjustments (consisting only of normal
recurring accruals) that are necessary for a fair presentation of the
consolidated financial condition of the Company and its subsidiaries and the
results of operations and cash flows of the Company and its subsidiaries as of
the dates thereof or for the periods covered thereby.
SECTION 3.09 Absence of Certain Changes or Events. Since
December 31, 2001, except as expressly contemplated by this Agreement, (a) each
of the Company and its subsidiaries has conducted its business only in the
ordinary course and in a manner consistent with past practice, and (b) there has
not been any Company Material Adverse Effect.
SECTION 3.10 Absence of Litigation. Except as would not have a
Company Material Adverse Effect, as of the date of this Agreement there is no
litigation, suit, claim, action, proceeding or investigation (each, an "Action")
pending or, to the knowledge of the Company, threatened (a) against (i) any of
the Company, its subsidiaries or their respective businesses, (ii) any officers
or directors of the Company or its subsidiaries in their capacity as such, or
(iii) any stockholder of the Company in such stockholder's capacity as a
stockholder of the Company; (b) seeking to delay or enjoin the Transactions; or
(c) in which any of the Company or its subsidiaries is a plaintiff, including
any derivative suits brought by or on behalf of the Company or any of its
subsidiaries. Section 3.10 of the Company Disclosure Schedule identifies any
agreement or other document or instrument entered into since January 1, 2000
settling any Action, or threat of any such Action, against any of the Company or
its subsidiaries.
12
None of the Company or any of its subsidiaries are in default with respect to or
subject to any Order, and there are no unsatisfied judgments against any of the
Company or its subsidiaries or their businesses. None of the Actions set forth
on Section 3.10 of the Company Disclosure Schedule, if determined adversely to
either the Company or any of its subsidiaries, as applicable, would have a
Company Material Adverse Effect.
SECTION 3.11 Vote Required. The only votes of the holders of
any classes or series of capital stock of the Company necessary to approve this
Agreement, the Merger and the other Transactions are (a) the affirmative vote of
the holders of a majority of the outstanding shares of Company Common Stock,
voting as a single class, and (b) the affirmative vote of the holders of a
majority of the outstanding shares of Company Series A Preferred Stock, voting
as a single class.
SECTION 3.12 Intellectual Property. To the knowledge of the
Company, each of the Company and its subsidiaries owns, or is licensed to use,
or otherwise has the right to use all Intellectual Property (including, without
limitation, biological materials), all registrations of any of the foregoing, or
applications therefor, and all grants and licenses or other rights running to or
from either the Company or any of its subsidiaries relating to any of the
foregoing that are sufficient for the conduct of their businesses as presently
conducted or as presently contemplated by the Company to be conducted
(collectively, the "Company Proprietary Rights"). A list of all material
registered or applied for copyrights, trademarks, servicemarks, tradenames,
patents and patent applications owned by any of the Company or its subsidiaries
is included in Section 3.12 of the Company Disclosure Schedule. To the knowledge
of the Company, all of the patents, registered trademarks and registered
copyrights set forth in Section 3.12 of the Company Disclosure Schedule are
valid and subsisting and are not subject to any material taxes or maintenance
fees falling due within 90 days from the date of this Agreement. The Company is
not aware of any basis for any claim by any third party that the businesses of
any of the Company or its subsidiaries materially infringe upon the proprietary
rights of others, nor has the Company or any of its subsidiaries received any
unresolved notice or claim of infringement in writing from any third party. The
Company is not aware of any existing or threatened infringement by any third
party on, or any competing claim of right to use or own any of, the Company
Proprietary Rights that would have a Company Material Adverse Effect. None of
the Company or any of its subsidiaries has received any written notice of a
violation by a current employee of any non-competition agreement that such
employee has entered into with a former employer. To the knowledge of the
Company, all employees and consultants who contributed to the discovery or
development of any of the material Company Proprietary Rights (other than
Company Proprietary Rights licensed to either the Company or any of its
subsidiaries) did so either (a) within the scope of his or her employment such
that, in accordance with applicable law, all Company Proprietary Rights arising
therefrom became the exclusive property of either the Company or one of its
subsidiaries or (b) pursuant to written agreements assigning all Company
Proprietary Rights arising therefrom to either the Company or any of its
subsidiaries.
SECTION 3.13 Employee Benefit Matters. (a) Plans and Material
Documents. Section 3.13(a) of the Company Disclosure Schedule lists with respect
to the six year period ending on the Closing Date (i) all employee benefit plans
(as defined in Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA")) and all
13
bonus, stock option, stock purchase, restricted stock, incentive, deferred
compensation, retiree medical or life insurance, supplemental retirement,
severance or other benefit plans, programs or arrangements, and all employment,
consulting, termination, severance or other contracts or agreements, to which
the Company or any of its subsidiaries was or is a party, with respect to which
the Company or any of its subsidiaries had or has any obligation or that was or
are maintained, contributed to or sponsored by the Company or any of its
subsidiaries for the benefit of any current or former employee, consultant,
officer or director of the Company or any of its subsidiaries and (ii) any
contracts, arrangements or understandings between the Company or any of its
subsidiaries and any employee, former employee or consultant of the Company or
its subsidiaries, including any contracts, arrangements or understandings
relating to a change in control of the Company or similar transaction
(collectively, the "Company Plans"). Each Company Plan is in writing and the
Company has provided Parent with a true and complete copy of each Company Plan.
Except as described above, there are no employee benefit plans, programs,
arrangements or agreements, whether formal or informal, whether in writing or
not, to which either the Company or any of its subsidiaries is a party, with
respect to which during the six year period ending on the Closing Date either
the Company or any of its subsidiaries had or has any obligation or which were
or are maintained, contributed to or sponsored by either the Company or any of
its subsidiaries for the benefit of any current or former employee, consultant,
officer or director of either the Company or any of its subsidiaries.
(b) Absence of Certain Types of Plans. With respect to the six
year period ending on the Closing Date, none of the Company Plans was or is (i)
subject to the minimum funding requirements of Section 412 of the Code or
Section 302 of ERISA or subject to Title IV of ERISA, (ii) a "multiemployer
plan" as that term is defined in Section 414(f) of the code or Section
4001(a)(3) of ERISA; (iii) a foreign plan; or (iv) a voluntary employees'
beneficiary association intended to be exempt from federal income taxes under
Section 501(c)(9) of the Code and none of the Company Plans provides for the
payment of separation, severance, termination or similar-type benefits to any
employee or consultant of either the Company or any of its subsidiaries or
obligates either the Company or any of its subsidiaries to pay separation,
severance, termination bonus, retirement, enhanced benefits nor any
acceleration, vesting, distribution or increase in benefits or obligations or
similar-type benefits solely as a result of any transaction contemplated by this
Agreement or as a result of a "change in control", within the meaning of such
term under Section 280G of the Code. None of the Company Plans provides for or
promises retiree medical, disability or life insurance benefits to any current
or former employee, consultant, officer or director of either the Company or any
of its subsidiaries except to the extent required by Part 6 of Title I of ERISA.
(c) Compliance with Applicable Law and Plan Terms. (i) Except
as would not result in a Company Material Adverse Effect, (x) each Company Plan
is operated in accordance with the requirements of all applicable Laws,
including, ERISA and the Code; (y) each of the Company and its subsidiaries have
performed the obligations required to be performed by it under, is not in
default under or in violation of the terms of, and has no knowledge of any
default or violation by any party with respect to, any Company Plan; and (z) no
legal action, suit or claim is pending or, to the knowledge of the Company,
threatened with respect to any Company Plan (other than claims for benefits in
the ordinary course) and no fact or event exists that could give rise to any
such action, suit or claim.
14
(ii) Each Company Plan that is intended to comply with the
requirements of Section 401(a) of the Code has been the subject of a
determination letter from the IRS to the effect that such Company Plan is
qualified under Section 401(a) of the Code, or can still be submitted in a
timely manner to the IRS for such a letter, and no such determination letter has
been revoked nor, to the knowledge of the Company, has revocation of any such
letter been threatened, nor has any such Company Plan been amended since the
date of its most recent determination letter or application therefor in any
respect that would adversely affect its qualification or increase it costs, and
to the knowledge of the Company, nothing has occurred or failed to occur in
connection with the adoption or maintenance of such Company Plan that would
cause the loss of such qualification, and all amendments required to be adopted
before the Closing Date for any such Company Plan to continue to be so qualified
have been or will be duly and timely adopted.
(iii) None of the Company nor any of its subsidiaries, the
officers thereof, the Company Plans or any fiduciary of any Company Plan that is
subject to ERISA, nor any trustee or administrator thereof, has engaged in a
"prohibited transaction" (as such term is defined in Section 406, 407 or 408 of
ERISA or Section 4975 of the Code) or any other breach of fiduciary
responsibility that could subject the Company or any of its subsidiaries or the
officers thereof to the tax or penalty on prohibited transactions imposed by
such Section 4975 or to any liability under Section 502(i) or (l) of ERISA, or
any other provision of ERISA, which would have a Company Material Adverse
Effect.
(iv) Except as would not have a Company Material Adverse
Effect, all contributions required by law or by a collective bargaining or other
agreement to be made under the Company Plans with respect to all periods through
the Closing Date, including a pro rata share of contributions due for the
current plan year, will have been made by such date or provided for by adequate
reserves properly reflected on the books of the Company in accordance with GAAP.
Except as would not result in a Company Material Adverse Effect, no changes in
contributions or benefit levels have been implemented or negotiated (but not yet
implemented), with respect to any Company Plan since the date on which the
information provided in the Company Disclosure Schedule has been provided, and
no such changes are scheduled to occur other than in the ordinary course of
business.
(v) Except as would not have a Company Material Adverse
Effect, neither the Company nor any of its subsidiaries has or will have any
liability or obligation for taxes, penalties, contributions, losses, claims,
damages, judgments, settlement costs, expenses, costs, or any other liability or
liabilities of any nature whatsoever arising out of or in any manner relating to
any employee benefit plan that has been, or is, contributed to (or required to
be contributed to) by any affiliate that is required to be aggregated with the
Company or any of its subsidiaries under Section 414(b), (c), (m) or (o) of the
Code or any parallel provisions of ERISA.
(d) Absence of Certain Liabilities and Events. With respect to
the Company Plans, no event has occurred and, to the knowledge of the Company,
there exists no condition or set of circumstances in connection with which
either the Company or any of its subsidiaries could reasonably be expected to be
subject to any liability under the terms of such Company Plans, ERISA, the Code
or any other applicable Law, that in any such case would have a Company Material
Adverse Effect. Each Company Plan in effect as of the date of this
15
Agreement may be amended or terminated without liability (other than with
respect to benefits in the ordinary course) to the Company or any of its
subsidiaries on or at any time after the consummation of the transactions
contemplated by this Agreement without contravening the terms of such plan, or
any law or agreement that pertains to the Company or any of its subsidiaries.
(e) Severance Obligations; No Change in Control. The
transactions contemplated by this Agreement shall not constitute a severance of
employment of any employee of either the Company or any of its subsidiaries
under any Company Plan that is a severance plan, program or arrangement of
either the Company or any of its subsidiaries and such employees shall be deemed
under any such Company Plan to have continuous and uninterrupted employment
before and immediately after the Closing. The Company Board has taken actions to
ensure that neither the Merger nor any of the other Transactions shall, as of
the Closing or at any time thereafter prior to December 31, 2003, constitute a
"change of control", "sale of the company" or any other similar transaction as
such terms may be or are defined under any Company Plan.
SECTION 3.14 Key Employees. (a) The Company has provided to
Parent a written list of all full-time employees of each of the Company and its
subsidiaries, along with the position and the current rate of compensation of
each such person on an annual basis, for such employees whose annual
compensation exceeds $75,000. Except as provided by law or by mandatory
collective bargaining agreements, the employment of all persons presently
employed or retained by either the Company or any of its subsidiaries is
terminable at will. Each employee (i) has entered into a
confidentiality/non-competition/assignment of inventions agreement with either
the Company or one of its subsidiaries, which has previously been delivered (or
copies thereof having been made available) to Parent or (ii) is bound to such
effect by applicable law. No key employee or group of employees has provided
written notification to either the Company or any of its subsidiaries of any
plans to terminate employment with either the Company or any of its subsidiaries
within the next six months. Except as provided by applicable law, neither the
Company nor any of its subsidiaries are party to or bound by any collective
bargaining agreement, nor have they, since January 1, 2001, experienced any
material strikes, grievances, claims of unfair labor practices or other
collective bargaining disputes that in any such case would have a Company
Material Adverse Effect. The Company has no knowledge of any organizational
effort made or threatened, either currently or at any time after January 1,
2001, by or on behalf of any labor union with respect to employees of either the
Company or any of its subsidiaries. Each of the Company and its subsidiaries has
provided all employees with all relocation benefits, stock options, bonuses and
incentives, and all other compensation that such employee has earned up through
the date of this Agreement or that such employee was otherwise promised in his
or her employment agreements with either the Company or one of its subsidiaries.
(b) Except as provided by applicable law or by mandatory
collective bargaining agreements, none of the Company or any of its subsidiaries
are party to any labor agreement with respect to their employees with any labor
organization, union, group or association. None of the Company or any of its
subsidiaries has experienced any attempt by organized labor or its
representatives to make any of the Company or its subsidiaries conform to
demands of organized labor relating to its employees or to enter into a binding
agreement with
16
organized labor that would cover the employees of any of the Company or its
subsidiaries. Except as would not have a Company Material Adverse Effect, there
is no labor strike or labor disturbance pending or, to the knowledge of the
Company, threatened against either the Company or any of its subsidiaries nor is
any grievance currently being asserted against the Company or any of its
subsidiaries before any Governmental Authority, and none of the Company or any
of its subsidiaries has experienced a work stoppage within the past three years,
and is not engaged in any unfair labor practice. Without limiting the foregoing,
each of the Company and its subsidiaries is in compliance with the Immigration
Reform and Control Act of 1986 and maintains a current Form I-9, as required by
such Act, in the personnel file of each employee hired after November 9, 1986.
SECTION 3.15 Tax Matters. (a) To the knowledge of the Company,
neither the Company nor any of its subsidiaries has taken or agreed to take, or
has failed to take or failed to agree to take, any action which act or failure
to act would prevent the Merger from qualifying as a reorganization within the
meaning of Section 368(a) of the Code. The Company is not aware of any
agreement, plan or other circumstance that would prevent the Merger from
qualifying as a reorganization within the meaning of Section 368(a) of the Code.
(b) (i) All Tax Returns required to be filed by or with
respect to the Company or any of its subsidiaries have been timely filed (taking
into account valid extensions to the filing period); (ii) all Taxes required to
be shown on the Tax Returns or otherwise due and payable by or with respect to
the Company or any of its subsidiaries have been timely paid; (iii) all such Tax
Returns are true, correct and complete in all material respects; (iv) no
adjustment relating to such Tax Returns has been proposed in writing by any Tax
authority and, to the knowledge of the Company, no basis exists for any such
adjustment; (v) there are no pending or, to the knowledge of the Company,
threatened actions or proceedings for the assessment or collection of Taxes
against the Company or any subsidiary; (vi) all Tax deficiencies proposed in
writing as a result of any audits have been paid or finally settled and no
deficiencies have been proposed in writing in the course of any pending audit;
(vii) there are no Tax liens on any assets of the Company or any subsidiary;
(viii) none of the Company or any of its subsidiaries has any income reportable
for a period ending after the Closing Date but attributable to a transaction
(e.g., an installment sale) occurring in a period or a change in accounting
method made for a period ending on or prior to the Closing Date which resulted
in a deferred reporting of income from such transaction or from such change in
accounting method; (ix) the financial statements of each of the Company and its
subsidiaries include adequate reserves and allowances to satisfy all known
liabilities for Taxes relating to each of the Company and its subsidiaries for
the periods covered thereby; and (x) the Company has not been a United States
real property holding corporation within the meaning of Section 897(c)(2) of the
Code for any applicable period specified in Section 897(c)(1)(A)(ii).
SECTION 3.16 Brokers. No broker, finder or investment banker
(other than Paramount Capital, Inc.) is entitled to any brokerage, finder's or
other fee or commission in connection with the Transactions based upon
arrangements made by or on behalf of either the Company or any of its
subsidiaries.
SECTION 3.17 Subsidiaries. Section 3.17 of the Company
Disclosure Schedule lists each of the subsidiaries of the Company, the type of
entity of each such subsidiary,
17
the jurisdiction of organization of each such subsidiary and the percentage of
each such subsidiary's outstanding capital stock or other equity interest owned
by the Company or another direct or indirect subsidiary of the Company. For
purposes of this Section 3.17 only, a subsidiary shall include any entity in
which the Company owns, either directly or indirectly, 30% or more of its
equity. All outstanding shares of capital stock of each subsidiary that are
owned by the Company or by another subsidiary of the of the Company are owned,
directly or indirectly, by the Company, free and clear of all liens. None of the
Company or any of its subsidiaries owns any equity interest in, or any interest
convertible into or exchangeable or exercisable for, directly or indirectly, any
equity interest in, any other Person or entity.
SECTION 3.18 Material Misstatements or Omissions. The
representations or warranties of the Company set forth in this Agreement,
including the Company Disclosure Schedule, do not contain any untrue statement
of a material fact, and do not omit to state any material fact necessary to make
the statements or facts contained herein not misleading. To the knowledge of the
Company, the Company has disclosed to Parent all events, conditions and facts
materially affecting its business and financial condition.
SECTION 3.19 No Undisclosed Liabilities. None of the Company
or any of its subsidiaries has any Liability, except for: (a) Liabilities
accrued or reserved against on the Company Balance Sheet; (b) Liabilities which
have arisen since the date of the Company Balance Sheet in the ordinary course
of business; (c) Liabilities incurred in the ordinary course of business which
are consistent with past practice and are not required by GAAP to be reflected
on a balance sheet; and (d) Liabilities which individually or in the aggregate
would not result in a Company Material Adverse Effect.
SECTION 3.20 Title to Properties; Absence of Liens; Entire
Assets. Either the Company or one of its subsidiaries has good valid title to,
or valid and subsisting leasehold interest in, all of the properties and assets,
real or personal, tangible or intangible, reflected on the Company Balance Sheet
(except for property or assets disposed of in the ordinary course of business
since the date of the Company Balance Sheet), free and clear of any liens,
except for (i) liens reflected on the Company Balance Sheet, (ii) liens that do
not materially interfere with the present use by the Company or its subsidiaries
of the property subject thereto or affected thereby, and (iii) liens for taxes,
assessments or governmental charges, or landlords', mechanics, workmen's,
materialmen's or similar liens, in each case that are not delinquent or which
are being contested in good faith.
SECTION 3.21 Material Contracts.
(a) Section 3.21(a) of the Company Disclosure Schedule sets
forth a complete and accurate list of the following Contracts:
(i) any (A) research, development or license agreement with
respect to material Company Proprietary Rights (other than feasibility
study agreements entered into by the Company or any of its subsidiaries
in the ordinary course of business), (B) agreement granting a right of
first refusal, or right of first offer or comparable right with respect
to Company Proprietary Rights, (C) joint venture, partnership or
similar agreement involving a sharing of profits, losses, costs, or
liabilities with another person
18
or entity, (D) agreement providing for the payment or receipt by either
the Company or one of its subsidiaries of milestone payments or
royalties (other than feasibility study agreements entered into by the
Company or any of its subsidiaries in the ordinary course of business),
or (E) agreement that individually requires aggregate expenditures by
any of the Company or its subsidiaries in any one year of more than
$250,000;
(ii) any indenture, trust agreement, loan agreement or note
that involves or evidences outstanding Liabilities for borrowed money
in excess of $250,000;
(iii) any agreement of surety, guarantee or indemnification
that involves potential obligations in excess of $250,000;
(iv) any agreement that limits or restricts the Company, any
of its subsidiaries or any of their affiliates or successors in
competing or engaging in any line of business, in any therapeutic area,
in any geographic area or with any Person;
(v) any interest rate, equity or other swap or derivative
instrument;
(vi) any agreement obligating the Company to register
securities under the Securities Act; or
(vii) any other Contract of the Company or its subsidiaries
that is material to the Company or its subsidiaries.
(b) The Company has delivered to Parent or has made available
to Parent a correct and complete copy of each Contract (as amended to the date
of this Agreement) listed in Section 3.21(a) of the Company Disclosure Schedule.
With respect to each Contract so listed, except as would not have a Company
Material Adverse Effect: (i) the Contract is legal, valid, binding and
enforceable and in full force and effect with respect to the Company or the
applicable subsidiary, and, to the knowledge of the Company, the written
arrangement is legal, valid, binding and is enforceable and in full force and
effect with respect to each other party thereto, in each case except as such
enforcement may be limited by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws affecting the enforcement of
creditors' rights generally, and except that the availability of equitable
remedies, including specific performance, is subject to the discretion of the
court before which any proceeding therefore may be brought; (ii) the Contract
will continue to be legal, valid, binding and enforceable and in full force and
effect immediately following the Closing in accordance with the terms thereof as
in effect prior to the Closing and does not require the consent of any party to
the Transactions; and (iii) none of the Company or the applicable subsidiary is
in breach or default, and to the knowledge of the Company, no event has occurred
which with notice or lapse of time would constitute a breach or default or
permit termination, modification, or acceleration, thereunder. To the knowledge
of the Company, none of the Company or any of its subsidiaries is a party to any
oral contract, agreement or other arrangement which, if reduced to written form,
would be required to be listed on Section 3.21(a) of the Company Disclosure
Schedule. There are no outstanding powers of attorney executed on behalf of the
Company or any of its subsidiaries.
19
SECTION 3.22 Books and Records. To the knowledge of the
Company, the minute books and similar records of the Company and its
subsidiaries accurately reflect all material actions taken by the shareholders,
board of directors and committees of the board of directors of the Company and
its subsidiaries at any meetings thereof, and of all written consents executed
in lieu of a meeting, through the date of this Agreement.
SECTION 3.23 Real Property. (a) Each of the Company and its
subsidiaries owns or has leases or rights of access to the real property
reasonably necessary to conduct the Company's and such subsidiaries' businesses
as presently conducted; (b) the Company's and each of its subsidiaries' uses of
the same are in compliance with all applicable laws, ordinances and regulations,
including building, zoning and other laws and ordinances, except as would not
have a Company Material Adverse Effect; and (c) with respect to all material
leases pursuant to which the Company or any of its subsidiaries leases real
property, no person other than the Company or such subsidiary, as the case may
be, is lessee in such parcel, except where such interests would not have a
Company Material Adverse Effect.
SECTION 3.24 Insurance. Section 3.24 of the Company Disclosure
Schedule lists each material insurance policy (including fire, theft, casualty,
general liability, workers compensation, business interruption, environmental,
product liability and automobile insurance policies and bond and surety
arrangements) to which either the Company or its subsidiaries is a party or a
named insured as of the date of this Agreement. Each such policy is in full
force and effect, except as would not have a Company Material Adverse Effect,
and, by its terms and with the payment of the requisite premiums thereon, will
continue to be in full force and effect following the Closing Date. None of the
Company or any of its subsidiaries is in material breach or material default
(including with respect to the payment of premiums or the giving of notices)
under any such policy, and no event has occurred which, with notice or the lapse
of time, would constitute such a breach or default or permit termination,
modification or acceleration, under any such policy. None of the Company or any
of its subsidiaries has received any written notice from the insurer disclaiming
coverage or reserving rights with respect to a particular claim or such policy
in general. None of the Company or any of its subsidiaries has incurred any
material loss, damage, expense or liability covered by any such insurance policy
for which it has not properly asserted a claim under such policy. To the
knowledge of the Company, the Company is covered by insurance in such types and
amounts, and covering such risks, as are consistent with customary practices and
standards of companies of similar size and engaged in businesses and operations
similar to those of the Company.
SECTION 3.25 Environmental Matters. Except as would not have a
Company Material Adverse Effect:
(a) Each of the Company and its subsidiaries is in compliance
with all applicable Environmental Laws. There is no pending or, to the
knowledge of the Company, threatened civil or criminal litigation,
written notice of violation, formal administrative proceeding, or, to
the knowledge of the Company, any investigation, inquiry or information
request by any Governmental Authority, relating to any Environmental
Law involving either the Company or any of its subsidiaries.
20
(b) To the knowledge of the Company, none of the Company or
any of its subsidiaries has released any Hazardous Materials in
concentrations and quantities that require reporting to any
Governmental Authority into the environment at any parcel of real
property or any facility during the time when such real property or
facility was leased, operated or controlled by either the Company or
its subsidiaries.
(c) None of the Company or any of its subsidiaries is in
possession of any environmental reports, investigations and audits
relating to premises currently or previously leased or operated by
either the Company or any of its subsidiaries (whether conducted by or
on behalf of the Company, any of its subsidiaries or a third party, and
whether done at the initiative of either the Company or any of its
subsidiaries or directed by a Governmental Authority or other third
party) being issued or conducted during the past five years.
(d) To the knowledge of the Company, no person has been
exposed to Hazardous Materials released by the Company or any of its
subsidiaries, or present at any parcel of real property or facility at
a time when such real property or facility was leased, operated or
controlled by either the Company or its subsidiaries, in quantities the
exposure to which violates any Environmental Law.
SECTION 3.26 Status of Company Stockholders Receiving Parent
Common Stock. Each of the Company Stockholders is a sophisticated investor with
such knowledge and experience in financial and business matters that such
Company Stockholder is capable of evaluating the merits and risks of an
investment in Parent, and is able to bear the economic risk of loss of such
Company Stockholder's investment in Parent. Each such Company Stockholder is an
"accredited investor," as that term is defined in Rule 501(a) of Regulation D
under the Securities Act. Each such Company Stockholder is acting on its own
behalf in connection with the investigation and examination of Parent and its
decision to execute these documents and consummate the Transactions. Each such
Company Stockholder is acquiring its portion of the Aggregate Closing Shares,
the shares of Parent Common Stock issuable pursuant to Section 2.01(b) hereof
and, if applicable, the Earn-Out Shares for its own account and not with a view
to distribution. Each of such Company Stockholders acknowledges that the
Aggregate Closing Shares, the shares of Parent Common Stock issuable pursuant to
Section 2.01(b) hereof and the Earn-Out Shares, if applicable, will not be
registered except as provided in the Stockholders Agreement/Registration Rights
Agreement and may not be sold or transferred in the absence of registration
under the Securities Act and applicable state securities laws, unless an
exemption exists therefore (including, without limitation, Rule 144 and Rule 145
under the Securities Act).
SECTION 3.27 Transactions with Directors and Officers. As of
the date of this Agreement, none of the directors or executive officers of the
Company have any personal loans outstanding from the Company.
SECTION 3.28 Absence of Restriction on Business Activities.
There is no Court Order binding upon the Company or any of its subsidiaries or
any of their properties which has had or could reasonably be expected to have
the effect of prohibiting or materially impairing
21
any business practice of the Company or any of its subsidiaries or the conduct
of business by the Company or any of its subsidiaries.
SECTION 3.29 Certain Business Practices. To the knowledge of
the Company, as of the date of this Agreement, except as would not have a
Company Material Adverse Effect, none of the Company, any of its subsidiaries or
any director or officer of the Company or any of its subsidiaries has, on behalf
of the Company or any of its subsidiaries, (i) used any funds of the Company or
any of its subsidiaries for unlawful contributions, gifts, entertainment or
other unlawful payments relating to political activity, (ii) violated any
provision of the Foreign Corrupt Practices Act of 1977, as amended, or (iii)
taken any action in violation of Section 1128B(b) of the Social Security Act, as
amended.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT
As an inducement to the Company and each of the Company
Stockholders to enter into this Agreement, Parent hereby represents and warrants
to the Company and each of the Company Stockholders that, except as disclosed in
the disclosure schedule delivered by Parent concurrently with the execution of
this Agreement (the "Parent Disclosure Schedule") (it being agreed that
disclosure under any particular section of the Parent Disclosure Schedule shall
be deemed adequate for all sections of the Parent Disclosure Schedule where
disclosure would be applicable):
SECTION 4.01 Corporate Organization. Parent is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has the requisite corporate power and authority and all
necessary governmental approvals to own, lease and operate its properties and to
carry on its business as it is now being conducted, except where the failure to
be so organized, existing or in good standing or to have such power, authority
and governmental approvals would not prevent or materially delay consummation of
the Merger, or otherwise prevent or materially delay Parent from performing its
obligations under this Agreement and would not have a Parent Material Adverse
Effect. Parent is duly qualified or licensed to do business and is in good
standing in each jurisdiction in which the nature of its business or the
ownership, leasing or operation of its properties makes such qualification or
licensing necessary, except for those jurisdictions in which the failure to be
so qualified or licensed or to be in good standing individually or in the
aggregate is not reasonably likely to have a Parent Material Adverse Effect.
SECTION 4.02 Certificate of Incorporation and By-laws. Parent
has heretofore furnished to the Company a complete and correct copy of the
Certificate of Incorporation and the By-laws of Parent, each as amended to date.
Except as would not have a Parent Material Adverse Effect, such Certificate of
Incorporation and By-laws are in full force and effect. Parent is not in
violation of any of the provisions of its Certificate of Incorporation or
By-laws.
22
SECTION 4.03 Capitalization. (a) The authorized capital stock
of Parent consists of (i) 20,000,000 shares of Parent Common Stock and (ii)
5,000,000 shares of preferred stock, par value $0.001 per share ("Parent
Preferred Stock"). As of the date of this Agreement, (A) 11,396,181 shares of
Parent Common Stock are issued and outstanding, all of which are validly issued,
fully paid and non-assessable, (B) 415,300 shares of Parent Common Stock are
held in the treasury of Parent and (C) 3,165,194 shares of Parent Common Stock
are reserved for future issuance pursuant to either the Parent's employee
benefit plans or warrants. As of the date of this Agreement, no shares of Parent
Preferred Stock are issued and outstanding. Except for (i) stock options to
acquire 1,579,617 shares of Parent Common Stock granted pursuant to the stock
option plans of Parent (the "Parent Stock Option Plans"), (ii) warrants to
acquire 51,194 shares of Parent Common Stock issued prior to the date of this
Agreement and (iii) the Parent Rights Agreement, there are no options, warrants
or other rights, agreements, arrangements or commitments of any character
relating to the issued or unissued capital stock of Parent or obligating Parent
to issue or sell any shares of capital stock of, or other equity interests in,
Parent. All shares of Parent Common Stock subject to issuance as aforesaid, upon
issuance on the terms and conditions specified in the instruments pursuant to
which they are issuable, will be duly authorized, validly issued, fully paid and
non-assessable. There are no outstanding contractual obligations of Parent to
repurchase, redeem or otherwise acquire any shares of Parent Common Stock. There
are no outstanding contractual obligations of Parent to provide funds to, or
make any investment (in the form of a loan, capital contribution or otherwise)
in, any person.
(b) The shares of Parent Common Stock to be issued pursuant to
the Merger in accordance with Section 2.01 will be duly authorized, validly
issued, fully paid and non-assessable and not subject to preemptive rights
created by statute, the Parent's Certificate of Incorporation or By-laws or any
agreement to which Parent is a party or is bound.
SECTION 4.04 Authority Relative to this Agreement. Parent has
all necessary corporate power and authority to execute and deliver this
Agreement, to perform its obligations hereunder and to consummate the
Transactions. The execution and delivery of this Agreement by Parent and the
consummation by Parent of the Transactions have been duly and validly authorized
by all necessary corporate action, and no other corporate proceedings on the
part of Parent are necessary to authorize this Agreement or to consummate the
Transactions (other than, with respect to the Merger and the Certificate
Amendments, the necessary approvals of the stockholders of Parent and the filing
and recordation of appropriate merger documents as required by the DGCL). This
Agreement has been duly and validly executed and delivered by Parent and,
assuming the due authorization, execution and delivery by the Company and the
Company Stockholders, constitutes a legal, valid and binding obligation of
Parent, enforceable against Parent in accordance with its terms. The Parent
Board has approved this Agreement and the other Transactions and such approvals
are sufficient so that the restrictions on business combinations set forth in
Section 203 of the DGCL shall not apply to any of the Company Stockholders or
the Transactions. No other state anti-takeover statute is applicable to the
Merger or the other Transactions.
SECTION 4.05 No Conflict; Required Filings and Consents. (a)
The execution and delivery of this Agreement by Parent do not, and the
performance of this Agreement by Parent will not, (i) conflict with or violate
the Certificate of Incorporation or By-laws of Parent, (ii) assuming that all
consents, approvals, authorizations and other actions
23
described in Section 4.05(a) of the Parent Disclosure Schedule have been
obtained and all filings and obligations described in Section 4.05(a) of the
Parent Disclosure Schedule have been made, conflict with or violate any Law
applicable to Parent or by which any property or asset of Parent is bound or
affected or (iii) result in any breach of, or constitute a default (or an event
which, with notice or lapse of time or both, would become a default) under, or
give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or other encumbrance on any
property or asset of Parent pursuant to, any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which Parent is a party or by which Parent or any property or
asset of Parent is bound or affected, except, with respect to clauses (ii) and
(iii), for any such conflicts, violations, breaches, defaults or other
occurrences which would not prevent or materially delay consummation of the
Transactions or otherwise prevent or materially delay Parent from performing its
obligations under this Agreement and would not have a Parent Material Adverse
Effect.
(b) The execution and delivery of this Agreement by Parent do
not, and the performance of this Agreement by Parent will not, require any
consent, approval, authorization or permit of, or filing with or notification
to, any Governmental Authority, except: (i) for applicable requirements, if any,
of the Exchange Act, Blue Sky Laws, the Securities Act of 1933, as amended (the
"Securities Act"), the Nasdaq and state takeover laws, the HSR Act, the
mandatory pre-merger notification requirements, if any, of competition
authorities located outside the United States, and filing and recordation of
appropriate merger documents as required by the DGCL, and (ii) where the failure
to obtain such consents, approvals, authorizations or permits, or to make such
filings or notifications, would not prevent or materially delay consummation of
the Merger, or otherwise prevent Parent from performing its material obligations
under this Agreement.
SECTION 4.06 Permits; Compliance. Parent is in possession of
all franchises, grants, authorizations, licenses, permits, easements, variances,
exceptions, consents, certificates, approvals and orders of any Governmental
Authority necessary for Parent to own, lease and operate its properties or to
carry on its business as it is now being conducted (the "Parent Permits"),
except where the failure to have, or the suspension or cancellation of, any of
the Parent Permits would not prevent or materially delay consummation of the
Merger and would not have a Parent Material Adverse Effect. As of the date of
this Agreement, no suspension or cancellation of any of the Parent Permits is
pending or, to the knowledge of Parent, threatened, except where the failure to
have, or the suspension or cancellation of, any of the Parent Permits would not
prevent or materially delay consummation of the Merger or otherwise prevent or
materially delay Parent from performing its obligations under this Agreement and
would not have a Parent Material Adverse Effect. Parent is not in conflict with,
or in default, breach or violation of, (a) any Law applicable to Parent or by
which any property or asset of Parent is bound or affected, or (b) any note,
bond, mortgage, indenture, contract, agreement, lease, license, Parent Permit,
franchise or other instrument or obligation to which Parent is a party or by
which Parent or any property or asset of Parent is bound, except for any such
conflicts, defaults, breaches or violations that would not prevent or materially
delay consummation of the Merger and would not have a Parent Material Adverse
Effect.
SECTION 4.07 SEC Filings; Financial Statements. (a) Parent has
filed all forms, reports and documents required to be filed by it with the
Securities and Exchange
24
Commission (the "SEC") (collectively, the "Parent SEC Reports"). As of the
respective dates they were filed, (i) the Parent SEC Reports filed prior to the
date of this Agreement were prepared, and all Parent SEC Reports filed with the
SEC after the date of this Agreement and prior to the Effective Time will be
prepared, in all material respects, in accordance with the requirements of the
Securities Act or the Exchange Act, as the case may be, and (ii) none of the
Parent SEC Reports filed prior to the date of this Agreement contained, nor will
any Parent SEC Reports filed after the date of this Agreement and prior to the
Effective Time contain, any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary in order to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading.
(b) Each of the consolidated financial statements (including,
in each case, any notes thereto) contained in the Parent SEC Reports filed prior
to the date of this Agreement and in any Parent SEC Reports filed after the date
of this Agreement and prior to the Effective Time was, or will be, as the case
may be, prepared in accordance with GAAP applied on a consistent basis
throughout the periods indicated (except as may be indicated in the notes
thereto or, in the case of unaudited statements, as permitted by Form 10-Q of
the Exchange Act) and each presented or will present fairly, in all material
respects, the consolidated financial position, results of operations and cash
flows of Parent as at the respective dates thereof and for the respective
periods indicated therein.
(c) Except as and to the extent set forth on the consolidated
balance sheet of Parent as at December 31, 2001, including the notes thereto
(the "Parent Balance Sheet"), Parent does not have any Liability of any nature,
except for Liabilities, incurred in the ordinary course of business consistent
with past practice since December 31, 2001 which are not, in the aggregate,
material to Parent.
(d) Parent has heretofore furnished to the Company complete
and correct copies of all amendments and modifications that have not been filed
by Parent with the SEC to all agreements, documents and other instruments that
previously had been filed by Parent with the SEC and are currently in effect.
SECTION 4.08 Absence of Certain Changes or Events. Since
December 31, 2001, except as expressly contemplated by this Agreement or
specifically disclosed in any Parent SEC Report filed since December 31, 2001
and prior to the date of this Agreement, (a) Parent has conducted its business
only in the ordinary course and in a manner consistent with past practice, and
(b) there has not been any Parent Material Adverse Effect.
SECTION 4.09 Absence of Litigation. Except as would not have a
Parent Material Adverse Effect, as of the date of this Agreement there is no
Action pending or, to the knowledge of Parent, threatened (a) against (i) Parent
or its business, (ii) any officers or directors of Parent in their capacity as
such, or (iii) any stockholder of Parent in such stockholder's capacity as a
stockholder of Parent; (b) seeking to delay or enjoin the Transactions; or (c)
in which Parent is a plaintiff, including any derivative suits brought by or on
behalf of Parent. Section 4.09 of the Parent Disclosure Schedule identifies any
agreement or other document or instrument entered into since January 1, 2000
settling any Action, or a threat of any such Action, against Parent. Parent is
not in default with respect to or subject to any Order, and there are no
25
unsatisfied judgments against Parent or its business. None of the Actions set
forth on Section 4.09 of the Parent Disclosure Schedule, if determined adversely
to Parent, would have a Parent Material Adverse Effect.
SECTION 4.10 Vote Required. The only votes of the holders of
any class or series of capital stock of Parent necessary in order for Parent to
consummate the Transactions (including the Certificate Amendments and the
issuance of shares of Parent Common Stock in the Merger) is the affirmative vote
of the holders of a majority of the outstanding shares of Parent Common Stock.
SECTION 4.11 Intellectual Property. To the knowledge of
Parent, Parent owns, or is licensed to use, or otherwise has the right to use
all Intellectual Property (including, without limitation, biological materials),
all registrations of any of the foregoing, or applications therefor, and all
grants and licenses or other rights running to or from Parent relating to any of
the foregoing that are sufficient for the conduct of its business as presently
conducted or as presently contemplated by Parent to be conducted (collectively,
the "Parent Proprietary Rights"). A list of all material registered or applied
for copyrights, trademarks, servicemarks, tradenames, patents and patent
applications owned by Parent is included in Section 4.11 of the Parent
Disclosure Schedule. To the knowledge of Parent, all of the patents, registered
trademarks and registered copyrights set forth on the list in Section 4.11 of
the Parent Disclosure Schedule are valid and subsisting and are not subject to
any material taxes or maintenance fees falling due within 90 days from the date
of this Agreement. Parent is not aware of any basis for any claim by any third
party that the business of Parent materially infringes upon the proprietary
rights of others, nor has Parent received any unresolved notice or claim of
infringement in writing from any third party. Parent is not aware of any
existing or threatened infringement by any third party on, or any competing
claim of right to use or own any of, the Parent Proprietary Rights. Parent has
not received any written notice of a violation by a current employee of any
non-competition agreement that such employee has entered into with a former
employer. To the knowledge of Parent, all employees and consultants who
contributed to the discovery or development of any of the material Parent
Proprietary Rights (other than Parent Proprietary Rights licensed to Parent) did
so either (a) within the scope of his or her employment such that, in accordance
with applicable law, all Parent Proprietary Rights arising therefrom became the
exclusive property of Parent or (b) pursuant to written agreements assigning all
Parent Proprietary Rights arising therefrom to Parent.
SECTION 4.12 Employee Benefit Matters. (a) Plans and Material
Documents. Section 4.12(a) of the Parent Disclosure Schedule lists with respect
to the six year period ending on the Closing Date (i) all employee benefit plans
(as defined in Section 3(3) of ERISA) and all bonus, stock option, stock
purchase, restricted stock, incentive, deferred compensation, retiree medical or
life insurance, supplemental retirement, severance or other benefit plans,
programs or arrangements, and all employment, consulting, termination, severance
or other contracts or agreements, to which Parent was or is a party, with
respect to which Parent had or has any obligation or that was or are maintained,
contributed to or sponsored by Parent for the benefit of any current or former
employee, consultant, officer or director of Parent and (ii) any contracts,
arrangements or understandings between Parent and any employee, former employee
or consultant of Parent, including any contracts, arrangements or understandings
relating to a change in control of Parent or similar transaction (collectively,
the "Parent Plans").
26
Each Parent Plan is in writing and Parent has provided the Company with a true
and complete copy of each Parent Plan. Except as described above, there are no
employee benefit plans, programs, arrangements or agreements, whether formal or
informal, whether in writing or not, to which Parent is a party, with respect to
which during the six year period ending on the Closing Date Parent had or has
any obligation or which were or are maintained, contributed to or sponsored by
Parent for the benefit of any current or former employee, consultant, officer or
director of Parent.
(b) Absence of Certain Types of Plans. With respect to the six
year period ending on the Closing Date, none of the Parent Plans was or is (i)
subject to the minimum funding requirements of Section 412 of the Code or
Section 302 of ERISA or subject to Title IV of ERISA, (ii) a "multiemployer
plan" as that term is defined in Section 414(f) of the code or Section
4001(a)(3) of ERISA; (iii) a foreign plan; or (iv) a voluntary employees'
beneficiary association intended to be exempt from federal income taxes under
Section 501(c)(9) of the Code and none of the Parent Plans provides for the
payment of separation, severance, termination or similar-type benefits to any
employee or consultant of Parent or obligates Parent to pay separation,
severance, termination bonus, retirement, enhanced benefits nor any
acceleration, vesting, distribution or increase in benefits or obligations or
similar-type benefits solely as a result of any transaction contemplated by this
Agreement or as a result of a "change in control", within the meaning of such
term under Section 280G of the Code. None of the Parent Plans provides for or
promises retiree medical, disability or life insurance benefits to any current
or former employee, consultant, officer or director of Parent except to the
extent required by Part 6 of Title I of ERISA.
(c) Compliance with Applicable Law and Plan Terms. (i) Except
as would not result in a Parent Material Adverse Effect, (x) each Parent Plan is
operated in accordance with the requirements of all applicable Laws, including,
ERISA and the Code; (y) Parent has performed the obligations required to be
performed by it under, is not in default under or in violation of the terms of,
and has no knowledge of any default or violation by any party with respect to,
any Parent Plan; and (z) no legal action, suit or claim is pending or, to the
knowledge of Parent, threatened with respect to any Parent Plan (other than
claims for benefits in the ordinary course) and no fact or event exists that
could give rise to any such action, suit or claim.
(ii) Each Parent Plan that is intended to comply with the
requirements of Section 401(a) of the Code has been the subject of a
determination letter from the IRS to the effect that such Parent Plan is
qualified under Section 401(a) of the Code, or can still be submitted in a
timely manner to the IRS for such a letter, and no such determination letter has
been revoked nor, to the knowledge of Parent, has revocation of any such letter
been threatened, nor has any such Parent Plan been amended since the date of its
most recent determination letter or application therefor in any respect that
would adversely affect its qualification or increase it costs, and to the
knowledge of Parent, nothing has occurred or failed to occur in connection with
the adoption or maintenance of such Parent Plan that would cause the loss of
such qualification, and all amendments required to be adopted before the Closing
Date for any such Parent Plan to continue to be so qualified have been or will
be duly and timely adopted.
(iii) None of the Parent, the officers of Parent, the Parent
Plans or any fiduciary of any Parent Plan that is subject to ERISA, nor any
trustee or administrator thereof,
27
has engaged in a "prohibited transaction" (as such term is defined in Section
406, 407 or 408 of ERISA or Section 4975 of the Code) or any other breach of
fiduciary responsibility that could subject Parent or the officers of Parent to
the tax or penalty on prohibited transactions imposed by such Section 4975 or to
any liability under Section 502(i) or (l) of ERISA, or any other provision of
ERISA, which would have a Parent Material Adverse Effect.
(iv) Except as would not have a Parent Material Adverse
Effect, all contributions required by law or by a collective bargaining or other
agreement to be made under the Parent Plans with respect to all periods through
the Closing Date, including a pro rata share of contributions due for the
current plan year, will have been made by such date or provided for by adequate
reserves properly reflected on the books of Parent in accordance with GAAP.
Except as would not result in a Parent Material Adverse Effect, no changes in
contributions or benefit levels have been implemented or negotiated (but not yet
implemented), with respect to any Parent Plan since the date on which the
information provided in the Parent Disclosure Schedule has been provided, and no
such changes are scheduled to occur other than in the ordinary course of
business.
(v) Except as would not have a Parent Material Adverse
Effect, Parent does not have, nor will it have any liability or obligation for
taxes, penalties, contributions, losses, claims, damages, judgments, settlement
costs, expenses, costs, or any other liability or liabilities of any nature
whatsoever arising out of or in any manner relating to any employee benefit plan
that has been, or is, contributed to (or required to be contributed to) by any
affiliate that is required to be aggregated with Parent under Section 414(b),
(c), (m) or (o) of the Code or any parallel provisions of ERISA.
(d) Absence of Certain Liabilities and Events. With respect to
the Parent Plans, no event has occurred and, to the knowledge of Parent, there
exists no condition or set of circumstances in connection with which either
Parent could reasonably be expected to be subject to any liability under the
terms of such Parent Plans, ERISA, the Code or any other applicable Law, that in
any such case would have a Parent Material Adverse Effect. Each Parent Plan in
effect as of the date of this Agreement may be amended or terminated without
liability (other than with respect to benefits in the ordinary course) to Parent
on or at any time after the consummation of the transactions contemplated by
this Agreement without contravening the terms of such plan, or any law or
agreement that pertains to Parent.
(e) Severance Obligations; No Change in Control. The
transactions contemplated by this Agreement shall not constitute a severance of
employment of any employee retained by the Surviving Corporation pursuant to
Section 6.06(a) hereof under any Parent Plan that is a severance plan, program
or arrangement of Parent and such employees shall be deemed under any such
Parent Plan to have continuous and uninterrupted employment before and
immediately after the Closing. Section 4.12(e) of the Parent Disclosure Schedule
lists the Parent Plan under which the Merger or any of the other Transactions
shall, as of the Closing constitute a "change of control", "sale of the company"
or any other similar change in control transaction, as such terms may be or are
defined under such Parent Plan.
SECTION 4.13 Key Employees. (a) Parent has provided to the
Company a written list of all full-time employees of Parent, along with the
position and the current rate of
28
compensation of each such person on an annual basis, for such employees whose
annual compensation exceeds $75,000. Except as provided by law, the employment
of all persons presently employed or retained by Parent is terminable at will.
Each employee has entered into a confidentiality/non-competition/assignment of
inventions agreement with Parent, which has previously been delivered (or copies
thereof having been made available) to Parent. No key employee or group of
employees has provided written notification to Parent of any plans to terminate
employment with Parent within the next six months. Except as provided by
applicable law, Parent is not party to or bound by any collective bargaining
agreement, nor has it, since January 1, 2001, experienced any material strikes,
grievances, claims of unfair labor practices or other collective bargaining
disputes that in any such case would have a Parent Material Adverse Effect.
Parent has no knowledge of any organizational effort made or threatened, either
currently or at any time after January 1, 2001, by or on behalf of any labor
union with respect to employees of Parent. Parent has provided all employees
with all relocation benefits, stock options, bonuses and incentives, and all
other compensation that such employee has earned up through the date of this
Agreement or that such employee was otherwise promised in his or her employment
agreements with Parent.
(b) Except as provided by applicable law, Parent is not party
to any labor agreement with respect to its employees with any labor
organization, union, group or association. Parent has not experienced any
attempt by organized labor or its representatives to make Parent conform to
demands of organized labor relating to its employees or to enter into a binding
agreement with organized labor that would cover the employees of Parent. Except
as would not have a Parent Material Adverse Effect, there is no labor strike or
labor disturbance pending or, to the knowledge of Parent, threatened against
Parent nor is any grievance currently being asserted against Parent before any
Governmental Authority, and Parent has not experienced a work stoppage within
the past three years, and is not engaged in any unfair labor practice. Without
limiting the foregoing, Parent is in compliance with the Immigration Reform and
Control Act of 1986 and maintains a current Form I-9, as required by such Act,
in the personnel file of each employee hired after November 9, 1986.
SECTION 4.14 Tax Matters. (a) To the knowledge of Parent,
neither Parent nor any of its affiliates has taken or agreed to take, or has
failed to take or failed to agree to take, any action which act or failure to
act would prevent the Merger from qualifying as a reorganization within the
meaning of Section 368(a) of the Code. Parent is not aware of any agreement,
plan or other circumstance that would prevent the Merger from qualifying as a
reorganization within the meaning of Section 368(a) of the Code.
(b) (i) All Tax Returns required to be filed by or with
respect to Parent have been timely filed (taking into account valid extensions
to the filing period); (ii) all Taxes required to be shown on the Tax Returns or
otherwise due and payable by or with respect to Parent have been timely paid;
(iii) all such Tax Returns are true, correct and complete in all material
respects; (iv) no adjustment relating to such Tax Returns has been proposed in
writing by any Tax authority and, to the knowledge of Parent, no basis exists
for any such adjustment; (v) there are no pending or, to the knowledge of
Parent, threatened actions or proceedings for the assessment or collection of
Taxes against Parent; (vi) all Tax deficiencies proposed in writing as a result
of any audits have been paid or finally settled and no deficiencies have been
proposed in writing in the course of any pending audit; (vii) there are no Tax
liens on any assets of Parent;
29
(viii) Parent does not have income reportable for a period ending after the
Closing Date but attributable to a transaction (e.g., an installment sale)
occurring in a period or a change in accounting method made for a period ending
on or prior to the Closing Date which resulted in a deferred reporting of income
from such transaction or from such change in accounting method; and (ix) the
financial statements of Parent include adequate reserves and allowances to
satisfy all known liabilities for Taxes relating to Parent for the periods
covered thereby.
SECTION 4.15 Opinion of Financial Advisor. The Parent Board
has received the opinion of CIBC World Markets Corp. ("Parent's Financial
Advisor"), dated the date of this Agreement, to the effect that, as of the date
of this Agreement, the aggregate number of shares of Parent Common Stock
issuable in exchange for all outstanding shares of Company Common Stock, Company
Series A Preferred Stock and Company Series B Preferred Stock is fair, from a
financial point of view, to Parent, and a copy of the written opinion will be
delivered to Parent promptly after the execution of this Agreement.
SECTION 4.16 Brokers. No broker, finder or investment banker
(other than Parent's Financial Advisor) is entitled to any brokerage, finder's
or other fee or commission in connection with the Transactions based upon
arrangements made by or on behalf of Parent.
SECTION 4.17 Parent Rights Agreement. A copy of the Parent
Rights Agreement, including all amendments and exhibits, has been provided to
the Company and is a complete and correct copy of that document. Parent has
amended the Parent Rights Agreement so that (a) each Company Stockholder and its
respective Affiliates and Associates (as each is defined in the Parent Rights
Agreement) is exempt from the definition of an "Acquiring Person" (as defined in
the Parent Rights Agreement) and (b) none of the execution of this Agreement,
the execution of the agreements described herein, the consummation of the Merger
and the other Transactions or the subsequent acquisition by any Company
Stockholder or any of its Affiliates and Associates of any Parent Common Stock
after the Effective Time will (i) cause the Rights (as defined in the Parent
Rights Agreement) to become exercisable or (ii) give rise to a Distribution Date
(as defined in the Parent Rights Agreement.
SECTION 4.18 Investment Company Act. Parent is not, and upon
the issuance of the Parent Common Stock as herein contemplated will not be, an
"investment company" or an entity "controlled" by an "investment company" as
such terms are defined in the Investment Company Act of 1940, as amended.
SECTION 4.19 Subsidiaries. Parent has no subsidiaries. Parent
does not own any equity interest in, or any interest convertible into or
exchangeable or exercisable for, directly or indirectly, any equity interest in,
any Person or entity.
SECTION 4.20 No Undisclosed Liabilities. Parent does not have
any Liability, except for: (a) Liabilities accrued or reserved against on the
Parent Balance Sheet; (b) Liabilities which have arisen since the date of the
Parent Balance Sheet in the ordinary course of business and which are similar in
nature and amount to the Liabilities which arose during the comparable period of
time in the immediately preceding fiscal period; (c) Liabilities incurred in the
ordinary course of business which are consistent with past practice and are not
required by
30
GAAP to be reflected on a balance sheet; and (d) Liabilities which individually
or in the aggregate would not result in a Parent Material Adverse Effect.
SECTION 4.21 Title to Properties; Absence of Liens; Entire
Assets. Parent has good and valid title to, or valid and subsisting leasehold
interest in, all of the properties and assets, real or personal, tangible or
intangible, reflected on the Parent Balance Sheet (except for property or assets
disposed of in the ordinary course of business since the date of the Parent
Balance Sheet), free and clear of any liens, except for (i) liens reflected on
the Parent Balance Sheet, (ii) liens that do not materially interfere with the
present use by Parent of the property subject thereto or affected thereby, and
(iii) liens for taxes, assessments or governmental charges, or landlords',
mechanics', workmen's, materialmen's or similar liens, in each case that are not
delinquent or which are being contested in good faith.
SECTION 4.22 Books and Records. The minute books and similar
records of Parent accurately reflect all material actions taken by the
shareholders, board of directors and committees of the board of directors of
Parent at any meetings thereof, and of all written consents executed in lieu of
a meeting, through the date of this Agreement.
SECTION 4.23 Real Property. (a) Parent owns or has leases or
rights of access to the real property reasonably necessary to conduct Parent's
business as presently conducted; (b) Parent's use of the same are in compliance
with all applicable laws, ordinances and regulations, including building, zoning
and other laws and ordinances, except as would not have a Parent Material
Adverse Effect; (c) all material leases pursuant to which Parent leases real
property are in writing and a copy of each such lease is in the possession of
Parent and (d) with respect to each parcel of real property leased by Parent, no
person other than Parent, as the case may be, is lessee in such parcel, except
where such interests would not have a Parent Material Adverse Effect.
SECTION 4.24 Insurance. Section 4.24 of the Parent Disclosure
Schedule lists each material insurance policy (including fire, theft, casualty,
general liability, workers compensation, business interruption, environmental,
product liability and automobile insurance policies and bond and surety
arrangements) to which Parent is a party or a named insured as of the date of
this Agreement. Each such policy is in full force and effect, except as would
not have a Parent Material Adverse Effect, and, by its terms and with the
payment of the requisite premiums thereon, will continue to be in full force and
effect following the Closing Date. Parent is not in material breach or material
default (including with respect to the payment of premiums or the giving of
notices) under any such policy, and no event has occurred which, with notice or
the lapse of time, would constitute such a breach or default or permit
termination, modification or acceleration, under any such policy. Parent has not
received any written notice from the insurer disclaiming coverage or reserving
rights with respect to a particular claim or such policy in general. Parent has
not incurred any material loss, damage, expense or liability covered by any such
insurance policy for which it has not properly asserted a claim under such
policy. To the knowledge of Parent, Parent is covered by insurance in such types
and amounts, and covering such risks, as are consistent with customary practices
and standards of companies of similar size and engaged in businesses and
operations similar to those of Parent.
31
SECTION 4.25 Environmental Matters. Except as would not have a
Parent Material Adverse Effect:
(a) Parent is in compliance with all applicable Environmental
Laws. There is no pending or, to the knowledge of Parent, threatened
civil or criminal litigation, written notice of violation, formal
administrative proceeding, or, to the knowledge of Parent, any
investigation, inquiry or information request by any Governmental
Authority, relating to any Environmental Law involving Parent.
(b) Parent has not released any Hazardous Materials in
concentrations and quantities that require reporting to any
Governmental Authority into the environment at any parcel of real
property or any facility during the time when such real property or
facility was leased, operated or controlled by Parent.
(c) Parent is not in possession of any environmental reports,
investigations and audits relating to premises currently or previously
leased or operated by Parent (whether conducted by or on behalf of
Parent or a third party, and whether done at the initiative of Parent
or directed by a Governmental Authority or other third party) being
issued or conducted during the past five years.
(d) To the knowledge of Parent, no person has been exposed to
Hazardous Materials released by Parent, or present at any parcel of
real property or facility at a time when such real property or facility
was leased, operated or controlled by Parent, in quantities the
exposure to which violates any Environmental Law.
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 5.01 Conduct of Business by the Company Pending the
Merger. The Company agrees that, between the date of this Agreement and the
Effective Time, except as set forth in Section 5.01 of the Company Disclosure
Schedule or as expressly contemplated by any other provision of this Agreement,
unless Parent shall otherwise consent in writing:
(i) the businesses of the Company and its subsidiaries shall
be conducted only in, and the Company and its subsidiaries shall not
take any action except in, the ordinary course of business and in a
manner consistent with recent past practice; and
(ii) the Company shall use its reasonable efforts to preserve
substantially intact the business organization of the Company and its
subsidiaries, to keep available the services of the current officers,
employees and consultants of the Company and its subsidiaries and to
preserve the current relationships of the Company and its subsidiaries
with customers, suppliers and other persons with which the Company or
any subsidiary has significant business relations.
By way of amplification and not limitation, except as
expressly contemplated by any other provision of this Agreement or as set forth
in Section 5.01 of the Company Disclosure
32
Schedule, neither the Company nor any of its subsidiaries shall, between the
date of this Agreement and the Effective Time, directly or indirectly, do, or
propose to do, any of the following without the prior written consent of Parent:
(b) amend or otherwise change its Certificate of Incorporation
or By-laws or equivalent organizational documents;
(c) issue, sell, pledge, dispose of, grant or encumber, or
authorize the issuance, sale, pledge, disposition, grant or encumbrance
of (i) any shares of any class of capital stock of the Company or any
subsidiary, or any options, warrants, convertible securities or other
rights of any kind to acquire any shares of such capital stock, or any
other ownership interest (including any phantom interest), of the
Company or any subsidiary (except for (y) the issuance of up to
1,853,863 shares of Company Common Stock issuable pursuant to the
Company Options outstanding on the date hereof and (z) the issuance of
up to 100,000 Company Options to employees of the Company and the
shares of Company Common Stock issuable pursuant thereto) or (ii) any
assets of the Company or any subsidiary, except in the ordinary course
of business and in a manner consistent with past practice;
(d) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with
respect to any of its capital stock;
(e) reclassify, combine, split, subdivide or redeem, or
purchase or otherwise acquire, directly or indirectly, any of its
capital stock;
(f) (i) acquire (including by merger, consolidation, or
acquisition of stock or assets or any other business combination) any
corporation, partnership, other business organization or any division
thereof or any material amount of assets; (ii) incur any indebtedness
for borrowed money or issue any debt securities or assume, guarantee or
endorse, or otherwise become responsible for, the obligations of any
person, or make any loans or advances, or grant any security interest
in any of its assets except in the ordinary course of business and
consistent with past practice; (iii) enter into any contract or
agreement other than in the ordinary course of business and consistent
with past practice; (iv) authorize, or make any commitment with respect
to, any single capital expenditure which is in excess of $250,000 or
capital expenditures which are, in the aggregate, in excess of
$1,000,000 for the Company and its subsidiaries taken as a whole; or
(v) enter into or amend any contract, agreement, commitment or
arrangement with respect to any matter set forth in this Section
5.01(e);
(g) increase the compensation payable or to become payable or
the benefits provided to its directors, officers or employees, except
for increases in the ordinary course of business and consistent with
past practice in salaries or wages of employees of the Company or any
of its subsidiaries who are not officers, or grant any severance or
termination pay to, or enter into any new employment or severance
agreement with, any director, officer or other employee of the Company
or of any of its subsidiaries, or establish, adopt, enter into or amend
any collective bargaining, bonus, profit-sharing, thrift, compensation,
stock option, restricted stock, pension, retirement, deferred
33
compensation, employment, termination, severance or other plan,
agreement, trust, fund, policy or arrangement for the benefit of any
director, officer or employee;
(h) take any action, other than reasonable and usual actions
in the ordinary course of business and consistent with past practice,
with respect to accounting policies or procedures;
(i) make, change or revoke any material Tax election, change
any method of Tax accounting or settle or compromise any material Tax
liability;
(j) pay, discharge or satisfy any claim or Liability, other
than the payment, discharge or satisfaction, in the ordinary course of
business and consistent with past practice, of Liabilities reflected or
reserved against in the Company Balance Sheet or subsequently incurred
in the ordinary course of business and consistent with past practice;
(k) amend, modify or consent to the termination of any
material contract, or amend, waive, modify or consent to the
termination of the Company's or any subsidiary's material rights
thereunder, other than in the ordinary course of business and
consistent with past practice;
(l) commence or settle any Action; or
(m) announce an intention, enter into any formal or informal
agreement or otherwise make a commitment, to do any of the foregoing.
SECTION 5.02 Conduct of Business by Parent Pending the Merger.
Parent agrees that, between the date of this Agreement and the Effective Time,
except as set forth in Section 5.02 of the Parent Disclosure Schedule or as
expressly contemplated by any other provision of this Agreement, unless the
Company shall otherwise consent in writing:
(i) the businesses of Parent shall be conducted only in, and
Parent shall not take any action except in, the ordinary course of
business and in a manner consistent with recent past practice; and
(ii) Parent shall use its reasonable efforts to preserve
substantially intact the business organization of Parent, to keep
available the services of the current officers, employees and
consultants of Parent and to preserve the current relationships of
Parent with customers, suppliers and other persons with which Parent
has significant business relations.
By way of amplification and not limitation, except as
expressly contemplated by any other provision of this Agreement or as set forth
in Section 5.02 of the Parent Disclosure Schedule, Parent shall not, between the
date of this Agreement and the Effective Time, directly or indirectly, do, or
propose to do, any of the following without the prior written consent of the
Company:
34
(a) amend or otherwise change its Certificate of Incorporation
or By-laws or equivalent organizational documents;
(b) issue, sell, pledge, dispose of, grant or encumber, or
authorize the issuance, sale, pledge, disposition, grant or encumbrance
of (i) any shares of any class of capital stock of Parent, or any
options, warrants, convertible securities or other rights of any kind
to acquire any shares of such capital stock, or any other ownership
interest (including any phantom interest), of Parent (except for the
issuance of up to 105,000 shares of Parent Common Stock issuable
pursuant to employee stock awards and up to 1,630,811 shares of Parent
Common Stock issuable pursuant to employee or director stock options
outstanding on the date hereof or outstanding warrants on the date
hereof) or (ii) any assets of Parent, except in the ordinary course of
business and in a manner consistent with past practice;
(c) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with
respect to any of its capital stock;
(d) reclassify, combine, split, subdivide or redeem, or
purchase or otherwise acquire, directly or indirectly, any of its
capital stock;
(e) (i) acquire (including by merger, consolidation, or
acquisition of stock or assets or any other business combination) any
corporation, partnership, other business organization or any division
thereof or any material amount of assets; (ii) incur any indebtedness
for borrowed money or issue any debt securities or assume, guarantee or
endorse, or otherwise become responsible for, the obligations of any
person, or make any loans or advances, or grant any security interest
in any of its assets except in the ordinary course of business and
consistent with past practice; (iii) enter into any contract or
agreement other than in the ordinary course of business and consistent
with past practice; (iv) authorize, or make any commitment with respect
to, any single capital expenditure which is in excess of $250,000 or
capital expenditures which are, in the aggregate, in excess of
$1,000,000 for Parent taken as a whole; or (v) enter into or amend any
contract, agreement, commitment or arrangement with respect to any
matter set forth in this Section 5.02(e);
(f) increase the compensation payable or to become payable or
the benefits provided to its directors, officers or employees, except
for increases in the ordinary course of business and consistent with
past practice in salaries or wages of employees of Parent who are not
officers, or grant any severance or termination pay to, or enter into
any employment or severance agreement with, any director, officer or
other employee of Parent, or establish, adopt, enter into or amend any
collective bargaining, bonus, profit-sharing, thrift, compensation,
stock option, restricted stock, pension, retirement, deferred
compensation, employment, termination, severance or other plan,
agreement, trust, fund, policy or arrangement for the benefit of any
director, officer or employee;
(g) take any action, other than reasonable and usual actions
in the ordinary course of business and consistent with past practice,
with respect to accounting policies or procedures;
35
(h) make, change or revoke any material Tax election, change
any method of Tax accounting or settle or compromise any material Tax
liability;
(i) pay, discharge or satisfy any claim or Liability, other
than the payment, discharge or satisfaction, in the ordinary course of
business and consistent with past practice, of Liabilities reflected or
reserved against in the Parent Balance Sheet or subsequently incurred
in the ordinary course of business and consistent with past practice;
(j) amend, modify or consent to the termination of any
material contract, or amend, waive, modify or consent to the
termination of Parent's or any of its subsidiaries' material rights
thereunder, other than in the ordinary course of business and
consistent with past practice;
(k) commence or settle any Action; or
(l) announce an intention, enter into any formal or informal
agreement or otherwise make a commitment, to do any of the foregoing.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01 Company Stockholders' Approval. (a) The Company
shall either: (i) call and hold a meeting of the stockholders of the Company
(the "Company Stockholders Meeting") or (ii) distribute to the stockholders of
the Company an action by written consent (the "Stockholder Consent"), in either
case, simultaneously with the Parent Stockholders' Meeting, for the purpose of
voting upon the approval and adoption of this Agreement. The Company shall use
its reasonable efforts to secure the required vote or consent of the
stockholders of the Company, except in the event and to the extent that the
Company Board, in accordance with Section 6.01(b), withdraws or modifies its
recommendation to the stockholders of the Company in favor of the approval and
adoption of this Agreement; provided, however, that even if (x) the Company
Board withdraws or modifies its recommendation to the stockholders of the
Company or (y) a Company Superior Proposal is received by the Company, the
Company Board shall still hold the Company Stockholders' Meeting or distribute
the Stockholders' Consent as described above in order to submit this Agreement
for approval by the stockholders of the Company. Either at the Company
Stockholders Meeting or pursuant to the Stockholder Consent, as applicable, the
appropriate officer of the Company shall vote all of the shares of Company
Common Stock and Company Series A Preferred Stock represented by the irrevocable
proxies he has received pursuant to the Company Voting Agreement in favor of
approval and adoption of this Agreement.
(b) None of the Company Board or any committee thereof shall
withdraw or modify, or propose to withdraw or modify, in a manner adverse to
Parent, the approval or recommendation by the Company Board or any committee
thereof of this Agreement, the Merger or any other Transaction; provided,
however, that the Company Board may, at any time prior to the Company
Stockholders' Meeting or execution of the Stockholder Consent, withdraw or
36
modify any such recommendation to the extent that the Company Board determines,
in its good faith judgment and after receiving the written advice of its
independent legal counsel (who may be the Company's regularly engaged
independent legal counsel), that the failure to so withdraw or modify its
recommendation would cause the Company Board to breach its fiduciary duties to
the Company and the stockholders of the Company under applicable Law.
SECTION 6.02 Parent Proxy Statement. (a) As promptly as
practicable after the execution of this Agreement, Parent shall prepare the
proxy statement to be sent to the stockholders of Parent relating to the meeting
of the stockholders of Parent (the "Parent Stockholders' Meeting") to be held to
consider (i) approval and adoption of this Agreement, (ii) approval of
amendments to the Parent's Certificate of Incorporation (the "Certificate
Amendments") to (A) increase the number of authorized shares of Parent Common
Stock to 75,000,000 and (B) change the name of Parent to "Lavipharm Corporation"
and (iii) approval of the issuance of shares of Parent Common Stock in
connection with the Merger (such proxy statement or information statement, as
amended or supplemented, being referred to herein as the "Parent Proxy
Statement"). Parent shall provide the Company and its advisors with a reasonable
opportunity to review and comment on the Parent Proxy Statement before it is
first filed with the SEC. Parent shall use its reasonable best efforts to cause
the Parent Proxy Statement to be cleared by the SEC as promptly as practicable.
As promptly as practicable after Parent Proxy Statement has been cleared by the
SEC, Parent shall mail the Parent Proxy Statement to the stockholders of Parent.
Parent will advise the Company promptly after it receives notice thereof, of any
request by the SEC for amendment of the Parent Proxy Statement or comments
thereon and responses thereto or requests by the SEC for additional information
and will promptly provide to the Company copies of any such written request or
comments. Parent shall not file the Parent Proxy Statement with the SEC or make
any amendment or supplement to the Parent Proxy Statement without the approval
of the Company (such approval not to be unreasonably withheld or delayed).
(b) The information supplied by either the Company or Parent
for inclusion in the Parent Proxy Statement shall not, at (i) the time the
Parent Proxy Statement (or any amendment thereof or supplement thereto) is first
mailed to the stockholders of Parent, (ii) the time of the Parent Stockholders'
Meeting and (iii) the Effective Time, contain any untrue statement of a material
fact or fail 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. If, at any time prior to the
Effective Time, any event or circumstance relating to the Company, or its
officers or directors, should be discovered by the Company which should be set
forth in an amendment or a supplement to the Parent Proxy Statement, the Company
shall promptly inform Parent. All documents that Parent is responsible for
filing with the SEC in connection with the Transactions will comply as to form
and substance in all material respects with the applicable requirements of the
Exchange Act and the rules and regulations thereunder.
(c) None of the Parent Board or any committee thereof shall
withdraw or modify, or propose to withdraw or modify, in a manner adverse to the
Company, the approval or recommendation by the Parent Board or any committee
thereof of this Agreement, the Merger, the Certificate Amendments or any other
Transaction and the Parent Proxy Statement shall include the recommendation of
the Parent Board to the stockholders of Parent in favor of
37
approval and adoption of this Agreement and approval of the Certificate
Amendments and the issuance of shares of Parent Common Stock in the Merger;
provided, however, that the Parent Board may, at any time prior to the Parent
Stockholders' Meeting, withdraw or modify any such recommendation to the extent
that the Parent Board determines, in its good faith judgment and after receiving
the written advice of its independent legal counsel (who may be Parent's
regularly engaged independent legal counsel), that the failure to so withdraw or
modify its recommendation would cause the Parent Board to breach its fiduciary
duties to Parent and the stockholders of Parent under applicable Law.
SECTION 6.03 Parent Stockholders' Meeting. Parent shall call
and hold the Parent Stockholders' Meeting as promptly as practicable after the
execution of this Agreement for the purpose of voting upon (i) the approval and
adoption of this Agreement, (ii) the approval of the Certificate Amendments and
(iii) the approval of the issuance of shares of Parent Common Stock in
connection with the Merger. Parent shall use its reasonable efforts to solicit
from the stockholders of Parent proxies in favor of the approval and adoption of
this Agreement and shall take all other action necessary or advisable to secure
the required vote or consent of the stockholders of Parent, except in the event
and to the extent that the Parent Board, in accordance with Section 6.02(c),
withdraws or modifies its recommendation to the stockholders of Parent in favor
of the approval and adoption of this Agreement; provided, however, that even if
(x) the Parent Board withdraws or modifies its recommendation to the
stockholders of Parent or (y) a Parent Superior Proposal is received by Parent,
the Parent Board shall still hold the Parent Stockholders' Meeting as described
above and submit for approval by the stockholders of Parent all the items listed
in the first sentence of this Section 6.03.
SECTION 6.04 Access to Information; Confidentiality. (a)
Except as required pursuant to any confidentiality agreement or similar
agreement or arrangement to which the Company, Parent or any of the Company's
subsidiaries is a party and pursuant to and in compliance with all applicable
Laws, from the date of this Agreement until the Effective Time, the Company and
Parent shall (and the Company shall cause its subsidiaries to): (i) provide to
the other party (and the other party's officers, directors, employees,
accountants, consultants, legal counsel, agents and other representatives)
access at reasonable times upon prior notice to the officers, employees, agents,
properties, offices and other facilities of such party and its subsidiaries and
to the books and records thereof, and (ii) furnish promptly to the other party
such information concerning the business, properties, contracts, assets,
liabilities, personnel and other aspects of such party and its subsidiaries as
the other party or its officers, directors, employees, accountants, consultants,
legal counsel, agents and other representatives may reasonably request.
(a) All information obtained by the parties pursuant to this
Section 6.04 shall be kept confidential in accordance with the Non-Disclosure
Agreement, dated as of May 2, 2002 (the "Confidentiality Agreement"), between
Parent and the Company.
SECTION 6.05 No Solicitation of Transactions. (a) (i) Parent
will not, directly or indirectly, and will instruct its officers, directors,
employees, agents, advisors and other representatives (including any investment
banker, attorney or accountant retained by it), not to, directly or indirectly,
solicit, initiate or encourage (including by way of furnishing nonpublic
information), or take any other action to facilitate, any inquiries or the
making of any
38
proposal or offer (including any proposal or offer to its stockholders) that
constitutes, or may reasonably be expected to lead to, any Parent Competing
Transaction (as defined below), or enter into or maintain or continue
discussions or negotiate with any person or entity in furtherance of such
inquiries or to obtain a Parent Competing Transaction, or agree to or endorse
any Parent Competing Transaction, or authorize or permit any of the officers,
directors or employees of such party or any of its subsidiaries, or any
investment banker, financial advisor, attorney, accountant or other
representative retained by Parent, to take any such action. Parent shall notify
the Company immediately if any proposal or offer, or any inquiry or contact with
any person, regarding a Parent Competing Transaction is made. Parent immediately
shall cease and cause to be terminated all existing discussions or negotiations
with any parties conducted heretofore with respect to a Parent Competing
Transaction. Parent shall not release any third party from, or waive any
provision of, any confidentiality or standstill agreement to which it is a
party.
(ii) Notwithstanding anything to the contrary in this Section
6.05(a), the Parent Board may furnish information to, and enter into discussions
with, a person who has made an unsolicited, written, bona fide proposal or offer
regarding a Parent Competing Transaction, if the Parent Board has (w)
determined, in its good faith judgment (after consultation with an independent
legal counsel and third party financial advisor of internationally recognized
reputation), that such proposal or offer constitutes a Parent Superior Proposal
(as defined below), (x) determined, in its good faith judgment after having
received the advice of independent legal counsel, that, in light of such Parent
Superior Proposal, the furnishing of such information or entering into
discussions is required to comply with its fiduciary obligations to Parent and
its stockholders under applicable Law, (y) provided no less than two business
days advance written notice to the Company of its intent to furnish information
or enter into discussions with such person and provided to the Company a
detailed written description of such proposal and (z) obtained from such person
an executed confidentiality agreement on terms no less favorable to Parent than
those contained in the Confidentiality Agreement.
(b) (i) The Company will not, directly or indirectly, and will
instruct its officers, directors, employees, subsidiaries, agents, advisors and
other representatives (including any investment banker, attorney or accountant
retained by it), not to, directly or indirectly, solicit, initiate or encourage
(including by way of furnishing nonpublic information), or take any other action
to facilitate, any inquiries or the making of any proposal or offer (including
any proposal or offer to its stockholders) that constitutes, or may reasonably
be expected to lead to, any Company Competing Transaction (as defined below), or
enter into or maintain or continue discussions or negotiate with any person or
entity in furtherance of such inquiries or to obtain a Company Competing
Transaction, or agree to or endorse any Company Competing Transaction, or
authorize or permit any of the officers, directors or employees of such party or
any of its subsidiaries, or any investment banker, financial advisor, attorney,
accountant or other representative retained by the Company or any of its
subsidiaries, to take any such action. The Company shall notify Parent
immediately if any proposal or offer, or any inquiry or contact with any person,
regarding a Company Competing Transaction is made. The Company immediately shall
cease and cause to be terminated all existing discussions or negotiations with
any parties conducted heretofore with respect to a Company Competing
Transaction. The Company shall not release any third party from, or waive any
provision of, any confidentiality or standstill agreement to which it is a
party.
39
(ii) Notwithstanding anything to the contrary in this Section
6.05(b), the Company Board may furnish information to, and enter into
discussions with, a person who has made an unsolicited, written, bona fide
proposal or offer regarding a Company Competing Transaction, if the Company
Board has (w) determined, in its good faith judgment (after consultation with an
independent legal counsel and third party financial advisor of internationally
recognized reputation), that such proposal or offer constitutes a Company
Superior Proposal (as defined below), (x) determined, in its good faith judgment
after having received the advice of independent legal counsel, that, in light of
such Company Superior Proposal, the furnishing of such information or entering
into discussions is required to comply with its fiduciary obligations to the
Company and its stockholders under applicable Law, (y) provided no less than two
business days advance written notice to Parent of its intent to furnish
information or enter into discussions with such person and provided to Parent a
detailed written description of such proposal and (z) obtained from such person
an executed confidentiality agreement on terms no less favorable to the Company
than those contained in the Confidentiality Agreement.
SECTION 6.06 Employee Benefits Matters. (a) Generally. From
and after the Effective Time, the Surviving Corporation shall (i) employ all
persons who, as of the Effective Time, are employees of the Company or any of
its subsidiaries (the "Company Employees") and (ii) continue to employ the
employees of Parent listed on Section 6.06(a) of the Parent Disclosure Schedule
(the "Parent Employees"). In addition, from and after the Effective Time, the
Surviving Corporation shall either (i) honor, and shall cause its subsidiaries
to honor, in accordance with their terms, all Company Plans and all other
contracts, agreements, arrangements, policies, plans and commitments of the
Company and its subsidiaries as in effect immediately prior to the Effective
Time that are applicable to any current or former employees, consultants,
officers or directors of the Company or its subsidiaries or (ii) provide such
employees, consultants, officers or directors of the Company or its subsidiaries
with substantially similar or more favorable compensation and benefits under
contracts, agreements, arrangements, policies, plans or commitments of the
Surviving Corporation and its subsidiaries. From and after the Effective Time,
each Parent Employee shall be eligible to participate in all benefits plans and
arrangements of the Surviving Corporation to the same extent and according to
the same terms as those offered to similarly situated Company Employees.
(b) Benefits. Company Employees and Parent Employees shall
receive credit for purposes of eligibility to participate and vesting (but not
for benefit accruals) under any employee benefit plan, program or arrangement
established or maintained by the Surviving Corporation or any of its
subsidiaries for service accrued or deemed accrued prior to the Effective Time
with, as applicable, either the Company or its subsidiaries or Parent (subject
to approval by the carrier, as applicable); provided, however, that such
crediting of service shall not operate to duplicate any benefit or the funding
of any such benefit. In addition, with respect to all Company Plans assumed by
the Surviving Corporation, the Surviving Corporation shall waive, or cause to be
waived (subject to approval by the carrier, as applicable), any limitations on
benefits relating to any pre-existing conditions to the same extent such
limitations are waived under any comparable plan of the Surviving Corporation or
its subsidiaries and recognize, for purposes of annual deductible and
out-of-pocket limits under its medical and dental plans, deductible and
out-of-pocket expenses paid by employees of the Company and its subsidiaries in
the calendar year in which the Effective Time occurs.
40
(c) Termination of Certain Parent Employees. As of the
Effective Time, the employment of the Parent employees listed on Schedule
6.06(c) of the Company Disclosure Schedule will terminate and such employees
will be offered the severance packages that are described with respect to each
such employee on Schedule 6.06(c) to the Company Disclosure Schedule.
(d) Retirement Benefits Plans. Prior to the Effective Time,
in accordance with the terms of the Parent employee retirement plan (the "Parent
Defined Contribution Plan"), the Parent shall take all such action as may be
required to terminate the Parent Defined Contribution Plan, effective not later
than immediately prior to the Effective Time (the "Termination Date"). All
Parent employees shall be 100% vested in their individual account balances under
the Parent Defined Contribution Plan as of the Termination Date. Effective as of
the Effective Time, the Parent shall cause the Surviving Corporation to amend
the Company 401(k) Plan (the "Company Defined Contribution Plan") to the extent
necessary to enable Parent Employees who were participants in the Parent Defined
Contribution Plan to elect to make rollover distributions to the Company Defined
Contribution Plan. Service of the Parent Transferred Employees prior to the
Effective Time which was recognized under the Parent Defined Contribution Plan
shall be credited to the Parent Transferred Employees for purposes of
eligibility and vesting under the Company Defined Contribution Plan.
SECTION 6.07 Notification of Certain Matters. The Company
shall give prompt written notice to Parent, and Parent shall give prompt written
notice to the Company, of (a) the occurrence, or non-occurrence, of any event
the occurrence, or non-occurrence, of which could reasonably be expected to
cause any representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect such that the conditions set forth in
Sections 7.02(a) and 7.03(a) could not reasonably be expected to be satisfied
and (b) any failure of the Company or Parent, as the case may be, to comply with
or satisfy any covenant or agreement to be complied with or satisfied by it
hereunder such that the conditions set forth in Sections 7.02(b) and 7.03(b)
could not reasonably be expected to be satisfied; provided, however, that the
delivery of any notice pursuant to this Section 6.07 shall not limit or
otherwise affect the remedies available hereunder to the party receiving such
notice.
SECTION 6.08 Further Action; Reasonable Best Efforts. Upon the
terms and subject to the conditions of this Agreement, each of the parties shall
(i) make promptly its respective filings, if required, and thereafter make any
other required submissions, under the HSR Act, the mandatory pre-merger
requirements of competition authorities located outside the United States or
other applicable Law with respect to the Transactions and (ii) use its
reasonable best efforts to take, or cause to be taken, all appropriate action,
and to do, or cause to be done, all things necessary, proper or advisable under
applicable Laws or otherwise to consummate and make effective the Transactions,
including using its reasonable best efforts to obtain all Permits, consents,
approvals, authorizations, qualifications and orders of Governmental Authorities
and parties to contracts with the Company and its subsidiaries as are necessary
for the consummation of the Transactions and to fulfill the conditions to the
Merger. In case, at any time after the Effective Time, any further action is
necessary or desirable to carry out the purposes of this Agreement, the proper
officers and directors of each party to this Agreement shall use their
reasonable best efforts to take all such action.
41
SECTION 6.09 Plan of Reorganization. (a) This Agreement is
intended to constitute a "plan of reorganization" within the meaning of section
1.368-2(g) of the U.S. federal income tax regulations promulgated under the
Code. From and after the date of this Agreement and until the Effective Time,
each party hereto shall use its reasonable best efforts to cause the Merger to
qualify, and will not knowingly take any action, cause any action to be taken,
fail to take any action or cause any action to fail to be taken, which action or
failure to act could prevent the Merger from qualifying as a reorganization
within the meaning of Section 368(a) of the Code. Following the Effective Time,
neither the Surviving Corporation nor any of its affiliates shall knowingly take
any action, cause any action to be taken, fail to take any action or cause any
action to fail to be taken, which action or failure to act could cause the
Merger to fail to qualify as a reorganization within the meaning of Section
368(a) of the Code.
(b) As of the date of this Agreement, the Company does not
know of any reason why it would not be able to deliver to Shearman & Sterling,
at and dated as of the date of the legal opinion referred to below, an officer's
certificate substantially in the form attached hereto as Exhibit B-1 and
substantially in compliance with IRS published advance ruling guidelines, with
reasonable or customary exceptions and modifications thereto, to enable such
counsel to deliver the legal opinion contemplated by Section 7.03(f), if
required. The Company will deliver, if required, such certificate, executed by a
duly authorized officer and dated as of the date that the legal opinion
contemplated by Section 7.03(f) is to be delivered, to Shearman & Sterling, at
the date of such legal opinion.
(c) As of the date of this Agreement, Parent does not know of
any reason why it would not be able to deliver to Shearman & Sterling, at and
dated as of the date of the legal opinion referred to below, an officer's
certificate substantially in the form attached hereto as Exhibit B-2 and,
substantially in compliance with IRS published advance ruling guidelines, with
reasonable or customary exceptions and modifications thereto, to enable such
counsel to deliver the legal opinion contemplated by Section 7.03(f), if
required. Parent will deliver, if required, such certificate, executed by a duly
authorized officer and dated as of the date that the legal opinion contemplated
by Section 7.03(f) is to be delivered, to Shearman & Sterling, at the date of
such legal opinion.
SECTION 6.10 Nasdaq Quotation. (a) Parent shall promptly
prepare and submit to the Nasdaq a supplemental listing application covering the
Aggregate Closing Shares, the shares of Parent Common Stock issuable pursuant to
Section 2.01(b) hereof and the shares of Parent Common Stock issuable upon
exercise of the Substituted Options, and shall use its reasonable efforts to
obtain approval for the quotation of such Parent Common Stock, subject to
official notice of issuance to Nasdaq, and the Company shall cooperate with
Parent with respect to such quotation.
(b) Upon the occurrence of a Milestone Determination Date,
Parent or the Surviving Corporation, as the case may be, shall promptly prepare
and submit to the Nasdaq a supplemental listing application covering the
applicable Earn-Out Shares, and shall use its reasonable efforts to obtain
approval for the quotation of such Parent Common Stock, subject to official
notice of issuance to the Nasdaq, and if the Milestone Determination Date occurs
prior to Closing, the Company shall cooperate with Parent or the Surviving
Corporation, as the case may be, with respect to such quotation.
42
SECTION 6.11 Delisting from Pacific Stock Exchange. Prior to
the Effective Time, Parent shall take all necessary actions to delist the Parent
Common Stock from the Pacific Stock Exchange.
SECTION 6.12 Public Announcements. The initial press release
relating to this Agreement shall be a joint press release, the text of which has
been agreed to in writing by each of Parent and the Company. Thereafter, unless
otherwise required by applicable Law or the requirements of the Nasdaq or the
Athens Stock Exchange, as applicable, no party to this Agreement and no
stockholder of the Company shall issue any press release or public announcement
in respect of this Agreement or any of the Transactions without the prior
written consent of the other parties, which written consent shall not be
unreasonably withheld. Each party shall allow the other parties a reasonable
opportunity to review and comment on any press release issued by such party
relating to the Merger. The parties shall cooperate as to the timing and
contents of any such press release or public announcement.
SECTION 6.13 Surviving Corporation Board; Management. (a) The
Parent Board shall take such action as may be necessary to cause the Board of
Directors of the Surviving Corporation (the "Surviving Corporation Board"),
immediately following the Effective Time, to be comprised of nine members and to
cause the persons set forth on Exhibit C hereto to be elected to the Surviving
Corporation Board. In furtherance thereof, Parent shall increase or decrease the
size of the Surviving Corporation Board and secure the resignations of such
number of its incumbent directors as is necessary to effect the foregoing
sentence. All members of the Surviving Corporation Board shall serve in
accordance with the Certificate of Incorporation and By-laws of the Surviving
Corporation until their respective successors are duly elected or appointed and
qualified. Subject to applicable law and Nasdaq requirements, the composition of
the committees of the Surviving Corporation Board shall be based upon and
reflect proportionally the composition of the Surviving Corporation Board as a
whole; provided, however, that, as of the Effective Time, all of the audit
committee members shall be directors who satisfy the independence requirements
of the Nasdaq listing rules.
(b) Parent shall take such action as may be necessary to cause
the individuals set forth on Exhibit D hereto to be appointed to the positions
set forth on Exhibit D as of the Effective Time. Each such officer shall serve
in accordance with the Certificate of Incorporation and By-laws of the Surviving
Corporation.
SECTION 6.14 Conveyance Matters. Each party shall pay its own
real property transfer or gains, sales, use, value added, stock transfer and
stamp taxes, any transfer, registration or recording charges, and other fees and
similar Taxes incurred in connection with the transactions contemplated by this
Agreement; provided, however, that the Company shall pay for all such transfer
taxes and related fees incurred by the stockholders of the Company.
SECTION 6.15 Registration. (a) At the Closing, Parent and the
stockholders of the Company shall enter into a Stockholders
Agreement/Registration Rights Agreement in the form attached hereto as Exhibit
E.
(b) In the event that the issuance of Parent Common Stock in
the Merger is not exempt from registration under the Securities Act in the
reasonable judgment of the
43
Company, (i) Parent as promptly as practicable will prepare and file with the
SEC a Registration Statement on Form S-4 (the "Merger S-4") with respect to the
Transactions and use reasonable efforts to cause the Merger S-4 to become
effective as soon as possible, (ii) the Company will cooperate with Parent in
the preparation of the Merger S-4 and use reasonable efforts to assist and
facilitate such filing and declaration of effectiveness, (iii) the date in
Section 8.01(b) shall be deemed for all purposes to be March 31, 2003 and (iv)
the parties hereto shall cooperate with each other and use reasonable efforts to
cause the consummation of the Transactions notwithstanding the inability or
failure to obtain an exemption from registration under the Securities Act,
including negotiating expeditiously and in good faith with respect to any and
all amendments to this Agreement or any other agreements necessary.
SECTION 6.16 Available Cash of Parent. At the Closing, Parent
shall have available at least $25 million of unencumbered cash and investment
interest receivable, after paying or reserving for all actual and anticipated
Merger-related expenses (except those contemplated by Section 8.03(a) hereof to
be paid by L-S.A.) but before wind-down expenses, such as severance payments and
lease termination charges, which are not expected to exceed $1.6 million;
provided, however, that if the Closing shall not have been consummated by
November 15, 2002, the amount of unencumbered cash required to be available to
Parent may decrease by up to $350,000 for each 30 days between November 15, 2002
and the date of Closing.
SECTION 6.17 Interested Transactions. Subject to applicable
law and the rules and regulations of Nasdaq and except as set forth on Section
6.17 of the Company Disclosure Schedule, following the Effective Time, any
material transaction to be entered into by the Surviving Corporation with any
officer or director of the Surviving Corporation or any stockholder owning at
least five percent (5%) of the total voting stock of the Surviving Corporation
or an affiliate thereof shall be subject to the approval of the directors marked
with an asterisk on Exhibit C or, after December 31, 2003 (or if any of such
directors no longer serve as directors of the Surviving Corporation), a majority
of the members of the audit committee of the Surviving Corporation Board.
SECTION 6.18 Post-Closing Headquarters. As of the date of the
Closing, the principal executive officers of the Surviving Corporation will be
located at the Company's existing headquarters in East Windsor, New Jersey.
SECTION 6.19 Directors' and Officers' Indemnification and
Insurance.
(a) After the Effective Time, the Certificate of Incorporation of the Surviving
Corporation shall contain provisions no less favorable with respect to
indemnification than are set forth in either of the Certificates of
Incorporation of Parent or the Company as of the date of this Agreement, which
provisions shall not be amended, repealed or otherwise modified for a period of
six years from the Effective Time in any manner that would affect adversely the
rights thereunder of individuals who, at or prior to the Effective Time, were
directors, officers, employees or agents of Parent or the Company, as
applicable, unless such modification shall be required by law.
(b) The Surviving Corporation shall use its reasonable best
efforts to maintain in effect for six years from the Effective Time, to the
extent reasonably available in the market,
44
directors' and officers' liability insurance protection for the directors and
officers of Parent immediately prior to the Effective Time, with respect to
matters occurring prior to the Effective Time, with aggregate coverage of no
less than $10,000,000 and no more than $15,000,000, on such terms as are
reasonably agreed to by Parent and the Company prior to the Closing.
(c) In the event the Surviving Corporation or any of its
respective successors or assigns (i) consolidates with or merges into any other
person and shall not be the continuing or surviving corporation or entity of
such consolidation or merger or (ii) transfers all or substantially all of its
properties and assets to any person, then, and in each such case, proper
provision shall be made so that the successors and assigns of the Surviving
Corporation shall assume the obligations set forth in this Section 6.19.
SECTION 6.20 Company Indebtedness. As of immediately prior to
the Closing, the Company shall have no liabilities of the type required to be
disclosed on a balance sheet prepared in accordance with GAAP, except as set
forth on Section 6.20 of the Company Disclosure Schedule or as incurred in the
ordinary course of business since June 30, 2002. After the Effective Time, the
Surviving Corporation shall engage its independent auditor to conduct certain
agreed upon procedures on the Company's indebtedness as of the Closing Date, and
such agreed upon procedures shall be reasonably agreed upon by Parent, the
Company and such independent auditors prior to the Closing Date; provided,
however, that, if the Closing occurs prior to December 31, 2002, such review
shall be conducted as part of the audit of the Surviving Corporation's financial
statements for the fiscal year in which the Closing occurs.
SECTION 6.21 Cancellation of Indebtedness. Immediately prior
to the Closing, the $10,000,000 indebtedness of Lavipharm Laboratories Inc. owed
to HypoVereins Bank shall be repaid with the proceeds of a capital contribution
by L-S.A. and, in connection therewith, shares of Company Series B Preferred
Stock shall be issued to L-S.A. Such Company Series B Preferred Stock shall,
pursuant to Section 2.01(b) hereof as of the Effective Time, be converted into
2,000,000 shares of Parent Common Stock, which shall not be deemed to be issued
and outstanding for purposes of calculating the number of shares of Outstanding
Parent Common Stock pursuant to Section 2.01(a).
SECTION 6.22 Product Liability Insurance. Parent shall use
good faith efforts to obtain, prior to the Effective Time, at least $10,000,000
in product liability insurance on commercially reasonable terms.
ARTICLE VII
CONDITIONS TO THE MERGER
SECTION 7.01 Conditions to the Obligations of Each Party. The
obligations of the Company, each of the Company Stockholders and Parent to
consummate the Merger are subject to the satisfaction or waiver (where
permissible) of the following conditions:
(a) Stockholder Approvals. This Agreement shall have been
approved and adopted by (i) the requisite vote of the stockholders of
the Company in accordance with
45
the DGCL and the Company's Certificate of Incorporation and (ii) the
requisite vote of Parent's stockholders in accordance with the DGCL and
Parent's Certificate of Incorporation.
(b) No Order. No Governmental Authority shall have enacted,
issued, promulgated, enforced or entered any law, rule, regulation,
judgment, decree, executive order or award (an "Order") which is then
in effect and has the effect of making the Merger illegal or otherwise
prohibiting consummation of the Merger.
(c) Antitrust Approvals and Waiting Periods. Any required
waiting period (and any extension thereof) applicable to the
consummation of the Merger under the HSR Act or similar statute or
regulation outside the United States shall have expired or been
terminated.
(d) Stockholders Agreement/Registration Rights Agreement.
Parent and the stockholders of the Company shall have entered into a
Stockholders Agreement/Registration Rights Agreement in the form
attached hereto as Exhibit E.
SECTION 7.02 Conditions to the Obligations of Parent. The
obligations of Parent to consummate the Merger are subject to the satisfaction
or waiver (where permissible) of the following additional conditions:
(a) Representations and Warranties. The representations and
warranties of the Company and the Company Stockholders contained in
this Agreement shall be true and correct in all material respects as of
the Effective Time, as though made on and as of the Effective Time,
except to the extent expressly made as of an earlier date, in which
case as of such earlier date (provided that any representation or
warranty that is qualified by materiality or Company Material Adverse
Effect shall be true and correct in all respects as of the Effective
Time, or as of such particular earlier date, as the case may be).
(b) Agreements and Covenants. The Company shall have performed
or complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by it on or
prior to the Effective Time.
(c) Officer Certificate. The Company shall have delivered to
Parent a certificate, dated the date of the Closing, signed by an
authorized officer of the Company, certifying as to the satisfaction of
the conditions specified in Sections 7.02(a) and (b).
(d) Consents. All filings, consents, approvals, permits and
authorizations set forth on Section 7.02(d) of the Company Disclosure
Schedule shall have been made or obtained, as the case may be.
(e) Material Adverse Effect. No Company Material Adverse
Effect shall have occurred since the date of this Agreement.
(f) FIRPTA Certificate. The Company shall have provided Parent
with a statement, pursuant to Section 1.897-2(h) of the Regulations,
certifying that the Company
46
is not a U.S. real property interest within the meaning of Section
897(c)(1) of the Code, in the form attached as Exhibit G hereto.
(g) Indebtedness. The indebtedness of the Company shall have
been restructured on the terms as set forth on Section 7.02(g) of the
Company Disclosure Schedule. As of immediately prior to the Closing,
the Company shall have no liabilities of the type required to be
disclosed on a balance sheet prepared in accordance with GAAP, except
as set forth on Section 6.20 of the Company Disclosure Schedule or as
incurred in the ordinary course of business since June 30, 2002.
(h) Interim Balance Sheet. Parent shall receive a consolidated
and consolidating balance sheet of the Company dated as of September
30, 2002, reviewed by Deloitte & Touche or another internationally
recognized independent accounting firm.
(i) Legal Opinion. Parent shall receive a legal opinion from
Shearman & Sterling, counsel to the Company, covering the matters set
forth in Exhibit H hereto.
(j) Additional Documents. The Company shall have obtained the
following documents:
(i) A waiver of additional claims from Paramount
Capital Group regarding the engagement letter dated July 17,
2002, as amended on October 9, 2002; and;
(ii) A cancelled note (or other evidence that all
obligations have been satisfied) from HypoVereins Bank
relating to the $10,000,000 indebtedness of Lavipharm
Laboratories Inc. owed to HypoVereins Bank.
(k) Lease. The Company shall have entered into a lease with
L-S.A. in connection with its facilities in East Windsor, New Jersey
containing the principal terms set forth on Section 7.02(k) of the
Company Disclosure Schedule.
SECTION 7.03 Conditions to the Obligations of the Company and
the Company Stockholders. The obligations of the Company and the Company
Stockholders to consummate the Merger are subject to the satisfaction or waiver
(where permissible) of the following additional conditions:
(a) Representations and Warranties. The representations and
warranties of Parent contained in this Agreement shall be true and
correct in all material respects as of the Effective Time, as though
made on and as of the Effective Time, except to the extent expressly
made as of an earlier date, in which case as of such earlier date
(provided that any representation or warranty that is qualified by
materiality or Parent Material Adverse Effect shall be true and correct
in all respects as of the Effective Time, or as of such particular
earlier date, as the case may be).
(b) Agreements and Covenants. Parent shall have performed or
complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by it on or
prior to the Effective Time.
47
(c) Officer Certificate. Parent shall have delivered to the
Company a certificate, dated the date of the Effective Time, signed by
an authorized officer of Parent, certifying as to the satisfaction of
the conditions specified in Sections 7.03(a) and (b).
(d) Consents. All filings, consents, approvals, permits and
authorizations set forth on Section 7.03(d) of the Parent Disclosure
Schedule shall have been made or obtained, as the case may be.
(e) Material Adverse Effect. No Parent Material Adverse Effect
shall have occurred since the date of this Agreement.
(f) Tax Opinion. The Company shall have received the opinion
of Shearman & Sterling, based upon representations of Parent and the
Company, and normal assumptions, to the effect that, for United States
federal income tax purposes, the Merger will qualify as a
reorganization within the meaning of Section 368(a) of the Code and
that each of Parent and the Company will be a party to the
reorganization within the meaning of Section 368(b) of the Code, which
opinion shall not have been withdrawn or modified in any material
respect. The issuance of such opinion shall be conditioned on receipt
by Shearman & Sterling of officer's certificates from each of Parent
and Company as contemplated in Section 6.09 of this Agreement. Each
such officer's certificate shall be dated as of the date such opinion
is to be delivered and shall not have been withdrawn or modified in any
material respect as of the Effective Time.
(g) Legal Opinion. The Company shall receive a legal opinion
from Andrews & Kurth LLP, legal counsel for Parent, covering the
matters set forth in Exhibit F hereto.
(h) Available Cash of Parent. At the Closing, Parent shall
have available at least $25 million of unencumbered cash and investment
interest receivable, after paying or reserving for all actual and
anticipated Merger-related expenses (except those contemplated by
Section 8.03(a) hereof to be paid by L-S.A.) but before wind-down
expenses, such as severance payments and lease termination charges,
which are not expected to exceed $1.6 million; provided, however, that
if the Closing shall not have been consummated by November 15, 2002,
the amount of unencumbered cash required to be available to Parent may
decrease by up to $350,000 for each 30 days between November 15, 2002
and the date of Closing.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01 Termination. This Agreement may be terminated and
the Merger and the other Transactions may be abandoned at any time prior to the
Effective Time, notwithstanding any requisite approval and adoption of this
Agreement and the Transactions by the stockholders of Parent, as follows:
(a) by mutual written consent of Parent and the Company duly
authorized by the Boards of Directors of Parent and the Company;
48
(b) by either Parent or the Company if the Effective Time
shall not have occurred on or before February 28, 2003; provided,
however, that the right to terminate this Agreement under this Section
8.01(b) shall not be available to any party whose failure to fulfill
any obligation under this Agreement has been the cause of, or resulted
in, the failure of the Effective Time to occur on or before such date;
(c) by the Company if: (i) the Parent Board withdraws,
modifies or changes its recommendation of this Agreement, the Merger,
the Certificate Amendments or the Transactions in a manner adverse to
the Company or shall have resolved to do so; (ii) the Parent Board
shall have recommended to the stockholders of Parent a Parent Competing
Transaction or shall have resolved to do so or shall have entered into
any letter of intent or similar document or any agreement, contract or
commitment accepting or agreeing to recommend the acceptance of any
Parent Competing Transaction; (iii) Parent shall have failed to include
in the Parent Proxy Statement the recommendation of the Parent Board in
favor of the approval and adoption of this Agreement and approval of
the Merger, (iv) the Parent Board fails to reaffirm its recommendation
in favor of the approval and adoption of this Agreement and the
approval of the Merger within five business days after the Company
requests in writing that such recommendation be reaffirmed; or (v) a
tender offer or exchange offer for 20% or more of the outstanding
shares of the capital stock of Parent is commenced, and the Parent
Board fails to recommend against acceptance of such tender offer or
exchange offer by its stockholders (including by taking no position
with respect to acceptance).
(d) by Parent if: (i) the Company Board withdraws, modifies or
changes its recommendation of this Agreement, the Merger or the
Transactions in a manner adverse to Parent or shall have resolved to do
so; (ii) the Company Board shall have recommended to the stockholders
of the Company a Company Competing Transaction or shall have resolved
to do so or shall have entered into any letter of intent or similar
document or any agreement, contract or commitment accepting or agreeing
to recommend the acceptance of any Company Competing Transaction; (iii)
the Company Board fails to reaffirm its recommendation in favor of the
approval and adoption of this Agreement and the approval of the Merger
within five business days after Parent requests in writing that such
recommendation be reaffirmed; or (iv) a tender offer or exchange offer
for 20% or more of the outstanding shares of the capital stock of the
Company is commenced, and the Company Board fails to recommend against
acceptance of such tender offer or exchange offer by its stockholders
(including by taking no position with respect to acceptance).
(e) by either Parent or the Company if the other party shall
have breached or failed to perform in any material respect any of its
representations, warranties, covenants or other agreements contained in
this Agreement, which breach or failure to perform (i) would give rise
to the failure of a condition set forth in Article VII and (ii) either
(A) is incapable of being cured by such party or (B) if curable, such
failure is not cured within 30 days after receipt by the breaching
party of a written notice from the other party requesting such cure;
49
(f) by either Parent or the Company if any Governmental
Authority shall have enacted, issued, promulgated, enforced or entered
any injunction, order, decree or ruling (whether temporary, preliminary
or permanent) which has become final and nonappealable and has the
effect of making consummation of the Merger illegal or otherwise
preventing or prohibiting consummation of the Merger;
(g) by either Parent or the Company if any proceeding related
to the other party under any bankruptcy, reorganization, arrangement,
insolvency, readjustment of debt, dissolution or liquidation law of any
jurisdiction is filed or any such proceeding is commenced, by or
against such other party and either (A) such other party by any act
indicates its approval thereof, consent thereto or acquiesces therein
or (B) such petition, application or proceeding is not dismissed within
180 days; or
(h) (i) by the Company or Parent if this Agreement or the
Certificate Amendments shall fail to receive the requisite vote of
approval at the Parent Stockholders' Meeting or any adjournment or
postponement thereof; or
(i) by Parent if this Agreement shall fail to receive the
requisite vote of approval by the stockholders of the Company.
SECTION 8.02 Effect of Termination. In the event of the
termination of this Agreement pursuant to Section 8.01, this Agreement shall
forthwith become void, and there shall be no liability under this Agreement on
the part of any party hereto, except (a) as set forth in Section 8.03 and (b)
nothing herein shall relieve any party from liability for any willful breach of
any of its representations, warranties, covenants or agreements set forth in
this Agreement prior to such termination; provided, however, that the
Confidentiality Agreement shall survive any termination of this Agreement.
SECTION 8.03 Fees and Expenses. (a) Except as set forth in
this Section 8.03, all expenses incurred in connection with this Agreement and
the transactions contemplated by this Agreement shall be paid by the party
incurring such expenses, whether or not the Merger or any other transaction is
consummated; provided, however, that expenses of third party advisors to the
Company, directly related to this Agreement and the Transactions, are not
expected to exceed $500,000, and that L-S.A. shall be responsible for all such
expenses in excess of $950,000.
(b) Parent agrees that:
(i) if the Company shall terminate this Agreement pursuant to
Section 8.01(c);
(ii) if (A) either Parent or the Company terminates this
Agreement pursuant to Section 8.01(b), (B) prior to such termination a
Parent Competing Transaction shall have been publicly announced with
respect to Parent and (C) Parent enters into an agreement providing for
a Parent Third Party Acquisition within 12 months after the date of
such termination; or
50
(iii) if (A) the Company or Parent terminates this Agreement
pursuant to Section 8.01(h)(i), (B) prior to such termination a Parent
Competing Transaction shall have been publicly announced with respect
to Parent and (C) Parent enters into an agreement providing for a
Parent Third Party Acquisition within 12 months after the date of such
termination,
then Parent shall pay to the Company promptly (but in any event no later than
five business days after the first of such events shall have occurred) a fee of
$1,000,000 (the "Parent Fee"), which amount shall be payable in immediately
available funds.
(c) The Company agrees that:
(i) if Parent shall terminate this Agreement pursuant to
Section 8.01(d);
(ii) if (A) either Parent or the Company terminates this
Agreement pursuant to Section 8.01(b), (B) prior to such termination a
Company Competing Transaction shall have been publicly announced with
respect to the Company and (C) the Company enters into an agreement
providing for a Company Third Party Acquisition within 12 months after
the date of such termination; or
(iii) if (A) Parent terminates this Agreement pursuant to
Section 8.01(h)(ii), (B) prior to such termination a Company Competing
Transaction shall have been publicly announced with respect to the
Company and (C) the Company enters into an agreement providing for a
Company Third Party Acquisition within 12 months after the date of such
termination,
then the Company shall pay to Parent promptly (but in any event no later than
five business days after the first of such events shall have occurred) a fee of
$1,000,000 (the "Company Fee"), which amount shall be payable in immediately
available funds.
(d) Each party acknowledges that the agreements contained in
this Section 8.03 are an integral part of the transactions contemplated by this
Agreement. In the event that Parent or the Company shall fail to pay the Parent
Fee or the Company Fee, as applicable, when due, commencing on the date that the
Parent Fee or the Company Fee, as applicable, became due, interest shall accrue
thereon at a rate equal to the rate of interest publicly announced by Citibank,
N.A., from time to time, in The City of New York, as such bank's Prime Rate plus
5.00%. Payment of the fees and expenses described in this Section 8.03 shall not
be in lieu of any damages incurred in the event of willful or intentional breach
of this Agreement.
SECTION 8.04 Amendment. This Agreement may be amended by the
parties hereto at any time prior to the Effective Time; provided, however, that,
after the approval and adoption of this Agreement and the Transactions by the
stockholders of the Company, no amendment may be made that would reduce the
amount or change the type of consideration into which each Share shall be
converted upon consummation of the Merger. This Agreement may not be amended
except by an instrument in writing signed by each of the parties hereto.
SECTION 8.05 Waiver. At any time prior to the Effective Time,
any party hereto may (a) extend the time for the performance of any obligation
or other act of any other
51
party hereto, (b) waive any inaccuracy in the representations and warranties of
any other party contained herein or in any document delivered pursuant hereto
and (c) waive compliance with any agreement of any other party or any condition
to its own obligations contained herein. Any such extension or waiver shall be
valid if set forth in an instrument in writing signed by the party or parties to
be bound thereby.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01 Survival of Representations, Warranties and
Agreements. The representations, warranties, covenants and agreements of the
Company and each of the Company Stockholders contained in this Agreement shall
survive the Closing until (and Claims based upon or arising out of such
representations, warranties, covenants and agreements may be asserted at any
time before the date which shall be) December 31, 2003; provided, however, that
the representations and warranties contained in Section 3.25 shall survive until
December 31, 2004; provided further that the representatives and warranties
contained in Section 3.15 shall survive until the expiration of the applicable
statute of limitations; and provided further that the representations and
warranties contained in Sections 3.04 and 3.17 shall survive indefinitely. The
termination of the representations, warranties, covenants and agreements
provided herein shall not affect the rights of a party in respect of any Claim
for which a Claim Notice was received by the other party prior to the expiration
of the applicable survival period provided herein.
SECTION 9.02 Indemnification. (a) The Company Stockholders
(the "Indemnifying Stockholders") shall jointly and severally indemnify, save
and hold harmless the Surviving Corporation, its affiliates and subsidiaries,
and its and their respective Representatives (the "Indemnified Parties" and
each, an "Indemnified Party"), from and against any and all Damages actually
incurred by them arising out of or resulting from:
(i) any breach of any representation or warranty made by
either the Company or the Company Stockholders in this Agreement; or
(ii) any breach of any covenant or agreement by either the
Company or the Company Stockholders contained in this Agreement;
provided, however, that the Company Stockholders shall not be liable for any
Damages arising out of or resulting from the negligence, willful misconduct or
bad faith of Parent or the Surviving Corporation or any third party retained by
it or their respective Representatives, or by Parent's breach of any of its
representations, warranties, covenants or agreements contained in this
Agreement.
Notwithstanding any other provisions of this Section 9.02, the
Indemnifying Stockholders shall not be required to indemnify the Surviving
Corporation for any Damages until the aggregate amount of all such Damages
exceeds $100,000, whereupon the Indemnifying Stockholders shall be required to
indemnify the Surviving Corporation for such Damages to the extent (but only to
the extent) that such Damages exceed $100,000. Notwithstanding anything
52
else in this Section 9.02, the Indemnifying Stockholders shall not be liable for
Damages in excess of $5,000,000 in the aggregate.
(b) Defense of Claims; Cooperation. If a claim for Damages (a
"Claim") is to be made by an Indemnified Party under this Section 9.02 against
an indemnifying party (an "Indemnifying Party" and collectively, the
"Indemnifying Parties") or if any Action is filed against any Indemnified Party
entitled to the benefit of indemnity hereunder, the Indemnified Party shall give
written notice, specifying the projected amount of the loss and the method of
computation thereof (a "Claim Notice"), to the Indemnifying Party as soon as
practicable, but in no event more than 30 days, after the filing of such Action
or receipt of any third party claim concerning any Damages for which
indemnification may be sought under this Section 9.02; provided, however, that
the failure of any Indemnified Party to give timely notice hereunder shall not
affect its rights to indemnification hereunder unless the Indemnifying Party is
materially adversely affected by such delay. After receipt of such Claim Notice,
the Indemnifying Party shall be entitled, if it so elects at its own cost, risk
and expense, (i) to take control of the defense and investigation of such Claim
or Action, (ii) to employ and engage attorneys of its own choice to handle and
defend the same (unless the named parties to any such Action include both the
Indemnifying Party and the Indemnified Party and the Indemnified Party has been
advised by counsel that there may be one or more legal defenses available to it
that are different from or additional to those available to the Indemnifying
Party, in which event the Indemnified Party shall be entitled, at the
Indemnifying Party's expense, to separate counsel of its own choosing), and
(iii) to compromise or settle such Claim or Action, which compromise or
settlement shall be made only with the written consent of the Indemnified Party,
such consent not to be unreasonably withheld; provided, however, that,
notwithstanding the foregoing, the Indemnified Party may, at its own cost,
participate in the investigation, trial and defense of such Claim or Action and
any appeal arising therefrom. If the Indemnifying Party fails to assume the
defense of such Claim or Action within 30 calendar days after receipt of the
Claim Notice, the Indemnified Party will have the right to undertake, at the
Indemnifying Party's expense, the defense, compromise or settlement of such
Claim or Action on behalf of and for the account and risk of the Indemnifying
Party; provided, however, that such Claim or Action shall not be compromised or
settled without the written consent of the Indemnifying Party, which consent
shall not be unreasonably withheld. In the event the Indemnified Party assumes
the defense of such Claim or Action, the Indemnified Party will keep the
Indemnifying Party reasonably informed of the progress of any such defense,
compromise or settlement. Notwithstanding the foregoing, the Indemnified Party
shall cooperate in all reasonable respects with the Indemnifying Party in the
investigation, trial and defense of such lawsuit or action and any appeal
arising therefrom.
(c) Notwithstanding anything in this Agreement to the
contrary, the Indemnifying Stockholders will not indemnify, save and hold
harmless an Indemnified Party for Damages that relate to or arise out of a
breach of the representations and warranties contained in Section 3.25 hereof,
unless such Damages arise from an order issued by a Governmental Authority or
from a third-party claim, provided, however, that the Indemnifying Stockholders
will not indemnify, save and hold harmless such Indemnified Party if such
Damages result from or arise wholly or partly out of actions or omissions of any
Indemnified Party after the Closing, and, in all cases where remediation is
required, the parties agree that the most cost-effective
53
measures that are consistent with the applicable Environmental Laws shall have
preference, except to the extent an Indemnified Party undertakes irrevocably to
pay any supplementary cost.
(d) Notwithstanding anything in this Agreement to the
contrary, the Indemnifying Stockholders' obligations pursuant to this Article IX
(whether to indemnify, save and hold harmless or otherwise), to the extent they
relate to or arise out of a breach of the representations and warranties
contained in Section 3.15 hereof, or any breach of any Tax covenant or Tax
agreement by either the Company or the Company Stockholders contained in this
Agreement, shall be subject to the following terms and conditions:
(i) After the Closing, the Surviving Corporation shall
promptly notify the Company Stockholders in writing of the commencement
of any Tax audit or administrative or judicial proceeding or of any
demand or claim on the Company, any subsidiary or the Surviving
Corporation which, if determined adversely to the taxpayer or after the
lapse of time would be grounds for indemnification by the Company
Stockholders under Section 9.02. Such notice shall contain factual
information (to the extent known to the Surviving Corporation)
describing the asserted Tax liability in reasonable detail and shall
include copies of any notice or other document received from any Taxing
authority in respect of any such asserted Tax liability. If the
Surviving Corporation fails to give the Company Stockholders prompt
notice of an asserted Tax liability as required by this Section 9.02(d)
then (x) if the Company Stockholder are precluded by the failure to
give prompt notice from contesting the asserted Tax liability in both
the administrative and judicial forums, then the Company Stockholders
shall not have any obligation to indemnify for any loss arising out of
such asserted Tax liability, and (y) if the Company Stockholders are
not so precluded from contesting but such failure to give prompt notice
results in a detriment to the Company Stockholders, then any amount
which the Company Stockholders are otherwise required to pay the
Surviving Corporation pursuant to Section 9.02 with respect to such
liability shall be reduced by the amount of such detriment.
(ii) The Company Stockholders may elect to direct, through
counsel of their own choosing and at their own expense, any audit,
claim for refund and administrative or judicial proceeding involving
any asserted Tax liability with respect to which indemnity may be
sought from the Indemnifying Stockholders under Section 9.02 (any such
audit, claim for refund or proceeding relating to an asserted Tax
liability are referred to herein collectively as a "Contest"). If the
Company Stockholders elect to direct the Contest of an asserted Tax
liability, they shall within 30 calendar days of receipt of the notice
of asserted Tax liability notify the Surviving Corporation of their
intent to do so, and the Surviving Corporation shall cooperate and
shall cause each of its subsidiaries to cooperate, at the Company
Stockholders' expense, in each phase of such Contest. If the Company
Stockholders elect not to direct the Contest, fail to notify the
Surviving Corporation of their election as herein provided or contest
their indemnification obligation under this Section 9.02(d), the
Surviving Corporation may pay, compromise or contest, at its own
expense, such asserted liability. However, in such case, the Surviving
Corporation may not settle or compromise any asserted liability over
the objection of the Company Stockholders; provided, however, that
consent to settlement or compromise
54
shall not be unreasonably withheld. In any event, each of the Surviving
Corporation and the Company Stockholders may participate, at their own
expense, in the Contest.
(iii) The Company Stockholders and Surviving Corporation will
provide each other with such cooperation and information as either of
them reasonably may request of the other in filing any Tax Return,
amended Tax Return or claim for refund, determining a liability for
Taxes or a right to a refund of Taxes or participating in or conducting
any audit or other proceeding in respect of Taxes. Such cooperation and
information shall include providing copies of relevant Tax Returns or
portions thereof, together with accompanying schedules and related work
papers and documents relating to rulings or other determinations by
Taxing authorities. Each party shall make its employees available on a
mutually convenient basis to provide explanations of any documents or
information provided hereunder. Each party will retain all Tax Returns,
schedules and work papers and all material records or other documents
relating to Tax matters of the Company and its subsidiaries for its
taxable period first ending after the Closing Date and for all prior
taxable periods until the later of (x) the expiration of the statute of
limitations of the taxable periods to which such Tax Returns and other
documents relate, without regard to extensions except to the extent
notified by the other party in writing of such extensions for the
respective Tax periods, or (y) six years following the due date
(without extension) for such Tax Returns. Any information obtained
under this Section 9.02(d) shall be kept confidential, except as may be
otherwise necessary in connection with the filing of Tax Returns or
claims for refund or in conducting an audit or other proceeding.
(e) Payments by the Indemnifying Stockholders hereunder shall
be limited to the amount of any Damages that remain after deducting therefrom
(i) any Tax benefit realizable by the Surviving Corporation, the Company or any
subsidiary by reason of the deductibility of such Damages (determined by
multiplying such deductible amount by the then applicable corporate income Tax
rate), and any deferred Tax benefit attributable to such Damages (determined on
the same basis but present valued to the extent obtained through depreciation or
amortization deductions) and (ii) any indemnity, contribution or other similar
payment recoverable by the Surviving Corporation from any third party with
respect thereto.
(f) For Tax purposes, the parties agree to treat all indemnity
payments made under this Article IX and for any misrepresentations or breaches
of warranties or covenants, as adjustments to the Merger Consideration, unless
otherwise required by applicable Law.
SECTION 9.03 Exclusive Remedies. Parent hereby acknowledges
that, except as otherwise contemplated by Section 2.06(e), its sole and
exclusive remedy with respect to any and all Claims relating to the subject
matter of this Agreement shall be pursuant to the indemnification provisions set
forth in this Article IX, except to the extent such claims arise out of willful
breach or fraud.
SECTION 9.04 Notices. All notices, requests, claims, demands
and other communications hereunder shall be in writing and shall be given (and
shall be deemed to have been duly given upon receipt) by delivery in person, by
facsimile transmission or by registered or certified mail (postage prepaid,
return receipt requested) to the respective parties at the following
55
addresses (or at such other address for a party as shall be specified in a
notice given in accordance with this Section 9.04):
(a) if to Parent:
Zonagen, Inc.
2408 Timberloch Place, Suite B-4
The Woodlands, TX 77380
Attention: Joseph S. Podolski
Telephone No.: (281) 719-3400
Facsimile No.: (281) 719-3446
with a copy to:
Andrews & Kurth L.L.P.
Waterway Plaza Two, Suite 200
10001 Woodloch Forest Drive
The Woodlands, Texas 77380
Attention: Jeffrey R. Harder, Esq.
Telephone No.: (713) 220-4312
Facsimile No.: (713) 238-7282
(b) if to the Company or the Surviving Corporation:
Lavipharm Corp.
69 Princeton-Hightstown Road
East Windsor, NJ 08520
Attention: Zsolt Lavotha
Chief Executive Officer and President
Telephone No.: (609) 371-6531
Facsimile No.: (609) 371-6522
with a copy to:
Lavipharm Corp.
69 Princeton-Hightstown Road
East Windsor, NJ 08520
Attention: Andrew I. Koven, Esq.
Senior Vice President and General Counsel
Telephone No.: (609) 371-6531
Facsimile No.: (609) 371-6522
56
and a copy to:
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
Attention: Christa A. D'Alimonte, Esq.
Telephone No.: (212) 848-4000
Facsimile No: (212) 848-7179
(c) and if to the Company Stockholders:
c/o Lavipharm S.A
Agias Marinas Street
PB 59
Peania, Attica Greece 19002
Facsimile No.: (011-3010) 66-45-386
Attention: Dr. A. Lavidas, Chairman
with a copy to:
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
Attention: Christa A. D'Alimonte, Esq.
Telephone No.: (212) 848-4000
Facsimile No: (212) 848-7179
SECTION 9.05 Certain Definitions. (a) For purposes of this
Agreement:
"affiliate" of a specified person means a person who, directly
or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, such specified person.
"business day" means any day on which the principal offices of
the SEC in Washington, D.C. are open to accept filings, or, in the case
of determining a date when any payment is due, any day on which banks
are not required or authorized to close in The City of New York.
"CERCLA" means the federal Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended.
"Company Competing Transaction" means any of the following
(other than the Transactions): (u) any merger, consolidation, share
exchange, business combination, recapitalization, liquidation,
dissolution or other similar transaction involving the Company or any
of its
57
material subsidiaries; (v) any sale, lease, exchange, transfer or other
disposition of all or substantially all of the assets of the Company or of any
of its material subsidiaries; (w) any sale, exchange, transfer or other
disposition of 15% or more of any class of equity securities of the Company or
of any of its subsidiaries; (x) any tender offer or exchange offer that, if
consummated, would result in any person beneficially owning 15% or more of any
class of equity securities of the Company or of any of its material
subsidiaries; (y) any solicitation in opposition to approval and adoption of
this Agreement by the Company's stockholders; or (z) any other transaction the
consummation of which would reasonably be expected to impede, interfere with,
prevent or materially delay any of the Transactions.
"Company Material Adverse Effect" means any event,
circumstance, change or effect that, in the aggregate with all other
events, circumstances, changes and effects, is or is reasonably likely
to be materially adverse to (i) the business, financial condition,
assets, liabilities or results of operations of the Company and its
subsidiaries taken as a whole or (ii) the ability of the Company to
consummate the transactions contemplated by this Agreement; provided,
however, that "Company Material Adverse Effect" shall not include any
event, circumstance, change or effect resulting from (x) changes in
general economic conditions, (y) general changes in the industries in
which the Company and its subsidiaries operate or (z) the public
announcement or pendency of the execution of this Agreement or the
Transactions.
"Company Superior Proposal" means an unsolicited written bona
fide offer made by a third party to consummate any of the following
transactions: (y) a merger, consolidation, share exchange, business
combination or other similar transaction involving the Company pursuant
to which the stockholders of the Company immediately preceding such
transaction would hold less than 65% of the equity interest in the
surviving or resulting entity of such transaction or (z) the
acquisition by any person or group (including by means of a tender
offer or an exchange offer or a two-step transaction involving a tender
offer followed with reasonable promptness by a cash-out merger
involving the Company), directly or indirectly, of ownership of 100% of
the then outstanding shares of stock of the Company, on terms
(including conditions to consummation of the contemplated transaction)
that the Company Board determines, in its good faith judgment (after
consultation with an independent legal counsel and a third party
financial advisor of internationally recognized reputation), to be more
favorable to the stockholders of the Company than the Merger and for
which financing, to the extent required, is then committed.
"Company Third Party Acquisition" means any of the following
transactions (other than the transactions contemplated by this
Agreement): (i) a merger, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction
involving the Company pursuant to which the stockholders of the Company
immediately preceding such transaction hold less than 50% of the
aggregate equity interests in the surviving or resulting entity of such
transaction or of any direct or indirect parent thereof; (ii) a sale or
other disposition by the Company of assets representing in excess of
50% of the aggregate fair market value of the Company's business
immediately prior to such sale or other disposition; or (iii) an
acquisition by any person or group (including by way of a tender offer
or an exchange offer or an issuance of capital stock
58
by the Company), directly or indirectly, of beneficial ownership of 50%
or more of the voting power of the then outstanding shares of capital
stock of the Company.
"Company Warrants" means any securities of the Company set
forth in Section 3.04(4) of the Company Disclosure Schedule.
"Contract" means any material written agreement, contract,
loan, indenture, security or pledge agreement, license or instrument to
which any of the Company or its subsidiaries is a party.
"control" (including the terms "controlled by" and "under
common control with") means the possession, directly or indirectly, or
as trustee or executor, of the power to direct or cause the direction
of the management and policies of a person, whether through the
ownership of voting securities, as trustee or executor, by contract or
credit arrangement or otherwise.
"Damages" means, individually and collectively, all costs,
losses, Taxes, Liabilities, damages, claims, and expenses (whether or
not arising out of third-party claims), including, without limitation,
interest, penalties, costs of mitigation, attorneys' fees and all
amounts paid in investigation, defense or settlement of any of the
foregoing.
"Environmental Law" means any law, statute, rule or regulation
of any Governmental Authority relating to the environment or
occupational health and safety as such relates to exposure to Hazardous
Materials, including, without limitation, any statute, regulation or
order pertaining to: (i) treatment, storage, disposal, generation and
transportation of Hazardous Materials; (ii) noise pollution; (iii) the
release or threatened release into the environment of Hazardous
Materials; (iv) the protection of wild life, marine sanctuaries and
wetlands, including, without limitation, all endangered and threatened
species; (v) underground storage tanks; (vi) the manufacture,
processing, use, distribution, or handling of Hazardous Materials and
(vii) the exposure of persons or property to Hazardous Materials. As
used above, the terms "release" and "environment" shall have the
meaning set forth in CERCLA.
"Hazardous Materials" means any pollutants or contaminants,
hazardous substances (as such term is defined under CERCLA), hazardous
wastes (as such terms are defined under the federal Resources
Conservation and Recovery Act), toxic materials, oil or petroleum and
petroleum products, or any other material subject to regulation under
any Environmental Law.
"Intellectual Property" means all of the following in any
jurisdiction throughout the world: (a) inventions, (b) patents and
patent applications (including all reissues, divisions, continuations,
continuations-in-part, extensions and reexaminations) and all rights
therein provided by international treaties or conventions and all
improvements to the inventions disclosed in each such patent or
application, (c) trademarks, service marks, trade dress, logos, trade
names and corporate names, (and all translations, adaptations,
derivations, and combinations of the foregoing) and Internet domain
names, together with all goodwill associated with each of the
foregoing, (d) copyrights and copyrightable
59
works, (e) registrations and applications for any of the foregoing, (f)
computer software, including object code, source code, operating
systems and specifications, data, data bases, files, documentation and
other materials related thereto, (g) trade secrets, confidential,
technical and business information (including formula and
compositions), know-how, manufacturing and production processes and
techniques, research and development information and technical data,
and (h) all rights to sue or recover and retain damages and costs and
attorneys' fees for present and past infringement of any of the
foregoing.
"knowledge of Parent" means the actual knowledge of any
director or executive officer of Parent, after due inquiry.
"knowledge of the Company" means the actual knowledge of any
director or executive officer of the Company, after due inquiry.
"Liabilities" mean any direct or indirect liability,
indebtedness, obligation, commitment, claim, deficiency, guaranty of or
by any Person of any type, whether accrued, absolute, contingent,
matured or unmatured.
"Parent Competing Transaction" means any of the following
(other than the Transactions): (u) any merger, consolidation, share
exchange, business combination, recapitalization, liquidation,
dissolution or other similar transaction involving Parent; (v) any
sale, lease, exchange, transfer or other disposition of all or
substantially all of the assets of Parent; (w) any sale, exchange,
transfer or other disposition of 15% or more of any class of equity
securities of Parent; (x) any tender offer or exchange offer that, if
consummated, would result in any person beneficially owning 15% or more
of any class of equity securities of Parent; (y) any solicitation in
opposition to approval and adoption of this Agreement by Parent's
stockholders; or (z) any other transaction the consummation of which
would reasonably be expected to impede, interfere with, prevent or
materially delay any of the Transactions.
"Parent Material Adverse Effect" means any event,
circumstance, change or effect that, in the aggregate with all other
events, circumstances, changes and effects, is or is reasonably likely
to be materially adverse to (i) the business, financial condition,
assets, liabilities or results of operations of Parent taken as a whole
or (ii) the ability of Parent to consummate the transactions
contemplated by this Agreement; provided, however, that "Parent
Material Adverse Effect" shall not include any event, circumstance,
change or effect resulting from (x) changes in general economic
conditions, (y) general changes in the industries in which Parent
operate or (z) the public announcement or pendency of the execution of
this Agreement or the Transactions.
"Parent Superior Proposal" means an unsolicited written bona
fide offer made by a third party to consummate any of the following
transactions: (y) a merger, consolidation, share exchange, business
combination or other similar transaction involving a party pursuant to
which the stockholders of Parent immediately preceding such transaction
would hold less than 65% of the equity interest in the surviving or
resulting entity of such transaction or (z) the acquisition by any
person or group (including by means of a tender offer or an exchange
offer or a two-step transaction
60
involving a tender offer followed with reasonable promptness by a
cash-out merger involving Parent), directly or indirectly, of ownership
of 100% of the then outstanding shares of stock of Parent, on terms
(including conditions to consummation of the contemplated transaction)
that Parent Board determines, in its good faith judgment (after
consultation with an independent legal counsel and a third party
financial advisor of internationally recognized reputation), to be more
favorable to the stockholders of Parent than the Merger and for which
financing, to the extent required, is then committed.
"Parent Third Party Acquisition" means any of the following
transactions (other than the transactions contemplated by this
Agreement): (i) a merger, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction
involving Parent pursuant to which the stockholders of Parent
immediately preceding such transaction hold less than 50% of the
aggregate equity interests in the surviving or resulting entity of such
transaction or of any direct or indirect parent thereof; (ii) a sale or
other disposition by Parent of assets representing in excess of 50% of
the aggregate fair market value of Parent's business immediately prior
to such sale or other disposition; or (iii) an acquisition by any
person or group (including by way of a tender offer or an exchange
offer or an issuance of capital stock by Parent), directly or
indirectly, of beneficial ownership of 50% or more of the voting power
of the then outstanding shares of capital stock of Parent.
"person" means a "person" as defined in Section 13(d)(3) of
the Exchange Act.
"Primary Milestone" has the meaning ascribed thereto in
Section 2.06(b) of the Company Disclosure Schedule.
"Representatives" means any officer, director, principal,
attorney, agent, employee or other representative.
"Secondary Milestone" has the meaning ascribed thereto in
Section 2.06(b) of the Company Disclosure Schedule.
"subsidiary" or "subsidiaries" of the Company, the Surviving
Corporation, Parent or any other person means an affiliate controlled
by such person, directly or indirectly, through one or more
intermediaries; provided, however, that with respect to the Company,
such subsidiaries shall not include Express Separations Ltd., Phasex
Corporation and Biovaleur.
"Tax" or "Taxes" shall mean any and all taxes, fees, levies,
duties, tariffs, imposts and other charges of any kind (together with
any and all interest, penalties, additions to tax and additional
amounts imposed with respect thereto) imposed by any Governmental
Authority or taxing authority, including, without limitation: taxes or
other charges on or with respect to income, franchise, windfall or
other profits, gross receipts, property, sales, use, capital stock,
payroll, employment, social security, workers' compensation,
unemployment compensation or net worth; taxes or other charges in the
nature of excise, withholding, ad valorem, stamp, transfer, value-added
or gains taxes; license, registration and documentation fees; and
customers' duties, tariffs and similar charges.
61
"Tax Returns" means all returns, reports, forms, declarations
and other filings with respect to Taxes.
(b) The following terms have the meaning set forth in the
Sections set forth below:
Defined Term Location of Definition
- ------------ ----------------------
Action........................................................... ss. 3.10
Aggregate Closing Shares......................................... ss. 2.01(a)
Agreement........................................................ Preamble
Arbitrator Milestone Determination Date.......................... ss. 2.06(e)
Arbitration Notice............................................... ss. 2.06(e)
Blue Sky Laws.................................................... ss. 3.06(b)
Board Milestone Determination Date............................... ss. 2.06(d)
Certificate Amendments........................................... ss. 6.02(a)
Certificate of Merger............................................ ss. 1.02
Certificates..................................................... ss. 2.02(a)
Charter Documents................................................ ss. 3.03
Claim............................................................ ss. 9.02(b)
Claim Notice..................................................... ss. 9.02(b)
Closing.......................................................... ss. 1.02
Code............................................................. Recitals
Company.......................................................... Preamble
Company Balance Sheet............................................ ss. 3.08
Company Board.................................................... Recitals
Company Common Stock............................................. ss. 2.01(a)
Company Defined Contribution Plan................................ ss. 6.06(d)
Company Disclosure Schedule...................................... Article III
Company Employees................................................ ss. 6.06(a)
Company Fee...................................................... ss. 8.03(c)
Company Option................................................... ss. 2.04(a)
Company Permits.................................................. ss. 3.07
Company Plans.................................................... ss. 3.13(a)
Company Proprietary Rights....................................... ss. 3.12
Company Series A Preferred Stock................................. ss. 2.01(a)
Company Series B Preferred Stock................................. ss. 2.01(b)
Company Stockholder or Company Stockholders...................... Preamble
Company Stockholders Meeting..................................... ss. 6.01(a)
Company Voting Agreement......................................... Recitals
Company's Equity Plan ........................................... ss. 2.04(a)
Confidentiality Agreement........................................ ss. 6.04(b)
Contest.......................................................... ss. 9.02(d)(ii)
DGCL............................................................. Recitals
Earn-Out Period.................................................. ss. 2.06(a)
Earn-Out Shares.................................................. ss. 2.06(a)
Earn-Out Stockholders............................................ ss. 2.06(a)
62
Defined Term Location of Definition
- ------------ ----------------------
Effective Time................................................... ss. 1.02
ERISA............................................................ ss. 3.13(a)
Exchange Act..................................................... ss. 3.06(b)
Exchange Ratio................................................... ss. 2.01(a)
Financial Statements............................................. ss. 3.08
GAAP............................................................. ss. 3.08
Governmental Authority........................................... ss. 3.06(b)
HSR Act.......................................................... ss. 3.06(b)
Indemnified Party or Indemnified Parties......................... ss. 9.02(a)
Indemnifying Party or Indemnifying Parties....................... ss. 9.02(b)
Indemnifying Stockholders........................................ ss. 9.02(a)
Interim Financial Statements..................................... ss. 3.08
Law.............................................................. ss. 3.06(a)
L-S.A............................................................ Preamble
LGH.............................................................. Preamble
Merger........................................................... Recitals
Merger Consideration............................................. ss. 2.01(a)
Merger S-4....................................................... ss. 6.15(b)
Milestone Determination Date..................................... ss. 2.06(e)
Nasdaq........................................................... ss. 2.02(c)
Order............................................................ ss. 7.01(b)
Outstanding Parent Common Stock.................................. ss. 2.01(a)
Parent........................................................... Preamble
Parent Balance Sheet............................................. ss. 4.07(c)
Parent Board..................................................... Recitals
Parent Common Stock.............................................. ss. 2.01(a)
Parent Defined Contribution Plan................................. ss. 6.06(d)
Parent Disclosure Schedule....................................... Article IV
Parent Employees................................................. ss. 6.06(a)
Parent Fee....................................................... ss. 8.03(b)
Parent Permits................................................... ss. 4.06
Parent Plans..................................................... ss. 4.13(a)
Parent Preferred Stock........................................... ss. 4.03(a)
Parent Proprietary Rights........................................ ss. 4.11
Parent Proxy Statement........................................... ss. 6.02(a)
Parent Rights Agreement.......................................... ss. 2.05
Parent SEC Reports............................................... ss. 4.07(a)
Parent's Financial Advisor....................................... ss. 4.16
Parent Stockholders' Meeting..................................... ss. 6.02(a)
Parent Stock Option Plans........................................ ss. 4.03(a)
Parent Voting Agreement.......................................... Recitals
SEC.............................................................. ss. 4.07(a)
Securities Act................................................... ss. 4.05(b)
Series B Preferred Stock Exchange Ratio.......................... ss. 2.01(b)
Shares........................................................... ss. 2.01(a)
63
Defined Term Location of Definition
- ------------ ----------------------
Stockholders Consent............................................. ss. 6.01(a)
Substituted Option............................................... ss. 2.04(a)
Surviving Corporation............................................ ss. 1.01
Surviving Corporation Board...................................... ss. 1.05
Target Percentage................................................ ss. 2.06(b)
Termination Date................................................. ss. 6.06(d)
Transactions..................................................... ss. 3.05
SECTION 9.06 Severability. If any term or other provision of
this Agreement is invalid, illegal or incapable of being enforced by any rule of
law, or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic or
legal substance of the Transactions is not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in a mutually acceptable manner in
order that the Transactions be consummated as originally contemplated to the
fullest extent possible.
SECTION 9.07 Entire Agreement; Assignment. This Agreement, the
Confidentiality Agreement, the Stockholders Agreement/Registration Rights
Agreement, the Parent Voting Agreement and the Company Voting Agreement
constitute the entire agreement among the parties with respect to the subject
matter hereof and supersede, except as set forth in Section 6.04(b), all prior
agreements and undertakings, both written and oral, among the parties, or any of
them, with respect to the subject matter hereof. This Agreement shall not be
assigned (whether pursuant to a merger, by operation of law or otherwise)
without the consent of the Company and Parent.
SECTION 9.08 Parties in Interest. This Agreement shall be
binding upon and inure solely to the benefit of each party hereto, and nothing
in this Agreement, express or implied, is intended to or shall confer upon any
other person any right, benefit or remedy of any nature whatsoever under or by
reason of this Agreement, except that Section 2.06 is intended to be for the
benefit of the Earn-Out Stockholders and may be enforced by such persons.
SECTION 9.09 Specific Performance. The parties hereto agree
that irreparable damage would occur in the event any provision of this Agreement
were not performed in accordance with the terms hereof and that the parties
shall be entitled to specific performance of the terms hereof, in addition to
any other remedy at law or equity.
SECTION 9.10 Governing Law. This Agreement shall be governed
by, and construed in accordance with, the laws of the State of New York
applicable to contracts executed in and to be performed in that State, except to
the extent that the Delaware General Corporation Law is mandatorily applicable
to the Merger or to matters arising under or in connection with this Agreement.
64
(i) Any claim, action, suit or proceeding seeking to enforce
any provision of, or based on any matter arising out of or in
connection with, this Agreement or the transactions contemplated hereby
may be heard and determined in any New York state or federal court
sitting in The City of New York, County of Manhattan, and each of the
parties hereto hereby consents to the exclusive jurisdiction of such
courts (and of the appropriate appellate courts therefrom in any such
claim, action, suit or proceeding) and irrevocably waives, to the
fullest extent permitted by law, any objection that it may now or
hereafter have to the laying of venue of any such claim, action, suit
or proceeding in any such court or that any such claim, action, suit or
proceeding that is brought in any such court has been brought in an
inconvenient forum.
(ii) Subject to applicable law, process in any such claim,
action, suit or proceeding may be served on any party anywhere in the
world, whether within or without the jurisdiction of any such court.
Without limiting the foregoing and subject to applicable law, each
party agrees that service of process on such party as provided in
Section 9.04 shall be deemed effective service of process on such
party. Nothing herein shall affect the right of any party to serve
legal process in any other manner permitted by law or at equity. WITH
RESPECT TO ANY SUCH CLAIM, ACTION, SUIT OR PROCEEDING IN ANY SUCH
COURT, EACH OF THE PARTIES IRREVOCABLY WAIVES AND RELEASES TO THE OTHER
ITS RIGHT TO A TRIAL BY JURY, AND AGREES THAT IT WILL NOT SEEK A TRIAL
BY JURY IN ANY SUCH PROCEEDING.
SECTION 9.11 Headings. The descriptive headings contained in
this Agreement are included for convenience of reference only and shall not
affect in any way the meaning or interpretation of this Agreement.
SECTION 9.12 Counterparts. This Agreement may be executed and
delivered (including by facsimile transmission) in one or more counterparts, and
by the different parties hereto in separate counterparts, each of which when
executed shall be deemed to be an original, but all of which taken together
shall constitute one and the same agreement.
[Remainder of Page Intentionally Left Blank]
65
IN WITNESS WHEREOF, Parent, the Company and the Company
Stockholders have caused this Agreement to be executed as of the date first
written above by their respective officers thereunto duly authorized.
ZONAGEN, INC.
By: /s/ JOSEPH PODOLSKI
------------------------------------
Name: Joseph Podolski
Title: President and Chief Executive
Officer
LAVIPHARM CORP.
By: /s/ ZSOLT LAVOTHA
------------------------------------
Name: Zsolt Lavotha
Title: President and Chief Executive
Officer
LAVIPHARM S.A.
By: /s/ DR. ATHANASE LAVIDAS
------------------------------------
Name: Dr. Athanase Lavidas
Title: Chairman and Chief Executive
Officer
LAVIPHARM GROUP HOLDING S.A.
By: /s/ DR. ATHANASE LAVIDAS
------------------------------------
Name: Dr. Athanase Lavidas
Title: Chairman
EXHIBIT A
DIRECTORS AND OFFICERS OF PARENT PARTY TO THE PARENT VOTING AGREEMENT
Martin P. Sutter
Joseph S. Podolski
Lloyd M. Bentsen, III
Steven Blasnik
Louis Ploth, Jr.
A-1
EXHIBIT B-1
FORM OF COMPANY TAX
OFFICER'S CERTIFICATE
[ ], 2002
LAVIPHARM CORP.
OFFICER'S CERTIFICATE
In connection with the opinion to be rendered on [ ], 2002, by Shearman
& Sterling ("Shearman"), counsel to Lavipharm Corp., a Delaware corporation
("Target"), regarding certain United States federal income tax consequences of
the merger (the "Merger") of Target with and into Zonagen, Inc., a Delaware
corporation ("Acquiror"), pursuant to the Agreement and Plan of Merger, dated
October 30, 2002 (the "Merger Agreement"), recognizing that Shearman will rely
on this Certificate in delivering its opinion, the undersigned officer of Target
hereby certifies that, to the best of his knowledge, the facts relating to the
Merger, as such facts are described in the Merger Agreement [and the Acquiror
Proxy Statement (as defined in the Merger Agreement) of Acquiror filed with the
Securities and Exchange Commission on November [ ], 2002] are, insofar as such
facts pertain to Target, true, correct, and complete in all material respects.
The undersigned further certifies as follows:
1. The exchange ratio provided for in the Merger Agreement was
the result of arm's length bargaining between Target and
Acquiror and their respective representatives and,
accordingly, the fair market value of the Acquiror common
stock to be received by each Target stockholder in the Merger
will be approximately equal to the fair market value of the
Target stock surrendered in exchange therefor.
2. Neither Target nor any person related to Target has redeemed
or made any distributions (other than regular, normal
dividends) with respect to, or will either redeem or make any
distributions (other than regular, normal dividends) with
respect to, either directly or indirectly, any shares of
Target stock in the time following the commencement of
negotiations with respect to the Merger and prior to the
effective time of the Merger. For purposes of this
representation, "related" means (i) ownership of stock
possessing at least 50% of the total combined voting power of
all classes of stock entitled to vote or at least 50% of the
total value of shares of all classes of stock or (ii) members
of the same affiliated group.
3. Target has no plan or intention to issue additional shares of
its stock that would result in Acquiror losing control of
Target. For purposes of this representation, "control" means
the direct ownership of Target stock possessing at least 80%
of the combined voting power of all classes of Target stock
entitled to vote and at least 80% of the total number of
shares of all other classes of Target stock.
B-1-1
4. Target and its stockholders will pay their respective
expenses, if any, incurred in connection with the Merger.
5. There is no intercorporate indebtedness existing between
Acquiror and Target that was issued, acquired, or will be
settled at a discount.
6. Target is not an investment company as that term is defined in
Section 368(a)(2)(F)(iii) and (iv) of the Internal Revenue
Code of 1986, as amended (the "Code").
7. Target will pay its dissenting stockholders, if any, the value
of their stock out of its own funds. No funds will be supplied
for that purpose, directly or indirectly, by Acquiror, nor
will Acquiror directly or indirectly reimburse Target for any
payments to dissenters.
8. Target is not under the jurisdiction of a court in a Title 11
or similar case within the meaning of Section 368(a)(3)(A) of
the Code.
9. On the date of the Merger, the fair market value of the assets
of Target transferred to Acquiror will equal or exceed the
sum of the liabilities assumed by Acquiror plus the amount of
liabilities, if any, to which the transferred assets are
subject. The liabilities of Target assumed by Acquiring and
the liabilities to which the transferred assets of Target are
subject were incurred by Target in the ordinary course of its
business.
10. The payment of cash in lieu of fractional shares of Acquiror
common stock is solely for the purpose of avoiding the expense
and inconvenience to Acquiror of issuing fractional shares and
does not represent separately bargained-for consideration. The
total cash consideration that will be paid in the Merger to
the Target stockholders instead of issuing fractional shares
of Acquiror common stock will not exceed one percent of the
total consideration that will be issued in the Merger to the
Target stockholders in exchange for their shares of Target
stock. The fractional share interests of each Target
stockholder will be aggregated, and no Target stockholder will
receive cash in an amount equal to or greater than the value
of one full share of Acquiror common stock.
11. None of the compensation received by any stockholder-employee
of Target will be separate consideration for, or allocable to,
any of his or her shares of Target stock; none of the shares
of Acquiror common stock received by any such
stockholder-employee will be separate consideration for, or
allocable to, any employment agreement or noncompetition
agreement; and the compensation paid to any such
stockholder-employee will be for services actually rendered
and will be commensurate with amounts paid to third parties
bargaining at arm's length for similar services.
12. The individual executing this letter is an authorized officer
of Target.
B-2
13. There are no agreements in existence other than the Merger
Agreement and the related documents discussed therein that
represent the understanding of Target on the one hand and
Acquiror on the other hand with respect to the Merger.
Lavipharm Corp.
By: ______________________________________
Name: ____________________________________
Title: ___________________________________
B-3
EXHIBIT B-2
FORM OF PARENT TAX
OFFICER'S CERTIFICATE
[ ], 2002
ZONAGEN, INC.
OFFICER'S CERTIFICATE
In connection with the opinion to be rendered on [ ], 2002, by Shearman
& Sterling ("Shearman"), counsel to Lavipharm Corp., a Delaware corporation
("Target"), regarding certain United States federal income tax consequences of
the merger (the "Merger") of Target with and into Zonagen, Inc., a Delaware
corporation ("Acquiror"), pursuant to the Agreement and Plan of Merger, dated
October 30, 2002 (the "Merger Agreement"), recognizing that Shearman will rely
on this Certificate in delivering its opinion, the undersigned officer of
Acquiror hereby certifies that, to the best of his knowledge, the facts relating
to the Merger, as such facts are described in the Merger Agreement [and the
Acquiror Proxy Statement (as defined in the Merger Agreement) of Acquiror filed
with the Securities and Exchange Commission on November [ ] 2002 ] are, insofar
as such facts pertain to Acquiror, true, correct, and complete in all material
respects. The undersigned further certifies as follows:
1. The exchange ratio provided for in the Merger Agreement was
the result of arm's length bargaining between Target and
Acquiror and their respective representatives and,
accordingly, the fair market value of the Acquiror common
stock to be received by each Target stockholder in the Merger
will be approximately equal to the fair market value of the
Target stock surrendered in exchange therefor.
2. Neither Acquiror nor any person related to Acquiror (i) is
under any obligation, or has entered into any agreement, to
redeem, repurchase or otherwise reacquire any shares of
Acquiror common stock issued in the Merger or (ii) has any
plan or intention to redeem, repurchase, or otherwise
reacquire any shares of Acquiror common stock issued in the
Merger. For purposes of this representation, "related" means
(i) ownership of stock possessing at least 50% of the total
combined voting power of all classes of stock entitled to vote
or at least 50% of the total value of shares of all classes of
stock or (ii) members of the same affiliated group.
3. Acquiror does not have any plan or intention to sell or
otherwise dispose of any of the assets of Target acquired in
the Merger except for dispositions made in the ordinary course
of business or transfers to a corporation controlled by
Acquiror.
B-2-1
4. Following the Merger, Acquiror will cause Target to continue
the historic business of Target or to use a significant
portion of Target's historic business assets in a business.
5. Acquiror will pay its expenses, if any, incurred in connection
with the Merger.
6. There is no intercorporate indebtedness existing between
Acquiror and Target that was issued, acquired, or will be
settled at a discount.
7. Acquiror is not an investment company as that term is defined
in Section 368(a)(2)(F)(iii) and (iv) of the Internal Revenue
Code of 1986, as amended (the "Code").
8. Target will pay its dissenting stockholders, if any, the value
of their stock out of its own funds. No funds will be supplied
for that purpose, directly or indirectly, by Acquiror, nor
will Acquiror directly or indirectly reimburse Target for any
payments to dissenters.
9. Acquiror is not under the jurisdiction of a court in a Title
11 or similar case within the meaning of Section 368(a)(3)(A)
of the Code.
10. The payment of cash in lieu of fractional shares of Acquiror
common stock is solely for the purpose of avoiding the expense
and inconvenience to Acquiror of issuing fractional shares and
does not represent separately bargained-for consideration. The
total cash consideration that will be paid in the Merger to
Target stockholders instead of issuing fractional shares of
Acquiror common stock will not exceed one percent of the total
consideration that will be issued in the Merger to Target
stockholders in exchange for their shares of Target stock. The
fractional share interests of each Target stockholder will be
aggregated, and no Target stockholder will receive cash in an
amount equal to or greater than the value of one full share of
Acquiror common stock.
11. None of the compensation received by any stockholder-employee
of Target will be separate consideration for, or allocable to,
any of his or her shares of Target stock; none of the shares
of Acquiror common stock received by any such
stockholder-employee will be separate consideration for, or
allocable to, any employment agreement or noncompetition
agreement; and the compensation paid to any such
stockholder-employee will be for services actually rendered
and will be commensurate with amounts paid to third parties
bargaining at arm's length for similar services.
12. The individual executing this letter is an authorized to make
all the representations set forth herein.
B-2-2
13. The Merger Agreement and all related documents discussed
therein represent the entire understanding of Target on the
one hand and Acquiror on the other hand with respect to the
Merger.
Zonagen, Inc.
By: _________________________________________
Name: _______________________________________
Title: ______________________________________
B-2-3
EXHIBIT C
DIRECTORS OF SURVIVING CORPORATION
BOARD FOLLOW THE MERGER
Board of Directors
Dr. Lavidas Chairman of the Board
Mr. Lavotha Director
Hans E. Reiche Director
Martin P. Sutter Director
Steven Blasnik Director
[Paramount Designee]+ Director
[Independent director with pharmaceutical Director
and health care industry related
experience designated by the Company]+
[Independent director with pharmaceutical Director
and health care industry related
experience designated by the Company]+
[Independent director with pharmaceutical Director
and health care industry related
experience designated by Parent]* +
__________________________
+ To be determined prior to Closing.
C-1
EXHIBIT D
SENIOR MANAGEMENT OF SURVIVING CORPORATION
FOLLOWING THE MERGER
Zsolt E. Lavotha President and Chief Executive Officer
Andrew I. Koven Executive Vice President, General Counsel and
Corporate Business Development
TBD Vice President and Chief Financial Officer
Suresh B. Borsadia Vice President - Research and Development
Michel J.B. Perrut Chief Technology Officer
Patricia J. Houston Vice President - Human Resources
Jean Bonnelye Vice President, General Manager - Separex
Raynal Rubio Vice president of Quality Assurance and Site
Management
TBD Director of Investment Relations and Public
Relations
D-1
EXHIBIT E
FORM OF STOCKHOLDERS AGREEMENT/REGISTRATION RIGHTS AGREEMENT
E-1
EXECUTION COPY
STOCKHOLDERS AGREEMENT/REGISTRATION RIGHTS AGREEMENT
Between
Zonagen, Inc.
and
Stockholders of Zonagen, Inc.
EXECUTION COPY
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
SECTION 1.01 Certain Defined Terms.....................................................1
SECTION 1.02 Additional Defined Terms..................................................3
ARTICLE II
REGISTRATION RIGHTS
SECTION 2.01 Demand Registration.......................................................3
SECTION 2.02 Piggy-Back Registration...................................................4
SECTION 2.03 Blackout Periods..........................................................6
SECTION 2.04 Registration Procedures...................................................6
SECTION 2.05 Expenses 10
SECTION 2.06 Rule 144 and Rule 144A Information.......................................10
SECTION 2.07 Indemnification and Contribution.........................................11
SECTION 2.08 (a) Certain Additional Limitations on Registration Rights................13
SECTION 2.09 Limitations on Registration of Other Securities; Representation..........14
SECTION 2.10 No Inconsistent Agreements...............................................14
SECTION 2.11 Selection of Managing Underwriters.......................................14
ARTICLE III
ADDITIONAL AGREEMENTS
SECTION 3.01 Designation of Board of Directors........................................15
SECTION 3.02 Replacement Designees....................................................15
SECTION 3.03 Committees of the Board..................................................15
SECTION 3.04 Covenant to Vote.........................................................15
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SECTION 3.05 No Voting or Conflicting Agreements......................................16
SECTION 3.06 Holdback Agreement.......................................................16
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PARTIES
SECTION 4.01 Incorporation and Authority of the Stockholders..........................16
SECTION 4.02 Incorporation and Authority of Parent....................................17
ARTICLE V
MISCELLANEOUS
SECTION 5.01 Specific Performance.....................................................17
SECTION 5.02 Amendments and Waivers...................................................17
SECTION 5.03 Notice Generally.........................................................18
SECTION 5.04 Successors and Assigns; Third Party Beneficiaries........................19
SECTION 5.05 Headings 19
SECTION 5.06 Governing Law; Jurisdiction..............................................19
SECTION 5.07 Severability.............................................................20
SECTION 5.08 Entire Agreement.........................................................20
SECTION 5.09 Cumulative Remedies......................................................20
SECTION 5.10 Construction.............................................................20
SECTION 5.11 Counterparts.............................................................20
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STOCKHOLDERS AGREEMENT/REGISTRATION RIGHTS AGREEMENT, dated as of
[____], 2002 (this "Agreement"), by and between Zonagen, Inc., a Delaware
corporation ("Parent"), and the stockholders set forth on the signature pages
hereto (the "Stockholders").
WHEREAS, the Stockholders are receiving shares of common stock, par
value $0.001 per share, of Parent (the "Parent Common Stock") pursuant to that
certain Agreement and Plan of Merger (the "Merger Agreement"), dated as of
October 30, 2002, among Lavipharm Corp., a Delaware corporation (the "Company"),
Lavipharm S.A., a Greek corporation ("L-S.A."), Lavipharm Group Holding S.A., a
Luxembourg corporation ("LGH"), and Parent, pursuant to which the Company was
merged with and into Parent(the "Merger").
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, and intending to be legally
bound hereby, it is agreed as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01 Certain Defined Terms. Unless otherwise defined herein,
the terms below shall have the following meanings (such meanings being equally
applicable to both the singular and plural form of the terms defined):
"Affiliate" shall mean, with respect to any specified Person, any other
Person that directly, or indirectly through one or more intermediaries,
Controls, is Controlled by, or is under common Control with, such specified
Person.
"Agreement" shall mean this Stockholders Agreement/Registration Rights
Agreement, including all amendments, modifications and supplements and any
exhibits or schedules to any of the foregoing.
"Business Day" shall mean any day that is not a Saturday, a Sunday or a
day on which commercial banks are required or permitted by law to be closed in
the City of New York in the State of New York.
"Control" (including the terms "Controlling", "Controlled by" and
"under common Control with") means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, as trustee or
executor, by contract or otherwise, including, without limitation, the
ownership, directly or indirectly, of securities having the power to elect a
majority of the board of directors or similar body governing the affairs of such
Person.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and all rules and regulations promulgated thereunder.
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"Holder" shall mean any of the Stockholders, and any transferee of a
Stockholder to whom Registrable Securities are permitted to be transferred in
accordance with the terms of this Agreement, and, in each case, who continues to
be entitled to the rights of a Holder hereunder.
"Initiating Holders" shall mean a Holder or Holders who in the
aggregate own at least a majority of the outstanding Registrable Securities.
"NASD" shall mean the National Association of Securities Dealers, Inc.,
or any successor entity thereof.
"Person" shall mean any individual, corporation, partnership, joint
venture, firm, trust, unincorporated organization, government or any agency or
political subdivision thereof or other entity.
"Prospectus" means the prospectus (including any preliminary prospectus
and any final prospectus) included in the Registration Statement as amended or
supplemented by any supplement with respect to the terms of the offering of any
portion of the Registrable Securities pursuant to a Demand Registration or
Piggy-Back Registration and by all other amendments and supplements thereto,
including post-effective amendments and any material incorporated by reference
therein.
"Registrable Securities" shall mean (a) the shares of Parent Common
Stock issued pursuant to the Merger Agreement, whether in the Merger or pursuant
to Section 2.06 of the Merger Agreement, and held by a Holder and (b) any
securities issuable or issued or distributed in respect of any of the Parent
Common Stock identified in clause (a) by way of stock dividend or stock split or
in connection with a combination of shares, recapitalization, reorganization,
merger, consolidation or otherwise. For purposes of this Agreement, Registrable
Securities shall cease to be Registrable Securities when (i) a Registration
Statement covering such Registrable Securities has been declared effective under
the Securities Act by the SEC and such Registrable Securities have been disposed
of pursuant to such effective Registration Statement, (ii) such Registrable
Securities have been disposed of pursuant to a valid exemption from registration
under the Securities Act or (iii) such Registrable Securities may be sold under
Rule 144 of the Securities Act without limitation on the number of shares or
manner of sale.
"Registration Statement" shall mean the Demand Registration Statement
and/or the Piggy-Back Registration Statement, as the case may be, including the
Prospectus contained therein, any amendments and supplements to such
Registration Statement, including post-effective amendments, and all exhibits
and any materials incorporated by reference in such Registration Statement.
"Securities Act" shall mean the Securities Act of 1933, as amended, and
all rules and regulations promulgated thereunder.
"SEC" shall mean the Securities and Exchange Commission, or any
successor thereto.
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SECTION 1.02 Additional Defined Terms. The following terms have the
meanings set forth in the Section set forth opposite such term:
Term Section
---- -------
Blackout Period 2.03
Board 3.01
Company Recitals
Company Directors 3.01
Demand for Registration 2.01(c)
Demand Registration 2.01(a)
Demand Registration Statement 2.01(a)
Indemnified Party 2.07(d)
Indemnifying Party 2.07(d)
Independent Directors 3.01
LGH Recitals
L-S.A. Recitals
Maximum Number of Securities 2.01(b)
Merger Agreement Recitals
Parent Preamble
Parent Common Stock Recitals
Participating Demand Holders 2.01(a)
Participating Piggy-Back Holders 2.02(b)
Piggy-Back Registration 2.02(a)
Piggy-Back Registration Statement 2.02(a)
Stockholders Preamble
ARTICLE II
REGISTRATION RIGHTS
SECTION 2.01 Demand Registration. (a) After receipt of a written
request from the Initiating Holders requesting that Parent effect a registration
(a "Demand Registration") under the Securities Act covering all or part of the
Registrable Securities which specifies the intended method or methods of
disposition thereof, Parent shall promptly notify all Holders in writing of the
receipt of such request and each such Holder, in lieu of exercising its rights
under Section 2.02, may elect (by written notice sent to Parent within ten
Business Days from the date of such Holder's receipt of the aforementioned
notice from Parent) to have all or part of such Holder's Registrable Securities
included in such registration thereof pursuant to this Section 2.01, and such
Holder shall specify in such notice the number of Registrable Securities that
such Holder elects to include in such registration. Thereupon Parent shall, as
expeditiously as is possible, but in any event no later than 30 days (excluding
any days which occur during a permitted Blackout Period under Section 2.03
below) after receipt of a written request for a Demand Registration, file with
the SEC and use its reasonable efforts to cause to be declared effective, a
registration statement (a "Demand Registration Statement") relating to all
shares of Registrable Securities which Parent has been so requested to register
by such Holders
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("Participating Demand Holders") for sale, to the extent required to permit the
disposition (in accordance with the intended method or methods thereof, as
aforesaid) of the Registrable Securities so registered; provided, however, that
the Registrable Securities requested to be registered (i) constitute at least
15% of the Registrable Securities issued pursuant to the Merger Agreement or
(ii) include all Registrable Securities held by all of the Holders at such time.
(b) If the majority of the Participating Demand Holders in a Demand
Registration relating to a public offering so request that the offering be
underwritten with a managing underwriter selected in the manner set forth in
Section 2.11 below and such managing underwriter of such Demand Registration
advises Parent in writing that, in its opinion, the number of securities to be
included in such offering is greater than the total number of securities which
can be sold therein without having a material adverse effect on the distribution
of such securities or otherwise having a material adverse effect on the
marketability thereof (the "Maximum Number of Securities"), then Parent shall
include in such Demand Registration the Registrable Securities that the
Participating Demand Holders have requested to be registered thereunder only to
the extent the number of such Registrable Securities does not exceed the Maximum
Number of Securities. If such amount exceeds the Maximum Number of Securities,
the number of Registrable Securities included in such Demand Registration shall
be allocated among all the Participating Demand Holders on a pro rata basis
(based on the number of Registrable Securities held by each Participating Demand
Holder). If the amount of such Registrable Securities does not exceed the
Maximum Number of Securities, Parent may include in such Registration any other
securities of Parent held by other security holders of Parent, as Parent may in
its discretion determine or be obligated to allow, in an amount which together
with the Registrable Securities included in such Demand Registration shall not
exceed the Maximum Number of Securities.
(c) The Initiating Holders shall be entitled to an aggregate of two
registrations of Registrable Securities per calendar year on Form S-3 (or such
other successor form to Form S-3) pursuant to this Section 2.01 (each, a "Demand
for Registration") and one of such registrations per year may be an underwritten
offering pursuant to Section 2.01(b); provided, that a registration requested
pursuant to this Section 2.01 shall not be deemed to have been effected for
purposes of this Section 2.01(c) unless (i) it has been declared effective by
the SEC, (ii) it has remained effective for the period set forth in Section
2.04(a), (iii) Holders of Registrable Securities included in such registration
have not withdrawn sufficient shares from such registration such that the
remaining holders requesting registration would not have been able to request
registration under the provisions of Section 2.01 and (iv) the offering of
Registrable Securities pursuant to such registration is not subject to any stop
order, injunction or other order or requirement of the SEC (other than any such
stop order, injunction, or other requirement of the SEC prompted by act or
omission of Holders of Registrable Securities).
(d) Notwithstanding anything to the contrary contained herein, Parent
shall not be required to prepare and file (i) more than two Demand Registration
Statements in any 12-month period, or (ii) any Demand Registration Statement
within 60 days following the date of effectiveness of any other Registration
Statement.
SECTION 2.02 Piggy-Back Registration. (a) If Parent proposes to file on
its behalf and/or on behalf of any holder of its securities (other than a holder
of Registrable
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Securities) a registration statement under the Securities Act on any form (other
than a registration statement on Form S-4 or S-8 or any successor form for
securities to be offered in a transaction of the type referred to in Rule 145
under the Securities Act or to employees of Parent pursuant to any employee
benefit plan, respectively) for the registration of Parent Common Stock (a
"Piggy-Back Registration"), it will give written notice to all Holders at least
20 days before the initial filing with the SEC of such piggy-back registration
statement (a "Piggy-Back Registration Statement"), which notice shall set forth
the intended method of disposition of the securities proposed to be registered
by Parent. The notice shall offer to include in such filing the aggregate number
of shares of Registrable Securities as such Holders may request.
(b) Each Holder desiring to have Registrable Securities registered
under this Section 2.02 ("Participating Piggy-Back Holders") shall advise Parent
in writing within ten days after the date of receipt of such offer from Parent,
setting forth the amount of such Registrable Securities for which registration
is requested. Parent shall thereupon include in such filing the number or amount
of Registrable Securities for which registration is so requested, subject to
Section 2.02 (c), and shall use its reasonable efforts to effect registration of
such Registrable Securities under the Securities Act.
(c) If the Piggy-Back Registration relates to an underwritten public
offering and the managing underwriter of such proposed public offering advises
in writing that, in its opinion, the amount of Registrable Securities requested
to be included in the Piggy-Back Registration in addition to the securities
being registered by Parent would be greater than the Maximum Number of
Securities (having the same meaning as defined in Section 2.01(b), but replacing
the term "Demand Registration" with "Piggy-Back Registration"), then:
(i) in the event Company initiated the Piggy-Back
Registration, Parent shall include in such Piggy-Back Registration:
first, the securities Parent proposes to register and second, the
securities of all other selling security holders, including the
Participating Piggy-Back Holders, to be included in such Piggy-Back
Registration in an amount which together with the securities Parent
proposes to register, shall not exceed the Maximum Number of
Securities, such amount to be allocated among such selling security
holders on a pro rata basis (based on the number of securities of
Parent held by each such selling security holder);
(ii) in the event any holder of securities of Parent initiated
the Piggy-Back Registration, Parent shall include in such Piggy-Back
Registration: first, the securities such initiating security holder
proposes to register, second, the securities of any other selling
security holders (including Participating Piggy-Back Holders), in an
amount which together with the securities the initiating security
holder proposes to register, shall not exceed the Maximum Number of
Securities, such amount to be allocated among such other selling
security holders on a pro rata basis (based on the number of securities
of Parent held by each such selling security holder) and third, any
securities Parent proposes to register, in an amount which together
with the securities the initiating security holder and the other
selling security holders propose to register, shall not exceed the
Maximum Number of Securities;
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(d) Parent will not hereafter enter into any agreement, which is
inconsistent with the rights of priority provided in Section 2.02 (c).
SECTION 2.03 Blackout Periods. Parent shall have the right to delay the
filing or effectiveness of a Registration Statement required pursuant to
Sections 2.01 or 2.02 hereof during no more than three periods aggregating to
not more than 90 days in any twelve-month period (a "Blackout Period") in the
event that (i) Parent would, in accordance with the advice of its counsel, be
required to disclose in the Prospectus information not otherwise then required
by law to be publicly disclosed and (ii) in the judgment of Parent's Board of
Directors, there is a reasonable likelihood that such disclosure, or any other
action to be taken in connection with the Prospectus, would materially and
adversely affect or interfere with any financing, capital raising, acquisition,
merger, disposition of assets (not in the ordinary course of business),
corporate reorganization or other similar transaction involving Parent;
provided, however, that Parent shall delay during such Blackout Period the
filing or effectiveness of any Registration Statement required pursuant to the
registration rights of the holders of any securities of Parent. Parent shall
promptly give the Holders written notice of such determination containing a
general statement of the reasons for such postponement and an approximation of
the anticipated delay.
SECTION 2.04 Registration Procedures. If Parent is required by the
provisions of Section 2.01 or 2.02 to use its reasonable efforts to effect the
registration of any of its securities under the Securities Act, Parent will, as
expeditiously as possible:
(a) prepare and file with the SEC a Registration Statement with respect
to such securities and use its reasonable efforts to cause such Registration
Statement promptly to become and remain effective for a period of time required
for the disposition of such securities by the holders thereof but not to exceed
120 days; provided, however, that before filing such Registration Statement or
any amendments or supplements thereto (for purposes of this subsection,
amendments and supplements shall not be deemed to include any filing that Parent
is required to make pursuant to the Exchange Act), Parent shall furnish the
representatives of the Holders referred to in Section 2.04(m) copies of all
documents proposed to be filed, which documents will be subject to the review
and comment of such representatives and their counsel. Parent shall not be
deemed to have used its reasonable efforts to keep a Registration Statement
effective during the applicable period if it voluntarily takes any action that
would result in the Holders of such Registrable Securities not being able to
sell such Registrable Securities during that period, unless such action is
required under applicable law;
(b) prepare and file with the SEC such amendments and supplements to
such Registration Statement as may be necessary to keep such Registration
Statement effective and to comply with the provisions of the Securities Act with
respect to the sale or other disposition of all securities covered by such
Registration Statement until the earlier of such time as all of such securities
have been disposed of in a public offering or the expiration of 120 days;
provided, however, that if any securities have not been disposed of during such
120 day period, subject to Section 2.05(a), the Holder or Holders selling
securities under the Registration Statement may request in writing that Parent
prepare and file with the SEC additional amendments and supplements to such
Registration Statement, to keep such Registration Statement effective and in
compliance with the provisions of the Securities Act, for an additional 30 day
period, and Parent shall not unreasonably withhold its consent to such request.
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(c) furnish to such Holders such number of conformed copies of the
applicable Registration Statement and each such amendment and supplement thereto
and of any Prospectus, in conformity with the requirements of the Securities
Act, and such other documents, as such Holders may reasonably request;
(d) use its reasonable efforts to register or qualify the securities
covered by such Registration Statement under such other securities or blue sky
laws of such jurisdictions within the United States and Puerto Rico as each
Holder of such securities shall reasonably request, to keep such registration or
qualification in effect for so long as such Registration Statement remains in
effect, and to take any other action which may be reasonably necessary to enable
such seller to consummate the disposition in such jurisdictions of the
securities owned by such Holder (provided, however, that Parent shall not be
required in connection therewith or as a condition thereto to qualify to do
business, subject itself to taxation in or to file a general consent to service
of process in any jurisdiction wherein it would not but for the requirements of
this Section 2.04 (d) be obligated to do so; and provided further that Parent
shall not be required to qualify such Registrable Securities in any jurisdiction
in which the securities regulatory authority requires that any Holder submit any
shares of its Registrable Securities to the terms, provisions and restrictions
of any escrow, lockup or similar agreement(s) for consent to sell Registrable
Securities in such jurisdiction unless such Holder agrees to do so), and do such
other reasonable acts and things as may be required of it to enable such Holder
to consummate the disposition in such jurisdiction of the securities covered by
such Registration Statement;
(e) furnish, at the request of any Holder requesting registration of
Registrable Securities pursuant to Section 2.01 or 2.02, if the method of
distribution is by means of an underwriting, on the date that the shares of
Registrable Securities are delivered to the underwriters for sale pursuant to
such registration, or if such Registrable Securities are not being sold through
underwriters, on the date that the registration statement with respect to such
shares of Registrable Securities becomes effective, (1) a signed opinion, dated
such date, of the independent legal counsel representing Parent for the purpose
of such registration, addressed to the underwriters, if any, and if such
Registrable Securities are not being sold through underwriters, then to the
Holders making such request, as to such matters that are customarily covered in
the type of offering which is conducted and such other matters as may be
reasonably requested by the underwriters, if any, or the Holders, as the case
may be. and (2) letters dated such date and the date the offering is priced from
the independent certified public accountants of Parent, addressed to the
underwriters, if any, and if such Registrable Securities are not being sold
through underwriters, then to the Holders making such request and, if such
accountants refuse to deliver such letters to such Holders, then to Parent (i)
stating that they are independent certified public accountants within the
meaning of the Securities Act and that, in the opinion of such accountants, the
financial statements and other financial data of Parent included in the
Registration Statement, or any amendment or supplement thereto, comply as to
form in all material respects with the applicable accounting requirements of the
Securities Act and (ii) covering such other financial matters (including
information as to the period ending not more than five business days prior to
the date of such letters) with respect to the registration in respect of which
such letter is being given as such underwriters or the Holders holding a
majority of the Registrable Securities included in such registration, as the
case may be, may reasonably request and as would be customary in such a
transaction;
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(f) enter into customary agreements (including if the method of
distribution is by means of an underwriting, an underwriting agreement in
customary form) and take such other actions as are reasonably required in order
to expedite or facilitate the disposition of such Registrable Securities;
(g) otherwise use its reasonable efforts to comply with all applicable
rules and regulations of the SEC, and make earnings statements satisfying the
provisions of Section 11(a) of the Securities Act generally available to the
Holders no later than 45 days after the end of any twelve-month period (or 90
days, if such period is a fiscal year) (i) commencing at the end of any fiscal
quarter in which Registrable Securities are sold to underwriters in an
underwritten public offering, or (ii) if not sold to underwriters in such an
offering, beginning with the first month of Parent's first fiscal quarter
commencing after the effective date of the Registration Statement, which
statements shall cover said twelve-month periods;
(h) use its reasonable efforts to cause all such Registrable Securities
to be listed on each securities exchange or quotation system on which similar
securities issued by Parent are listed or traded;
(i) give written notice to the Holders:
(i) when such Registration Statement or any amendment thereto
has been filed with the SEC and when such Registration Statement or any
post-effective amendment thereto has become effective;
(ii) of any request by the SEC for amendments or supplements
to such Registration Statement or for additional information;
(iii) of the issuance by the SEC of any stop order suspending
the effectiveness of such Registration Statement or the initiation of
any proceedings for that purpose;
(iv) of the receipt by Parent or its legal counsel of any
notification with respect to the suspension of the qualification of the
Parent Common Stock for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose; and
(v) of the existence of any fact which results in: (A) the
Registration Statement containing an untrue statement of material fact
or omitting to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; and (B) the
Prospectus containing an untrue statement of material fact or omitting
to state a material fact necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading; (which notice shall be accompanied by an instruction to
suspend the use of the Prospectus until the requisite changes have been
made);
(j) use its reasonable efforts to prevent the issuance or obtain the
withdrawal of any order suspending the effectiveness of such Registration
Statement at the earliest possible time;
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(k) furnish to each Holder, without charge, at least one copy of such
Registration Statement and any post-effective amendment thereto, including
financial statements and schedules, and, if the Holder so requests in writing,
all exhibits (including those, if any, incorporated by reference);
(l) furnish to each Holder and to any underwriter, as many copies of
the Prospectus as such Person may reasonably request;
(m) upon the occurrence of any fact contemplated by Section 2.04(i)(v),
promptly prepare a post-effective amendment to such Registration Statement or a
supplement to the related Prospectus or file any other required document so
that, as thereafter delivered to the Holders, the Prospectus will not contain an
untrue statement of a material fact or omit to state any material fact necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading. If Parent notifies the Holders in accordance with
Section 2.04(i)(v) to suspend the use of the Prospectus until the requisite
changes to the Prospectus have been made, then the Holders shall suspend use of
such Prospectus and use their reasonable efforts to return to Parent all copies
of such Prospectus (at Parent's expense) other than permanent file copies then
in such Holder's possession, and the period of effectiveness of such
Registration Statement provided for above shall be extended by the number of
days from and including the date of the giving of such notice to the date
Holders shall have received such amended or supplemented Prospectus pursuant to
this Section 2.04(m);
(n) make reasonably available for inspection by the representatives of
the Holders, any underwriter participating in any disposition pursuant to such
Registration Statement and any attorney, accountant or other agent retained by
such representative or any such underwriter all relevant financial and other
records, pertinent corporate documents and properties of Parent and cause
Parent's officers, directors and employees to supply all relevant information
reasonably requested by such representative or any such underwriter, attorney,
accountant or agent in connection with the registration;
(o) in connection with any underwritten offering, make appropriate
officers of Parent available to the selling security holders for meetings with
prospective purchasers of the Registrable Securities and prepare and present to
potential investors customary "road show" material in each case in accordance
with the recommendations of the underwriters and in all respects in a manner
consistent with other new issuances of securities in an offering of a similar
size to such offering of the Registrable Securities; and
(p) use reasonable efforts to procure the cooperation of Parent's
transfer agent in settling any offering or sale of Registrable Securities,
including with respect to the transfer of physical stock certificates into
book-entry form in accordance with any procedures reasonably requested by the
Holders or the underwriters.
It shall be a condition precedent to the obligation of Parent to take
any action pursuant to this Agreement in respect of the Registrable Securities
which are to be registered at the request of any Holder that such Holder shall
furnish to Parent such information regarding the Registrable Securities held by
such Holder and the intended method of disposition thereof as
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Parent shall reasonably request and as shall be required in connection with the
action taken by Parent.
SECTION 2.05 Expenses. All expenses incurred in connection with each
registration pursuant to Sections 2.01 and 2.02 of this Agreement, excluding
underwriters' discounts and commissions, but including without limitation all
registration, filing and qualification fees, word processing, duplicating,
printers' and accounting fees (including the expenses of any special audits or
"comfort" letters required by or incident to such performance and compliance),
fees of the NASD or listing fees, messenger and delivery expenses, all fees and
expenses of complying with state securities or blue sky laws, fees and
disbursements of counsel for Parent, fees and expenses of Parent and the
underwriters relating to "road show" investor presentations, including the cost
of any aircraft chartered for such purpose, and the fees and disbursements of
one counsel for the selling Holders (which counsel shall be selected by the
Holders holding a majority in interest of the Registrable Securities being
registered), shall be paid by Parent, except that:
(a) all such expenses in connection with any amendment or supplement to
a Registration Statement or Prospectus filed more than 120 days after the
effective date of such Registration Statement because any Holder has not
effected the disposition of the securities requested to be registered shall be
paid by such Holder; and
(b) the Holders shall bear and pay the (i) underwriting commissions and
discounts applicable to securities offered for their account in connection with
any registrations, filings and qualifications made pursuant to this Agreement
and (ii) any fees and expenses incurred in respect of counsel, except as
provided above, or other advisors to the Holders.
SECTION 2.06 Rule 144 and Rule 144A Information. With a view to making
available the benefits of certain rules and regulations of the SEC which may at
any time permit the sale of the Registrable Securities to the public without
registration:
(a) At all times after 120 days after any Registration Statement
covering securities of Parent shall have become effective, Parent agrees to:
(i) make and keep public information available, as those terms
are understood and defined in Rule 144 under the Securities Act;
(ii) use its best efforts to file with the SEC in a timely
manner all reports and other documents required of Parent under the
Securities Act and the Exchange Act; and
(iii) furnish to each Holder of Registrable Securities
forthwith upon request a written statement by Parent as to its
compliance with the reporting requirements of such Rule 144 and of the
Securities Act and the Exchange Act, a copy of the most recent annual
or quarterly report of Parent, and such other reports and documents so
filed by Parent as such Holder may reasonably request in availing
itself of any rule or regulation of the SEC allowing such Holder to
sell any Registrable Securities without registration.
(b) At all times during which Parent is neither subject to the
reporting requirements of Section 13 or 15(d) of the Exchange Act, nor exempt
from reporting pursuant to
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Rule 12g3-2(b) under the Exchange Act, it will provide, upon the written request
of any holder of Registrable Securities in written form (as promptly as
practicable and in any event within 15 business days), to any prospective buyer
of such stock designated by such holder, all information required by Rule
144A(d)(4)(i) of the General Regulations promulgated by the SEC under the
Securities Act.
SECTION 2.07 Indemnification and Contribution. (a) Parent shall
indemnify and hold harmless each Holder, such Holder's directors and officers,
each person who participates in the offering of such Registrable Securities,
including underwriters (as defined in the Securities Act), and each person, if
any, who controls such Holder or participating person within the meaning of the
Securities Act, against any losses, claims, damages or liabilities, joint or
several, to which they may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or proceedings in
respect thereof) arise out of or are based on the existence of a fact
contemplated by Section 2.04(i)(v), and shall reimburse each such Holder, such
Holder's directors and officers, such participating person or controlling person
for any legal or other expenses reasonably incurred by them (but not in excess
of expenses incurred in respect of one counsel for all of them unless there is
an actual conflict of interest between any indemnified parties, which
indemnified parties may be represented by separate counsel) in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the indemnity agreement contained in this Section 2.07
shall not apply to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent of Parent
(which consent shall not be unreasonably withheld); provided further that Parent
shall not be liable to any Holder, such Holder's directors and officers,
participating person or controlling person in any such case for any such loss,
claim, damage, liability or action to the extent that it arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in connection with such Registration Statement or
Prospectus or amendments or supplements thereto, in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by such Holder, such Holder's directors and officers,
participating person or controlling person. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of any
such Holder, such Holder's directors and officers, participating person or
controlling person, and shall survive the transfer of such securities by such
Holder.
(b) Each Holder requesting or joining in a registration shall,
severally and not jointly, indemnify and hold harmless Parent, each of its
directors and officers, each person, if any, who controls Parent within the
meaning of the Securities Act, and each agent and any underwriter for Parent
(within the meaning of the Securities Act) against any losses, claims, damages
or liabilities, joint or several, to which Parent or any such director, officer,
controlling person, agent or underwriter may become subject, under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or proceedings in respect thereof) arise out of or are based upon
any untrue statement or alleged untrue statement of any material fact contained
in such Registration Statement on the effective date thereof (including any
Prospectus filed under Rule 424 under the Securities Act or any amendments or
supplements thereto) or arise out of or are based upon the existence of any fact
contemplated in Section 2.04(i)(v), but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged omission was made
in such Registration Statement or Prospectus, or amendments or supplements
thereto,
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in reliance upon and in conformity with written information furnished by or on
behalf of such Holder expressly for use in connection with such registration;
and each such Holder shall reimburse any legal or other expenses reasonably
incurred by Parent or any such director, officer, controlling person, agent or
underwriter (but not in excess of expenses incurred in respect of one counsel
for all of them unless there is an actual conflict of interest between any
indemnified parties, which indemnified parties may be represented by separate
counsel) in connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that the indemnity agreement
contained in this Section 2.07(b) shall not apply to amounts paid in settlement
of any such loss, claim, damage, liability or action if such settlement is
effected without the consent of such Holder (which consent shall not be
unreasonably withheld), and provided further that the liability of each Holder
hereunder shall be limited to the proportion of any such loss, claim, damage,
liability or expense which is equal to the proportion that the net proceeds from
the sale of the shares sold by such Holder under such registration statement
bears to the total net proceeds from the sale of all securities sold thereunder,
but not in any event to exceed the net proceeds received by such Holder from the
sale of Registrable Securities covered by such registration statement.
(c) If the indemnification provided for in this Section 2.07 from the
indemnifying party is unavailable to an indemnified party hereunder in respect
of any losses, claims, damages, liabilities or expenses referred to therein,
then the indemnifying party, in lieu of indemnifying such indemnified party,
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages, liabilities or expenses in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party and indemnified parties in connection with the actions which resulted in
such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative fault of such indemnifying party
and indemnified parties shall be determined by reference to, among other things,
whether any action in question, including any untrue or alleged untrue statement
of a material fact or omission or alleged omission to state a material fact, has
been made by, or relates to information supplied by, such indemnifying party or
indemnified parties, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action. The amount paid
or payable by a party as a result of the losses, claims, damages, liabilities
and expenses referred to above shall be deemed to include any legal or other
fees or expenses reasonably incurred by such party in connection with any
investigation or proceeding. If the allocation provided in this Section 2.07(c)
is not permitted by applicable law, the parties shall contribute based upon the
relevant benefits received by Parent from the initial offering of the securities
on the one hand and the net proceeds received by the Holders from the sale of
securities on the other. The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 2.07(c) were determined by
pro rata allocation or by any other method of allocation which does not take
account of the equitable considerations referred to in this Section 2.07(c). No
Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation.
(d) Any Person entitled to indemnification hereunder (the "Indemnified
Party") agrees to give prompt written notice to the indemnifying party (the
"Indemnifying Party") after the receipt by the Indemnified Party of any written
notice of the commencement of any action, suit, proceeding or investigation or
threat thereof made in writing for which the
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Indemnifying Party intends to claim indemnification or contribution pursuant to
this Agreement; provided that the failure so to notify the Indemnified Party
shall not relieve the Indemnifying Party of any liability that it may have to
the Indemnifying Party hereunder unless such failure is materially prejudicial
to the Indemnifying Party. If notice of commencement of any such action is given
to the Indemnifying Party as provided above, the Indemnifying Party shall be
entitled to participate in and, to the extent it may wish, to assume the defense
of such action at its own expense, with counsel chosen by it and reasonably
satisfactory to the Indemnified Party. The Indemnified Party shall have the
right to employ separate counsel in any such action and participate in the
defense thereof, but the fees and expenses of such counsel shall be paid by the
Indemnified Party unless (i) the Indemnifying Party agrees to pay the same, (ii)
the Indemnifying Party fails to assume the defense of such action, or (iii) the
named parties to any such action (including any impleaded parties) have been
advised by such counsel that either (A) representation of such Indemnified Party
and the Indemnifying Party by the same counsel would be inappropriate under
applicable standards of professional conduct or (B) there are one or more legal
defenses available to it which are substantially different from or additional to
those available to the Indemnifying Party. No Indemnifying Party shall be liable
for any settlement entered into without its written consent, which consent shall
not be unreasonably withheld.
(e) The agreements contained in this Section 2.07 shall survive the
transfer of the Registrable Securities by any Holder and sale of all the
Registrable Securities pursuant to any registration statement and shall remain
in full force and effect, regardless of any investigation made by or on behalf
of any Holder or such director, officer or participating or controlling Person.
SECTION 2.08 (a) Certain Additional Limitations on Registration Rights.
Notwithstanding the other provisions of this Agreement, Parent shall not be
obligated to register the Registrable Securities of any Holder (i) if such
Holder or any underwriter of such Registrable Securities shall fail to furnish
to Parent necessary information in respect of the distribution of such
Registrable Securities, or (ii) if such registration involves an underwritten
offering, such Registrable Securities are not included in such underwritten
offering on the same terms and conditions as shall be applicable to the other
securities being sold through underwriters in the registration or such Holder
fails to enter into an underwriting agreement in customary form with the
underwriter or underwriters selected for such underwritten offering.
(b) Lock-up Agreements
(i) Each Holder agrees not to effect any public sale or
distribution (including sales pursuant to Rule 144) of equity
securities of Parent, or any securities convertible into or
exchangeable or exercisable for such securities, during the seven days
prior to and the 120-day period beginning on the effective date of any
underwritten Demand Registration or underwritten Piggy-Back
Registration in which Registrable Securities are included (except as
part of such underwritten registration) unless the underwriters
managing the public offering otherwise agree.
(ii) Parent agrees not to effect any public sale or
distribution of its equity securities, or any securities convertible
into or exchangeable or exercisable for such securities, during the
seven days prior to and during the 120-day period beginning on the
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effective date of any underwritten Demand Registration or underwritten
Piggy-Back Registration (except as part of such underwritten
registration) unless the underwriters managing the public offering
otherwise agree provided however, that the foregoing limitations shall
not apply to any purchases, issuances or grants of options, rights or
warrants under Parent's employee or director compensation and benefit
plans, or used for similar employee compensation or benefit purposes.
Parent also agrees to cause each holder of at least 2% (on a fully
diluted basis) of Parent Common Stock, each executive officer and
director, and each holder of any securities convertible into or
exchangeable or exercisable for Parent Common Stock purchased from
Parent at any time after the date of this Agreement (other than in a
registered public offering) to agree not to effect any public sale or
distribution of any such securities during such period (except as part
of such underwritten registration, if otherwise permitted), unless the
underwriters managing the registered public offering otherwise agree.
SECTION 2.09 Limitations on Registration of Other Securities;
Representation. From and after the date of this Agreement, Parent shall not,
without the prior written consent of a majority in interest of the Holders as of
the date of this Agreement, enter into any agreement with any holder or
prospective holder of any securities of Parent giving such holder or prospective
holder any registration rights the terms of which are as or more favorable taken
as a whole other than the registration rights granted to the Holders hereunder
unless Parent shall also give such rights to the Holders hereunder.
SECTION 2.10 No Inconsistent Agreements. Parent will not hereafter
enter into any agreement with respect to its securities, which is inconsistent
in any material respects with the rights granted to the Holders in this
Agreement.
SECTION 2.11 Selection of Managing Underwriters. In the event a
majority of the Participating Demand Holders have requested an underwritten
offering, the underwriter or underwriters shall be selected by Parent and shall
be approved by the Holders of a majority of the shares being so registered,
which approval shall not be unreasonably withheld or delayed, provided (i) that
all of the representations and warranties by, and the other agreements on the
part of, Parent to and for the benefit of such underwriters shall also be made
to and for the benefit of such Holders of Registrable Securities, (ii) that any
or all of the conditions precedent to the obligations of such underwriters under
such underwriting agreement shall be conditions precedent to the obligations of
such Holders of Registrable Securities, and (iii) that no Holder shall be
required to make any representations or warranties to or agreements with Parent
or the underwriters other than representations, warranties or agreements
regarding such Holder, the Registrable Securities of such Holder and such
Holder's intended method of distribution and any other representations required
by law. Subject to the foregoing, all Holders proposing to distribute
Registrable Securities through such underwritten offering shall enter into an
underwriting agreement in customary form with the underwriter or underwriters.
Subject to the provisions of Section 2.06(b), if any Holder of Registrable
Securities disapproves of the terms of the underwriting, such Holder may elect
to withdraw all its Registrable Securities by written notice to Parent, the
managing underwriter and the other Holders participating in such registration.
The securities so withdrawn shall also be withdrawn from registration.
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ARTICLE III
ADDITIONAL AGREEMENTS
SECTION 3.01 Designation of Board of Directors. So long as L-S.A.and
LGH hold in the aggregate a percentage of the outstanding shares of Parent
Common Stock as set forth below, L-S.A. and LGH jointly shall have the right to
designate such number of persons for election to the Board of Directors of
Parent (the "Board") equal to the fraction (as set forth below) of members to
the Board, and Parent agrees to use its best efforts to cause the election of
each such designee to the Board; provided, however, that the Independent
Directors (as defined below) shall be independent directors with pharmaceutical
and health care industry-related experience:
<Table>
<Caption>
Percentage Company Directors Independent Directors
- -------------------------------------------------------------------------------------------------------------------
More than or equal to 10% One-third of the total number of Two-ninths of the total number of
members of the Board members of the Board
- -------------------------------------------------------------------------------------------------------------------
Up to 10% Two-ninths of the total number of One-ninth of the total number of
members of the Board members of the Board
- -------------------------------------------------------------------------------------------------------------------
</Table>
SECTION 3.02 Replacement Designees. In the event that a vacancy is
created at any time by the death, disability, retirement, resignation or removal
(with or without cause) of any Company Director or Independent Director, L-S.A.
and LGH shall have the right to designate a replacement director to fill such
vacancy and Parent agrees to use its best efforts to cause the election of each
such designee.
SECTION 3.03 Committees of the Board. Subject to applicable law and The
Nasdaq National Market requirements (and the requirements of any other
applicable national securities exchange or self-regulatory body or agency), the
composition of the committees of the Board shall be based upon and reflect
proportionally the composition of the Board as a whole.
SECTION 3.04 Covenant to Vote. Each of the Holders shall appear in
person or by proxy at any annual or special meeting of stockholders for the
purpose of obtaining a quorum and shall vote the shares of Parent Common Stock
owned by such Holder entitled to vote, either in person or by proxy, at any
annual or special meeting of stockholders of Parent (or its successor) called
for the purpose of voting on the election of directors or by consensual action
of stockholders with respect to the election of directors, in favor of the
election of the directors nominated in accordance with Sections 3.01 and 3.02
hereof. In addition, each Holder shall appear in person or by proxy at any
annual or special meeting of stockholders for the purpose of obtaining a quorum
and shall vote the shares of Parent Common Stock owned by such Holder and
entitled to vote upon any other matter submitted to a vote of the stockholders
of Parent in a
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manner so as to be consistent and not in conflict with, and to implement, the
terms of this Agreement.
SECTION 3.05 No Voting or Conflicting Agreements. (a) No Holder shall
grant any proxy or enter into or agree to be bound by any voting trust with
respect to the Parent Common Stock held by such Holder nor shall any Holder
enter into any stockholder agreements or arrangements of any kind with any
person with respect to the Parent Common Stock inconsistent with the provisions
of this Agreement (whether or not such agreements and arrangements are with
other stockholders of the Company that are not parties to this Agreement). The
foregoing prohibition includes, but is not limited to, agreements or
arrangements with respect to the acquisition, disposition or voting of shares of
Parent Common Stock held by such Holders. No Holder shall act, for any reason,
as a member of a group or in concert with any other persons in connection with
the acquisition, disposition or voting of shares of Parent's capital stock in
any manner which is inconsistent with the provisions of this Agreement.
(b) So long as L-S-A. and LGH own any Registrable Securities, Parent
shall not, without the written consent of L-S.A. and LGH, amend its certificate
of incorporation or bylaws in any manner or enter into any agreement that would
be contrary to or that would adversely affect the rights of L-S.A. and LGH under
this Article III.
SECTION 3.06 Holdback Agreement. Notwithstanding any other provisions
of this Agreement to the contrary, all of the Holders shall be restricted from
selling any Parent Common Stock for a period of 60 days following the
consummation of the Merger. Following such date, all of the Holders shall be
permitted, in any subsequent calendar quarter, to sell (a) not more than 35% of
the Parent Common Stock that such Holders received upon the consummation of the
transactions contemplated under the Merger Agreement or (b) all the Registrable
Securities held by such Holders at such time.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PARTIES
SECTION 4.01 Incorporation and Authority of the Stockholders. The
Stockholders hereby represent and warrant that each Stockholder (i) that is a
corporation is a corporation duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation and has all
necessary corporate power and authority to enter into this Agreement, to carry
out its obligations hereunder and to consummate the transactions contemplated
hereby, (ii) that is a limited partnership is a limited partnership duly formed,
validly existing and in good standing under the laws of its jurisdiction of
formation and has all the necessary power and authority to enter into this
Agreement, to carry out its obligations hereunder and to consummate the
transaction contemplated hereby, or (iii) that is an individual is an individual
with all legal capacity to enter into this Agreement, to carry out his/her
obligations hereunder and to consummate the transactions contemplated hereby. In
each case where a Stockholder is a corporation or a limited partnership, the
execution and delivery of this Agreement by such Stockholder and the
consummation by such Stockholder of the transactions contemplated hereby have
been duly authorized by all necessary corporate or partnership actions on the
part of such Stockholder, and no other corporate or partnership proceedings on
the part of
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such Stockholder are necessary to authorize this Agreement or to consummate the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by each Stockholder and, assuming due authorization, execution and
delivery by Parent, this Agreement constitutes a legal, valid and binding
obligation of each Stockholder enforceable against each Stockholder in
accordance with its terms.
SECTION 4.02 Incorporation and Authority of Parent. Parent hereby
represents and warrants that:
(a) Parent is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and has the requisite
corporate power and authority and all necessary governmental approvals to own,
lease and operate its properties and to carry on its business as it is now being
conducted, except where the failure to be so organized, existing or in good
standing or to have such power, authority and governmental approvals would not
prevent or materially delay consummation of the transactions contemplated
hereby, or otherwise prevent or materially delay Parent from performing its
obligations under this Agreement and would not have a material adverse effect on
the business, financial condition, assets, liabilities or results of operations
of Parent and its subsidiaries taken as a whole.
(b) Parent has all necessary corporate power and authority to execute
and deliver this Agreement, to perform its obligations hereunder and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement by Parent and the consummation by Parent of the transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action, and no other corporate proceedings on the part of Parent are
necessary to authorize this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by Parent and, assuming the due authorization, execution and delivery
by the Stockholders, constitutes a legal, valid and binding obligation of
Parent, enforceable against Parent in accordance with its terms.
ARTICLE V
MISCELLANEOUS
SECTION 5.01 Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement were
not performed in accordance with the terms hereof and that the parties hereto
shall be entitled to specific performance of the terms hereof, in addition to
any other remedy at law or in equity.
SECTION 5.02 Amendments and Waivers. (a) Any provision of this
Agreement may be amended or waived if, and only if, such amendment or waiver is
in writing and signed, in the case of an amendment, by Parent and a majority in
interest of the Holders or, in the case of a waiver, by the party or parties
against whom the waiver is to be effective; provided, however, that waiver by
the Holders shall require the consent of a majority in interest of the Holders.
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(b) No failure or delay by any party in exercising any right, power or
privilege hereunder (other than a failure or delay beyond a period of time
specified herein) shall operate as a waiver thereof and no single or partial
exercise thereof shall preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
SECTION 5.03 Notice Generally. All notices, requests, claims, demands
and other communications hereunder shall be in writing and shall be given (and
shall be deemed to have been duly given upon receipt) by delivery in person, by
facsimile transmission or by registered or certified mail (postage prepaid,
return receipt requested) to the respective parties at the following addresses
(or at such other address for a party as shall be specified by notice given in
accordance with this Section 5.03:
(a) If to any Holder, at its last known address appearing on the books
of Parent maintained for such purpose, with a copy to:.
Lavipharm Corp.
69 Princeton-Hightstown Road
East Windsor, NJ 08520
Attention: Andrew I. Koven, Esq.
Senior Vice President and General Counsel
Telephone No.: (609) 371-6531
Facsimile No.: (609) 371-6522
and a copy to:
Shearman & Sterling
599 Lexington Avenue
New York, NY 10022
Attn: Christa A. D'Alimonte, Esq.
Telephone No.: (212) 848-4000
Facsimile No.: (212) 848-7179
(b) If to Parent, at:
Zonagen, Inc.
2408 Timberloch Place, Suite B-4
The Woodlands, TX 77380
Attention: Joseph S. Podolski
Telephone No.: (281) 719-3400
Facsimile: (281) 719-3446
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with a copy to:
Andrews & Kurth L.L.P
Waterway Plaza Two, Suite 200
10001 Woodloch Forest Drive
The Woodlands, Texas 77380
Attn: Jeffrey R. Harder, Esq.
Telephone No.: (713) 220-4312
Facsimile No.: (713) 238-7282
SECTION 5.04 Successors and Assigns; Third Party Beneficiaries. This
Agreement shall inure to the benefit of and be binding upon the successors and
permitted assigns of the parties hereto as hereinafter provided. The rights and
obligations of any Holder hereunder with respect to any Registrable Securities
shall be transferred to any Person who is a transferee of such Registrable
Securities. All of the obligations of Parent hereunder shall survive any such
transfer. Within a reasonable period of time after the transfer of any
Registrable Securities (other than a transfer pursuant to which such Registrable
Securities cease to be Registrable Securities) to any Person, the Holder
transferring such Registrable Securities will deliver a written notice to
Parent, setting forth the name and address of such transferree and the amount of
Registrable Securities transferred to such transferee. Except as provided in
Section 2.07, no Person other than the parties hereto and their successors and
permitted assigns is intended to be a beneficiary of this Agreement.
SECTION 5.05 Headings. The descriptive headings contained in this
Agreement are included for convenience of reference only and shall not affect in
any way the meaning or interpretation of this Agreement.
SECTION 5.06 Governing Law; Jurisdiction. This Agreement shall be
governed by, and construed in accordance with, the laws of the State of New York
applicable to contracts executed in and to be performed in that State.
(i) Any claim, action, suit or proceeding seeking to enforce
any provision of, or based on any matter arising out of or in
connection with, this Agreement or the transactions contemplated hereby
may be heard and determined in any New York state or federal court
sitting in The City of New York, County of Manhattan, and each of the
parties hereto hereby consents to the exclusive jurisdiction of such
courts (and of the appropriate appellate courts therefrom in any such
claim, action, suit or proceeding) and irrevocably waives, to the
fullest extent permitted by law, any objection that it may now or
hereafter have to the laying of venue of any such claim, action, suit
or proceeding in any such court or that any such claim, action, suit or
proceeding that is brought in any such court has been brought in an
inconvenient forum.
(ii) Subject to applicable law, process in any such claim,
action, suit or proceeding may be served on any party anywhere in the
world, whether within or without the jurisdiction of any such court.
Without limiting the foregoing and subject to applicable law, each
party agrees that service of process on such party as provided in
Section 5.03 shall be deemed effective service of process on such
party. Nothing herein shall affect the right of any party to serve
legal process in any other manner permitted by law or at equity. WITH
RESPECT TO ANY SUCH CLAIM, ACTION, SUIT OR PROCEEDING IN ANY SUCH
COURT, EACH OF THE PARTIES IRREVOCABLY WAIVES AND RELEASES TO THE OTHER
ITS RIGHT TO A TRIAL BY JURY, AND AGREES THAT IT WILL NOT SEEK A TRIAL
BY JURY IN ANY SUCH PROCEEDING.
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SECTION 5.07 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in a mutually acceptable
manner in order that the transactions contemplated hereby be consummated as
originally contemplated to the fullest extent possible.
SECTION 5.08 Entire Agreement. This Agreement constitutes the entire
agreement among the parties hereto pertaining to the subject matter hereof and
supersedes all prior agreements and undertakings, both oral and written, among
the parties, or any of them, with respect to the subject matter hereof.
SECTION 5.09 Cumulative Remedies. The rights and remedies provided by
this Agreement are cumulative and the use of any one right or remedy by any
party shall not preclude or waive its right to use any or all other remedies.
Said rights and remedies are given in addition to any other rights the parties
may have by law, statute, ordinance or otherwise.
SECTION 5.10 Construction. Each party hereto acknowledges and agrees it
has had the opportunity to draft, review and edit the language of this Agreement
and that no presumption for or against any party arising out of drafting all or
any part of this Agreement will be applied in any dispute relating to, in
connection with or involving this Agreement. Accordingly, the parties hereto
hereby waive the benefit of any rule of law or any legal decision that would
require, in cases of uncertainty, that the language of a contract should be
interpreted most strongly against the party who drafted such language.
SECTION 5.11 Counterparts. This Agreement may be executed and delivered
(including by facsimile transmission) in one or more counterparts, and by the
different parties hereto in separate counterparts, each of which when executed
shall be deemed to be an original, but all of which taken together shall
constitute one and the same agreement.
[SIGNATURES APPEAR ON NEXT PAGE]
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the date first above written.
ZONAGEN, INC.
By:
-------------------------------------
Name:
Title:
LAVIPHARM S.A.
By:
-------------------------------------
Name:
Title:
LAVIPHARM GROUP HOLDING S.A.
By:
-------------------------------------
Name:
Title:
TECHNOPHARM S.A.R.L.
By:
-------------------------------------
Name:
Title:
EXECUTION COPY
PARAMOUNT CAPITAL INVESTMENTS, LLC
By:
-------------------------------------
Name:
Title:
2
EXHIBIT F
FORM OF LEGAL OPINION OF COUNSEL TO PARENT
Parent's counsel will deliver an opinion, subject to customary
exceptions, limitations and qualifications, to the effect that:
1. Parent is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware.
2. Parent has all requisite corporate power and authority to
execute and deliver the Merger Agreement and to consummate the Merger and the
other transactions contemplated by the Merger Agreement.
3. The execution and delivery of the Merger Agreement by Parent
and the consummation by Parent of the Merger and the other transactions
contemplated by the Merger Agreement have been duly and validly authorized by
all necessary corporate action and no other proceedings on the part of Parent
are necessary to authorize the Merger Agreement or to consummate the Merger and
the other transactions contemplated by the Merger Agreement other than, with
respect to the Merger, the filing and recordation of such appropriate merger
documents as required by Delaware Law.
4. The Merger Agreement has been duly authorized and validly
executed and delivered by Parent and, assuming the due authorization, execution
and delivery by the Company and each Company Stockholder, constitutes the legal,
valid and binding obligation of Parent, enforceable against Parent in accordance
with its terms, subject to the effect of any applicable bankruptcy, insolvency
(including, without limitation, all laws relating to fraudulent transfers),
reorganization, moratorium or similar law affecting creditors' rights generally
and subject to the principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
5. The issue and sale of shares of Parent Common Stock to the
stockholders of the Company pursuant to the Merger does not require registration
pursuant to Section 5 of the Securities Act of 1933, as amended.
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EXHIBIT G
FORM OF FIRPTA CERTIFICATE
STATEMENT TO FOREIGN INTEREST HOLDER
Lavipharm Corp.
69 Princeton-Hightstown Road
East Windsor, NJ 08520
22-3744075
c/o Lavipharm S.A.
Agias Marinas Street
PB 59
Peania, Attica Greece 19002
094105528
Section 1.897-2(h)(1) of the Internal Revenue Code of 1986, as amended
(the "Code") provides that a domestic corporation must, within a reasonable
period after receipt of a request from a foreign person holding an interest in
it, inform that person whether the interest constitutes a U.S. real property
interest. The undersigned hereby certifies the following on behalf of Lavipharm
Crop. to Lavipharm S.A., its 49.38 percent shareholder:
The stock of Lavipharm Corp. is not a U.S. real property interest
within the meaning of section 897(c)(1) and Treasury Regulation section
1.897-1(c) of the Code.
Under penalties of perjury, I declare that I have examined this
certificate and to the best of my knowledge and belief it is true, correct and
complete, and I further declare that I have authority to sign this document on
behalf of Lavipharm Corp.
Dated: _____________________ By: _______________________________
Title: _____________________________
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EXHIBIT H
FORM OF LEGAL OPINION OF COMPANY COUNSEL
The Company's counsel will deliver an opinion, subject to customary
exceptions, limitations and qualifications, to the effect that:
1._______The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware.
2._______The Company has all requisite corporate power and authority to
execute and deliver the Merger Agreement and to consummate the Merger and the
other transactions contemplated by the Merger Agreement.
3._______The execution and delivery of the Merger Agreement by the
Company and the consummation by the Company of the Merger and the other
transactions contemplated by the Merger Agreement have been duly and validly
authorized by all necessary corporate action and no other proceedings on the
part of the Company are necessary to authorize the Merger Agreement or to
consummate the Merger and the other transactions contemplated by the Merger
Agreement other than, with respect to the Merger, the filing and recordation of
such appropriate merger documents as required by Delaware Law.
4._______The Merger Agreement has been duly authorized and validly
executed and delivered by the Company and, assuming the due authorization,
execution and delivery by Parent and each Company Stockholder, constitutes the
legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, subject to the effect of any applicable
bankruptcy, insolvency (including, without limitation, all laws relating to
fraudulent transfers), reorganization, moratorium or similar law affecting
creditors' rights generally and subject to the principles of equity (regardless
of whether such enforceability is considered in a proceeding in equity or at
law).
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