Exhibit 2.1
MERGER AGREEMENT
DATED AS OF OCTOBER 30, 2000
AMONG
CHESAPEAKE BIOLOGICAL LABORATORIES, INC.,
CANGENE CORPORATION
AND
AC ACQUISITION SUBSIDIARY, INC.
TABLE OF DEFINED TERMS
DEFINED TERM SECTION PAGE
Acquisition Agreement............. Preamble............................... 1
Affiliate......................... Section 9.8(a)......................... 47
Bank.............................. Section 4.4............................ 30
Board............................. Recitals............................... 1
Breakup Fee....................... Section 8.3(a)......................... 44
Business day...................... Section 9.8(b)......................... 47
Cash Merger Consideration......... Section 2.8(a)......................... 7
Certificates...................... Section 2.9(b)......................... 8
Closing Time...................... Section 2.2............................ 6
Code.............................. Section 3.11(c)........................ 19
Company Assets.................... Section 3.14........................... 23
Company Disclosure Schedule....... Article 3.............................. 11
Company Employee Plan............. Section 3.11(a)........................ 19
Company Marks..................... Section 3.16(b)........................ 26
Company Personnel................. Section 3.11(a)........................ 11
Company SEC Reports............... Section 3.4(a)......................... 14
Company Securities................ Section 3.2(a)......................... 12
Company Stock Options............. Section 2.10(a)........................ 10
Company........................... Preamble............................... 1
Company Trade Secrets............. Section 3.16(e)........................ 27
Confidentiality Agreement......... Section 5.5............................ 36
Continuing Directors.............. Section 1.3(a)......................... 5
Continuing Employees.............. Section 5.9(a)......................... 38
Contracts......................... Section 3.15(a)........................ 24
Convertible Securities............ Section 2.8............................ 7
Convertible Preferred Stock....... Recitals............................... 1
CS Act............................ Section 3.9(b)......................... 16
DEA............................... Section 3.9(b)......................... 16
Disclosure Statements............. Section 3.5............................ 14
Effective Time.................... Section 1.3(a)......................... 5
Environmental Claim............... Section 3.12(b)........................ 22
Environmental Laws................ Section 3.12(a)........................ 21
ERISA Affiliate................... Section 3.11(a)........................ 19
ERISA............................. Section 3.11(a)........................ 19
Exchange Act...................... Section 1.1(a)......................... 2
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FDA............................... Section 3.9(b)......................... 16
FDA Act .......................... Section 3.9(b)......................... 16
GAAP.............................. Section 3.4(a)......................... 14
Governmental Entity............... Section 3.6............................ 15
HSR Act........................... Section 3.6............................ 15
Indemnified Parties............... Section 5.13........................... 40
Initial Expiration Date........... Section 1.1(b)......................... 2
Intellectual Property Assets...... Section 3.16(a)(ii).................... 26
Intellectual Property Rights...... Section 3.16(a)(i)..................... 25
Knowledge......................... Section 3.8............................ 16
Licensed Intellectual Property.... Section 3.16(g)........................ 28
Licensed Software Agreements...... Section 3.16(f)........................ 28
Licensed Software................. Section 3.16(a)(iii)................... 26
Lien.............................. Section 3.2(b)......................... 13
Loan Commitment................... Section 4.4............................ 30
Marks............................. Section 3.16(a)(i)(A).................. 25
MGCL.............................. Section 1.2(a)......................... 3
Management Employment Agreements..
Section 5.1(h)......................... 32
Material Adverse Effect........... Section 3.1(a)......................... 11
Merger Certificate................ Section 2.3............................ 6
Merger Fund....................... Section 2.9(a)......................... 9
Merger............................ Section 2.1............................ 6
Minimum Condition................. Section 1.1(a)......................... 2
Offer Documents................... Section 1.1(c)......................... 3
Offer............................. Recitals............................... 1
Option Agreement.................. Section 1.2(d)......................... 4
Option Plans...................... Section 2.10(a)........................ 10
Options........................... Section 8.3(c)......................... 44
Owned Copyrights.................. Section 3.16(d)(i)..................... 27
Owned Software.................... Section 3.16(f)........................ 28
Parent Material Adverse Effect.... Section 4.1(a)......................... 29
Parent............................ Preamble............................... 1
Patents........................... Section 3.16(a)(i)(B).................. 25
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Per Share Amount.................. Recitals............................... 1
Person............................ Section 9.8(d)......................... 47
PHS Act .......................... Section 3.9(b)......................... 16
Potential Proposal................ Section 5.4(a)......................... 35
Product .......................... Section 3.9(b)......................... 16
Proxy Statement................... Section 3.5............................ 14
Regulatory Law.................... Section 3.9(b)......................... 39
Schedule 14D-9.................... Section 1.2(b)......................... 4
SEC............................... Section 1.1(b)......................... 2
Securities Act.................... Section 3.4(a)......................... 14
Series B Preferred Stock.......... Section 1.2(d)......................... 5
Shares............................ Section 3.2(a)......................... 12
Software.......................... Section 3.16(a)(iii)................... 26
Stock............................. Section 9.8(c)......................... 47
Stockholders' Agreement........... Recitals............................... 12
Stockholders' Meeting............. Section 5.2(a)(i)...................... 34
Subsidiaries...................... Section 9.8(e)......................... 47
Subsidiary........................ Section 9.8(e)......................... 47
Superior Proposal................. Section 5.4(b)......................... 35
Surviving Corporation............. Section 2.1............................ 6
Tax Return........................ Section 3.13(a)........................ 22
Tax............................... Section 3.13(a)........................ 22
Taxes............................. Section 3.13(a)........................ 22
Tender Offer Purchase Time........ Section 1.3(a)......................... 5
Third Party Acquisition........... Section 5.4(b)......................... 35
Third Party....................... Section 5.4(b)......................... 35
Trade Secrets..................... Section 3.16(a)(i)(C).................. 26
Warrants.......................... Recitals............................... 1
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MERGER AGREEMENT
THIS MERGER AGREEMENT (this "Agreement") dated as of October 30, 2000,
is among CHESAPEAKE BIOLOGICAL LABORATORIES, INC., a Maryland corporation
("Company"), CANGENE CORPORATION, a Canadian corporation ("Parent"), and AC
ACQUISITION SUBSIDIARY, INC., a Maryland corporation and a wholly owned, direct
subsidiary of Parent ("Acquisition").
WHEREAS, the Board of Directors of the Company (the "Board") has, in
light of and subject to the terms and conditions set forth herein, (i)
determined that each of the Offer and the Merger (each as defined below) is
advisable and is fair to the stockholders of the Company and in the best
interests of such stockholders; (ii) approved and adopted this Agreement and the
transactions contemplated hereby; and (iii) resolved to recommend acceptance of
the Offer and approval and adoption by the stockholders of the Company, if
necessary, of this Agreement;
WHEREAS, in furtherance thereof, Acquisition shall promptly commence a
tender offer (the "Offer") to acquire all of the issued and outstanding Shares
(defined in Section 3.2(a)), together with all of the issued and outstanding
shares of the Company's Series A-1 Convertible Preferred Stock (the "Convertible
Preferred Stock") and warrants to purchase Shares (the "Warrants"), at a price
of $4.60 per Share (such amount, as it may be increased from time to time in
connection with the Offer, being hereinafter referred to as the "Per Share
Amount"), net to the seller in cash, less any required withholding of taxes, in
accordance with the terms and subject to the conditions provided herein; and
WHEREAS, as a condition of and inducement to Parent's and Acquisition's
entering into this Agreement and incurring the obligations set forth herein,
certain stockholders of the Company concurrently herewith are entering into a
stockholders' agreement (the "Stockholders' Agreement") dated as of the date
hereof, with Parent and Acquisition, substantially in the form of Exhibit A to
this Agreement.
NOW THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements herein contained and
intending to be legally bound hereby, the Company, Parent and Acquisition hereby
agree as follows.
ARTICLE 1
THE OFFER
SECTION 1.1. THE OFFER.
(a) Provided that this Agreement shall not have been terminated in
accordance with Section 8.1 and none of the events or conditions set forth in
Article 6 shall have occurred and be
existing (unless waived as provided in Article 6), as promptly as practicable
after the date hereof (but in no event later than the twentieth business day
after the public announcement of this Agreement), Acquisition shall commence
(within the meaning of Rule 14d-2 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), the Offer. The Offer will be made pursuant to the
Offer Documents (as defined below) containing the terms and conditions set forth
in this Agreement. Acquisition shall accept for payment, purchase and pay for
all Shares, Convertible Preferred Stock and Warrants which have been validly
tendered and not withdrawn pursuant to the Offer at the earliest time following
expiration of the Offer that all conditions to the Offer set forth in Article 6
shall have been satisfied or waived by Acquisition. The obligation of
Acquisition to accept for payment, purchase and pay for Shares, Convertible
Preferred Stock and Warrants tendered pursuant to the Offer shall be subject
only to the condition that at least a majority of the then issued and
outstanding Shares (giving effect to the conversion of all outstanding shares of
Convertible Preferred Stock and the exercise of all then outstanding Warrants)
be validly tendered (the "Minimum Condition") and the satisfaction of the other
conditions set forth in Article 6. Acquisition expressly reserves the right to
waive any such condition (other than the Minimum Condition), to increase the
price per Share payable in the Offer or to make any other changes in the terms
and conditions of the Offer (provided that, unless previously approved by the
Company in writing, no change may be made which decreases the Per Share Amount,
which reduces the number of Shares to be purchased in the Offer, which changes
the form of consideration to be paid in the Offer, which imposes conditions to
the Offer in addition to those set forth in Article 6 or which amends or changes
any term or condition of the Offer in a manner adverse to the holders of
Shares). In the case of shares of Convertible Preferred Stock tendered pursuant
to the Offer, Acquisition shall pay the Per Share Amount multiplied by the
number of Shares into which such Shares of Convertible Preferred Stock are then
convertible. In the case of Warrants tendered pursuant to the Offer, Acquisition
shall purchase such Warrants for a purchase price equal to the difference
between the exercise price thereof and the Per Share Amount, multiplied by the
number of Shares for which such Warrants are then exercisable. The Per Share
Amount shall be paid net to each seller in cash, less any required withholding
of taxes, upon the terms and subject to the conditions of the Offer. The Company
agrees that no Shares held by the Company or any of its subsidiaries will be
tendered in the Offer.
(b) Subject to the terms and conditions thereof, the Offer shall expire
at midnight, New York City time, on January 3, 2001 (the "Initial Expiration
Date"); provided, however, without the consent of the Board, Parent may cause
Acquisition to (i) from time to time extend the Offer, if at the Initial
Expiration Date of the Offer, any of the conditions to the Offer necessary to
consummate the Offer have not been satisfied or waived (other than the Minimum
Condition, to which this clause (i) does not apply), until such time as such
conditions are satisfied or waived; (ii) extend the Offer for any period
required by any applicable rule, regulation, interpretation or position of the
Securities and Exchange Commission (the "SEC") or the staff thereof; (iii) if
the Minimum Condition is not satisfied, extend the Offer; provided that all
extensions pursuant to clauses (i) through (iii) hereof shall not exceed twenty
(20) business days, and (iv) if the Minimum Condition is satisfied but the
number of Shares validly tendered and not withdrawn represents less than ninety
percent (90%) of the then outstanding Shares
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(giving effect to the conversion of all then outstanding shares of Convertible
Preferred Stock and the exercise of all then outstanding Warrants), after
consummation of the Offer and payment for all validly tendered shares, commence
one subsequent offer for the Shares provided that Acquisition shall meet the
requirements of Rule 14d-11 under the Exchange Act in connection with such
subsequent offer; provided however, that in no event shall any such subsequent
offer period exceed twenty (20) business days. In addition, Parent and
Acquisition agree that Acquisition shall from time to time extend the Offer if
requested by the Company, if, at the Initial Expiration Date (or any extended
expiration date of the Offer, if applicable), any of the conditions to the Offer
including the Minimum Condition shall not have been waived or satisfied, until
(taking into account all such extensions) February 28, 2001, provided, however,
that if the Minimum Condition is the only condition to the Offer not then
satisfied, Acquisition shall not be required to extend the Offer for more than
twenty (20) business days.
(c) As soon as practicable after the date of commencement of the Offer,
Acquisition shall file with the SEC a Tender Offer Statement on Schedule TO with
respect to the Offer, which shall include an offer to purchase and form of
transmittal letter (together with any amendments thereof or supplements thereto,
collectively the "Offer Documents"). The Offer Documents shall comply in all
material respects with the provisions of applicable federal securities laws and
the rules and regulations of the SEC. Parent, Acquisition and the Company each
agrees promptly to correct any information provided by it for use in the Offer
Documents if and to the extent that such information shall have become false or
misleading in any material respect, and Acquisition further agrees to take all
steps necessary to cause the Offer Documents as so corrected to be promptly
filed with the SEC and to be disseminated to holders of Shares, in each case as
and to the extent required by applicable federal securities laws and the rules
and regulations of the SEC. The Company and its counsel shall be given a
reasonable opportunity to review and comment on the Offer Documents prior to
their being filed with the SEC. Parent and Acquisition agree to provide to the
Company and its counsel any comments or other communications which Parent,
Acquisition or their counsel receives from the staff of the SEC with respect to
the Offer Documents promptly after receipt thereof.
SECTION 1.2. COMPANY ACTION.
(a) The Company hereby approves of and consents to the Offer and the
Merger and represents and warrants that the Board, including all of the
independent directors of the Company, at a meeting duly called and held on
October 12, 2000, has, subject to the terms and conditions set forth herein,
adopted resolutions, which are not conditional and have not been amended or
repealed, pursuant to which the Board has (i) determined that this Agreement and
the transactions contemplated hereby, including the Offer and the Merger, are
fair to, and in the best interests of, the stockholders of the Company, (ii)
declared that the Merger is advisable and approved this Agreement and the
transactions contemplated hereby, including the Offer and the Merger, in all
respects and such approval constitutes prior approval of the Offer, this
Agreement and the Merger for purposes of Section 3-105(b) of the Maryland
General Corporation Law (the "MGCL") and similar provisions of any other similar
state statutes that might be deemed
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applicable to the transactions contemplated hereby, (iii) recommended that the
stockholders of the Company accept the Offer, tender their Shares thereunder to
Acquisition and, if required by law, approve and adopt this Agreement and the
Merger; and in addition that the Company consents, subject to Section 5.4, to
the inclusion of such recommendation and approval in the Offer Documents, (iv)
agreed to take all actions to amend the Option Plans in the manner contemplated
by this Agreement, (v) caused the transactions contemplated by this Agreement
not to be governed by the provisions of Subtitles 6 and 7 of Title 3 of the
MGCL, and (v) approved the Option Agreement (as hereinafter defined), authorized
the classification of the Series B Preferred Stock (as hereinafter defined), the
filing of Articles Supplementary with respect to the Series B Preferred Stock
and the issuance of the Series B Preferred Stock to Acquisition upon exercise of
the Option in the manner described in the Option Agreement.
(b) The Company hereby agrees to file with the SEC as soon as
practicable after the date hereof a Solicitation/Recommendation Statement on
Schedule 14D-9 pertaining to the Offer (together with any amendments thereof or
supplements thereto, the "Schedule 14D-9"), containing the recommendation
described in Section 1.2(a) and to promptly mail the Schedule 14D-9 to the
stockholders of the Company. The Company, Parent and Acquisition each agrees
promptly to correct any information provided by it for use in the Schedule 14D-9
if and to the extent that such information shall have become false or misleading
in any material respect, and the Company further agrees to take all steps
necessary to cause the Schedule 14D-9 as so corrected to be promptly filed with
the SEC and disseminated to the holders of Shares, in each case as and to the
extent required by applicable federal securities laws and the rules and
regulations of the SEC. The Parent, Acquisition and their counsel shall be given
a reasonable opportunity to review and comment on the Schedule 14D-9 prior to it
being filed with the SEC. The Company agrees to provide to Parent, Acquisition
and their counsel any comments or other communications which the Company or its
counsel receives from the staff of the SEC with respect to the Schedule 14D-9
promptly after receipt thereof. Notwithstanding anything to the contrary in this
Agreement, the Board may withdraw, modify or amend its recommendation under the
circumstances set forth in Section 5.4.
(c) In connection with the Offer, the Company will promptly furnish
Parent and Acquisition with mailing labels, security position listings and any
available listing or computer files containing the names and addresses of the
record holders of the Shares as of a recent date and shall furnish Acquisition
with such additional information and assistance (including, without limitation,
updated lists of stockholders, mailing labels and lists of securities positions)
as Acquisition or its agents may reasonably request to facilitate communicating
the Offer to the record and beneficial holders of Shares. Subject to the
requirements of applicable law, and except for such steps as are necessary to
disseminate the Offer Documents and any other documents necessary to consummate
the Merger, Parent, Acquisition and their affiliates, associates, agents and
advisors shall use the information contained in any such labels, listings and
files only in connection with the Offer and the Merger, and, if this Agreement
shall be terminated, will deliver to the Company all copies of such information
then in their possession.
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(d) Immediately prior to Acquisition's commencement of the Offer, the
Company shall grant Acquisition an option (the "Option") to purchase from the
Company authorized but unissued shares of Series B Preferred Stock pursuant to
an option agreement substantially in the form attached as Exhibit B to this
Agreement (the "Option Agreement"); provided, however, that the exercise of the
Option shall be subject to the approval of the stockholders of the Company if
counsel to the Company reasonably determines that such approval is required as a
condition of the continued listing of the Shares on the Nasdaq National Market
at any time prior to Acquisition's exercise of the Option. The Series B
Preferred Stock shall be entitled to vote together with the Shares as a single
class on the Merger and any other matter to be voted upon by the Shares and
shall entitle each holder of the Series B Preferred Stock to 1,000 votes for
each share of Series B Preferred Stock held. The Option Agreement shall grant
Acquisition the right to purchase that number of shares of Series B Preferred
Stock that will cause Acquisition to own shares of the Company's capital stock
representing at least ninety percent (90%) of the total number of votes entitled
to vote on the Merger immediately following the exercise of the Option. The
Option shall be exercisable only when and if Acquisition has, pursuant to the
Offer, purchased and paid for a sufficient number of Shares to satisfy the
Minimum Condition. The Option shall terminate and expire, if not previously
exercised, simultaneously with the earlier of (i) Acquisition's termination of
the Offer without having purchased and paid for a sufficient number of Shares to
satisfy the Minimum Condition or (ii) termination of this Agreement in
accordance with Section 8.1. The exercise price of the Option shall be
$2,500,000 for all of the shares of Series B Preferred Stock to be purchased.
(e) In order to enable Acquisition's exercise of the Option,
immediately after Acquisition has, pursuant to the Offer, purchased and paid for
a sufficient number of Shares to satisfy the Minimum Condition, the Company
shall file Articles Supplementary with the SDAT containing the rights,
preferences and powers of the Series B Preferred Stock.
SECTION 1.3. BOARDS OF DIRECTORS AND COMMITTEES; SECTION 14(F).
(a) Beginning immediately after the purchase by Acquisition of Shares
pursuant to the Offer following the Initial Expiration Date or, if applicable,
the extended expiration date of the Offer (the "Tender Offer Purchase Time") and
from time to time thereafter, and subject to the last sentence of this Section
1.3(a), Acquisition shall be entitled to designate that number (but no more than
that number) of directors of the Company that would constitute a majority of the
Board, and the Company shall use its best efforts to, upon request by
Acquisition, promptly, at the Company's election, either increase the size of
the Board or secure the resignation of such number of directors as is necessary
to enable Acquisition's designees to be elected to the Board and to cause
Acquisition's designees to be so elected and to constitute at all times after
the Tender Offer Purchase Time a majority of the Board. At such times, and
subject to the last sentence of this Section 1.3(a), the Company will use its
best efforts to cause persons designated by Acquisition to constitute the same
percentage as is on the Board of (i) each committee of the Board (other than any
committee of the Board established to take action under this Agreement), (ii)
each board of directors of each subsidiary of the Company and (iii) each
committee of each
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such board. Notwithstanding the foregoing, until the Effective Time (as defined
in Section 2.3 hereof) the Company shall retain at least three directors who are
directors of the Company on the date hereof (the "Continuing Directors").
(b) The Company's obligation to appoint designees to the Board shall be
subject to Section 14(f) of the Exchange Act and Rule 14f-1 promulgated
thereunder. The Company shall promptly take all action required pursuant to such
Section and Rule in order to fulfill its obligations under this Section 1.3 and
shall include in the Schedule 14D-9 such information with respect to the Company
and its officers and directors as is required under such Section and Rule in
order to fulfill its obligations under this Section 1.3. Acquisition will supply
to the Company in writing and be solely responsible for any information with
respect to itself and its nominees, officers, directors and affiliates required
by such Section and Rule.
(c) From and after the time, if any, that Acquisition's designees
constitute a majority of the Board until the Effective Time, any amendment,
modification or waiver of any term or condition of this Agreement or the Option
Agreement, any amendment or modification to the Articles of Incorporation or
By-Laws of the Company, any termination of this Agreement by the Company, any
extension of time of performance of any of the obligations of Parent or
Acquisition hereunder, any waiver of any condition or any of the Company's
rights hereunder or other action by the Company in connection with the rights of
the Company hereunder may be effected only with the approval of a majority of
the Continuing Directors.
ARTICLE 2
THE MERGER
SECTION 2.1. THE MERGER. At the Effective Time and upon the terms and
subject to the conditions of this Agreement and in accordance with the MGCL,
Acquisition shall be merged with and into the Company (the "Merger"). Following
the Merger, the Company shall continue as the surviving corporation (the
"Surviving Corporation") and the separate corporate existence of Acquisition
shall cease. Parent, as the sole stockholder of Acquisition, hereby approves
this Agreement, the Merger and the other transactions contemplated hereby.
Subject to the terms and conditions of this Agreement, Parent and Acquisition
agree to cause the Effective Time to occur as soon as practicable after the
Stockholders' Meeting (as defined in Section 5.2(a)) or Acquisition's purchase
and payment for shares of the capital stock of the Company representing not less
than ninety percent (90%) of the votes entitled to be cast on the Merger
pursuant to the Offer and the Option.
SECTION 2.2. CLOSING OF THE MERGER. The closing of the Merger will take
place at a time (the "Closing Time") and on a date to be specified by the
parties, which shall be no later than the second business day after satisfaction
or waiver (in accordance with this Agreement) of the latest to occur of the
conditions set forth in Article 7 (other than those conditions that, by their
nature, are to be satisfied at the Closing Time, but subject to the satisfaction
or waiver of
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those conditions) at the offices of Hartman & Craven LLP, 460 Park Avenue, New
York, New York 10022, unless another time, date or place is agreed to in writing
by the parties hereto.
SECTION 2.3. EFFECTIVE TIME. Subject to the terms and conditions set
forth in this Agreement, Articles of Merger (the "Merger Certificate") shall be
duly executed and acknowledged by Acquisition and the Company and thereafter
delivered at the Closing Time to the State Department of Assessments and
Taxation ("SDAT") of the State of Maryland for filing pursuant to the MGCL. The
Merger shall become effective at such time as a properly executed Merger
Certificate is duly accepted by the SDAT for filing pursuant to the MGCL, or
such later time as Acquisition and the Company may agree upon and set forth in
the Merger Certificate (not exceeding 30 days after the Merger Certificate is
accepted for record; the time the Merger becomes effective being referred to
herein as the "Effective Time").
SECTION 2.4. EFFECTS OF THE MERGER. The Merger shall have the effects
set forth in the MGCL. Without limiting the generality of the foregoing and
subject thereto, at the Effective Time, all the properties, rights, privileges,
powers and franchises of the Company and Acquisition shall vest in the Surviving
Corporation and all debts, liabilities and duties of the Company and Acquisition
shall become the debts, liabilities and duties of the Surviving Corporation.
SECTION 2.5. ARTICLES OF INCORPORATION AND BYLAWS. The Articles of
Incorporation of Acquisition in effect at the Effective Time shall be the
Articles of Incorporation of the Surviving Corporation until amended in
accordance with applicable law. The Bylaws of Acquisition in effect at the
Effective Time shall be the Bylaws of the Surviving Corporation until amended in
accordance with applicable law.
SECTION 2.6. DIRECTORS. The directors of Acquisition at the Effective
Time shall be the initial directors of the Surviving Corporation, each to hold
office in accordance with the Articles of Incorporation and Bylaws of the
Surviving Corporation until the next annual meeting of stockholders and until
each such director's successor is duly elected or appointed and qualified;
provided, however, that immediately following the Merger, the Board of Directors
of the Surviving Corporation shall cause Thomas P. Rice to be elected a director
of the Surviving Corporation.
SECTION 2.7. OFFICERS. The officers of the Company at the Effective
Time shall be the initial officers of the Surviving Corporation, each to hold
office in accordance with the Articles of Incorporation and Bylaws of the
Surviving Corporation until such officer's successor is duly elected or
appointed and qualified.
SECTION 2.8. CONVERSION OF SHARES AND CONVERTIBLE PREFERRED STOCK.
(a) At the Effective Time, each Share issued and outstanding
immediately prior to the Effective Time (excluding (i) any Shares held by any of
the Company's subsidiaries and (ii) any
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Shares held by Parent, Acquisition or any other subsidiary of Parent) shall, by
virtue of the Merger and without any action on the part of Acquisition, the
Company or the holder thereof, be converted into and shall become the right to
receive the Per Share Amount in cash, without interest (the "Cash Merger
Consideration"). At the Effective Time, each share of Convertible Preferred
Stock issued and outstanding immediately prior to the Effective Time (excluding
(i) any shares of Convertible Preferred Stock held by any of the Company's
subsidiaries and (ii) any shares of Convertible Preferred Stock held by Parent,
Acquisition or any other subsidiary of Parent) shall, by virtue of the Merger
and without any action on the part of Acquisition, the Company or the holder
thereof, be converted into and shall become the right to receive the Cash Merger
Consideration multiplied by the number of Shares into which such share of
Convertible Preferred Stock is then convertible. Notwithstanding the foregoing,
if between the date of this Agreement and the Effective Time, the Shares shall
have been changed into a different number of shares or a different class by
reason of any stock dividend, subdivision, reclassification, recapitalization,
split, combination or exchange of shares, then the Cash Merger Consideration
contemplated by the Merger shall be correspondingly adjusted to reflect such
stock dividend, subdivision, reclassification, recapitalization, split,
combination or exchange of shares.
(b) At the Effective Time, any outstanding Company options (other than
stock options granted by the Company to employees, directors, officers or
consultants), warrants, convertible preferred stock (other than the Convertible
Preferred Stock) or other securities (collectively, the "Convertible
Securities") that are convertible into, exercisable for or exchangeable for
Shares and by their terms are not automatically converted into, exercised for or
exchanged for the right to receive the Cash Merger Consideration as a result of
the Merger shall thereafter represent only the right to receive the Cash Merger
Consideration (minus any cash exercise or exchange price). In furtherance of the
preceding sentence, the Company agrees to take all reasonable action to cause
the terms of any such securities to provide for such conversion, exercise or
exchange into the Cash Merger Consideration, including reasonable efforts to
obtain the consent of the holders of any such Convertible Securities to
agreements to amend the terms thereof to provide for such conversion, exercise
or exchange.
(c) At the Effective Time, each Share and each share of Series B
Preferred Stock held by Parent, Acquisition or any subsidiary of Parent,
Acquisition or the Company immediately prior to the Effective Time shall, by
virtue of the Merger and without any action on the part of Acquisition, the
Company or the holder thereof, be canceled and retired and will cease to exist
and no payment shall be made with respect thereto.
(d) At the Effective Time, each share of common stock of Acquisition
issued and outstanding immediately prior to the Effective Time shall be
converted into and shall become one validly issued, fully paid and nonassessable
share of common stock of the Surviving Corporation.
SECTION 2.9. PAYMENT OF CASH MERGER CONSIDERATION.
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(a) As of the Effective Time, Acquisition shall deposit in trust with
such agent or agents as may be appointed by Parent and Acquisition and
reasonably acceptable to the Company (the "Payment Agent") for the benefit of
the holders of issued and outstanding Shares, the Convertible Preferred Stock
and the Convertible Securities at the Effective Time (excluding (i) Shares held
by any of the Company's subsidiaries and (ii) Shares or shares of Series B
Preferred Stock held by Parent, Acquisition or any other subsidiary of Parent),
an amount in cash equal to the aggregate amount necessary to pay the Cash Merger
Consideration, together with an amount of cash sufficient to pay for the
settlement of each Company Stock Option as described in Section 2.10(b) hereof
(such cash is hereinafter referred to as the "Merger Fund") payable pursuant to
Section 2.8 and in settlement of each Company Stock Option pursuant to Section
2.10(b) in exchange for such issued and outstanding Shares. The Payment Agent
shall, pursuant to irrevocable instructions, deliver the Cash Merger
Consideration out of the Merger Fund only as provided in this Section 2.9. The
Merger Fund shall not be used for any other purpose.
(b) As soon as reasonably practicable after the Effective Time, Parent
shall cause the Payment Agent to mail to each holder of record of a certificate
or certificates which immediately prior to the Effective Time represented issued
and outstanding Shares, Convertible Preferred Stock or Convertible Securities
(the "Certificates") that were converted into the right to receive the Cash
Merger Consideration pursuant to Section 2.8: (i) a letter of transmittal (which
shall specify that delivery shall be effected and risk of loss and title to the
Certificates shall pass only upon delivery of the Certificates to the Payment
Agent and shall be in such form and have such other provisions as Parent and the
Company may reasonably specify) and (ii) instructions on how to surrender the
Certificates in exchange for the Cash Merger Consideration. Upon surrender to
the Payment Agent of a Certificate for cancellation, together with such letter
of transmittal duly executed, the holder of such Certificate shall be entitled
to receive in exchange therefor, and Parent shall cause the Payment Agent to
deliver, a check representing the Cash Merger Consideration (less the exercise
price, if any, of any Convertible Securities so surrendered) which such holder
has the right to receive pursuant to the provisions of this Article 2, and the
Certificate so surrendered shall forthwith be canceled. In the event of a
transfer of ownership of Shares, Convertible Preferred Stock or Convertible
Securities which is not registered in the transfer records of the Company,
payment of the Cash Merger Consideration may be made to a transferee if the
Certificate representing such Shares, Convertible Preferred Stock or Convertible
Securities is presented to the Payment Agent accompanied by all documents
required to evidence and effect such transfer and by evidence that any
applicable stock transfer taxes have been paid. Until surrendered as
contemplated by this Section 2.9, each Certificate shall be deemed at all times
and for all purposes after the Effective Time to represent only the right to
receive upon such surrender the Cash Merger Consideration as contemplated by
this Section 2.9.
(c) In the event that any Certificate shall have been lost, stolen or
destroyed, Parent shall cause the Payment Agent to issue in exchange therefor,
upon the making of an affidavit of that fact by the holder thereof, such Cash
Merger Consideration as may be required pursuant to this Agreement; provided,
however, that Acquisition or the Payment Agent may, in its discretion, require
the delivery of a suitable bond or indemnity.
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(d) All Cash Merger Consideration paid upon the surrender for exchange
of Shares, Convertible Preferred Stock or Convertible Securities in accordance
with the terms hereof shall be deemed to have been paid in full satisfaction of
all rights pertaining to such Shares, Convertible Preferred Stock or Convertible
Securities; subject, however, to the Surviving Corporation's obligation to pay
any dividends or make any other distributions with a record date prior to the
Effective Time which may have been declared or made by the Company on such
Shares, Convertible Preferred Stock or Convertible Securities in accordance with
the terms of this Agreement, or prior to the date hereof and which remain unpaid
at the Effective Time. After the Effective Time, there shall be no further
registration of transfers on the stock transfer books of the Surviving
Corporation of the Shares, Convertible Preferred Stock or Convertible Securities
which were outstanding immediately prior to the Effective Time. If after the
Effective Time, Certificates are presented to the Surviving Corporation for any
reason they shall be canceled and exchanged as provided in this Article 2.
(e) Any portion of the Merger Fund which remains undistributed to the
stockholders of the Company for six months after the Effective Time shall be
delivered to Parent upon demand, and any stockholders of the Company who have
not theretofore complied with this Article 2 shall thereafter look only to
Parent for payment of their claim for any portion of the Cash Merger
Consideration.
(f) Neither Acquisition nor the Company shall be liable to any holder
of Shares, Convertible Preferred Stock or Convertible Securities for cash from
the Merger Fund delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
SECTION 2.10. STOCK OPTIONS.
(a) At the Effective Time, each then outstanding option to purchase
Shares (a "Company Stock Option" or collectively "Company Stock Options") issued
pursuant to the Company's Second Incentive Stock Option Plan, Third Incentive
Stock Option Plan, Fourth Incentive Stock Option Plan, Fifth Stock Incentive
Plan and 1997 Directors' Stock Option Plan or otherwise issued to any employee,
officer, director, consultant or former employee, officer, director or
consultant (collectively, the "Option Plans"), whether vested or unvested, the
exercise price of which is greater than the Cash Merger Consideration, shall be
canceled and extinguished without consideration, and the Option Plans shall
terminate as of the Effective Date.
(b) At the Effective Time, each then outstanding Company Stock Option
issued pursuant to the Option Plans that is vested as of the Effective Time, the
exercise price of which is less than the Cash Merger Consideration shall be
canceled and extinguished and shall become the right to receive an amount,
without interest, in cash paid at the Effective Time equal to the excess, if any
of the Cash Merger Consideration over the exercise price per Share of such
Company Stock Option, less the amount of Taxes (as defined in Section 3.13(a))
required to be withheld under applicable Federal, state or local laws and
regulations, multiplied by the number
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of Shares subject to such Company Stock Option, payable in accordance with the
provisions of Section 2.9 of this Agreement.
(c) At the Effective Time, each then outstanding Company Stock Option
issued pursuant to the Option Plans or any other stock option plan, program,
arrangement or agreement to which the Company or any of its subsidiaries is a
party that is not vested as of the Effective Time, the exercise price of which
is less than the Cash Merger Consideration shall be canceled and extinguished in
consideration for a compensatory payment to be paid to the holder of such option
at the time such option would otherwise have vested (provided that such holder
is employed with the Company at such time of vesting and has not breached any of
such holder's obligations under any applicable employment agreement with the
Company or any Subsidiary) equal to an amount, without interest, in cash equal
to the excess, if any of the Cash Merger Consideration over the exercise price
per Share of such options that would otherwise have vested at such time.
Notwithstanding the foregoing, the right to receive such payments shall vest in
accordance with the terms of the applicable option agreement.
(d) If and to the extent required by the terms of the Option Plans, or
any other stock option plan, program, arrangement or agreement to which the
Company or any of its subsidiaries is a party or the terms of any option granted
thereunder, the Company shall cooperate with Parent and Acquisition in obtaining
the consent of each holder of outstanding Company Stock Options to the foregoing
treatment of such options and to take any other action necessary to effect the
foregoing provisions.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the Disclosure Schedule previously delivered by
the Company to Parent (the "Company Disclosure Schedule"), the Company hereby
represents and warrants to each of Parent and Acquisition as of the date hereof
as follows:
SECTION 3.1. ORGANIZATION AND QUALIFICATION; SUBSIDIARIES.
(a) Each of the Company and each of its subsidiaries is duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation or organization, except where the failure to qualify or to be in
good standing would not have a Material Adverse Effect (as defined below) and
has all requisite power and authority to own lease and operate its properties
and to carry on its businesses as now being conducted, except where the failure
to have such power and authority would not have a Material Adverse Effect. The
Company has heretofore made available to Parent complete and correct copies of
the Articles of Incorporation and Bylaws (or similar governing documents), as
currently in effect, of the Company and each of its subsidiaries. When used in
connection with the Company or its subsidiaries, the term
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"Material Adverse Effect" means any change or effect (i) that is materially
adverse to the business, properties, financial condition, or results of
operations of the Company and its subsidiaries, taken as whole, or (ii) that
would materially impair the ability of the Company to perform its obligations
hereunder. Notwithstanding the foregoing, none of the following shall be deemed,
either alone or in combination, to constitute a Material Adverse Effect: (i)
changes or effects resulting from general changes in economic, market,
regulatory or political conditions or changes in conditions or business
practices generally applicable to the industries in which the Company and its
subsidiaries operate; (ii) changes in the market price or trading volume of the
Shares on the Nasdaq National Market or the delisting of the Shares on the
Nasdaq National Market; or (iii) changes or effects resulting from the
announcement or approval of the Offer and the Agreement or relating to the
identity of or facts pertaining to Parent or Acquisition.
(b) Each of the Company and its subsidiaries is duly qualified or
licensed and in good standing to do business in each jurisdiction in which the
property owned, leased or operated by it or the nature of the business conducted
by it makes such qualification or licensing necessary, except in such
jurisdictions where the failure to be so duly qualified or licensed and in good
standing would not have a Material Adverse Effect on the Company.
SECTION 3.2. CAPITALIZATION OF THE COMPANY AND ITS SUBSIDIARIES.
(a) The authorized stock of the Company consists of 14,984,490 shares
of Class A common stock, par value $.01 per share (the "Shares"), of which, as
of September 30, 2000, 5,681,156 Shares were issued and outstanding, and 15,510
shares of Series A-1 convertible preferred stock, par value $.01 per share (the
"Convertible Preferred Stock"), of which, as of September 30, 2000, 14,511
shares were outstanding. All of the outstanding Shares have been validly issued
and are fully paid and nonassessable, and free of preemptive rights granted by
the Company. As of September 30, 2000, (i) 1,515,338 were reserved for issuance
upon the exercise of outstanding Company Stock Options issued pursuant to the
Option Plans and other stock option plans, or agreements to which the Company or
any of its subsidiaries is a party, (ii) 967,448 Shares were reserved for
issuance upon the conversion of the outstanding Convertible Preferred Stock, and
(iii) 123,370 Shares were reserved for issuance upon the exercise of the
outstanding Warrants. Except as set forth in Section 3.2(a) of the Company
Disclosure Schedule, since September 30, 2000, no shares of the Company's stock
have been issued other than pursuant to Company Stock Options or other
stock-based employee benefit plans of the Company and no options to acquire
Shares have been granted other than pursuant to the Option Plans. Except as set
forth above and in Section 3.2(a) of the Company Disclosure Schedule, as of the
date hereof, there are issued, reserved for issuance, or outstanding (i) no
shares of stock or other voting securities of the Company, (ii) no securities of
the Company or its subsidiaries convertible into or exchangeable for shares of
stock or voting securities of the Company, (iii) no options or other rights to
acquire from the Company or its subsidiaries and, except for the Series B
Preferred Stock issuable upon exercise of the Option or as described in Section
3.2(a) of the Company Disclosure Schedule, no obligations of the Company or its
subsidiaries to issue any stock, voting securities or securities convertible
into or exchangeable for stock or voting
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securities of the Company, (iv) no bonds, debentures, notes or other
indebtedness or obligations of the Company or any of its subsidiaries entitling
the holders thereof to have the right to vote (or which are convertible into, or
exercisable or exchangeable for, securities entitling the holders thereof to
have the right to vote) with the stockholders of the Company or any of its
subsidiaries on any matter, and (v) no equity equivalent interests in the
ownership or earnings of the Company or its subsidiaries or other similar rights
(collectively "Company Securities"). As of the date hereof, except as set forth
in Section 3.2(a) of the Company Disclosure Schedule, there are no outstanding
obligations of the Company or its subsidiaries (absolute, contingent or
otherwise) to repurchase, redeem or otherwise acquire any Company Securities.
There are no Shares outstanding subject to rights of first refusal of the
Company, nor are there any pre-emptive rights granted by the Company with
respect to any Shares. Other than this Agreement, there are no stockholder
agreements, voting trusts or other agreements or understandings to which the
Company is a party or by which it is bound relating to the voting or, except as
set forth in Section 3.2(a) of the Company Disclosure Schedule, registration of
any shares of stock of the Company.
(b) Except as set forth in Section 3.2(b) of the Company Disclosure
Schedule, all of the outstanding stock of the Company's subsidiaries is owned by
the Company, directly or indirectly, free and clear of any Lien (as defined
below). There are no securities of the Company or its subsidiaries convertible
into or exchangeable for, no options or other rights to acquire from the Company
or its subsidiaries and no other contract, understanding, arrangement or
obligation (whether or not contingent) providing for the issuance or sale,
directly or indirectly, of any stock or other ownership interests in, or any
other securities, of any subsidiary of, the Company. Except as set forth in
Section 3.2(b) of the Company Disclosure Schedule, there are no outstanding
contractual obligations of the Company or its subsidiaries to repurchase, redeem
or otherwise acquire any outstanding shares of capital stock or other ownership
interests in any subsidiary of the Company. For purposes of this Agreement,
"Lien" means, with respect to any asset (including without limitation any
security), any mortgage, lien, pledge, charge, security interest or encumbrance
of any kind in respect of such asset (including any restrictions on the right to
vote or sell the same except as may be provided as a matter of law).
(c) The Shares constitute the only class of equity securities of the
Company or its subsidiaries registered or required to be registered under the
Exchange Act.
SECTION 3.3. AUTHORITY RELATIVE TO THIS AGREEMENT. The Company has all
necessary corporate power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly and validly authorized by the Board, and no other
corporate proceedings on the part of the Company are necessary to authorize this
Agreement or to consummate the transactions contemplated hereby except, if
required by law, the approval and adoption of this Agreement and the Merger by
the holders of the outstanding Shares and the filing of the Merger Certificate
with the SDAT, and the filing of Articles Supplementary with respect to the
Series B Preferred Stock. The Board has taken all action necessary under the
MGCL to prevent this Agreement and the transactions contemplated
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hereby from being governed by the provisions of Subtitles 6 and 7 of Title 3 of
the MGCL. This Agreement has been duly and validly executed and delivered by the
Company and, assuming the due authorization, execution and delivery by Parent
and Acquisition, constitutes a valid, legal and binding agreement of the
Company, enforceable against the Company in accordance with its terms, except as
such enforceability may be limited by any applicable conservator, receivership,
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally, and except as the
availability of equitable remedies may be limited by the application of general
principles of equity (regardless of whether such equitable principles are
applied in a proceeding at law or in equity).
SECTION 3.4. SEC REPORTS; FINANCIAL STATEMENTS; ACCOUNTING PROCEDURES.
(a) The Company has filed all required forms, reports and documents
("Company SEC Reports") with the SEC since March 31, 1999, each of which has
complied (as of its respective date) in all material respects with all
applicable requirements of the Securities Act of 1933, as amended (the
"Securities Act"), and the Exchange Act, each as in effect on the dates such
forms, reports and documents were filed. None of such Company SEC Reports,
including, without limitation, any financial statements or schedules included or
incorporated by reference therein, when filed contained any untrue statement of
a material fact or omitted to state a material fact required to be stated or
incorporated by reference therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The audited consolidated financial statements of the Company
included in the Company SEC Reports fairly present in all material respects in
conformity with generally accepted accounting principles in the United States as
in effect from time to time and applied on a consistent basis ("GAAP") (except
as may be indicated in the notes thereto or, in the case of unaudited
consolidated quarterly statements, as permitted by Form 10-Q of the SEC and
subject to normal year-end adjustments) the consolidated financial position of
the Company and its consolidated subsidiaries as of the dates thereof and their
consolidated results of operations and changes in financial position for the
periods then ended.
(b) The Company has heretofore made available to Acquisition or Parent
a complete and correct copy of all previously filed Company SEC Reports and will
promptly make available to Acquisition or Parent any Company SEC Reports filed
hereafter and any amendments or modifications which are required to be filed
with the SEC but have not yet been filed with the SEC to Company SEC Reports,
including any agreements, documents or other instruments which previously had
been filed by the Company with the SEC pursuant to the Exchange Act.
(c) The Company and its subsidiaries maintain a system of internal
accounting controls, policies and procedures sufficient to ensure that all
transactions relating to their business are executed in conformity in all
material respects with the applicable rules, regulations, directives and
instructions of governmental and regulatory authorities, and in a manner as to
permit preparation of financial statements to maintain accountability for the
Company's assets.
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SECTION 3.5. INFORMATION SUPPLIED. None of the information supplied by
the Company in writing for inclusion or incorporation by reference in the Offer
Documents, Schedule 14D-9, any other tender offer materials, Schedule 14A or
14C, or the proxy statement or information statement ("Proxy Statement")
relating to the Offer or any meeting to be held in connection with the Merger
(all of the foregoing documents, as amended or supplemented, collectively, the
"Disclosure Statements") will, at the date each and any of the Disclosure
Statements is mailed to stockholders of the Company, the date on which any such
document is filed with the SEC and, when applicable, and at the time of the
meeting of stockholders of the Company to be held, if necessary, in connection
with the Merger, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they are
made, not misleading. No representation or warranty is made by the Company with
respect to information supplied in writing by Parent or Acquisition for
inclusion in the Disclosure Statements. The Proxy Statement, if any, filed by
the Company and Schedule 14D-9 will comply as to form in all material respects
with all provisions of applicable law.
SECTION 3.6. CONSENTS AND APPROVALS; NO VIOLATIONS. Except as set forth
in Section 3.6 of the Company Disclosure Schedule and except for filings,
permits, authorizations, consents and approvals as may be required under, and
other applicable requirements of, (a) the Exchange Act, (b) state securities
laws ("Blue Sky Laws") or take-over laws, (c) the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), (d) the filing and
recordation and acceptance for record by SDAT of the Articles Supplementary with
respect to the Series B Preferred Stock and Merger Certificate, each as required
by the MGCL, or (e) approval by the Company's lenders and bondholders, no filing
with or notice to, and no permit, authorization, consent or approval of, any
court or tribunal, or administrative governmental or regulatory body, agency or
authority (a "Governmental Entity") is necessary for the execution and delivery
by the Company of this Agreement or the consummation by the Company of the
transactions contemplated hereby, except where the failure to obtain such
permits, authorizations, consents or approvals or to make such filings or give
such notice would not have a Material Adverse Effect. Neither the execution,
delivery and performance of this Agreement by the Company nor the consummation
by the Company of the transactions contemplated hereby will (i) conflict with or
result in any breach of any provision of the respective Articles of
Incorporation or Bylaws (or similar governing documents) of the Company or any
of its subsidiaries, (ii) except as set forth in Section 3.6 of the Company
Disclosure Schedule, result in a violation or breach of or constitute (with or
without due notice or lapse of time or both) a default (or give rise to any
right of termination, amendment, cancellation or acceleration or Lien) under any
of the terms, conditions or provisions of any note, bond, mortgage, indenture,
lease, license, contract, agreement or other instrument or obligation to which
the Company or any of its subsidiaries is a party or by which any of them or any
of their respective properties or assets may be bound or (iii) except as set
forth in Section 3.6 of the Company Disclosure Schedule or in this Section 3.6
violate any order, writ, injunction, decree, law, statute, rule or regulation
applicable to the Company or any of its subsidiaries or any of their respective
properties or assets except, in the case of (ii) or (iii), for violations,
breaches, defaults or rights of termination, amendment, cancellation or
acceleration or
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Liens which would not have a Material Adverse Effect.
SECTION 3.7. NO UNDISCLOSED LIABILITIES; ABSENCE OF CHANGES. Except to
the extent publicly disclosed in the Company's SEC Reports, as of March 31,
2000, none of the Company or any of its subsidiaries had any liabilities or
obligations of any nature, whether or not accrued, contingent or otherwise, that
would be required by GAAP to be reflected on a consolidated balance sheet of the
Company and its subsidiaries (including the notes thereto) or which would have a
Material Adverse Effect and since such date, the Company has incurred no such
liability or obligation, which would have a Material Adverse Effect, other than
in the ordinary course of business consistent with past practice.
SECTION 3.8. LITIGATION; DISPUTES. As of the date hereof (i) there is
no suit, claim, action, proceeding or investigation pending or, to the Company's
Knowledge (as defined below), threatened against the Company or any of its
subsidiaries or any of their respective properties or assets before any
Governmental Entity that individually or in the aggregate would have a Material
Adverse Effect; (ii) none of the Company or its subsidiaries nor any property or
asset of the Company or any of its subsidiaries is subject to any outstanding
order, writ, injunction or decree; and (iii) there is no claim or dispute
between the Company and any customer or supplier and, to the Company's
knowledge, no basis for any such claim or dispute, that individually or in the
aggregate would have a Material Adverse Effect. For purposes of this Agreement,
the term "Knowledge" with respect to the Company means the actual knowledge of
any of the officers and other employees of the Company identified in Exhibit C
hereto.
SECTION 3.9. COMPLIANCE WITH LAWS.
(a) The Company and its subsidiaries have complied in all material
respects with all applicable laws, rules, regulations, ordinances and codes,
whether federal, state, local or foreign including, without limitation, all laws
and regulations relating to occupational health and safety, equal employment
opportunities, fair employment practices, and sex, race, religious, age and
other prohibited discrimination, and all other labor laws, including without
limitation the Family and Medical Leave Act.
(b) As to each product subject to the jurisdiction of the Food and Drug
Administration ("FDA") under the Federal Food, Drug and Cosmetic Act, as
amended, and the regulations thereunder ("FDC Act") and the Public Health
Services Act, as amended ("PHS Act"), and the regulations thereunder, and each
product subject to the jurisdiction of the Drug Enforcement Administration
("DEA") under the Controlled Substance Act, as amended, and Controlled
Substances Import and Export Act, as amended ("CS Act") and the regulations
thereunder (each such product, a "Product") that is either manufactured,
packaged, labeled or tested by the Company and its subsidiaries, such Product is
being manufactured, packaged, labeled or tested in compliance with all the
requirements under the FDC Act, PHS Act and the CS Act, and similar laws, rules
and regulations relating to premarket clearance, licensure, or application,
approval, good manufacturing practices, quotas, labeling, record keeping and
filing of reports except where
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the failure to be in compliance would not have a Material Adverse Effect on the
Company. Except as disclosed in the Company SEC Reports or as set forth in
Schedule 3.9(b), since January 1, 1999, neither the Company nor any of its
subsidiaries has received any notice, warning letter or other communication from
FDA, DEA or any other Governmental Entity (i) contesting the premarket
clearance, licensure, registration, or approval of, the uses of, the
distribution of, the manufacturing or packaging of, the testing of, sale of,
controlled substance scheduling of and quotas for, or the labeling and promotion
of any Product described in this Section 3.9(b) or (ii) otherwise alleging any
violation of any laws, rules or regulations by the Company or any subsidiary,
and which would have a Material Adverse Effect on the Company.
(c) Except as set forth in Schedule 3.9(c), since January 1, 1999, no
Products of the Company or any of its subsidiaries have been recalled,
withdrawn, replaced, suspended or discontinued nor have any DEA registrations
been terminated by the Company or any subsidiary in the United States (whether
voluntary or otherwise) which would have a Material Adverse Effect on the
Company.
(d) As to each Product of the Company or its subsidiaries for which a
human biological license application, human establishment license application,
human product license application, new human drug application, investigational
new human drug application, abbreviated or supplemental new human drug
application, investigational new animal drug application, new animal drug
application, or abbreviated or supplemental new animal drug application,
registration or quota issued by the DEA, or similar state or foreign regulatory
application has been approved, the Company and any subsidiary are in compliance
with 21 U.S.C., (Section) 355, 360b, 42 U.S.C., (Section) 351, and 21 U.S.C.
(Section) 822, and 21 C.F.R. Parts 312, 314, 511, 514, 601, and 1301 et seq.,
respectively, and similar laws and all terms and conditions of such
applications, except where the failure to be in compliance would not have a
Material Adverse Effect on the Company. As to each such application or other
submission that the Company or any subsidiary has submitted to, but not yet
gained approval or the permission from FDA or DEA, the Company has provided all
additional information and taken all additional action reasonably required by
the FDA or DEA in connection with the application or submission. In the
Company's good faith opinion, there are no facts or circumstances that would
reasonably be expected to delay, in any material respect, outside the ordinary
course of business, or prevent approval of any pending applications or other
submissions to FDA or DEA. As to each such Product, the Company and its
subsidiaries have included in the application for such Product where required,
the certification described in 21 U.S.C. (Section) 335a (k)(1) or any similar
law and the list described in 21 U.S.C. (Section) 335(k)(2) or any similar law,
and such certification and such list was in each case true and accurate when
made and remained true and accurate thereafter. In addition, the Company and its
subsidiaries are in compliance with all applicable registration and listing
requirements set forth in 21 U.S.C. (Section) 360 and 21 C.F.R. Part 207 and all
similar laws except where the failure to be in compliance would not have a
Material Adverse Effect on the Company.
(e) Each article of any Product manufactured and released and/or
distributed by the Company or its subsidiaries is not adulterated within the
meaning of 21 U.S.C. (Section) 351 (or similar
-17-
laws) or misbranded within the meaning of 21 U.S.C. (Section) 352 (or similar
laws), except where such failure in compliance with the foregoing would not have
a Material Adverse Effect on the Company.
(f) Neither the Company nor its subsidiaries, or any officer, employee
or agent or the Company or any subsidiary has made any untrue statement of a
material fact or fraudulent statement to the FDA or other Governmental Entity,
failed to disclose a fact required to be disclosed to the FDA or any other
Governmental Entity, or committed an act, made a statement, or failed to make a
statement that, at the time such disclosure was made could reasonably be
expected to provide a basis for the FDA or any other Governmental Entity to
invoke its policy respecting "Fraud, Untrue Statements of Material Facts,
Bribery, and Illegal Gratuities," set forth in 56 Fed. Reg. 46191 (September 10,
1991) or any similar policy. Neither the Company nor any subsidiary, nor any
officer, employee or agent of the Company or any subsidiary has been convicted
of any crime or engaged in any conduct for which debarment is mandated by 21
U.S.C. (Section) 335a (a) or any similar law or authorized by 21 U.S.C.
(Section) 335a(b) or any similar law.
(g) Except as set forth on Schedule 3.9(g), since January 1, 1999,
neither the Company nor its subsidiaries has received any written notice that
the FDA or any other Governmental Entity has commenced, or threatened to
initiate, any action, including lawsuits, arbitrations, or legal or
administrative or regulatory proceedings, charges, complaints, or
investigations, nor are there any completed or pending efforts to withdraw its
approval of, request the recall of, suspension or, seizure or, change the quotas
for controlled substances, or change the controlled substances schedules of any
Product of the Company or its subsidiaries, or commenced, or threatened to
initiate, any action to enjoin production at, or suspend or revoke the DEA
registration or any facility of, or enter into a Consent Decree or Permanent
Injunction with the Company or any subsidiary which would have a Material
Adverse Effect on the Company.
(h) The Company and its subsidiaries, except where the failure be in
compliance would not have a Material Adverse Effect on the Company, are not in
violation of and are in compliance with, all applicable laws, rules and
regulations regarding the conduct of pre-clinical and clinical investigations.
(i) To the best knowledge of the Company, there are no violations by
the Company or its subsidiaries of the FDC Act including Current Good
Manufacturing Practices, the CS Act or any other legislation or regulation
promulgated by any other U.S. federal or state Governmental Entity that
reasonably might be expected to result in the revocation, cancellation,
suspension, limitation or adverse modification of any FDA permit, in criminal
liability or in cancellation of any substantial customer contract.
(j) All manufacturing, warehousing, distributing, and testing
operations conducted by or for the benefit of the Company and its subsidiaries
are not in violation of the good manufacturing practice regulations set forth in
21 C.F.R. Parts 210 and 211, except where the failure to be in compliance would
not have a Material Adverse Effect on the Company.
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(k) No person has filed a claim for loss or potential loss under any
indemnity covering participants in clinical trials or Products of the Company or
any subsidiary.
(l) The Company has provided or made available to Parent all documents
in its possession or the possession of its subsidiaries concerning communication
to or from FDA or DEA, or prepared by FDA or DEA which bear in any material
respect on compliance with FDA or DEA regulatory requirements, including, but
not limited to, any deficiency letter, warning letter, non-approvable
letter/order, withdrawal letter/order, or similar communications.
SECTION 3.10. LICENSES AND PERMITS. The Company or the applicable
subsidiary has obtained all licenses, permits, qualifications, franchises and
other governmental authorizations and approvals, including, without limitation,
from the FDA and DEA and, as applicable, approvals by the FDA and DEA required
in order for it to conduct its business as currently conducted. Each such
license, permit, qualification, franchise and other authorization is in full
force and effect and will remain in full force and effect immediately after the
Effective Time and shall not be violated, affected or impaired by, or require
any further action to remain effective as a result of the Closing. No material
violation exists in respect of any such license, permit, qualification,
franchise, authorization or approval. No proceeding is pending, or to the
Company's Knowledge, threatened to revoke or limit any such license, permit,
qualification, franchise, authorization or approval.
SECTION 3.11. EMPLOYEE BENEFIT PLANS; LABOR MATTERS.
(a) Section 3.11(a) of the Company Disclosure Schedule sets forth each
plan that is subject to the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), and each other material agreement, arrangement or commitment
that is an employment or consulting agreement (other than non-executive
employment agreements), executive or incentive compensation plan, bonus plan,
deferred compensation agreement, employee pension, profit sharing, savings or
retirement plan, employee stock option or stock purchase plan, group life,
health, or accident insurance or other employee benefit plan, agreement,
arrangement or commitment, including, without limitation, severance, vacation,
holiday or other bonus plans, currently maintained by the Company or any of its
subsidiaries (or any entity that is or was at the relevant time treated as a
single employer with the Company or any of its subsidiaries under Section
414(b), (c), (m), or (o) of the Code ("ERISA Affiliate")) for the benefit of any
present or former employees, officers or directors of the Company, any of its
subsidiaries or ERISA Affiliates ("Company Personnel") or with respect to which
the Company or any of its subsidiaries or ERISA Affiliates has liability or
makes or has an obligation to make contributions (each such plan, agreement,
arrangement or commitment set forth in Section 3.11(a) of the Company Disclosure
Schedule being hereinafter referred to as a "Company Employee Plan").
(b) The Company has made available to the Parent (i) copies of all
Company Employee Plans or in the case of an unwritten plan, a written
description thereof, (ii) copies of the most
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recent annual, financial and, if applicable, actuarial reports and Internal
Revenue Service determination letters relating to such Company Employee Plans
and (iii) copies of the most recent summary plan descriptions relating to such
Company Employee Plans and distributed to Company Personnel.
(c) Except as disclosed in Section 3.11(c) of the Company Disclosure
Schedule, there are no Company Personnel who are entitled to any medical, dental
or life insurance benefits to be paid under any Company Employee Plans after
termination of employment other than as required by Section 601 of ERISA,
Section 4980B of the Internal Revenue Code of 1986, as amended (the "Code"), or
applicable state law.
(d) Each Company Employee Plan that is an employee welfare benefit plan
under Section 3(1) of ERISA is either (i) funded through an insurance company
contract and is not a "welfare benefit fund" within the meaning of Section 419
of the Code or (ii) unfunded.
(e) All contributions or payments due with respect to any periods prior
to the Closing Time under any Company Employee Plan have been or will be timely
made or appropriate charges have been made on the financial statements. Each
Company Employee Plan by its terms and operation is in compliance in all
material respects with all applicable laws (including, but not limited to,
ERISA, the Code and the Age Discrimination in Employment Act of 1967, as
amended). The Company has obtained a favorable determination as to the
qualification under Section 401(a) (and 401(k) where applicable) of each Company
Employee Plan that is a tax-qualified employee pension benefit plan from the
IRS. To the Company's Knowledge, nothing has occurred since the date of each
such determination that would adversely affect such tax qualification.
(f) There are no actions, suits or claims pending or, to the Company's
Knowledge, threatened (other than routine non-contested claims for benefits),
against any Company Employee Plan or, to the Company's Knowledge, any
administrator or fiduciary of any such Company Employee Plan. As to each Company
Employee Plan for which an annual report is required to be filed under ERISA or
the Code, all such filings (including Forms 5500 and all schedules) have been
made on a timely basis, in accordance with all applicable requirements. No
Company Employee Plan is a defined benefit plan under Section 3(35) of ERISA.
(g) Neither the Company, any of its subsidiaries nor any ERISA
Affiliate maintains or has maintained, contributes to or has contributed to or
is or has been required to contribute to any plan under which more than one
employer makes contributions (within the meaning of Section 4064(a) of ERISA),
any plan that is a multi-employer plan within the meaning of Section 3(37) of
ERISA, or any plan subject to the minimum funding requirements of Section 412 of
the Code.
(h) Neither the Company nor any of its subsidiaries (nor, to the
Company's Knowledge, any other Person, including any fiduciary) has engaged in
any "prohibited transaction" (as defined in Section 4975 of the Code or Section
406 of ERISA) or committed any breach of
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fiduciary duty, which would subject any of the Company Employee Plans (or their
trusts), the Company, any of its subsidiaries or ERISA Affiliates, to any
material tax or penalty or other material liability imposed under the Code or
ERISA.
(i) None of the assets of the Company Employee Plans that are subject
to ERISA is invested in any property constituting employer real property or an
employer security within the meaning of Section 407(d) of ERISA.
(j) Except as disclosed in Section 3.11(j) of the Company Disclosure
Schedule or otherwise provided in this Agreement, the transactions contemplated
by this Agreement (either alone or together with any other transaction(s) or
event(s)) will not (i) entitle any Company Personnel to severance pay under any
Company Employee Plan, (ii) accelerate the time of payment or vesting or
materially increase the amount of benefits due under any Company Employee Plan
or compensation to any Company Personnel, (iii) result in any payments
(including parachute payments) under any Company Employee Plan becoming due to
any Company Personnel, or (iv) terminate or modify or give a third party a right
to terminate or modify the provisions or terms of any Company Employee Plan.
Section 3.11(j) of the Company Disclosure Schedule sets forth, for each employee
of the Company or any of its subsidiaries that will receive any parachute
payment within the meaning of Section 280G of the Code.
(k) Neither the Company nor any of its subsidiaries is a party to any
collective bargaining or other labor union contract applicable to any Company
Personnel. There is no pending or, to the Company's Knowledge, threatened labor
dispute, strike or work stoppage against the Company or any of its subsidiaries.
There is no labor union representing any of the Company's employees or, to the
Company's Knowledge, any organizational effort currently being made on behalf of
any labor organization to organize any such employees. Neither the Company nor
any of its subsidiaries nor their respective representatives or employees has
committed any unfair labor practices in connection with the operation of the
respective businesses of the Company or its subsidiaries, and there is no
pending or, to the Company's Knowledge, threatened charge or complaint against
the Company or its subsidiaries by the National Labor Relations Board or any
comparable state governmental agency. To the Company's Knowledge, the Company
and its subsidiaries are in compliance in all material respects with all
applicable laws and regulations respecting employment, employment practices,
labor relations, employment discrimination, safety and health, wages, hours and
terms and conditions of employment.
(l) All individuals who are performing or have performed services for
the Company or any affiliate thereof, whether as consultants, contractors,
agents or otherwise, and are or were classified by the Company or any affiliate
as "independent contractors" qualify for such classification under Section 530
of the Revenue Act of 1978 or Section 1706 of the Tax Reform Act of 1986, as
applicable. The Company has fully complied with and is not in default or
violation of any law, statute, rule, regulation or requirement applicable to
such individual. Except as set forth in Section 3.11(l) of the Company
Disclosure Schedule, there is no pending or, to the Company's Knowledge,
threatened claim against the Company by or on behalf of any such
-21-
individual, or investigation, audit or other proceeding relating to such an
individual or individuals, by any Governmental Entity. To the Company's
Knowledge, there is no labor union representing any such individuals or, to the
Company's Knowledge, any organizational effort currently being made on behalf of
any labor organization to organize any such individuals.
SECTION 3.12. ENVIRONMENTAL LAWS AND REGULATIONS.
(a) Except as publicly disclosed in the Company SEC Reports, (i) the
Company and its subsidiaries are in material compliance with all applicable
federal, state, local and foreign laws and regulations, orders, decrees,
judgments, permits and licenses relating to public and worker health and safety
and to the protection and clean-up of the natural environment (including,
without limitation, ambient air, surface water, ground water, land surface or
subsurface strata) and activities or conditions relating thereto, including,
without limitation, those relating to the generation, handling, disposal,
transportation or release of hazardous materials (collectively "Environmental
Laws"), except for non-compliance that would not have a Material Adverse Effect,
which compliance includes but is not limited to, the possession by the Company
and its subsidiaries of all permits and other governmental authorizations
required under applicable Environmental Laws and compliance with the terms and
conditions thereof; (ii) none of the Company or its subsidiaries has received
written notice of or, to the Company's Knowledge, is the subject of any
Environmental Claim (as defined below) that would have a Material Adverse Effect
or, to the Company's Knowledge, against any Person whose liability for any
Environmental Claim the Company or any of its subsidiaries has or may have
retained or assumed either contractually or by operation of law; and (iii) to
the best of the Company's knowledge, none of the Company's owned or leased real
properties contains any Hazardous Material (as defined in any Environmental Law)
including, without limitations, any asbestos.
(b) Except as disclosed in the Company SEC Reports, there is no action,
cause of action, claim, investigation, demand or written notice by any Person
alleging liability under or non-compliance by the Company with any Environmental
Law (an "Environmental Claim") that is pending or, to the Company's Knowledge,
threatened against the Company or its subsidiaries which would have a Material
Adverse Effect.
SECTION 3.13. TAXES.
(a) For purposes of this Agreement: (i) "Tax" or "Taxes" means any
taxes, charges, fees, levies, or other assessments imposed by any U.S. or
foreign governmental entity, whether national, state, county, local or other
political subdivision, including, without limitation, all net income, gross
income, sales and use, rent and occupancy, value added, ad valorem, transfer,
gains, profits, excise, franchise, real and personal property, gross receipt,
capital stock, business and occupation, disability, employment, payroll,
license, estimated, or withholding taxes or charges imposed by any governmental
entity, and includes any interest and penalties on or additions to any such
taxes (and includes taxes for which the Company and/or any of its subsidiaries,
as the case may be, may be liable in its own right, or as the transferee of the
assets
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of, or as successor to, any other corporation, association, partnership, joint
venture, or other entity, or under Treasury Regulation Section 1.1502-6 or any
similar provision of foreign, state or local law), provided, however, that to
the extent that the following representations relate to state and local sales
taxes or lodging taxes, such representations are limited to the Company's
Knowledge; and (ii) "Tax Return" means a report, return or other information
required to be supplied to a governmental entity with respect to Taxes
including, where permitted or required, group, combined or consolidated returns
for any group of entities that includes the Company or any of its subsidiaries.
(b) The Company and each of its subsidiaries, and any affiliated or
combined group of which the Company or any of its subsidiaries is or was a
member for applicable Tax purposes, have (i) filed all federal income and all
other Tax Returns required to be filed by applicable law and all such federal
income and other Tax Returns (A) reflect the liability for Taxes of the Company
and each of its subsidiaries, and (B) were filed on a timely basis and (ii)
within the time and in the manner prescribed by law, paid (and until the Closing
Time will pay within the time and in the manner prescribed by law) all Taxes
that were or are due and payable as set forth in such Tax Returns.
(c) Each of the Company and, where applicable, the Company's
subsidiaries has established (and until the Closing Time will maintain) on its
books and records reserves adequate to pay all Taxes of the Company or such
respective subsidiary, as the case may be, in accordance with GAAP, which are
reflected in the most recent consolidated financial statements of the Company
and its subsidiaries contained in the Company SEC Documents, as applicable, to
the extent required by GAAP.
(d) Neither the Company nor any subsidiary thereof has requested any
extension of time within which to file any income, franchise or other Tax
Return, which Tax Return has not been filed as of the date hereof.
(e) Neither the Company nor any subsidiary thereof has executed any
outstanding waivers or comparable consents that will be in effect after the
Effective Time regarding the application of the statute of limitations with
respect to any income, franchise or other Taxes or Tax Returns.
(f) No deficiency for any Tax which, alone or in the aggregate with any
other deficiency or deficiencies, would exceed $25,000, has been proposed,
asserted, or assessed in writing against the Company and/or any subsidiary
thereof that has not been resolved and paid in full or otherwise settled, no
audits or other administrative proceedings are presently in progress or pending
or threatened in writing with regard to any Taxes or Tax Returns of the Company
and/or any subsidiary thereof, and no written claim is currently being made by
any authority in a jurisdiction where any of the Company or any subsidiary
thereof, as the case may be, does not file Tax Returns that it is or may be
subject to Tax in that jurisdiction.
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(g) Neither the Company nor any of its subsidiaries is a party to any
agreement relating to allocating or sharing of the payment of, or liability for,
Taxes.
(h) The Company does not constitute and for the past five years has not
constituted a "United States real property holding corporation" within the
meaning of Section 897(c)(2) of the Code.
SECTION 3.14. PROPERTIES. Except as set forth in Section 3.14 of the
Company Disclosure Schedule, neither the Company nor any of its Subsidiaries
owns any real property. Each of the Company and its subsidiaries has good and
marketable title to all properties, assets and rights shown on its balance sheet
or its last Company SEC Report prior to the date hereof as being owned by it and
valid leasehold interests in all material properties and assets (whether real,
personal or mixed) leased by it (collectively, the "Company Assets"). With
respect to owned Company Assets, there are no liens, encumbrances, defects in
title, easements or rights of third parties (except routine easements or
rights-of-way that do not adversely affect title to, or the value of, any such
Company Assets) except as shown on the Company's balance sheet or latest Company
SEC Report prior to the date hereof. With respect to leased Company Assets,
there are no security deposits or portions thereof that have been applied in
respect of a breach or default under the applicable lease which has not been
redeposited in full, and neither the Company nor any of its subsidiaries has
mortgaged, deeded in trust or otherwise transferred or encumbered such Lease or
any interest therein except in the ordinary course of business. There are no
pending or, to the Company's Knowledge, threatened condemnation proceedings
against or affecting any material Company Assets.
SECTION 3.15. MATERIAL CONTRACTS AND COMMITMENTS.
(a) Section 3.15 of the Company Disclosure Schedule contains a true and
complete list as of the date of this Agreement of all of the following
contracts, agreements and commitments, whether oral or written ("Contracts"), to
which the Company or any of its subsidiaries is a party or by which any of them
or any of their material Company Assets is bound, as each such contract or
commitment may have been amended, modified or supplemented:
(i) any agreement (or group of related agreements) for the lease
of personal property to or from any Person;
(ii) any agreement for the lease of real property;
(iii) any agreement (or group of related agreements) or indemnity
under which the Company or any of its subsidiaries has created, incurred,
assumed or guaranteed any debt including without limitation any indebtedness for
borrowed money, warehouse lines of credit, or any capitalized lease or purchase
money obligation (except for intercompany obligations);
(iv) any agreement under which the Company or any of its
subsidiaries has
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granted a lien, pledge, security interest or other encumbrance upon any of its
material assets;
(v) any agreement under which the Company or any of its
subsidiaries has an obligation to indemnify a director, officer or employee;
(vi) any agreement for the employment of any individual on a
full-time, part-time, consulting or other basis other than oral retainers of
professionals terminable at will except for employment agreements of employees
with a salary of less than $100,000 who have signed the Company's or any of its
subsidiaries' standard form employment agreement;
(vii) any agreement concerning confidentiality or noncompetition
given by the Company other than those agreements (A) with employees on the
Company's standard form employment agreements, (B) related to Company Stock
Options, (C) entered into with any Person in connection with the proposed sale
of the Company and (D) that do not materially restrict the manner in which the
Company or any of its subsidiaries conduct its business;
(viii) any other plan, contract or arrangement, whether formal or
informal, which involves direct or indirect compensation (including bonus, stock
option, severance, golden parachute, deferred compensation, special retirement,
consulting and similar agreements) for the benefit of one or more of the current
or former directors, officers or employees of the Company (other than Company
Employee Plans described in Section 3.11(a)); and
(ix) any guaranty or suretyship, performance bond or contribution
agreement.
(b) The Company has heretofore made available to the Parent true and
complete copies of all of the Contracts required to be set forth in Section 3.15
of the Company Disclosure Schedule and all ongoing material contracts with its
customers. As to the Company, and to the Company's knowledge as to other parties
thereto, each such Contract is a valid and binding agreement of the Company or
one of its subsidiaries in accordance with its terms, and is in full force and
effect (except as set forth in Section 3.15 of the Company Disclosure Schedule),
except where the failure to be valid and binding and in full force and effect
would not individually or in the aggregate have a Material Adverse Effect.
Neither the Company nor any of its subsidiaries is in default with respect to
any such Contract, nor (to the Company's Knowledge) does any condition exist
that with notice or lapse of time or both would constitute such a default
thereunder or permit any other party thereto to terminate such Contract, except
as would not have a Material Adverse Effect. To the Company's Knowledge, no
other party to any such Contract is in default in any respect with respect to
any such Contract, which would have a Material Adverse Effect. No party has
given any written notice to the Company or any of its subsidiaries (i) of
termination or cancellation of any such Contract or (ii) that it intends to
assert a breach of any such Contract, whether as a result of the transactions
contemplated hereby or otherwise, which would have a Material Adverse Effect.
Each Contract identified in Section 3.15 of the Company Disclosure Schedule in
response to any item under this Section 3.15 shall be deemed incorporated by
reference to all other items in this Section 3.15.
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SECTION 3.16. INTELLECTUAL PROPERTY.
(a) Certain Definitions. When used in this Section 3.16, the following
capitalized terms shall have the following meanings:
(i) the term "Intellectual Property Rights" means intellectual
property rights arising from or in respect of the following, whether protected,
created or arising under the laws of the United States or any other
jurisdiction:
(A) fictitious business names, trade names, registered and
unregistered trademarks and service marks and logos (including any Internet
domain names), and applications therefor (collectively, "Marks");
(B) patents, patent rights and all applications therefor,
including any and all continuation, divisional, continuation-in-part, or reissue
patent applications or patents issuing thereon (collectively, "Patents"); and
(C) know-how, inventions, discoveries, concepts, ideas,
methods, processes, designs, formulae, technical data, drawings, specifications,
data bases and other proprietary and confidential information, including
customer lists, in each case to the extent not included in the foregoing
subparagraphs (A) or (B) (collectively, "Trade Secrets");
(ii) the term "Intellectual Property Assets" means all
Intellectual Property Rights owned or licensed by the Company necessary to the
conduct of the Company's business, and all further uses of the terms Marks,
Patents, Copyrights, and Trade Secrets in this Section 3.16 shall mean Marks,
Patents, Copyrights, and Trade Secrets that are Intellectual Property Assets;
and
(iii) the term "Software" means any and all (w) computer programs,
including any and all software implementations of algorithms, models and
methodologies, whether in source code or object code, (x) databases and
compilations, including any and all data and collections of data, whether
machine readable or otherwise, (y) descriptions, flow-charts and other work
product used to design, plan, organize and develop any of the foregoing, and (z)
all documentation, including user manuals and training materials, relating to
any of the foregoing, in each case developed or licensed by the Company
necessary for the conduct of its business as currently conducted, specifically
excluding those items prepared for customers in the operation of the Company's
business for which the customer contractually has vested title.
(b) Marks. Section 3.16(b) of the Company Disclosure Schedule sets
forth an accurate and complete list of all registered, pending applications for
registration of any Marks and material unregistered Marks, in each case owned by
the Company and used by the Company in its business as presently conducted
("Company Marks"). Except as may be set forth in Section 3.16(b) of the Company
Disclosure Schedule and as would not have an Material Adverse Effect:
-26-
(i) the Company owns all right, title and interest in each of the
Company Marks, free and clear of any and all liens and encumbrances (subject to
written licenses granted in the ordinary course of business), and the Company
has not received any written notice or claim challenging the Company's exclusive
and complete ownership of such Company Marks;
(ii) the Company Marks are valid and enforceable and the Company
has not received any written notice or claim challenging the validity or
enforceability of any such Company Marks;
(iii) to the Company's Knowledge, the Company has not taken any
action (or failed to take any action), that would result in the forfeiture,
relinquishment, or unenforceability of any of the Company Marks or any of the
Company's rights therein;
(iv) except with respect to licensing arrangements, business
relationships, advertisements or publicity in each case made in writing in the
ordinary course of business, the Company has not granted to any Person any
right, license or permission to use any of the Company Marks; and
(v) to the Company's Knowledge, there has been no prior use of any
Company Marks by any third party which would confer upon such third party
superior rights in such Company Marks.
(c) Owned Patents. The Company does not own any right, title or
interest in any Patents.
(d) Owned Copyrights. Except as may be set forth in Section 3.16(d) of
the Company Disclosure Schedule and as would not have an Material Adverse
Effect:
(i) the Company is the owner of all right, title and interest in
and to each of the copyrights used by the Company in its business as presently
conducted other than those as to which the rights being exercised by the Company
have been licensed from another Person (collectively, the "Owned Copyrights"),
free and clear of any and all liens and encumbrances (subject to written
licenses granted in the ordinary course of business), and the Company has not
received any written notice or claim challenging the Company's complete and
exclusive ownership of all Owned Copyrights;
(ii) the Company has not received any written notice or claim
challenging or questioning the validity or enforceability of any of the Owned
Copyrights or indicating an intention on the part of any Person to bring a claim
that any Owned Copyright is invalid, is unenforceable or has been misused and,
to the Company's Knowledge, no Owned Copyright otherwise has been challenged or
threatened in any way;
-27-
(iii) to the Company's Knowledge, the Company has not taken any
action (or failed to take any action), that would result in the unenforceability
of any of the Owned Copyrights; and
(iv) to the Company's Knowledge, no other Person has infringed or
is infringing on any of the Owned Copyrights.
(e) Trade Secrets. The Company has taken reasonable precautions to
protect the secrecy, confidentiality and value of all of the Company's Trade
Secrets ("Company Trade Secrets"). Except as may be set forth in Section 3.16(e)
of the Company Disclosure Schedule and as would not have an Material Adverse
Effect:
(i) the Company has the absolute and unrestricted right to use all
of the Company Trade Secrets and none of the Company Trade Secrets is subject to
any liens or encumbrances (subject to written licenses granted in the ordinary
course of business), and the Company has not received any written notice or
claim challenging the Company's absolute and unrestricted right to use all of
the Company Trade Secrets;
(ii) none of the Company Trade Secrets has been, or is to the
Company's Knowledge, alleged to have been, misappropriated from, any other
Person and to the Company's Knowledge none of the Company Trade Secrets
infringes, violates or conflicts with, or is to the Company's Knowledge, alleged
to infringe, violate or conflict with, any Intellectual Property Right of any
third party; and
(iii) except under appropriate confidentiality obligations that,
to the Company's Knowledge, have been fully observed and performed, to the
Company's Knowledge, there has been no disclosure by the Company of Company
Trade Secrets.
(f) Software. The Company does not own or license any material Software
(excluding licensed software that is contained in standard desktop applications
and is available through commercial distributors or in consumer retail stores).
(g) Sufficiency of Owned and Licensed Intellectual Property. Except as
set forth in Section 3.16(g) of the Company Disclosure Schedule and as would not
have an Material Adverse Effect, the Company has all of the Intellectual
Property Rights necessary for the conduct of the Company's business as presently
conducted and all of the Intellectual Property Rights necessary to operate such
business after the Closing in substantially the same manner as such business
heretofore has been operated by the Company.
(h) Employee Confidentiality Agreements. Except as set forth in Section
3.16(h) of the Company Disclosure Schedule, all current and former employees,
contractors and consultants of the Company have entered into confidentiality,
invention assignment and proprietary information agreements with the Company
where appropriate, except as would not have an Material Adverse
-28-
Effect. The carrying on of the Company's business as currently conducted by the
employees, contractors and consultants of the Company does not, to the Company's
Knowledge, conflict with or result in a breach of the terms, conditions or
provisions of, or to the Company's Knowledge, constitute a default under, any
contract, covenant or instrument under which any of such employees, contractors
or consultants or the Company is now obligated.
SECTION 3.17 STOCK OPTIONS. Section 3.17 of the Company Disclosure
Schedule sets forth the total number of options outstanding, the number of
vested options outstanding and the range of expiration dates for such options.
The Company has provided Parent or Acquisition the following information
concerning each of the Company Personnel that has been granted Company Stock
Options: the date of each such grant, the total number of Shares for which the
Company Stock Options are exercisable, the number of Shares for which unvested
options are exercisable and the exercise price of all vested and unvested
Company Stock Options.
SECTION 3.18. INSURANCE. The Company and its subsidiaries have obtained
and maintained in full force and effect insurance with responsible and reputable
insurance companies or associations in such amounts, on such terms and covering
such risks, as is customarily carried by reasonably prudent persons conducting
business or owning or leasing assets similar to those conducted, owned or leased
by the Company and its subsidiaries, except where the failure to obtain or
maintain such insurance would not have a Material Adverse Effect.
SECTION 3.19. BROKERS. No broker, finder or investment banker (other
than Arnhold and S. Bleichroeder, Inc., the Company's financial adviser, a true
and correct copy of whose entire engagement agreement has been provided to
Acquisition or Parent) is entitled to any brokerage, finder's or other fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of the Company.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
OF PARENT AND ACQUISITION
Parent and Acquisition hereby jointly and severally represent and
warrant to the Company as follows:
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SECTION 4.1. ORGANIZATION.
(a) Each of Parent and Acquisition is duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation,
and has all requisite power and authority to own, lease and operate its
properties and to carry on its businesses as now being conducted, except in such
jurisdictions where the failure to be so duly qualified or licensed and in good
standing would not have a Parent Material Adverse Effect. The term "Parent
Material Adverse Effect" means any change or effect that would materially impair
the ability of Parent and/or Acquisition to consummate the transactions
contemplated hereby.
(b) Each of Parent and Acquisition is duly qualified or licensed and in
good standing to do business in each jurisdiction in which the property owned,
leased or operated by it or the nature of the business conducted by it makes
such qualification or licensing necessary, except in such jurisdictions where
the failure to be so duly qualified or licensed and in good standing would not
have a Parent Material Adverse Effect.
SECTION 4.2. AUTHORITY RELATIVE TO THIS AGREEMENT. Each of Parent and
Acquisition has all necessary corporate power and authority to execute and
deliver this Agreement and the Stockholders' Agreement and to consummate the
transactions contemplated hereby and thereby. The execution and delivery of this
Agreement and the Stockholders' Agreement, and the consummation of the
transactions contemplated hereby and thereby including the Offer and the
purchase of all Shares tendered pursuant thereto have been duly and validly
authorized by the boards of directors of Parent and Acquisition and by Parent as
the sole stockholder of Acquisition, and no other corporate proceedings on the
part of Parent or Acquisition are necessary to authorize this Agreement and the
Stockholders' Agreement or to consummate the transactions contemplated hereby
and thereby including the Offer and the purchase of all Shares tendered pursuant
thereto. This Agreement and the Stockholders' Agreement each have been duly and
validly executed and delivered by each of Parent and Acquisition and each
constitutes a valid, legal and binding agreement of each of Parent and
Acquisition enforceable against each of Parent and Acquisition in accordance
with its terms, except as such enforceability may be limited by any applicable
conservator, receivership, bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting the enforcement of creditors' rights generally, and
except as the availability of equitable remedies may be limited by the
application of general principles of equity (regardless of whether such
equitable principles are applied in a proceeding at law or in equity).
SECTION 4.3. INFORMATION SUPPLIED. None of the information supplied by
Parent or Acquisition in writing for inclusion in any of the Disclosure
Statements will, at the respective times that the Offer Documents, the Proxy
Statement (if necessary) and the Schedule 14D-9 and any amendments of or
supplements to any of the foregoing are filed with the SEC and are first
published or sent or given to holders of Shares, and in the case of any required
Proxy Statement, at the time that it or any amendment thereof or supplement
thereto is mailed to the Company's stockholders, at the time of the
Stockholders' Meeting or the written consent of the stockholders,
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if either is required, or at the Effective Time, contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading except that no
representation or warranty is made by Parent or Acquisition with respect to
information supplied by the Company for inclusion in the Offer Documents. The
Offer Documents shall comply in all material respects as to form with applicable
federal securities laws.
SECTION 4.4. FINANCING; SHARE OWNERSHIP. Parent has received and
accepted a loan commitment (the "Loan Commitment") from Bank of Novia Scotia
(the "Bank"), under which the Bank has agreed to make a term loan to Parent in
an amount sufficient to enable Acquisition to (i) purchase all Shares,
Convertible Preferred Stock and Warrants, (ii) settle all Company Stock Options,
(iii) exercise the Option, and (iv) pay all related fees and expenses, all in
the manner described in this Agreement. Parent will make the proceeds of such
term loan available to Acquisition when required for the performance of its
obligations hereunder, including, without limitation, Acquisition's exercise of
the Option. As of the date hereof, Parent and Acquisition do not beneficially
own any Shares.
SECTION 4.5. CONSENTS AND APPROVALS; NO VIOLATIONS. Except for filings,
permits, authorizations, consents and approvals as may be required under, and
other applicable requirements of, the Exchange Act, HSR Act and the filing and
acceptance for record or recordation of the Merger Certificate as required by
the MGCL, no filing with or notice to, and no permit, authorization, consent or
approval of, any Governmental Entity is necessary for the execution and delivery
by Parent or Acquisition of this Agreement and the Stockholders' Agreement or
the consummation by Parent or Acquisition of the transactions contemplated
hereby and thereby, except where the failure to obtain such permits,
authorizations, consents or approvals or to make such filings or give such
notice would not have a Parent Material Adverse Effect. Neither the execution,
delivery and performance of this Agreement and the Stockholders' Agreement by
Parent or Acquisition nor the consummation by Parent or Acquisition of the
transactions contemplated hereby and thereby will (i) conflict with or result in
any breach of any provision of the respective Articles of Incorporation or
Bylaws (or similar charter or organizational documents) of Parent or
Acquisition, (ii) result in a violation or breach of or constitute (with or
without due notice or lapse of time or both) a default (or give rise to any
right of termination, amendment, cancellation or acceleration or Lien) under any
of the terms, conditions or provisions of any note, bond, mortgage, indenture,
lease, license, contract, agreement or other instrument or obligation to which
Parent or Acquisition or any of Parent's other subsidiaries is a party or by
which any of them or any of their respective properties or assets may be bound
or (iii) violate any order, writ, injunction, decree, law, statute, rule or
regulation applicable to Parent or Acquisition or any of Parent's other
subsidiaries or any of their respective properties or assets except, in the case
of (ii) or (iii), for violations, breaches or defaults which would not have a
Parent Material Adverse Effect.
SECTION 4.6. BROKERS AND FINDERS. Each of Parent and Acquisition
represents, as to
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itself and its affiliates, that no agent, broker, investment banker, financial
advisor or other firm or person is or will be entitled to any brokers' or
finders' fee or any other commission or similar fee in connection with any of
the transactions contemplated by this Agreement.
SECTION 4.7. NATURE AND INTERIM OPERATIONS OF ACQUISITION. Acquisition
is a wholly owned, direct subsidiary of the Parent and was formed on October 4,
2000 solely for the purpose of engaging in the transactions contemplated hereby,
has engaged in no other business activities and has conducted its operations
only as contemplated hereby.
ARTICLE 5
COVENANTS
SECTION 5.1. INTERIM OPERATIONS. From the date of this Agreement until
the Tender Offer Purchase Time, except as set forth in Section 5.1 of the
Company Disclosure Schedule or as expressly contemplated by any other provision
of this Agreement, unless the Parent has consented in writing thereto, the
Company shall, and shall cause each of its subsidiaries to:
(a) conduct its business and operations only in the ordinary course of
business consistent with past practice;
(b) use reasonable efforts to preserve intact the business,
organization, goodwill, rights, licenses, permits and franchises of the Company
and its subsidiaries and maintain their existing relationships with customers,
suppliers and other Persons having business dealings with them;
(c) use reasonable efforts to keep in full force and effect adequate
insurance coverage and maintain and keep its material Company Assets in good
repair, working order and condition, normal wear and tear excepted;
(d) not amend or modify its respective Articles of Incorporation,
Bylaws or other charter or organizational documents, except that the Company
shall file Articles Supplementary with respect to the Series B Preferred Stock
with the SDAT;
(e) not authorize for issuance, issue, sell, grant, deliver, pledge or
encumber or agree or commit to issue, sell, grant, deliver, pledge or encumber
any shares of any class or series of capital stock of the Company or any of its
subsidiaries or any other equity or voting security or equity or voting interest
in the Company or any of its subsidiaries, any securities convertible into or
exercisable or exchangeable for any such shares, securities or interests, or any
options, warrants, calls, commitments, subscriptions or rights to purchase or
acquire any such shares, securities or interests (other than issuances of Shares
or, in the case of clause (iv), shares of Series B Preferred Stock (i) exercise
of Company Stock Options granted prior to the date of this Agreement to
directors, officers, employees and consultants of the Company in accordance with
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the Option Plans as currently in effect; (ii) conversion of the Convertible
Preferred Stock, (iii) exercise of the Warrants and (iv) exercise by Acquisition
of the Option);
(f) not (i) split, combine or reclassify any shares of its stock or
issue or authorize or propose the issuance of any other securities in respect
of, in lieu of, or in substitution for, shares of its stock or (ii) in solely
the case of the Company, declare, set aside or pay any dividends on, or make
other distributions in respect of, any of the Company's stock, repurchase,
redeem or otherwise acquire, or agree or commit to repurchase, redeem or
otherwise acquire, any shares of stock or other equity or debt securities or
equity interests of the Company or any of its subsidiaries, except that the
Company may pay an aggregate dividend of $43,533.00 on the Convertible Preferred
Stock on November 12, 2000 and as contemplated by Section 2.10 with respect to
settlement of Company Stock Options;
(g) except as contemplated by Section 2.10, not amend or otherwise
modify the terms of any Company Stock Options or the Option Plans, the effect of
which shall be to make such terms more favorable to the holders thereof or
Persons eligible for participation therein;
(h) not (i) increase the compensation payable or to become payable to
any directors, officers or employees of the Company or any of its subsidiaries
except arrangements in connection with employee transfers and agreements with
new employees having a salary of greater than $85,000, (ii) grant any severance
or termination pay to, or enter into any employment or severance agreement with
any director or officer or employee (other than in the ordinary course of
business of the Company or any of its subsidiaries except that the Company may
enter into new employment agreements with each of Messrs. Thomas P. Rice and
John T. Botek ("Management Employment Agreements") in the form attached hereto
as Exhibits D and E, respectively, with such changes thereto as may be approved
by Parent), or (iii) establish, adopt, enter into or amend in any material
respect or take action to accelerate, any material rights or material benefits
under any collective bargaining, bonus, profit sharing, thrift, compensation,
stock option (except as contemplated by Section 2.10), restricted stock (except
to the extent described in existing employment agreements), pension, retirement,
deferred compensation, employment, termination, severance or other plan,
agreement, trust, fund, policy or arrangement for the benefit of any director or
officer or employee (other than in the ordinary course of business) of the
Company or any of its subsidiaries;
(i) not acquire or agree to acquire (including, without limitation, by
merger, consolidation, or acquisition of stock, equity securities or interests,
or assets) any corporation, partnership, joint venture, association or other
business organization or division thereof or otherwise acquire or agree to
acquire any assets of any other Person outside the ordinary course of business
consistent with past practice or any interest in any real properties (other than
in the ordinary course of business);
(j) not incur, assume or guarantee any indebtedness for borrowed money
(including draw-downs on letters or lines of credit) or issue any notes, bonds,
debentures, debt instruments,
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evidences of indebtedness or other debt securities of the Company or any of its
subsidiaries or any options, warrants or rights to purchase or acquire any of
the same, except for (i) renewals of existing bonds and letters of credit in the
ordinary course of business not to exceed $1,000,000 in the aggregate; (ii)
incurring indebtedness for borrowed money in the ordinary course of business
consistent with past practice in an aggregate amount not to exceed $1,000,000 or
(iii) advances in the ordinary course pursuant to (A) working capital lines of
credit in an amount not to exceed $1,000,000 in the aggregate and (B) warehouse
lines of credit set forth in Section 3.15(a)(v) of the Company Disclosure
Schedule, or any renewal or replacement thereof;
(k) not sell, lease, license, encumber or otherwise dispose of, or
agree to sell, lease, license, encumber or otherwise dispose of, any material
properties or assets of the Company or any of its subsidiaries, other than in
the ordinary course of business;
(l) not authorize or make any capital expenditures (including by lease)
in excess of $100,000 in the aggregate other than the ordinary course of
business for the Company and all of its subsidiaries;
(m) not make any material change in any of its accounting or financial
reporting (including tax accounting and reporting) methods, principles or
practices, except as may be required by a change in law or in GAAP;
(n) not make any material tax election or settle or compromise any
material United States or foreign tax liability;
(o) except in the ordinary course of business consistent with past
practice, not amend, modify or terminate any material Contract or waive, release
or assign any material rights or claims thereunder;
(p) other than in the ordinary course of business, not enter into
contracts that reasonably would involve financial obligations by the Company
exceeding $100,000;
(q) not adopt a plan of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other reorganization
of the Company or any of its subsidiaries;
(r) fail to report any facts, circumstance or events that has resulted
in any insurance claims that, individually or in the aggregate, would have a
Material Adverse Effect; and
(s) except as to subsections (a), (b) and (c) of Section 5.1, not agree
or commit in writing or otherwise to do any of the foregoing.
SECTION 5.2. STOCKHOLDERS' MEETING; ACTION BY CONSENT.
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(a) The Company, acting through the Board, shall, if required for the
Merger under the MGCL:
(i) duly call, give notice of, convene and hold a meeting of its
stockholders (the "Stockholders' Meeting"), to be held as soon as practicable
after the Tender Offer Purchase Time for the purpose of considering and taking
action upon this Agreement using a record date, to the extent practicable, that
is a day on which the Shares are listed on the Nasdaq National Market;
(ii) except as otherwise permitted under Section 5.4, include in
the Proxy Statement (A) the recommendation of the Board that stockholders of the
Company vote in favor of the approval and adoption of this Agreement, the Merger
and the other transactions contemplated hereby, and (B) a statement that the
Board believes that the consideration to be received by the stockholders of the
Company pursuant to the Merger is fair to such stockholders; and
(iii) except as otherwise permitted under Section 5.4, use
reasonable efforts (A) to obtain and furnish the information required to be
included by it in the Proxy Statement, if any, and, after consultation with
Parent and Acquisition, cause the Proxy Statement to be mailed to its
stockholders at the earliest practicable time following the Tender Offer
Purchase Time, and (B) to obtain the necessary approvals by its stockholders of
this Agreement and the transactions contemplated hereby. At such meeting, Parent
and Acquisition will, and will cause their affiliates to, vote all Shares owned
by them in favor of approval and adoption of this Agreement, the Merger and the
transactions contemplated hereby.
(b) Notwithstanding subsection (a), if Acquisition acquires Shares
and shares of Series B Preferred Stock together representing at least ninety
percent (90%) of the votes entitled to be cast on the Merger, the parties shall
take all necessary and appropriate action to cause the Merger to become
effective as soon as practicable after the purchase of the Shares pursuant to
the Offer without a Stockholders' Meeting in accordance with Section 3-106 of
the MGCL.
SECTION 5.3. TERMINATION OF REGISTRATION OF SHARES. The Company, acting
through its Board, at the earliest practicable time following the Tender Offer
Purchase Time and as soon as the number of holders of record of the Shares is
fewer than 300, shall take all steps necessary or appropriate to terminate
registration of the Shares under the Exchange Act, including without limitation
the filing of Exchange Act Form 15 with the SEC and of a notice to the Nasdaq
National Market to delist the Shares.
SECTION 5.4. OTHER POTENTIAL ACQUIRERS.
(a) The Company and its subsidiaries shall, and shall direct and use
their reasonable best efforts to cause its affiliates and their respective
officers, directors, employees,
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representatives and agents to, immediately cease any discussions or negotiations
with any parties with respect to any Third Party Acquisition (as defined below).
The Company and its subsidiaries shall and shall direct and use their reasonable
best efforts to cause their respective officers, directors, employees,
representatives or agents not to, directly or indirectly, encourage, solicit,
participate in or initiate discussions or negotiations with or provide any
non-public information to any Person or group (other than Parent and Acquisition
or any designees of Parent and Acquisition) concerning any Third Party
Acquisition; provided, however, that nothing herein shall prevent the Board from
taking and disclosing to the Company's stockholders a position contemplated by
Rules 14d-9 and 14e-2 promulgated under the Exchange Act with regard to any
tender offer; and provided further, that notwithstanding the foregoing, if,
prior to the Tender Offer Purchase Time, the Company receives a "Potential
Proposal" (defined as an unsolicited Superior Proposal (defined below) or an
unsolicited proposal, offer or indication that the Company in good faith
believes may lead to a Superior Proposal), then, following written notice to
Parent and Acquisition, the Company may, pursuant to a non-disclosure agreement
with terms regarding the protection of confidential information at least as
restrictive as such terms in the Confidentiality Agreement, provide the Person
making the Potential Proposal with the same non-public information that the
Company supplied to Parent and consider and negotiate a Potential Proposal. The
Company shall promptly, and in any event before furnishing non-public
information to any such Person, notify the Parent in the event it receives any
proposal or inquiry concerning a Third Party Acquisition, including the material
terms and conditions thereof and the identity of the party submitting such
proposal.
(b) Except as set forth in this Section 5.4(b), the Board shall not
withdraw its recommendation of the transactions contemplated hereby or approve
or recommend, or cause the Company to enter into any agreement with respect to,
any Third Party Acquisition. Notwithstanding the foregoing, if prior to the
Tender Offer Purchase Time, the Board by a majority vote determines in its good
faith judgment, after consultation with its legal counsel, that failure to do so
would be inconsistent with the fiduciary duties of the Board under applicable
law, the Board may withdraw its recommendation of the transactions contemplated
hereby and/or approve or recommend a Superior Proposal; provided, however, that
the Company shall not be entitled to enter into any agreement with respect to a
Superior Proposal unless and until this Agreement is terminated in accordance
with Section 8.1. For the purposes of this Agreement, "Third Party Acquisition"
means any of the following events: (i) the acquisition of the Company by merger
or otherwise by any Person (which includes a "person" as such term is defined in
Section 13(d)(3) of the Exchange Act) other than Parent, Acquisition or any
affiliate thereof (a "Third Party") or by an officer or director of the Company;
(ii) the acquisition by a Third Party of more than 20% of the total assets of
the Company and its subsidiaries taken as a whole; (iii) the acquisition by a
Third Party of Shares which, together with all other Shares owned by such Third
Party and its affiliates, equal 20% or more of the issued and outstanding
Shares; (iv) the adoption by the Company of a plan of liquidation or the
declaration or payment of an extraordinary dividend; (v) the repurchase by the
Company or any of its subsidiaries of more than 20% of the issued and
outstanding Shares; or (vi) the acquisition by the Company or any subsidiary by
merger, purchase of stock or assets, joint venture or otherwise of a direct or
indirect ownership
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interest or investment in any business whose annual revenues, net income or
assets attributable to such ownership interest or investment is equal or greater
than 20% of the annual revenues, net income or assets of the Company. For
purposes of this Agreement, a "Superior Proposal" means any bona fide proposal
to acquire directly or indirectly for consideration consisting of cash and/or
securities all of the Shares then issued and outstanding (by tender offer,
merger or otherwise) or all or substantially all the assets of the Company and
otherwise on terms which the Company Board by a majority vote determines in its
good faith judgment (consistent with the advice of a financial adviser of
nationally recognized reputation) to be more favorable to the Company's
stockholders than the Merger and the Offer. At and after the Tender Offer
Purchase Time, the Company shall not under any circumstances withdraw its
recommendation of the transactions contemplated hereby or approve or recommend,
or cause the Company to enter into any agreement with respect to, any Third
Party Acquisition.
SECTION 5.5. ACCESS TO INFORMATION. From the date of this Agreement
until the earlier of the termination of this Agreement pursuant to Section 8.1
or the Closing Time, upon reasonable prior notice, the Company shall (and shall
cause each of its subsidiaries to) (a) give the Parent and its representatives
full access, during normal business hours and at other reasonable times without
disruption to the Company's normal business affairs, to the books, records,
contracts, commitments, properties, offices and other facilities of it and its
subsidiaries, (b) arrange for Parent and its representatives reasonable access,
during normal business hours, to the officers, employees and agents of it and
its subsidiaries, and (c) furnish promptly to the Parent and its representatives
such financial and operating data and other information concerning the business,
operations, properties, contracts, records and personnel of the Company and its
subsidiaries as the Parent may from time to time reasonably request. Parent
agrees that it will not, and will cause its representatives not to, use any
information or access obtained pursuant to this Section 5.5 for any purpose not
reasonably related to the consummation of the transactions contemplated by this
Agreement. All information obtained by the Parent pursuant to this Section 5.5
shall be kept confidential in accordance with the confidentiality provisions of
the Letter Agreement between Parent and the Company dated as of May 5, 2000 (the
"Confidentiality Agreement").
SECTION 5.6. PARENT'S LOAN COMMITMENT. From and after the date of this
Agreement, Parent shall use commercially reasonable efforts to comply with the
conditions set forth in the Loan Commitment. No later than the Tender Offer
Purchase Time, Parent shall draw down such term loan in an amount at least equal
to the sum of: (i) the Per Share Amount multiplied by the total number of Shares
outstanding as of that date (assuming full conversion of all shares of the
Convertible Preferred Stock); and (ii) the amount necessary to pay the Per Share
Amount on each Share for which the Warrants are then exercisable. No later than
the Effective Time, Parent shall draw down such term loan in an amount at least
equal to the amount necessary to settle all Company Stock Options in the manner
described in this Agreement. Immediately following such draw, Parent shall
provide the proceeds thereof to Acquisition to enable Acquisition to make the
payments described in the preceding sentence.
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SECTION 5.7. FURTHER ACTIONS.
(a) Each of the parties hereto shall use commercially reasonable
efforts to take, or cause to be taken, all actions, and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations, and consult and fully cooperate with and provide reasonable
assistance to each other party hereto and their respective representatives in
order to consummate and make effective the transactions contemplated by this
Agreement as promptly as practicable hereafter, including, without limitation,
(i) using commercially reasonable efforts to make all filings, applications,
notifications, reports, submissions and registrations with, and to obtain all
consents, approvals, authorizations or permits of, Governmental Entities
(including, without limitation, the FDA and the DEA) or other Persons as are
necessary for commencement and consummation of the Offer and for the
consummation of the Merger and the other transactions contemplated hereby
(including, without limitation, pursuant to the HSR Act, the Securities Act, the
Exchange Act, Blue Sky Laws, Maryland law and other applicable laws and
regulations in effect in the United States or any other jurisdiction), (ii)
using commercially reasonable efforts to obtain the consents of the Maryland
Industrial Development Financing Authority, First Union National Bank and the
Mayor and City Council of Baltimore with respect to the outstanding bonds, loans
and letters or lines of credit extended to the Company by such parties and (iii)
taking such actions and doing such things as any other party hereto may
reasonably request in order to cause any of the conditions to such other party's
obligation to consummate the Merger as specified in Article 7 of this Agreement
to be fully satisfied. Prior to making any application to or filing with any
Governmental Entity or other Person in connection with this Agreement, the
Company, on the one hand, and the Parent and Acquisition, on the other hand,
shall provide the other with drafts thereof and afford the other a reasonable
opportunity to comment on such drafts.
(b) Without limiting the generality of the foregoing, each of the
Parent and the Company agrees to cooperate and use reasonable efforts to
vigorously contest and resist any action, suit, proceeding or claim, and to have
vacated, lifted, reversed or overturned any injunction, order, judgment or
decree (whether temporary, preliminary or permanent), that delays, prevents or
otherwise restricts the consummation of the Offer, the Merger or any other
transaction contemplated by this Agreement, and to take any and all actions (but
not including the disposition of material assets, divestiture of businesses, or
the withdrawal from doing business in particular jurisdictions, if material) as
may be required by Governmental Entities as a condition to the granting of any
such necessary approvals or as may be required to avoid, vacate, lift, reverse
or overturn any injunction, order, judgment, decree or regulatory action
(provided, however, that in no event shall any party hereto take, or be required
to take, any action that could reasonably be expected to have a Material Adverse
Effect or that, individually or in the aggregate, could reasonably be expected
to have a Parent Material Adverse Effect).
SECTION 5.8. PUBLIC ANNOUNCEMENTS. Parent and Acquisition on the one
hand, and the Company, on the other hand, will consult with one another and
mutually agree upon the content and timing of any press releases or public
statements with respect to the transactions
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contemplated by this Agreement, including, without limitation, the Offer and the
Merger, and shall not issue any such press release or make any such public
statement prior to such consultation and agreement except to the extent that
such disclosure may be required by applicable law or by obligations pursuant to
any listing agreement with the Toronto Stock Exchange or the Nasdaq National
Market as reasonably determined by Parent, Acquisition or the Company, as the
case may be.
SECTION 5.9. EMPLOYEE BENEFIT MATTERS.
(a) Parent agrees that, effective as of the Effective Time and for a
one year period following the Effective Time, Parent shall provide, or cause
Acquisition and its subsidiaries and successors to provide, those persons who,
immediately prior to the Effective Time, were employees of the Company and its
subsidiaries and who continue in such employment ("Continuing Employees"), with
benefits and compensation no less favorable in the aggregate to benefits and
compensation that are provided to the Continuing Employees as of the date of
this Agreement.
(b) Except with respect to accruals under any defined benefit pension
plan, at such time as a Continuing Employee is provided benefits under the
benefit plans or arrangements of Parent or the Surviving Corporation, or any
subsidiary of Parent or the Surviving Corporation, Parent will, or will cause
the Surviving Corporation and its subsidiaries to, give such Continuing Employee
full credit for purposes of eligibility and vesting under such employee benefit
plans or arrangements maintained by Parent, Acquisition or any subsidiary of
Parent or Acquisition for such Continuing Employees' service with the Company or
any subsidiary of the Company to the same extent recognized by the Company at
such time. Parent will, or will cause the Surviving Corporation and its
subsidiaries to, (i) waive all limitations as to preexisting conditions (except
to the extent that such limitations were not waived under the Company's
then-existing welfare plans), exclusions and waiting periods with respect to
participation and coverage requirements applicable to the Continuing Employees
under any welfare plan that such employees may be eligible to participate in
after the Effective Time, and (ii) provide each Continuing Employee with credit
for any co-payments and deductibles paid prior to the Effective Time in
satisfying any applicable deductible or out-of-pocket requirements under any
welfare plans that such employees are eligible to participate in after the
Effective Time to the same extent as if those deductibles or co-payments had
been paid under the welfare plans for which such employees are eligible after
the Effective Time.
(c) Parent and Acquisition agree (i) to cause Acquisition after
consummation of the Merger contemplated by this Agreement to assume, honor, and
pay all amounts provided under, all Company Employee Plans in accordance with
their terms, and (ii) to honor and to cause Acquisition to honor, all rights,
privileges and modifications to or with respect to any such Company Employee
Plans that become effective as a result of any of the transactions contemplated
by this Agreement.
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SECTION 5.10. EXPENSES. Whether or not the Merger is consummated,
subject to Section 8.3 hereof, all costs and expenses incurred in connection
with this Agreement and the transactions contemplated hereby (including, without
limitation, fees and disbursements of representatives) shall be borne by the
party which incurs such cost or expense. Parent and Acquisition acknowledge that
certain of such costs and expenses may be payable by the Company or the
Surviving Corporation after consummation of the Offer or the Merger.
Accordingly, Parent and Acquisition agree that they will take all commercially
reasonable action to enable the Company or the Surviving Corporation to pay such
costs and expenses as promptly as is practicable after consummation of the Offer
and the Merger and will not contest or challenge the amount thereof; provided
that such costs and expenses are either (i) in the case of the Company's
agreement with its financial advisor, Arnhold and S. Bleichroeder, Inc., not
more than the amount described in the agreement dated March 22, 2000, (ii) in
the case of the performance bonuses to Messrs. Thomas P. Rice and John T. Botek,
not more than the amounts described in Section 2.2 (c) of the Management
Employment Agreements; or (iii) in the case of the Company's legal counsel,
independent auditors or others, not more than is commercially reasonable.
SECTION 5.11. NOTIFICATION OF CERTAIN MATTERS. The Company shall give
prompt notice to Parent and Acquisition, and Parent and Acquisition shall give
prompt notice to the Company, as the case may be, of (a) the occurrence or
nonoccurrence of any event the occurrence or nonoccurrence of which would be
likely to cause any covenant, condition or agreement contained in this Agreement
not to be complied with or satisfied in all material respects prior to the
Tender Offer Purchase Time, (b) any material failure of the Company, Parent or
Acquisition, as the case may be, to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it hereunder, (c) the
Company's becoming aware of any facts that have caused, or reasonably could be
expected to cause, a violation by the Company of any Regulatory Law or
regulations of the FDA or the DEA, (d) the Company's receipt of any notice,
request for information or other writing from the FDA or the DEA (other than
routine notices sent by the FDA or the DEA generally to regulated companies and
which require no action or response thereto by the Company); and (e) the
Company's becoming aware of any facts that have caused, or could reasonably be
expected to cause, a breach, termination or non-renewal of any contract under
which the Company manufactures, packages, labels or tests a Product or that
otherwise constitutes a materially adverse development with respect to the
Company's business relationship with its customer under any such contract;
provided, however, that the delivery of any notice pursuant to this Section 5.11
shall not cure such breach or non-compliance or limit or otherwise affect the
remedies available hereunder to the party receiving such notice.
SECTION 5.12. GUARANTEE OF PERFORMANCE. Parent hereby guarantees the
timely and full performance by Acquisition and, after the Effective Time, the
Surviving Corporation of each of its obligations under this Agreement, including
but not limited to the Surviving Corporation's obligations under Section 5.13.
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SECTION 5.13. INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE.
Subject to the occurrence of the Effective Time, the Surviving Corporation shall
cause its Articles of Incorporation and Bylaws to contain the indemnification
provisions set forth in the Articles of Incorporation and Bylaws of the Company
on the date of this Agreement, which provisions thereafter shall not be amended,
repealed or otherwise modified after the Effective Time in any manner that could
reasonably be expected to adversely affect the rights thereunder of individuals
who at any time prior to the Effective Time were directors, officers or
employees of the Company in respect of actions or omissions occurring at or
prior to the Effective Time (including, without limitation, the transactions
contemplated by this Agreement). Parent shall cause the Surviving Corporation to
comply with the terms of and maintain in existence any current indemnification
agreements between the Company and any of its directors or officers. In the
event the Surviving Corporation or any of its successors or assigns (a)
consolidates with or merges into any other Person and the Surviving Corporation
shall not be the continuing or surviving corporation or entity of such
consolidation or merger or (b) 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 5.13. The
Surviving Corporation shall obtain and maintain in effect for not less than five
years after the Effective Time, the current policies of directors' and officers'
liability insurance and fiduciary liability insurance maintained by the Company
and the Company's subsidiaries with respect to matters occurring at or prior to
the Effective Time (including, without limitation, the transactions contemplated
by this Agreement), provided, that Parent may, with no lapse in coverage,
substitute therefore policies of substantially the same coverage containing
terms and conditions which are no less advantageous, in any material respect, to
the Company's present or former directors, officers, employees, agents or other
individuals otherwise covered by such insurance policies prior to the Effective
Time (the "Indemnified Parties"). This Section 5.13 is intended to benefit the
Indemnified Parties and shall be binding on all successors and assigns of
Parent, Acquisition, the Company and the Surviving Corporation.
ARTICLE 6
CONDITIONS TO THE OFFER
SECTION 6.1. CONDITIONS TO THE OFFER.
(a) Notwithstanding any other provisions of the Offer, Acquisition
shall not be required to accept for payment or, subject to any applicable rules
and regulations of the SEC including Rule 14e-l(c) under the Exchange Act
(relating to Acquisition's obligation to pay for or return tendered Shares
promptly after termination or withdrawal of the Offer), pay for, and may delay
the acceptance for payment of or, subject to the restrictions referred to above,
the payment for, any tendered Shares, if (w) any waiting periods applicable to
the Offer under the HSR Act shall not have been terminated or shall not have
expired; (x) any of the consents or approvals of any Person other than a
Governmental Entity, in connection with the execution, delivery and
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performance of this Agreement shall not have been obtained; except where the
failure to have obtained any such consent or approval would not have a Material
Adverse Effect; (y) the Minimum Condition shall not have been satisfied or (z)
at any time on or after the date of this Agreement and before the time of
acceptance of such Shares for payment pursuant to the Offer, any of the
following events shall occur:
(i) the Company shall not have received the consents required by
the agreements between the Company and the Maryland Industrial Development
Financing Authority, First Union National Bank and the Mayor and City Council of
Baltimore;
(ii) from the date of this Agreement until the Tender Offer
Purchase Time, any Governmental Entity or court of competent jurisdiction shall
have enacted, issued, promulgated, enforced or entered any statute, rule,
regulation, executive order, decree, injunction or other order which is in
effect at the Tender Offer Purchase Time and which (A) makes the acceptance for
payment of, or the payment for, any or all of the Shares illegal or otherwise
prohibits consummation of the Offer, the Merger or any of the other transactions
contemplated hereby, or (B) prohibits Acquisition from operating the business of
the Company in substantially the same manner as it is currently conducted;
provided, however, that the parties shall use commercially reasonable efforts
(subject to the proviso in Section 5.6(b)) to cause any such decree, judgment or
other order to be vacated or lifted prior to the Tender Offer Purchase Time;
(iii) the representations and warranties of the Company set forth
in this Agreement shall not be true and correct on the date of this Agreement or
the expiration time of the Offer, as it may be extended from time to time, or
the Company shall have breached or failed in any respect to perform or comply
with any material obligation, agreement or covenant required by this Agreement
to be performed or complied with by it at or prior to such time except where the
failure of representations and warranties (without regard to materiality
qualifications therein contained) to be true and correct, or the performance or
compliance with such obligations, agreements or covenants, would not,
individually or in the aggregate, have a Material Adverse Effect;
(iv) this Agreement shall have been terminated in accordance with
its terms;
(v) there shall have occurred an acceptance by the Company of a
Superior Proposal;
(vi) the Board shall have withdrawn or modified in a manner
adverse to Parent its approval or recommendation of the Offer, shall have
recommended to the Company's stockholders a Third Party Acquisition or shall
have adopted any resolution to effect any of the foregoing;
(vii) from the date of this Agreement until the Tender Offer
Purchase Time, there shall have occurred the commencement of a war having a
Material Adverse Effect on the
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Company; which, in the reasonable judgment of Parent and Acquisition, in any
such case, and regardless of the circumstances giving rise to any such
condition, makes it inadvisable to proceed with the Offer and/or with such
acceptance for payment or payments.
(viii) the Loan Commitment shall have been withdrawn by the Bank.
(ix) Parent shall not have received the favorable opinion of Piper
Marbury Rudnick & Wolfe LLP with respect to certain tax matters related to
compensation payable to the Company's executive officers.
(b) The conditions set forth in Section 6.1(a) (other than the Minimum
Condition) are for the sole benefit of Acquisition and may be asserted by
Acquisition regardless of any circumstances giving rise to any condition and may
be waived (other than the Minimum Condition) by Acquisition, in whole or in
part, at any time and from time to time, in the sole discretion of Acquisition.
The failure by Parent or Acquisition (or any affiliate of Acquisition) at any
time to exercise any of the foregoing rights will not be deemed a waiver of any
right and each right will be deemed an ongoing right which may be asserted at
any time and from time to time.
ARTICLE 7
CONDITIONS TO CONSUMMATION OF THE MERGER
SECTION 7.1. CONDITIONS TO EACH PARTY'S OBLIGATIONS TO EFFECT THE
MERGER. The respective obligations of each party hereto to effect the Merger are
subject to the satisfaction at or prior to the Closing Time of the following
conditions:
(a) this Agreement, the Merger and the other transactions contemplated
hereby shall have been approved by all necessary corporate action of the
Company, including, if necessary, adoption by vote of the stockholders of the
Company provided that Parent and Acquisition shall have complied with their
obligations in respect of the voting of Shares set forth in Section 5.2(a)(iii);
(b) no Governmental Entity or court of competent jurisdiction shall
have enacted, issued, promulgated, enforced or entered any statute, rule,
regulation, executive order, decree, injunction or other order which is in
effect and which makes the payment of the Cash Merger Consideration illegal or
otherwise prohibits the Merger; and
(c) Acquisition shall have purchased Shares pursuant to the Offer in
accordance with the terms of this Agreement and the Offer; provided, that
neither Parent nor Acquisition may invoke this condition if Acquisition shall
have failed to purchase and pay for, in violation of the terms of this Agreement
or the Offer, all Shares validly tendered and not withdrawn pursuant to the
Offer.
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ARTICLE 8
TERMINATION; AMENDMENT; WAIVER
SECTION 8.1. TERMINATION. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Closing Time whether before or
after approval and adoption of this Agreement by the Company's stockholders:
(a) by mutual written consent of Parent, Acquisition and the Company;
(b) by Parent or the Company if (i) any Governmental Entity or court of
competent jurisdiction shall have enacted, issued, promulgated, enforced or
entered any statute, rule, regulation, executive order, decree, injunction or
other order which is in effect and which makes payment of the Per Share Amount
or the Cash Merger Consideration illegal or otherwise prohibits the Offer or the
Merger or (ii) Acquisition shall not have purchased that number of Shares
necessary to satisfy the Minimum Condition pursuant to the Offer within the time
periods described in Section 1.1(b) or the Merger shall not have occurred on or
prior to February 28, 2001, provided, that the right to terminate this Agreement
pursuant to this Section 8.1(b) shall not be available to any party who fails to
fulfill any of its obligations under this Agreement and such failure results in
Acquisition's failure to purchase such number of Shares.
(c) by Parent and Acquisition prior to the Tender Offer Purchase Time
if there shall have been a breach of any covenant or agreement on the part of
the Company resulting in a Material Adverse Effect or a Parent Material Adverse
Effect which shall not have been cured prior to the earlier of (A) 10 days
following notice of such breach and (B) two business days prior to the date on
which the Offer expires as such date may be extended;
(d) by the Company prior to the Tender Offer Purchase Time if (i) the
Company shall have received a Superior Proposal, shall have furnished Parent a
reasonable written notice advising Parent that the Board has received a Superior
Proposal, specifying the material terms and conditions of such Superior Proposal
and identifying the Person making such Superior Proposal and Parent shall not,
within three business days of Parent's receipt of the Notice of Superior
Proposal, have made an offer which the Company Board, by a majority vote,
determines in its good faith judgment (consistent with the advice of a financial
advisor of nationally recognized reputation) to be at least as favorable to the
Company's stockholders as such Superior Proposal, provided, however, that such
termination under this clause (i) shall not be effective until payment of the
fee required by Section 8.3(b) if such payment is still payable after giving
effect to Section 8.3(c); (ii) there shall have been a breach of any
representation or warranty on the part of Parent or Acquisition which materially
adversely affects (or materially delays) the consummation of the Offer or
results in a Parent Material Adverse Effect or (iii) there shall have been a
material breach of any covenant or agreement on the part of Parent or
Acquisition and which materially adversely affects (or materially delays) the
consummation of the Offer which
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shall not have been cured prior to the earlier of (A) 10 days following notice
of such breach and (B) two business days prior to the date on which the Offer
expires as such date may be extended.
SECTION 8.2. EFFECT OF TERMINATION. In the event of the termination of
this Agreement and abandonment of this Agreement pursuant to Section 8.1, this
Agreement shall forthwith become void and have no effect without any liability
on the part of any party hereto or its affiliates, directors, officers or
stockholders other than the provisions of this Section 8.2 and the last sentence
of Sections 5.5, and Sections 8.3 and 9.1 through 9.12 hereof. Nothing contained
in this Section 8.2, however, shall relieve any party from liability for any
willful breach of this Agreement.
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SECTION 8.3. FEES AND EXPENSES.
(a) In the event this Agreement is terminated pursuant to certain
provisions, as set forth in Section 8.3(b) below, subject to the provisions of
Section 8.3(c), the Company shall pay to Acquisition the amount of $2,150,000
(the "Breakup Fee") immediately upon such a termination.
(b) Subject to the provisions of Section 8.3(c), the Breakup Fee shall
be payable
(i) if the Offer is terminated pursuant to Section 6.1(a) (vi) and
within one year after such termination either (x) the Company enters into an
agreement to merge with another company (other than a merger pursuant to which
the stockholders of the Company will acquire more than fifty percent (50%) of
the voting securities of such surviving corporation) or enters into an agreement
pursuant to which more than 50% of the issued and outstanding Shares are
acquired by another person or pursuant to which new voting securities are issued
to another person or to the stockholders of another company which will aggregate
more than fifty percent (50%) of the outstanding voting securities of the
Company after such issuance or (y) another person acquires more than fifty
percent (50%) of the issued and outstanding Shares, in which case the Company
shall promptly, but in no event later than two days after the date of any of the
events in (x) or (y), pay Parent the Breakup Fee; or
(ii) the Company shall have terminated this Agreement pursuant to
Section 8.1(d)(i).
(c) Notwithstanding the provisions of subsections (a) and (b) above,
Acquisition may, at its sole option, at any time prior to the expiration of
three business days after Parent's receipt of notice of the Superior Proposal in
accordance with Section 8.1(d), waive payment of the Breakup Fee in order to
exercise its options, in whole or in part, to purchase certain Shares pursuant
to Section 3 of the Stockholders' Agreement (the "Options"). In the event of any
such exercise, in whole or in part, the Breakup Fee shall no longer be payable.
SECTION 8.4. AMENDMENT. This Agreement may be amended by action taken
by the Board subject to Section 1.3(c), and by the parties hereto at any time
before or after approval, if necessary, of the Merger by the stockholders of the
Company but, after any such approval, no amendment shall be made which requires
the approval of such stockholders under applicable law without such approval.
This Agreement may not be amended except by an instrument in writing signed on
behalf of the parties hereto.
SECTION 8.5. EXTENSION; WAIVER. At any time prior to the Closing Time,
each party hereto may in its sole discretion (i) extend the time for the
performance of any of the obligations or other acts of the other party, (ii)
waive any inaccuracies in the representations and warranties of the other party
contained herein or in any document, certificate or writing delivered pursuant
hereto or (iii) waive compliance by the other party with any of the agreements
or conditions contained herein. Any agreement on the part of any party hereto to
any such extension or waiver
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shall be valid only if set forth in an instrument, in writing, signed on behalf
of such party. The failure of any party hereto to assert any of its rights
hereunder shall not constitute a waiver of such rights.
ARTICLE 9
MISCELLANEOUS
SECTION 9.1. ENTIRE AGREEMENT; ASSIGNMENT. This Agreement, the
Confidentiality Agreement, the Option and the Stockholders' Agreement together
(a) constitute the entire agreement among the parties hereto with respect to the
subject matter hereof and supersede all other prior agreements and
understandings both written and oral among the parties or any of them with
respect to the subject matter hereof and (b) shall not be assigned by operation
of law or otherwise.
SECTION 9.2. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties made herein shall not survive beyond the earlier
of (i) termination of this Agreement or (ii) the Tender Offer Purchase Time, in
the case of the representations and warranties of Parent or Acquisition or the
purchase of Shares by Acquisition pursuant to the Offer, in the case of the
representations and warranties of the Company. This Section 9.2 shall not limit
any covenant or agreement of the parties hereto which by its terms contemplates
performance after the Tender Offer Purchase Time.
SECTION 9.3. VALIDITY. If any provision of this Agreement or the
application thereof to any Person or circumstance is held invalid or
unenforceable the remainder of this Agreement and the application of such
provision to other Persons or circumstances shall not be affected thereby and to
such end the provisions of this Agreement are agreed to be severable.
SECTION 9.4. 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
or by registered or certified mail (postage prepaid, return receipt requested)
to each other party as follows:
if to Parent or Acquisition:
Cangene Corporation
3403 American Drive
Units 3/4
Mississauga, Ontario
L4V 1T4 Canada
Telecopier: (416) 401-3812
Attention: Alex Glasenberg
Chief Financial Officer
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with a copy to:
Hartman & Craven LLP
460 Park Avenue
New York, NY 10022
Telecopier: (212) 223-9911
Attention: Edward I. Tishelman, Esq.
Joel I. Frank, Esq.
if to the Company to:
Chesapeake Biological Laboratories, Inc.
1111 South Paca Street
Baltimore, MD 21230
Telecopier (410)843-2001
Attention: Thomas P. Rice
President and Chief Executive Officer
with a copy to:
Piper Marbury Rudnick & Wolfe
6225 Smith Avenue
Baltimore, MD 21209
Telecopier: (410) 580-3274
Attention: Richard C. Tilghman Jr., Esq.
or to such other address as the Person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
SECTION 9.5. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Maryland without regard to
the principles of conflicts of law thereof.
SECTION 9.6. DESCRIPTIVE HEADINGS. The descriptive headings herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.
SECTION 9.7. PARTIES IN INTEREST. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto and its successors and
permitted assigns and nothing in this Agreement express or implied is intended
to or shall confer upon any other Person any rights, benefits or remedies of any
nature whatsoever under or by reason of this Agreement; provided, however, that
the provisions of Section 5.12 shall inure to the benefit of and be enforceable
by the Indemnified Parties.
SECTION 9.8. CERTAIN DEFINITIONS. For the purposes of this Agreement
the term:
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(a) "affiliate" means a Person that, directly or indirectly, through
one or more intermediaries controls, is controlled by or is under common control
with the first-mentioned Person;
(b) "business day" means any day other than a day on which the New York
Stock Exchange is closed;
(c) "stock" means common stock, preferred stock, partnership interests,
limited liability company interests or other ownership interests entitling the
holder thereof to vote with respect to matters involving the issuer thereof;
(d) "Person" means an individual, corporation, partnership, limited
liability company, association, trust, unincorporated organization or other
legal entity; and
(e) "subsidiary" or "subsidiaries" of the Company, Parent, the
Surviving Corporation or any other Person means any corporation, partnership,
limited liability company, association, trust, unincorporated association or
other legal entity of which the Company, Parent, the Surviving Corporation or
any such other Person, as the case may be, (either alone or through or together
with any other subsidiary) (i) owns, directly or indirectly, 25% or more of the
capital stock the holders of which are generally entitled to vote for the
election of the board of directors or other governing body of such corporation
or other legal entity, (ii) has the right to appoint a majority of the board of
directors or other governing body of such corporation or other legal entity or
(iii) otherwise controls.
SECTION 9.9. PERSONAL LIABILITY. This Agreement shall not create or be
deemed to create or permit any personal liability or obligation on the part of
any direct or indirect stockholder of the Company or Parent or any officer,
director, employee, agent or representative of any party hereto.
SECTION 9.10. SPECIFIC PERFORMANCE. The parties hereby acknowledge and
agree that the failure of any party to perform its agreements and covenants
hereunder, including its failure to take all actions as are necessary on its
part to the consummation of the Merger, will cause irreparable injury to the
other parties for which damages, even if available, will not be an adequate
remedy. Accordingly, each party hereby consents to the issuance of injunctive
relief by any court of competent jurisdiction to compel performance of such
party's obligations and to the granting by any court of the remedy of specific
performance of its obligations hereunder; provided, however, that if Parent
receives the Breakup Fee pursuant to Section 8.3 it shall not also be entitled
to specific performance to compel the consummation of the Merger.
SECTION 9.11. WAIVER OF CONDITIONS. The conditions to each of the
parties' obligations to consummate the Merger are for the benefit of such party
and may be waived by such party in whole or in part in their sole discretion to
the extent permitted by applicable law.
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SECTION 9.12. COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original but all of
which shall constitute one and the same agreement.
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IN WITNESS WHEREOF, each of the parties has caused this Merger
Agreement to be duly executed on its behalf as of the day and year first above
written.
CHESAPEAKE BIOLOGICAL LABORATORIES, INC.
By: /s/ Thomas P. Rice
-------------------------------------
Name: Thomas P. Rice
Title: President and Chief Executive Officer
CANGENE CORPORATION
By: /s/ Alex Glasenberg
-------------------------------------
Name: Alex Glasenberg
Title: Chief Financial Officer
AC ACQUISITION SUBSIDIARY, INC.
By: /s/ Alex Glasenberg
-------------------------------------
Name: Alex Glasenberg
Title: Chief Financial Officer
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