EXHIBIT 10.1
ASSET PURCHASE AGREEMENT
AMONG
GLAXO WELLCOME INC.
AND
CATALYTICA PHARMACEUTICALS, INC.
AND
CATALYTICA, INC.
DATED AS OF
JUNE 25, 1997
TABLE OF CONTENTS
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ARTICLE I DEFINITIONS.......................................................... 2
1.1 Certain Definitions.................................................. 2
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1.2 Other Definitions.................................................... 15
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ARTICLE II SALE AND PURCHASE OF ASSETS.......................................... 18
2.1 Transfer of Assets................................................... 18
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2.2 Purchased Assets..................................................... 18
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(a) Owned Real Property........................................... 19
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(b) Tangible Personal Property.................................... 20
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(c) Purchased Inventories......................................... 20
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(d) Vehicles...................................................... 20
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(e) Contracts..................................................... 20
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(f) Certain Intellectual Property................................. 21
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(g) Permits....................................................... 22
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(h) Prepaid Items................................................. 22
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(i) Records....................................................... 22
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(j) Claims........................................................ 23
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2.3 Excluded Assets...................................................... 23
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(a) Cash.......................................................... 23
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(b) Prepaid Items................................................. 23
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(c) Personal Property Disposed Of................................. 23
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(d) Insurance..................................................... 23
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(e) Assets of Benefit Plans....................................... 23
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(f) Retained Records.............................................. 23
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(g) Claims........................................................ 23
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(h) Retained Product Inventories.................................. 24
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(i) Retained Intellectual Property................................ 24
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(j) Nontransferable Permits....................................... 24
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(k) Accounts Receivable........................................... 24
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(l) Other Excluded Assets......................................... 24
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2.4 Liabilities.......................................................... 24
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(a) Real Property Liens........................................... 24
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(b) Other Purchased Assets........................................ 25
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(c) Permitted Liens............................................... 25
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(d) Assumed Liabilities........................................... 25
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(e) Excluded Liabilities.......................................... 26
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ARTICLE III CONSIDERATION........................................................ 27
3.1 Cash Purchase Price.................................................. 27
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3.2 Additional Cash Consideration........................................ 28
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3.3 Additional Stock Consideration....................................... 28
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3.4 Warrants............................................................. 28
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3.5 Escrow............................................................... 28
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3.6 Adjustment of Purchase Price......................................... 28
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(a) Final Statement............................................... 28
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(b) Dispute Resolution............................................ 29
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(c) Adjustment.................................................... 30
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3.7 Allocation........................................................... 31
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3.8 Proration of Certain Items........................................... 31
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(a) Operating Expenses............................................ 31
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(b) Taxes......................................................... 31
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(c) Utilities..................................................... 32
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(d) Personal Property Leases...................................... 32
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(e) Deposits...................................................... 32
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(f) Prepaid Items................................................. 32
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ARTICLE IV REPRESENTATIONS AND WARRANTIES OF SELLER............................. 33
4.1 Organization and Good Standing....................................... 33
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4.2 Authority............................................................ 33
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4.3 No Conflict or Breach................................................ 34
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4.4 Consents and Approvals............................................... 35
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4.5 Books and Records; Financial Information............................. 35
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(a) Actual Historical Financial Information....................... 35
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(b) Historical Budgeted Financial Information..................... 37
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(c) Projected Financial Information............................... 37
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4.6 Title to Assets...................................................... 38
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4.7 Real Property........................................................ 38
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(a) Owned......................................................... 38
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(b) Leased........................................................ 40
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(c) Improvements.................................................. 40
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4.8 Certain Purchased Property........................................... 40
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4.9 Condition of Tangible Assets......................................... 41
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4.10 Purchased Inventories................................................ 42
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4.11 Contracts............................................................ 42
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4.12 Intellectual Property................................................ 44
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4.13 Legal Proceedings.................................................... 46
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4.14 Permits.............................................................. 46
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4.15 Taxes................................................................ 47
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4.16 Insurance............................................................ 47
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4.17 Labor and Employment Matters......................................... 47
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4.18 Employees; Compensation; Benefit Plans............................... 48
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(a) Compensation, Agreements...................................... 48
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(b) Employee Benefit Plans........................................ 48
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4.19 Absence of Certain Changes........................................... 49
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4.20 Names................................................................ 50
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4.21 Brokers.............................................................. 50
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4.22 Environmental Matters................................................ 50
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(a) Condition of the Purchased Assets............................. 50
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(b) Compliance With Environmental Laws............................ 51
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(c) Environmental Permits......................................... 51
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(d) CERCLA Liabilities............................................ 52
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(e) Environmental Liabilities..................................... 52
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(f) Environmental Reports......................................... 53
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4.23 Employee Health and Safety Matters................................... 54
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4.24 Seller Financial Condition........................................... 54
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4.25 Multisite Contracts.................................................. 54
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ARTICLE V REPRESENTATIONS AND WARRANTIES OF BUYER AND PARENT................... 54
5.1 Organization and Good Standing....................................... 55
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5.2 Authority............................................................ 55
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5.3 No Conflict or Breach................................................ 56
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5.4 Consents and Approvals............................................... 56
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5.5 Capital Structure of Parent and Buyer................................ 57
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(a) Parent........................................................ 57
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(b) Buyer......................................................... 58
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5.6 Financial Statements................................................. 59
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5.7 Material Adverse Change.............................................. 60
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5.8 Financial Plans...................................................... 60
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5.9 Securities Documents................................................. 61
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5.10 Legal Proceedings.................................................... 62
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5.11 No Other Representations............................................. 62
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5.12 FDA.................................................................. 62
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5.13 Financing............................................................ 63
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5.14 Brokers.............................................................. 63
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ARTICLE VI COVENANTS OF SELLER.................................................. 63
6.1 Conduct of Business.................................................. 63
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6.2 Access and Information............................................... 65
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6.3 No Other Solicitations............................................... 66
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6.4 Future Cash Flows.................................................... 66
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6.5 Environmental Reports................................................ 66
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6.6 Financial Statements................................................. 66
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6.7 Multisite Contracts.................................................. 66
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ARTICLE VII COVENANTS OF BUYER AND SELLER........................................ 67
7.1 Access............................................................... 67
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7.2 Employee Terminations............................................... 68
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7.3 Establishment Registration and AFT Permit........................... 68
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7.4 Covenant Not to Compete............................................. 69
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(a) General...................................................... 69
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(b) Time Period.................................................. 70
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(c) Remedies..................................................... 70
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7.5 Retained Product Inventories........................................ 70
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ARTICLE VIII MUTUAL COVENANTS.................................................... 71
8.1 Employment Matters.................................................. 71
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(a) Employment................................................... 71
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(b) Retirement and Benefit Plans; Incentives..................... 73
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(c) Service Credit for New Employees............................. 73
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(d) General...................................................... 73
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(e) WARN Act..................................................... 73
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(f) Tax Reporting................................................ 74
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(g) No Third Party Beneficiaries................................. 74
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8.2 Environmental Indemnification....................................... 74
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(a) Seller's Environmental Indemnity............................. 74
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(b) Buyer's Environmental Indemnity.............................. 75
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(c) Future Construction and Repair and Maintenance Activities.... 77
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(d) Seller's Obligation to Perform Remedial Activities........... 84
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(e) Buyer's Obligation to Perform Remedial Activities............ 85
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(f) The Procedure for Tendering An Indemnified Claim............. 86
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(g) Time for Indemnified Claims.................................. 87
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(h) No Recovery for Loss of Profits.............................. 87
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(i) Independent Covenants........................................ 88
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(j) Notice of Environmental Occurrences.......................... 89
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8.3 Best Efforts; Regulatory Approvals.................................. 89
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8.4 SWMU................................................................ 90
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(a) SWMU Remedial Activity....................................... 90
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(b) Future Remediation of Pre-Existing Environmental Conditions.. 90
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8.5 Termination of Confidentiality Agreement............................ 91
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8.6 Confidentiality..................................................... 91
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(a) General...................................................... 91
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(b) Nondisclosure................................................ 91
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(c) Permitted Exceptions......................................... 92
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(d) Consent...................................................... 93
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(e) Excluded Information......................................... 93
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(f) Notification of Mandatory Disclosure......................... 94
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(g) Publicity.................................................... 95
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(h) Return of Confidential Information........................... 95
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8.7 Additional Material Contracts....................................... 96
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8.8 Unemployment Accounts............................................... 97
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8.9 Asbestos............................................................ 97
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8.10 Information Technology Matters...................................... 98
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8.11 Maintenance of Representations and Warranties....................... 98
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8.12 Supply Agreement Charges............................................ 99
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8.13 Warren Encroachment.................................................100
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ARTICLE IX CONDITIONS PRECEDENT TO BUYER'S AND PARENT'S OBLIGATIONS............100
9.1 Representations and Warranties......................................100
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9.2 Compliance with Covenants...........................................101
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9.3 Absence of Litigation...............................................101
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9.4 Absence of Material Change..........................................101
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9.5 Consents and Approvals and Permits..................................101
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9.6 Title Insurance; Survey.............................................102
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9.7 Removal of Liens....................................................102
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9.8 Financing...........................................................102
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9.9 Legal Opinion.......................................................102
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9.10 Physical Condition of Purchased Assets..............................103
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9.11 Litigation..........................................................103
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9.12 Transaction Agreements..............................................103
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ARTICLE X CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS........................103
10.1 Representations and Warranties......................................103
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10.2 Compliance with Covenants...........................................104
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10.3 Absence of Litigation...............................................104
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10.4 Consents and Approvals..............................................104
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10.5 Legal Opinion.......................................................104
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10.6 Transaction Agreements..............................................104
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10.7 Insurance Coverages.................................................104
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ARTICLE XI CLOSING.............................................................105
11.1 Closing.............................................................105
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11.2 Deliveries by Seller................................................105
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11.3 Deliveries by Buyer and Parent......................................107
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11.4 Deliveries by Seller and Buyer......................................108
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11.5 Further Assurances..................................................109
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ARTICLE XII INDEMNIFICATION.....................................................109
12.1 Indemnification by Seller...........................................109
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12.2 Indemnification by Buyer and Parent.................................111
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12.3 Notice of Claim.....................................................113
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12.4 Defense.............................................................114
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(a) Third Party Claims...........................................114
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(b) Indemnitee's Right to Assume Defense.........................115
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(c) Indemnitor's Failure to Assume Defense of Third Party Claim..116
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(d) Statutes of Limitations......................................117
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12.5 Time for Claims.....................................................117
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12.6 Limitation..........................................................118
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12.7 Reduction by Insurance Proceeds.....................................118
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12.8 Maximum Indemnity Amount............................................119
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12.9 Known Matters.......................................................119
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12.10 Exclusive Remedy....................................................120
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12.11 Indemnities Related to Purchased Inventories........................120
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12.12 Exceptions..........................................................120
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ARTICLE XIII TERMINATION.........................................................121
13.1 Termination.........................................................121
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13.2 Effect on Obligations...............................................122
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ARTICLE XIV MISCELLANEOUS.......................................................123
14.1 Survival of Representations.........................................123
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14.2 Bulk Sales..........................................................123
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14.3 Risk of Loss........................................................123
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(a) Material.....................................................123
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(b) Not Material.................................................124
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14.4 Tax Filings.........................................................124
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14.5 Expenses............................................................125
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14.6 Publicity...........................................................125
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14.7 Notices.............................................................125
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14.8 Governing Law.......................................................127
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14.9 Jurisdiction........................................................127
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14.10 Counterparts........................................................128
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14.11 Assignment..........................................................128
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14.12 Third Party Beneficiaries...........................................128
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14.13 Headings............................................................129
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14.14 Amendments..........................................................129
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14.15 Severability........................................................129
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14.16 Entire Agreement....................................................129
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14.17 Drafting Ambiguities................................................129
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SCHEDULES
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Section 1.1(a) Assumed Supply Contracts
Section 1.1(b) Data Room Catalog
Section 2.2(a) Owned Real Property
Section 2.2 (d) Vehicles
Section 2.2(f)(i) Transferred Processes
Section 2.2(f)(ii) Transferred Systems
Section 2.2(g) Transferred Permits
Section 2.3(f) Retained Records
Section 2.3(j) Nontransferable Permits
Section 2.3(l) Excluded Assets
Section 2.4(a) Real Property Liens
Section 3.8(c) Deposits
Section 4.1 Foreign Qualifications
Section 4.4 Required Consents
Section 4.5 Financial Information
Section 4.6 Liens
Section 4.9 Condition of Tangible Assets
Section 4.10 Purchased Inventories Greater than Six Months of Forward Demand
Section 4.11 Material Contracts
Section 4.12(b) Trademark Proceedings
Section 4.12(c) Intellectual Property
Section 4.13 Legal Proceedings
Section 4.16 Insurance
Section 4.18 Employee Benefit Plans
Section 4.19 Absence of Certain Changes
Section 4.22 Environmental Matters
Section 4.23 Employee Health and Safety Matters
Section 6.1 Conduct of Business
Section 8.1(a)(1) Categories of New Greenville Employees
Section 8.1(b) Buyer Retirement and Benefit Plans
Section 8.2(c)(1) Prohibited Areas
Section 8.7 Additional Material Contracts
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EXHIBITS
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Exhibit A Amended and Restated Certificate of Incorporation
Exhibit B Environmental Agreement
Exhibit C License Agreement
Exhibit D Memorandum of Understanding
Exhibit E Supply Agreement
Exhibit F Additional Cash Consideration
Exhibit G Allocation of Total Consideration
Exhibit H Morgan Stanley Stock Purchase Agreement
Exhibit I Chase Manhattan Commitment Letter
Exhibit J Asbestos Release
Exhibit K Special Warranty Deed and Quitclaim Deed
Exhibit L Bill of Sale
Exhibit M Assignment and Assumption of Liabilities
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (together with all Schedules and
Exhibits hereto, this "Agreement"), dated as of June _____, 1997, is entered
into in the State of North Carolina by and among GLAXO WELLCOME INC., a North
Carolina corporation ("Seller"), CATALYTICA PHARMACEUTICALS, INC., a Delaware
corporation ("Buyer") and CATALYTICA, INC., a Delaware corporation that is the
parent of Buyer (the "Parent").
R E C I T A L S :
1. Seller is the owner and operator of a pharmaceuticals
manufacturing facility located in Greenville, North Carolina (the "Facility").
2. Seller desires to sell, and Buyer desires to buy, certain assets
of Seller used in or relating to the Operation of the Facility (as defined
below), on the terms and conditions set forth in this Agreement, and Seller and
Buyer desire, and it is a condition to the parties' obligations under this
Agreement, that Buyer manufacture and supply to Seller and Seller purchase
certain secondary and sterile pharmaceutical products and certain bulk active
ingredients and intermediates for use in pharmaceutical products, all under the
terms of the Supply Agreement (as defined below).
THEREFORE, in consideration of the mutual covenants, agreements,
representations and warranties contained in this Agreement, the parties agree as
follows:
ARTICLE I
DEFINITIONS
1.1 Certain Definitions. The following terms shall have the meanings
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set forth below:
Assigned Products. Those products that Buyer will manufacture for
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third parties under the Assumed Supply Contracts.
Assumed Supply Contracts. Those third party manufacturing contracts
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as set forth in Section 1.1(a) of the Disclosure Schedule which shall be
assigned by Seller to Buyer at the Closing.
Best Knowledge. Actual knowledge of the officers and directors of the
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party in question after reasonable inquiry of the management personnel of such
party who are, in such party's judgment, best situated to know about the
subject.
Buyer Confidential Information. All confidential business and
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technical communications, documents or other information, whether in written,
oral or other form, of Buyer, Parent or a Parent's Affiliate that are disclosed
to Seller by Buyer, Parent or a Parent's Affiliate or Seller otherwise learns in
connection with the negotiation or performance of this Agreement; provided,
however, that all information relating to the Products shall be Seller
Confidential Information except to the extent that information is part of or
constitutes a "Supplier Development" as described in the Supply Agreement.
Buyer Confidential Information shall include all of the above disclosed by
Buyer, Parent or a Parent's Affiliate or learned by Seller prior to the date of
this Agreement.
Buyer Preferred Stock. Shares of junior convertible preferred stock,
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par value $.001 per share, of Buyer having precisely the rights and preferences
described in the Amended and Restated Certificate of Incorporation attached
hereto as Exhibit A (which rights and preferences have previously been fully
negotiated by the parties and are not subject to change).
Closing. The closing of the purchase and sale of the Purchased Assets
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pursuant to this Agreement.
Closing Date. The day on which the Closing occurs.
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COBRA. Consolidated Omnibus Budget Reconciliation Act, as amended.
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Code. The Internal Revenue Code of 1986, as amended, including
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regulations and other guidance promulgated thereunder.
Continuing Release. Any release of a Hazardous Material that occurred
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at any time on or before the Effective Time and also after the Effective Time
from a below ground structure (including without limitation, a sewer, pipe,
tank, sump, or drain); provided, however, that no release shall be a Continuing
Release to the extent that it occurs during any period of time following (i) the
time Buyer discovers or reasonably should have discovered the release and has a
reasonable opportunity to cure or (ii) the fifth (5) anniversary of the Closing
Date, whichever is earlier.
Data Room Catalog. That certain catalog of documents which has
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previously been made available by Seller to Buyer, a copy of which is attached
hereto as Section 1.1(b) of the Disclosure Schedule.
Disclosure Schedule. The schedule accompanying this Agreement, which
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is arranged in sections corresponding to the Sections of this Agreement.
Environmental Agreement. Agreement in the form attached hereto as
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Exhibit B (which form has previously been fully negotiated by the parties and is
not subject to change) to be entered into between the parties at the Closing in
accordance with Section 11.4.
Environmental Claim. Any and all losses, damages, judgments, fines,
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liens, penalties, costs and expenses (including without limitation reasonable
attorneys' fees, experts' fees, consultants' fees, but not including loss of
profits described in Section 8.2(h)), administrative, enforcement or judicial
actions, suits, orders, notices, notices of violations, investigations,
complaints, demands for Remedial Activity, requests for information,
proceedings, or other written communication, based upon, arising from, alleging,
or asserting any (i) violation of or liability under any Environmental Law,
including, without limitation, a violation of any permit, approval, memorandum
of understanding, or settlement agreement; (ii) violations or liability arising
from the conduct of Remedial Activity; (iii) Environmental Condition, of any
kind or character, whether known or unknown as of the Effective Time; or (iv)
exposure of any person to a Hazardous Material (without regard to whether a
health effect is manifested as of the Effective Time), except for persons
covered by Section 12.1(c) or Section 12.2(c), whose claims are described in the
provisions of that Section and whose exposures shall give rise to a "Loss" under
such Sections, rather than to an "Environmental Claim."
Environmental Condition. The presence in the environment, including
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the soil, groundwater, surface water or air of any Hazardous Material at any
concentration (i) exceeding allowable levels under any Environmental Law, or
(ii) requiring Remedial Activity or other action under any Environmental Law.
Environmental Law. Any and all federal, state, or local laws,
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statutes, ordinances, orders, codes, rules, regulations, judgments or agreements
with any Governmental Body relating to environmental matters involving
pollution, contamination or protection of the environment, including but not
limited to the Comprehensive Environmental Response, Compensation and Liability
Act, Clean Air Act, the Federal Water Pollution Control Act, the Hazardous
Material Transportation Act, the Resource Conservation and Recovery Act of 1976,
the Toxic Substances Control Act, the North Carolina Oil Pollution and
Hazardous Substances Control Act, and other local, state and federal laws of
similar import.
ERISA. The Employee Retirement Income Security Act of 1974, as
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amended, including regulations and other guidance promulgated thereunder.
Escrow Agent. Branch Banking and Trust Company.
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Escrow Agreement. That certain Escrow Agreement dated of even date
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herewith between Seller, Buyer and Escrow Agent.
Exacerbation. Any exacerbation or worsening of an Environmental
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Condition to such an extent that Remedial Activities, or additional Remedial
Activities, which were not previously required, become necessary to fulfill the
Environmental Laws applicable to such Environmental Condition.
FDA. The United States Food and Drug Administration.
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FD&C Act. The Federal Food, Drug and Cosmetic Act, as amended, and
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the rules and regulations thereunder.
GAAS. Generally accepted international auditing standards.
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Governmental Body. Any nation or government, any state, province or
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other political subdivision thereof or any entity with legal authority to
exercise executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
Greenville Employees. All persons employed by Seller in regular (full
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time, part-time or long term temporary) positions as of the Effective Time whose
regular place of employment is the Facility.
HSR Act. The Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
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amended, and the rules and regulations thereunder.
Hazardous Material. Any material or substance designated by or
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regulated by any Governmental Body as radioactive, toxic, hazardous or otherwise
a danger to health, reproduction or the environment (including without
limitation solvents, petroleum, crude oil fractions, pesticides, asbestos
containing materials, radon gas, radioactive materials, blood, biological
substances, medical "sharps" waste, and other chemicals, "hazardous substances,"
"hazardous waste," "hazardous materials," or "toxic substances" under the
Environmental Laws). Hazardous Material shall not include (1) products or
materials used to produce products at the Facility for ultimate sale to
customers and stored in compliance with applicable Environmental Laws or (2) any
asbestos containing materials in an Improvement, utility, fixture and equipment
or Tangible Personal Property.
Incremental Construction Costs. With respect to expansion or
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modification of any existing improvement or construction of a new improvement
(hereinafter referred to as "Construction Activity") or repairs and maintenance
of any improvements, utilities, fixtures and equipment or tangible personal
property (herein a "Repair Activity") to or in an area affected by
a Pre-Existing Environmental Condition, the excess of (A) costs reasonably
incurred by Buyer in connection with either the Construction Activity or Repair
Activity, to the extent that such costs result from the presence of a Pre-
Existing Environmental Condition, over (B) the costs that would have been
incurred by Buyer in connection with the Construction Activity or Repair
Activity, as the case may be, had such Pre-Existing Environmental Condition not
been present. In no event shall Incremental Construction Costs include any costs
relating to the presence of asbestos containing materials in an Improvement,
utility, fixture and equipment or Tangible Personal Property.
Intellectual Property. (i) Trademarks, trademark registrations,
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trademark applications, service marks, service mark registrations, service mark
applications, business marks, brand names, trade names, trade dress, names,
logos and slogans and all goodwill associated therewith; (ii) patents, patent
rights, provisional patent applications, patent applications, designs,
registered designs, registered design applications, industrial designs,
industrial design applications and industrial design registrations, including
any and all divisions, continuations, continuations-in-part, extensions,
substitutions, renewals, registrations, revalidations, reexaminations, reissues
or additions, including supplementary certificates of protection, of or to any
of the foregoing items; (iii) copyrights, copyright registrations, copyright
applications, original works of authorship fixed in any tangible medium of
expression, including literary works (including all forms and types of computer
software, including all source code, object code, firmware, development tools,
files, records and data and all documentation related to any of the foregoing,
musical, dramatic, pictorial, graphic and sculptured works; (iv) trade secrets,
technology, discoveries and improvements, know-how, proprietary rights,
formulae,
confidential and proprietary information, technical information,
techniques, inventions, designs, drawings, procedures, processes, models,
formulations, manuals and systems, whether or not patentable or copyrightable,
including all biological, chemical, biochemical, toxicological, pharmacological
and metabolic material and information and data relating thereto and
formulation, clinical, analytical and stability information and data which have
actual or potential commercial value and are not available in the public domain;
and (v) all other intellectual property or proprietary rights, in each case
whether or not subject to statutory registration or protection.
Legal Requirements. Any and all laws, statutes, ordinances, rules,
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regulations, judgments, injunctions, stipulations, decrees, orders, treaties or
protocols now or hereafter enacted or promulgated by any Governmental Body, any
covenant, condition or restriction contained in any agreement, and any insurance
underwriter's requirement, but not including any Environmental Laws or the FD&C
Act.
License Agreement. Agreement, in the form attached hereto as Exhibit
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C (which form has previously been fully negotiated by the parties and is not
subject to change), to be entered into between Seller and Buyer at the Closing,
pursuant to which Buyer shall license certain of the Transferred Intellectual
Property to Seller.
Lien. Any encumbrance, lien, charge, claim, option, pledge, security
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interest, mortgage, deed of trust, easement, lease, occupancy agreement, license
or title defect of any nature.
Material Adverse Effect. A material adverse effect on the condition,
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permitted use or value of the Purchased Assets or the Operation of the Facility.
Medical Records Transfer Agreement. Agreement, in a form to be agreed
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upon by the parties, to be entered into between Seller and Buyer at the Closing
and which will govern the Seller's transfer of the medical records of the New
Employees to Buyer.
Memorandum of Understanding. That certain Memorandum of
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Understanding, a draft of which is attached hereto as Exhibit D and which has
been negotiated between Buyer and Seller and filed with the North Carolina
Department of Environmental Health and Natural Resources ("DEHNR") with respect
to certain Pre-Existing Environmental Conditions, as said memorandum is amended
and renewed from time to time as required by the DEHNR.
Operation of the Facility. The use of the Purchased Assets by Seller
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to manufacture and supply products in the manner and quantity being manufactured
and supplied by it at the Facility as of the Effective Time for its own use or
for the sale to any third party.
Parent's Affiliate. Any person controlling, controlled by or under
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direct or indirect common control with Parent or in which Parent holds 30% or
more of the outstanding voting or equity interests.
Parent Common Stock. Shares of common stock, par value $.001 per
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share, of Parent.
Parent Subsidiaries. All those corporations, associations or other
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business entities, including without limitation the Buyer, of which the Parent
owns or controls 50% or more of the outstanding equity securities, either
directly or through an unbroken chain of entities as to each of which 50% or
more of the outstanding equity securities is owned directly or indirectly by its
parent.
Permits. All permits, authorizations, certificates, approvals,
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licenses, exemptions and classifications required for the Operation of the
Facility and the ownership and operation of the Purchased Assets, except for
those required by the FD&C Act or the Environmental Laws.
Personnel Files Transfer Agreement. Agreement, in a form to be agreed
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upon by the parties, which will be entered into between Seller and Buyer at the
Closing and which will govern the Seller's transfer of the personnel files of
the New Employees to Buyer.
Post-Closing Environmental Condition. An Environmental Condition to
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the extent that it:
(1) exists on the Purchased Assets after the Effective Time, but is
not a Pre-Existing Environmental Condition (except as specifically set forth in
paragraph (3) below) or was not caused by Seller, or Seller's agents, employees,
consultants, contractors or hazardous waste haulers or handlers;
(2) exists at any other location to which Hazardous Materials
generated at the Owned Real Property after the Effective Time or at any time in
the course of a Remedial Activity conducted by or for the benefit of Buyer or
Buyer's agents, employees, consultants, contractors or hazardous waste haulers
or handlers under this Agreement, or the Environmental Agreement, have been
transferred, to the extent such Environmental Condition results from the
Hazardous Materials so generated; or
(3) is a Pre-Existing Environmental Condition that becomes subject to
Buyer's Environmental Indemnity Obligation under Section 8.2.
Pre-Existing Environmental Condition. An Environmental Condition to
------------------------------------
the extent that it:
(1) exists on the Purchased Assets before the Effective Time,
including, without limitation, those identified in the "Phase II RCRA Facility
Investigation Report," dated October 1995, as amended, which was submitted by
Seller to the North Carolina Department of Environment, Health and Natural
Resources ("DEHNR") (hereinafter referred to as "the RFI Report");
(2) results from a Continuing Release;
(3) exists at any other location to which Hazardous Materials
generated at the Owned Real Property prior to the Effective Time or at any time
in the course of a Remedial Activity conducted by or for the benefit of Seller
or Seller's agents, employees, consultants, contractors or hazardous waste
haulers or handlers under this Agreement, or the Environmental Agreement, have
been transferred, to the extent such Environmental Condition results from the
Hazardous Material so generated; or
(4) has resulted or hereafter results from the migration or
transformation of any of the Environmental Conditions described in subparts (1)
through (3) of this definition.
Products. The Products, as defined in the Supply Agreement, that
--------
Buyer is obligated to manufacture for purchase by Seller under the Supply
Agreement following the Closing.
Purchased Inventories. The following inventories as they exist as of
---------------------
the Effective Time: (a) all primary raw materials; (b) all primary work in
process; (c) all primary finished goods; (d) all secondary and sterile raw
materials and packaging components; (e) all secondary and sterile work in
process; (f) all secondary and sterile finished goods not yet passed by quality
assurance, except for the Retained Product Inventories.
Remedial Activity. Any reporting, investigation, feasibility study,
-----------------
remediation, treatment, removal, transport, disposal, characterization,
sampling, health assessment, risk assessment, encapsulation, monitoring, study,
report, assessment, analysis, or other activity with respect to an Environmental
Condition.
Rights. Any warrants, options, rights, convertible securities and
------
other arrangements or commitments which obligate an entity to issue or dispose
of any of its capital stock or other ownership interests, and stock appreciation
rights, performance units and similar stock-based rights, whether or not they
obligate the issuer thereof to issue stock or other securities or to pay cash.
Securities Documents. All reports, proxy statements, registration
--------------------
statements and all other documents filed, or required to be filed or sent to
shareholders, pursuant to the Securities Laws, including without limitation
annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on
Form 8-K, annual reports to shareholders, proxy statements and registration
statements.
Securities Laws. The Securities Act of 1933, as amended; the
---------------
Securities Exchange Act of 1934, as amended; the Investment Company Act of 1940,
as amended; the Investment Advisers Act of 1940, as amended; the Trust Indenture
Act of 1939 as amended; and the rules and regulations of the Securities and
Exchange Commission promulgated thereunder.
Seller Confidential Information. All confidential business and
-------------------------------
technical communications, documents and other information, whether in written,
oral or other form, which Seller or a Seller's Affiliate furnishes or discloses
to Buyer or Parent or which Buyer or Parent otherwise learns in connection with
the negotiation and performance of this Agreement or any of
the Transaction Agreements (whether relating to Seller, a Seller's Affiliate or
any third party for which Seller has an obligation of confidentiality),
including the terms of this Agreement, other than the existence of this
Agreement; price and cost information; customer and supplier lists; strategies;
forecasts; market research and analyses; computer programs; technical data and
know-how. Seller Confidential Information disclosed by Seller or a Seller's
Affiliate to Buyer, Parent or a Parent's Affiliate or learned by Buyer, Parent
or a Parent's Affiliate prior to the date of this Agreement, including without
limitation, pursuant to any confidentiality agreement between the parties, shall
be included in the definition of "Seller Confidential Information."
Seller's Affiliate. Any person controlling, controlled by or under
------------------
direct or indirect common control with Seller or in which Seller holds 30% or
more of the outstanding voting or equity interests.
Seller's Obligatory Remediation. All Remedial Activities required to
-------------------------------
comply with and fulfill Environmental Laws (including without limitation any
consent decrees, settlement agreements, permits, approvals, plans, agreements,
and memorandums of understanding) applicable to a Pre-Existing Environmental
Condition. If more than one alternative meets such requirements, the Remedial
Activity shall be the one that (A) can be achieved for the lowest financial cost
as compared with other alternatives and (B) does not restrict or interfere with
the operations of the Facility as they existed at the Effective Time. If more
than one alternative meets both (A) and (B), the Remedial Activity shall be the
one that minimizes any interference with other Facility operations and, to the
extent consistent with Facility operations, avoids or reduces the likelihood of
future liabilities.
Statement of Final Inventories. A written statement to be prepared
------------------------------
following the Closing, describing the type and amount of the Purchased
Inventories as of the Effective Time based on Seller's 1997 standard costs. The
Statement of Final Inventories shall be based on the Seller's perpetual
inventory record for the month-end that coincides with the Closing Date or such
shorter part of a month as ends on the day of the Closing Date, if the Closing
Date is not the last day of the month.
Sterile Products Facility. That building known as Building #16,
-------------------------
including all equipment located therein, which is located on the Owned Real
Property, is predominately used for the manufacture of sterile products and is
commonly referred to as the "Sterile Products Facility".
Stock Purchase Agreement. That certain Stock Purchase Agreement
------------------------
entered into between Buyer and Seller simultaneously with this Agreement,
pursuant to which Buyer will issue to Seller shares of Buyer Preferred Stock.
Supply Agreement. Agreement in precisely the form attached hereto as
----------------
Exhibit E (which form has previously been fully negotiated by the parties and is
not subject to change, except that the agreement may be amended to the extent
provided in Section 8.12 and Exhibit B to the Supply Agreement may be amended to
include new agreements entered into as described in Section 8.7 of this
Agreement), to be entered into between Seller and Buyer at the Closing, pursuant
to which Buyer will manufacture for Seller and Seller will purchase from Buyer
specified quantities of the products listed in said agreement.
Taxes. Any and all federal, state, local and foreign taxes,
-----
assessments and other governmental charges, duties, impositions and liabilities,
including taxes based upon or
measured by gross receipts, income, profits, sales, use and occupation, and
value added, ad valorem, transfer, franchise, withholding, payroll, recapture,
employment, licensing, privilege, excise and property taxes, together with all
interest, penalties and additions imposed with respect to such amounts and any
obligations under any agreements or arrangements with any other person with
respect to such amounts and including any liability for taxes of a predecessor
entity.
Transaction Agreements. The Escrow Agreement, the Supply Agreement,
----------------------
the Stock Purchase Agreement, the License Agreement, the Environmental
Agreement, the Memorandum of Understanding, the Personnel Files Transfer
Agreement, the Medical Records Transfer Agreement, the Warrant Purchase
Agreement, the Share Exchange Agreement (as defined in the Stock Purchase
Agreement) and the Asbestos Release.
UK GAAP. Generally accepted United Kingdom accounting principles.
-------
US GAAP. Generally accepted United States accounting principles.
-------
WARN Act. The Workers Adjustment Retraining and Notification Act, as
--------
amended, and the rules and regulations thereunder.
Warrant Purchase Agreement. That certain Warrant Purchase Agreement
--------------------------
entered into between Buyer and Seller simultaneously with this Agreement,
pursuant to which Buyer will deliver the Warrants.
Warrants. Warrants to purchase 2,000,000 shares of the common stock
--------
of Catalytica, Inc., which shall be delivered to Seller at the Closing, pursuant
to the Warrant Purchase Agreement.
1.2 Other Definitions. In addition, the following terms shall have
-----------------
the meanings given them in the following Sections of this Agreement:
Term Section
---- -------
Asbestos Consideration 8.9
Asbestos Release 8.9
Assumed Liabilities 2.4(d)
Buyer Indemnitees 8.2(a)
Buyer's Environmental Indemnity
Obligations 8.2(b)
Cash Purchase Price 3.1
Construction Activity 1.1
Contracts 2.2(e)
EBIT Payments Exhibit F
EBIT Period Exhibit F
EBIT Statement Exhibit F
Effective Time 11.1
Environmental Provisions 8.2(i)
Environmental Reports 4.22(f)
Escrow Amount 3.5
Excluded Assets 2.1
Excluded Liabilities 2.4(e)
Existing Environmental Permits 4.22(c)
Facility Recitals
GWI Projections 4.5
Improvements 2.2(a)(iii)
Indemnified Party 12.3
Indemnity Obligor 12.3
Loss 12.1
Material Contracts 4.11
Multisite Contracts 4.25
New Employees 8.1
Nontransferable Permits 2.3(j)
Owned Real Property 2.2(a)(i)
Permitted Liens 2.4(c)
Plans 4.18(b)
Projections 5.8
Prohibited Areas 8.2(c)
Prospective Employees 8.1(a)
Purchased Assets 2.1
Raw Materials Purchase Orders 4.11
Repair Activity 1.1
Required Consents 4.4
Retained Intellectual Property 2.3(i)
Retained Product Inventories 2.3(h)
Seller Indemnitees 8.2(b)
Seller's Environmental Indemnity
Obligations 8.2(a)
Sterile EBIT Exhibit F
Tangible Personal Property 2.2(b)
Target Year Exhibit F
Tax Returns 4.15
Transferred Intellectual Property 2.2(f)(ii)
Transferred Processes 2.2(f)(i)
Transferred Systems 2.2(f)(ii)
Transferred Permits 2.2(g)
Utilities 4.7(a)(iv)
ARTICLE II
SALE AND PURCHASE OF ASSETS
2.1 Transfer of Assets. Subject to the terms and conditions of this
------------------
Agreement, Seller agrees to sell, assign, transfer and deliver to Buyer, and
Buyer agrees to purchase and accept from Seller, at the Closing, free and clear
of all Liens, except Permitted Liens, those assets and properties of Seller
specifically described below in Section 2.2 which are used by Seller in
connection with the Operation of the Facility, but excluding certain assets
described in Section 2.3. The assets being sold hereunder are collectively
referred to as the "Purchased Assets," and the assets described in Section 2.3
are collectively referred to as the "Excluded Assets."
2.2 Purchased Assets. Except to the extent otherwise described in
----------------
Section 2.3,
the Purchased Assets consist of the following:
(a) Owned Real Property. All of Seller's right, title and interest
-------------------
in and to the following:
(i) all that certain real property consisting of 17 separate
parcels of land consisting of approximately 582 acres, located in
Greenville, North Carolina and more particularly described in Section
2.2(a) of the Disclosure Schedule (the "Owned Real Property");
(ii) all rights, privileges and easements appurtenant to the
Owned Real Property, including, without limitation, all development
rights, air rights, water, water rights and riparian rights relating
to the Owned Real Property and any rights-of-way or other
appurtenances used in connection with the beneficial use and enjoyment
of the Owned Real Property and all of Seller's right, title and
interest in and to all roads and alleys adjoining or servicing the
Owned Real Property;
(iii) all the improvements and fixtures located on the Owned
Real Property, and any additions, improvements and replacements
thereto made between the date of this Agreement and the Closing Date,
including, without limitation, all buildings located on the Owned Real
Property, and all fixtures used in connection with the Operation of
the Facility or occupancy of the Owned Real Property or the foregoing
improvements, including, without limitation, the systems and
facilities used to provide any of the Utilities, refrigeration,
heating and air-conditioning, ventilation, garbage disposal, or other
services, along with
all on-site parking (collectively, the "Improvements");
(b) Tangible Personal Property. All machinery, equipment, furniture,
--------------------------
fixtures, transportation, maintenance and distribution equipment, waste
treatment facilities, computers, analytical equipment, instruments,
communication equipment, control systems, spare parts, supplies, materials
and other items of tangible personal property of every kind owned by Seller
and contained in the Facility as of the date of this Agreement, except for
those items identified in Section 2.3(l) of the Disclosure Schedule and
except for those items disposed of or consumed prior to the Closing Date as
described in Section 2.3(c) (the "Tangible Personal Property"), and any
additions, improvements and replacements thereto made between the date of
this Agreement and the Closing Date, together with any express or implied
warranty by the manufacturers or sellers of any item or component part
thereof, and all maintenance records and other documents to the extent
available relating thereto.
(c) Purchased Inventories. The Purchased Inventories.
---------------------
(d) Vehicles. All motor vehicles owned by Seller and used primarily
--------
in connection with the Operation of the Facility, and all leases of motor
vehicles used primarily in connection with the Operation of the Facility,
as set forth in Section 2.2(d) of the Disclosure Schedule.
(e) Contracts. All contracts, commitments, agreements, leases
---------
(except leases of real property), licenses, understandings and obligations,
whether written or oral, entered into in connection with the conduct of
Operation of the Facility to which Seller is party or by which the
Purchased Assets are bound or affected, except for those that (i) are
not legally transferable; (ii) apply to other facilities or sites of Seller
in addition to the Facility; or (iii) are identified in Section 2.3(l) of
the Disclosure Schedule (the "Contracts"), certain of which (referred to
herein as the "Material Contracts" and defined in Section 4.11) are listed
in Section 4.11 of the Disclosure Statement; provided, however, that the
Purchased Assets will not include any contract or any liabilities,
obligations or commitments made under any Contract which are Excluded
Liabilities under Section 2.4(e).
(f) Certain Intellectual Property.
-----------------------------
(i) all rights in and to manufacturing processes and procedures,
including, but not limited to, analytical procedures, quality
assurance and control procedures and sampling procedures, at the
Facility that are owned by Seller that: (1) relate generally to the
operation or layout of equipment or relate to general manufacturing
functions, and (2) are not limited in use, knowledge, application or
otherwise to a particular Product or family of Products (the
"Transferred Processes"). Section 2.2(f)(i) of the Disclosure
Schedule contains a list of the Transferred Processes that the
parties have identified and agreed to as of the date of this
Agreement. The parties acknowledge that additional items may
constitute Transferred Processes pursuant to the foregoing
definition, and each party agrees to promptly inform the other party
of any additional items that such party believes should be added to
the list of Transferred Processes. The parties agree to review in
good faith any proposed additional Transferred Processes; provided,
however, that Buyer's notification to Seller under this Section
2.2(f) shall in no way limit
Seller's right to disagree with Buyer's characterization of any
process or procedure not listed in Section 2.2(f)(i) of the
Disclosure Schedule as a Transferred Process.
(ii) all rights in and to the computer software owned by Seller
and included within the information technology and automation
systems that are described in Section 2.2(f)(ii) of the Disclosure
Schedule (including, if any, all worldwide patent applications,
patents, inventor's certificates, copyrights and registrations
related to any of the foregoing) (the "Transferred Systems").
Together, the Transferred Processes and the Transferred Systems
shall be referred to herein as the "Transferred Intellectual
Property." Buyer's rights in and to the Transferred Intellectual
Property shall be subject to the rights and licenses granted to
Seller with respect to the Transferred Intellectual Property as set
forth in the License Agreement.
(g) Permits. All Permits which are legally transferable by Seller,
-------
including without limitation, those listed in Section 2.2(g) of the
Disclosure Schedule (the "Transferred Permits").
(h) Prepaid Items. Those prepaid items for which Buyer pays its pro
-------------
rata portion in connection with the prorations described in Section 3.8.
(i) Records. All records, technical data, asset ledgers, books of
-------
account, inventory records, budgets, contract manufacturing customer and
supplier lists, correspondence and other files of Seller created or
maintained in connection with the Operation of the Facility, unless
excluded pursuant to Section 2.3(f) below.
(j) Claims. Any and all causes of action and claims of Seller
------
arising out of or
relating to the Purchased Assets, except tax refunds, and
except that causes of action or claims of Seller against third parties for
events that happened prior to the Closing shall be retained by Seller, to
the extent of the losses incurred by Seller.
2.3 Excluded Assets. The following assets shall be excluded from the
---------------
Purchased Assets and shall be retained by Seller:
(a) Cash. All cash on hand and on deposit in banks, petty cash
----
funds, cash equivalents and investments.
(b) Prepaid Items. Those prepaid items for which Buyer does not pay
-------------
its pro rata portion in connection with the prorations described in Section
3.8.
(c) Personal Property Disposed Of. All tangible personal property
-----------------------------
disposed of or consumed in the ordinary course of the Operation of the
Facility or with the written consent of Buyer between the date hereof and
the Closing Date.
(d) Insurance. All insurance policies relating to the Facility,
---------
including policies relating to property, boiler and machinery, liability,
facility interruption, business interruption, health and workers'
compensation and lives of officers of Seller.
(e) Assets of Benefit Plans. Assets relating to all employee benefit
-----------------------
plans.
(f) Retained Records. Those records described in Section 2.3(f) of
----------------
the Disclosure Schedule.
(g) Claims. Any and all causes of action and claims of Seller
------
arising out of or relating to events prior to the Closing Date, including
without limitation claims for tax refunds, but excluding any causes of
action and claims of Seller included in the Purchased Assets and described
in Section 2.2(j).
(h) Retained Product Inventories. Inventories that, as of the
----------------------------
Effective Time, (i) cannot be used in the ordinary course of business
within six months and are not described on Section 4.10 of the Disclosure
Schedule, (ii) have been rejected in the final quality assurance
determination, or (iii) are obsolete (the "Retained Product Inventories").
(i) Retained Intellectual Property. All of the Intellectual
------------------------------
Property, other than the Transferred Intellectual Property (the "Retained
Intellectual Property"), and any royalty income or fees generated from the
Retained Intellectual Property, whether accruing before or after the
Effective Time, and all causes of action for infringement, including past
infringement, of the Retained Intellectual Property (whether accruing or
arising before or after the Effective Time).
(j) Nontransferable Permits. All Permits which are not legally
-----------------------
transferable by Seller, including without limitation those which are listed
in Section 2.3(j) of the Disclosure Schedule (the "Nontransferable
Permits").
(k) Accounts Receivable. All accounts receivable and trade accounts
-------------------
due to Seller as of the Effective Time, and the full benefit of any
security therefor.
(l) Other Excluded Assets. The assets, tangible and intangible,
---------------------
listed in Section 2.3(l) of the Disclosure Schedule.
2.4 Liabilities.
-----------
(a) Real Property Liens. The Owned Real Property shall be sold and
-------------------
conveyed to Buyer free and clear of all Liens, except for Liens described
in Section 2.4(a) of the Disclosure Schedule and such other interests of
that nature commonly found with respect to property of this type as (i) do
not adversely affect ownership or use of the
Owned Real Property, all of which, considered in the aggregate, do not have
a Material Adverse Effect on the use of the Owned Real Property for the
purposes for which it is currently used or materially detract from its
value; and (ii) will not require an expenditure, individually or in the
aggregate, of more than $50,000 to remove.
(b) Other Purchased Assets. The remainder of the Purchased Assets
----------------------
(excluding the Owned Real Property) shall be sold and conveyed to Buyer
free and clear of all Liens, except for the following:
(i) imperfections of title and encumbrances, if any, which, in
the aggregate, are not material, do not materially detract from the
marketability or value of the properties subject thereto, and do not
have a Material Adverse Effect or require an expenditure, individually
or in the aggregate, of more than $50,000;
(ii) Liens for Taxes not yet due and payable; and
(iii) Liens described in Section 4.6 of the Disclosure Schedule,
all of which will be removed at or prior to Closing.
(c) Permitted Liens. The Liens described in Sections 2.4(a) and (b)
---------------
above are referred to collectively in this Agreement as the "Permitted
Liens."
(d) Assumed Liabilities. Subject to the terms and conditions
-------------------
contained herein, at the Effective Time Buyer shall assume and agree
thereafter to pay, perform and discharge only the obligations and
liabilities of Seller under the Contracts and Transferred Permits and for
purchase orders for goods or services ordered prior to the Effective Time
but not received until after the Effective Time (provided that such goods
and services are usable by Buyer in the ordinary course of business of the
operation of the Facility
following the Effective Time), but Buyer shall not assume or pay, perform
or discharge any such obligations or liabilities arising out of any
performance by any other party or any breach or default by Seller under the
Contracts or the Transferred Permits prior to the Effective Time or any
such obligations or liabilities which are Excluded Liabilities. The
foregoing are hereinafter referred to collectively as the "Assumed
Liabilities." Buyer's assumption of the Assumed Liabilities is intended to
inure solely to the benefit of Seller, and, notwithstanding anything herein
to the contrary, such assumption is not intended and shall not be construed
to give any third parties any greater or additional benefits against Buyer
than they would have had against Seller.
(e) Excluded Liabilities. Notwithstanding anything in this Agreement
--------------------
to the contrary, except as expressly set forth in Section 2.4(d), Buyer
shall not assume or have any responsibility for any liability, obligation
or commitment of any nature of Seller, whether now or hereafter existing
(individually an "Excluded Liability" and collectively, the "Excluded
Liabilities"), and Seller covenants that it shall retain, perform and
discharge all of the Excluded Liabilities. The Excluded Liabilities shall
include without limitation the following:
(i) any liabilities for any Taxes of the Seller for any period
and any liabilities for any Taxes levied or imposed upon the Purchased
Assets, the Facility or the Operation of the Facility for any period
(or any portion of any period) ending on or prior to the Effective
Time;
(ii) except as set forth in Section 7.2, any liabilities,
obligations or commitments of Seller to its employees incurred or made
in connection with their
employment at the Facility including, without limitation, under the
Plans, ERISA, the WARN Act, and COBRA;
(iii) any liabilities, obligations or commitments made by Seller
pursuant to any agreements not assumed by Buyer, except for
commitments under the purchase orders described in Section 2.4(d) of
this Agreement;
(iv) any liabilities, obligations or commitments arising from
the breach or performance of a Contract or Permit or the use of the
Purchased Assets by Seller that occurred prior to the Effective Time;
(v) all accounts payable, except for expenses attributable to
the Operation of the Facility to the extent that they are prorated to
the account of Buyer under Section 3.8 below; and
(vi) any liabilities, obligations, or commitments of Seller to
the extent that they are primarily associated with the Excluded Assets
and do not primarily relate to any Purchased Assets.
ARTICLE III
CONSIDERATION
3.1 Cash Purchase Price. Buyer shall pay at the Closing $246,600,000
-------------------
for the Purchased Assets (the "Cash Purchase Price"), subject to adjustment as
provided in Section 3.6 below. The Cash Purchase Price shall be payable on the
Closing Date by wire transfer of immediately available funds to an account
designated by Seller. It is anticipated that part of the Cash Purchase Price
will be evidenced by the Escrow Amount.
3.2 Additional Cash Consideration. As additional consideration for
-----------------------------
the Purchased Assets, Buyer shall pay Seller additional cash consideration as
set forth in detail in Exhibit F.
3.3 Additional Stock Consideration. As additional consideration for
------------------------------
the Purchased Assets, Buyer shall deliver to Seller at the Closing 250,000
shares of Buyer Preferred Stock, which shall be issued pursuant to the Stock
Purchase Agreement.
3.4 Warrants. As additional consideration for the Purchased Assets,
--------
Buyer shall deliver to Seller at the Closing the Warrants, which shall be issued
pursuant to the Warrant Purchase Agreement.
3.5 Escrow. Simultaneously with the execution of this Agreement,
------
Buyer, Seller and the Escrow Agent have entered into the Escrow Agreement,
pursuant to which Buyer has deposited with the Escrow Agent the amount of
$2,000,000 in cash (such amount, together with interest thereon, referred to as
the "Escrow Amount"). In the event that the sale of the Purchased Assets
contemplated by this Agreement is consummated, Buyer and Seller shall give joint
written instructions to the Escrow Agent for the release of the Escrow Amount to
Seller, which Escrow Amount shall be applied towards the Cash Purchase Price.
3.6 Adjustment of Purchase Price.
----------------------------
(a) Final Statement. Within 45 days following the Closing Date,
---------------
Seller shall deliver to Buyer Seller's perpetual inventory report for the
month-end or such short period of a month that ends on the date that
coincides with the Closing Date, together with the Statement of Final
Inventories. Buyer's independent auditors shall be permitted, at or about
the time of the Closing Date, to conduct certain audit procedures to verify
the
accuracy of Seller's perpetual inventory records and system and to test
specific accounts. Buyer and Buyer's independent auditors shall be
permitted to review the preparation of the Statement of Final Inventories,
and to review all work papers, books and records associated with such
preparation. Buyer and Seller shall cooperate with each other and their
respective independent auditors to the extent reasonable and practical in
the course of preparing the Statement of Final Inventories. Each party
shall bear its own expenses in the preparation of the Statement of Final
Inventories. The Statement of Final Inventories shall provide a credit, at
a rate consistent with the adjustments specified in Section 3.6(c) below,
for any of the following items which are determined after the Closing Date
to have been included in the Purchased Inventories: any secondary and
sterile work in process and finished goods that do not pass quality
assurance; any primary work in process and primary finished goods that do
not pass quality assurance and cannot be reworked; and any obsolete
inventories.
(b) Dispute Resolution. If Buyer objects to the Statement of Final
------------------
Inventories, it shall give written notice of such objection to Seller
within twenty days after its receipt thereof. Buyer shall, in such notice,
specify in reasonable detail the basis and reason for such objection and
the amount to which Buyer objects. If Buyer does not object to the
Statement of Final Inventories within such period, the Statement of Final
Inventories shall be final and binding upon Buyer and Seller. If Buyer
objects to the Statement of Final Inventories within such period and Seller
and Buyer are unable to resolve such objection within ten days after
written notice of Buyer's objection, then so much of the Statement of Final
Inventories as is not objected to shall become final and
binding upon the parties, and the remainder shall be submitted to a
mutually agreed upon office of a nationally recognized independent
certified public accounting firm to be jointly selected by Seller and
Buyer, which shall not be the principal outside accountant for either
party, who shall act as an arbitrator. The arbitrator shall be instructed
to use its commercially reasonable efforts to resolve the dispute within
thirty days of the submission to it of the Statement of Final Inventories
and the related dispute and, in any case, as soon as practicable after such
submission. The decision of the arbitrator shall be final and binding on
the parties. Each of the parties shall bear all costs and expenses incurred
by it (including legal and accounting fees) in connection with such
arbitration; provided, however, that the fees and expenses of the public
accounting firm that acts as an arbitrator shall be shared equally by Buyer
and Seller.
(c) Adjustment. If the amount of the Purchased Inventories (the
----------
"Inventories Amount") shown on the Statement of Final Inventories (based on
Seller's 1997 standard costs), as finally determined in accordance with the
preceding subsection, is greater than $120,000,000, Buyer shall pay to
Seller an amount equal to sixty percent (60%) of the amount by which the
Inventories Amount is greater than $120,000,000, as well as interest
accrued on such amount from the Closing Date
to the date of payment, at the annual rate of six percent (6%). If the
Inventories Amount shown on the Statement of Final Inventories (based on
Seller's 1997 standard costs), as finally determined in accordance with the
preceding subsection, is less than $120,000,000, Seller shall pay to Buyer
an amount equal to sixty percent (60%) of the amount by which the
Inventories Amount is less than $120,000,000, as well as interest accrued
on such amount from the Closing Date to the date of payment, at the annual
rate of six percent (6%). Any payments required by this subsection shall be
paid by wire transfer of immediately available funds to an account
designated by the recipient thereof, and shall be due within ten days after
the Statement of Final Inventories becomes final or is decided by the
arbitrator, and shall constitute adjustments to the Cash Purchase Price.
3.7 Allocation. Buyer and Seller agree that the total consideration
----------
(as finally adjusted) shall be allocated among the Purchased Assets as set forth
in Exhibit G.
3.8 Proration of Certain Items. With respect to certain expenses
--------------------------
incurred in the Operation of the Facility, the following prorations shall be
made:
(a) Operating Expenses. Subject to the specific provisions of this
------------------
Section, Seller shall continue to be responsible for all operating expenses
attributable to the Operation of the Facility, including under any Contract
or Permit, up to the Effective Time, and Buyer shall become responsible for
such operating expenses attributable to the operation of the Facility,
including under any Contract or Transferred Permit, after the Effective
Time; provided, however, that all Excluded Liabilities shall remain
obligations of Seller and all Assumed Liabilities shall become obligations
of Buyer.
(b) Taxes. Real and personal ad valorem property taxes attributable
-----
to the Purchased Assets or to the Facility shall be apportioned at the
Closing as of the Effective Time, based on current tax bills if available;
and if not available, based on the most recent tax bills available with
appropriate subsequent adjustment when bills for the current year are
received.
(c) Utilities. Utilities, water and sewer charges shall be paid
---------
directly to the
obligee by the Seller and Buyer based on meter readings as of the Effective
Time and at the prevailing rates, if possible; otherwise such charges shall
be apportioned based on the number of operating days occurring before and
after the Effective Time during the billing period for each such charge.
(d) Personal Property Leases. Any payments due to lessors after the
------------------------
Effective Time with respect to any leased vehicles or equipment under the
Contracts assumed by Buyer at the Closing shall be apportioned between
Seller and Buyer based on the time in such period before and after the
Effective Time.
(e) Deposits. Deposits for utilities, leases, capital equipment
--------
commitments (except for those capital equipment commitments relating to the
bupropion capacity expansion project and to the regulatory/code compliance
projects described in Section 3.8(e) of the Disclosure Schedule) and other
deposits paid by Seller with respect to the Owned Real Property and other
Purchased Assets will be transferred to or for the benefit of Buyer and, to
the extent set forth on Section 3.8(e) of the Disclosure Schedule, Buyer
will pay Seller the full amount thereof.
(f) Prepaid Items. Prepaid expenses for spare parts, insurance
-------------
parts, fuel oil and other inventoried supply items, in each case, that will
benefit Buyer in the Operation of the Facility after the Closing shall not
be apportioned. Prepaid contracts for hardware maintenance and software
maintenance shall be prorated as of the Closing Date, and Buyer shall pay
to Seller that portion of such prepaid items attributable to periods
following the Closing Date.
Appropriate cash payments by Seller or Buyer, as the case may require, shall be
made from time to time, as soon as practicable after the facts giving rise to
the obligation for such payments are known, to give effect to the prorations
provided in this Section.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer as follows:
4.1 Organization and Good Standing. Seller is a corporation duly
------------------------------
organized, validly existing and in good standing under the laws of the State of
North Carolina. Seller has all requisite corporate power and authority to own,
operate and lease the Purchased Assets and to conduct the Operation of the
Facility as presently conducted. Seller is duly qualified to do business as a
foreign corporation and is in good standing in the jurisdictions listed in
Section 4.1 of the Disclosure Schedule. True, correct and complete copies of
the Articles of Incorporation and Bylaws of Seller have previously been
delivered to Buyer.
4.2 Authority. Seller has all requisite corporate power and
---------
authority to execute and deliver this Agreement and the Transaction Agreements
and to perform the transactions contemplated hereby and thereby. The execution,
delivery and performance by Seller of this Agreement and the Transaction
Agreements have been duly and validly authorized by all necessary corporate
action on the part of Seller. This Agreement and the Transaction Agreements
have been, or at the Closing will be, duly executed and delivered by Seller, and
each constitutes, or when executed and delivered will constitute, a valid and
binding obligation of Seller, enforceable against Seller in accordance with its
terms, except that enforceability thereof
may be limited by bankruptcy, insolvency, reorganization or other similar laws
affecting creditors' rights generally and by principles of equity regarding the
availability of remedies.
4.3 No Conflict or Breach. The execution, delivery and performance
---------------------
of this Agreement and the Transaction Agreements by Seller do not and will not:
(a) conflict with or constitute a violation of the Articles of
Incorporation or Bylaws of Seller;
(b) assuming compliance with the requirements of the HSR Act and the
FD&C Act, conflict with or constitute a violation of any law, statute,
judgment, order, decree or regulation of any Governmental Body applicable
to or relating to Seller or the Purchased Assets;
(c) conflict with, constitute a default under, result in a breach or
acceleration of or, except as set forth in Section 4.4 of the Disclosure
Schedule, require notice to or the consent of any third party under any
Contract, Lien, Permit or other agreement, commitment, mortgage, note,
license or other instrument or obligation to which Seller is party or by
which it is bound or by which the Purchased Assets are affected, except for
any instances which do not and will not have a Material Adverse Effect or
require an expenditure by Buyer of more than $50,000 individually or in the
aggregate; or
(d) result in the creation or imposition of any Lien on any of the
Purchased Assets, except for any Permitted Lien that does not and will not
have a Material Adverse Effect or require an expenditure by Buyer of more
than $50,000 individually or in the aggregate.
4.4 Consents and Approvals. Section 4.4 of the Disclosure Schedule
----------------------
describes
each of the following which is required in connection with the valid execution
and delivery by Seller of this Agreement and the Transaction Agreements or the
consummation by Seller of the transactions contemplated herein and therein
(including the transfer of the Purchased Assets to Buyer): (a) each consent,
approval, authorization, registration or filing with any Governmental Body,
other than as required under the HSR Act and the FD&C Act; and (b) each consent,
approval, authorization of or notice to any other third party; provided,
however, that Section 4.4 of the Disclosure Schedule does not describe any
consents, approvals, authorizations and notices the failure of which to obtain
or give would not result in a Material Adverse Effect or require an expenditure
of more than $50,000 individually or in the aggregate. The consents described in
Section 4.4 of the Disclosure Schedule are referred to herein as the "Required
Consents".
4.5 Books and Records; Financial Information. Attached as Section
----------------------------------------
4.5 of the Disclosure Schedule is an index of financial schedules for which the
Seller makes the following representations and warranties:
(a) Actual Historical Financial Information. Actual historical
---------------------------------------
financial information as of and for the year ended December 31, 1996 was
extracted, summarized or derived from the books and records of Seller which
were subject to certain annual audit procedures performed by Coopers &
Lybrand L.L.P. The books and records of Seller as of and for the year
ended December 31, 1996 were prepared according to UK GAAP and are correct
and complete in all material respects and appropriately reflect required
year-end adjustments. The financial schedules which were extracted,
summarized or derived from such books and records are correct in all
material respects and appropriately reflect required year-end adjustments.
Year-to-date actual historical financial information as of and
for the five months ended May 31, 1997 was extracted, summarized or derived
from the books and records of Seller. The books and records of Seller as
of and for the five months ended May 31, 1997 were prepared according to UK
GAAP and are correct in all material respects and do not reflect year-end
adjustments which may be required. The financial schedules which were
extracted, summarized or derived from such books and records are correct in
all material respects and do not reflect year-end adjustments which may be
required.
Collectively, the actual historical information contained in the
financial schedules described in Section 4.5 of the Disclosure Schedule
provides a complete and accurate accounting in all materials respects for
all significant costs and expenses incurred by Seller to manufacture
product at and operate the Facility for the year ended December 31, 1996.
Accordingly, no other material costs or expenses required to operate the
Facility for the year ended December 31, 1996 were incurred by Seller but
not reflected in the financial schedules described in said Section 4.5 of
the Disclosure Schedule, except for costs or expenses incurred at other
sites, which are reflected in documents listed in the Data Room Catalog and
provided to Buyer.
Furthermore, Seller is not aware of any material changes to the
nature and extent of costs or expenses required to manufacture product and
operate the Facility for the six months ended June 30, 1997 as compared to
the year ended December 31, 1996.
(b) Historical Budgeted Financial Information. Historical budget
-----------------------------------------
information provided is correct and complete in all material respects and
was extracted, summarized
or derived from the operating budgets of Glaxo Wellcome Inc. Such budgets
were subject to management review and control procedures appropriate in the
circumstances.
(c) Projected Financial Information. With respect to projections and
-------------------------------
forecasts provided during due diligence (the "GWI Projections"), Seller
represents only that the GWI Projections were prepared in good faith and on
what Seller believes is a reasonable basis. The GWI Projections are based
upon assumptions and estimates that, while presented with numerical
specificity and considered reasonable by Seller when taken as a whole, are
inherently subject to significant business, economic and competitive
uncertainties and contingencies, many of which are beyond the control of
Seller and are based upon specific assumptions with respect to Buyer's
future business decisions. The GWI Projections are necessarily speculative
in nature, and it can be expected that some or all of the assumptions
underlying the Projections may not materialize or may vary significantly
from actual results. Accordingly, the GWI Projections are only estimates.
Actual results will vary from the GWI Projections and variations may be
material. Consequently, the GWI Projections are not a representation by
Seller or any other person of results that will actually be achieved.
4.6 Title to Assets. Seller has good and marketable title to all of
---------------
the Purchased Assets, free and clear of any Liens, except for Liens described in
Section 4.6 of the Disclosure Schedule, all of which will be removed on or prior
to the Closing Date, and except for Permitted Liens.
4.7 Real Property.
-------------
(a) Owned.
-----
(i) Section 2.2(a) of the Disclosure Schedule contains a true
and correct description of the Owned Real Property and the easements
and similar appurtenances, and there is no other real property which
is owned by the Seller and used exclusively for the Operation of the
Facility.
(ii) Seller is the legal and equitable owner of the fee title of
the Owned Real Property, with full right to convey the same, and
without limiting the generality of the foregoing, Seller has not
granted any option or right of first refusal or first opportunity to
any party to acquire any interest in any of the Owned Real Property.
(iii) To the Best Knowledge of Seller, there are no
condemnation, environmental, zoning or other land-use regulation
proceedings, either instituted or planned to be instituted with
respect to the Owned Real Property or any portion thereof, nor has
Seller received notice of any special assessment proceedings affecting
the Owned Real Property. Seller shall notify Buyer promptly of any
such proceedings of which Seller becomes aware prior to the Closing.
(iv) All water, sewer, gas, electric, telephone lines and
drainage facilities and all other utilities (the "Utilities") required
by law or necessary for the Operation of the Facility are installed to
the property lines of the Owned Real Property and are validly
connected and in use in the Operation of the Facility.
(v) Existing vehicular and pedestrian ingress to and egress
from the Owned Real Property to public streets abutting the Owned Real
Property, at current levels, is lawful.
(vi) There is no litigation pending with respect to which Seller
or Seller's agent for service of process has been served, or, to the
Best Knowledge of Seller, threatened, against Seller that relates to
title to the Owned Real Property or that would materially and
adversely affect the value or the use or operation of the Owned Real
Property in the manner currently being made of the Owned Real
Property. Seller shall notify Buyer promptly of any such litigation
of which Seller becomes aware prior to the Closing.
(vii) Except as described in Section 4.11 of the Disclosure
Schedule or Section 4.19 of the Disclosure Schedule, at the time of
Closing there will be no outstanding written or oral contracts made by
Seller for any alterations or improvements on or to the Owned Real
Property, which have not been fully paid for, and Seller shall cause
to be discharged all mechanics' and materialmen's liens arising from
any labor or materials furnished to the Owned Real Property prior to
the time of Closing (or, with respect to any disputed Liens, shall
have posted a bond issued by a solvent corporate surety for an amount
equal to 1.25 times the disputed amount, so as to remove such Lien as
a cloud on the title of the Owned Real Property.
(viii) Seller is not a "foreign person" within the meaning of
Section 1445(f)(3) of the Code, and the purchase price payable to
Seller is not subject to withholding under any state or U.S. tax law.
(ix) To the Best Knowledge of Seller, no portion of the Owned
Real Property is located in a delineated wetland area, as defined by
Section 404 of the
Clean Water Act, or in a designated or recognized floodplain,
floodplain district, flood hazard area or area of similar
characterization.
(b) Leased. Seller presently leases warehouse space in Pitt County,
------
North Carolina, to support the Operation of the Facility (the "Leased Real
Property"). No interest in such lease will be transferred to Buyer.
(c) Improvements. The Operation of the Facility complies with
------------
applicable zoning ordinances, except for any instances of noncompliance
that, in the aggregate, do not and will not have a Material Adverse Effect
or require an expenditure of Buyer of more than $50,000.
4.8 Certain Purchased Property. The Owned Real Property and
--------------------------
Improvements and the Tangible Personal Property (including, without limitation,
motor vehicles and records) include all real property, improvements and tangible
personal property necessary to (i) manufacture the Products for Seller in
accordance with present product Specifications (as defined in the Supply
Agreement) in the volumes set forth in the Supply Agreement, including Products
manufactured under the Supply Agreement pursuant to third party manufacturing
agreements, and (ii) manufacture the Assigned Products to the extent required by
and in accordance with the Assumed Supply Contracts as in effect at the
Effective Time. All Tangible Personal Property is located on the Owned Real
Property, except for inventories of digitalis leaf, storage racks and certain
records, which are located on the Leased Real Property.
4.9 Condition of Tangible Assets. Except as set forth in Section 4.9
----------------------------
of the Disclosure Schedule, the tangible assets included in the Purchased Assets
(including without limitation the Tangible Personal Property, the Utilities and
the Improvements) (a) have, in the
aggregate, been regularly maintained in the ordinary course of business and in
accordance with customary industry practices; (b) are free of material defects,
except for defects attributable to wear and tear consistent with the age and
usage of such assets, and except for such defects as do not and will not, in the
aggregate, materially impair the ability to use such assets for the purposes now
used and as used by Seller as of the Effective Time for the Operation of the
Facility. SELLER EXPRESSLY DISCLAIMS ALL IMPLIED WARRANTIES OF MERCHANTABILITY
AND FITNESS FOR A PARTICULAR PURPOSE (except with respect to the fitness of the
tangible assets for the purpose of manufacturing Products and Assigned Products
in the manner that they are manufactured as of the Effective Time), AND ALL
OTHER WARRANTIES, EXPRESS AND IMPLIED, with respect to the condition or use of
such assets, except that no disclaimer is made which would impair the
representations set forth in the first sentence of Section 4.8 above and the
first sentence of Section 4.9. This Section contains all warranties of Seller
with respect to the condition of the tangible assets included in the Purchased
Assets, and is the sole and exclusive source of remedies for Buyer with respect
to the condition of the tangible assets included in the Purchased Assets.
4.10 Purchased Inventories. All items included in the Purchased
---------------------
Inventories are useable or saleable by Buyer in the ordinary course of
manufacturing the Products under the Supply Agreement (including Products
manufactured under the Supply Agreement pursuant to third party manufacturing
agreements) or manufacturing the Assigned Products under the Assumed Supply
Contracts based on the Binding Primary Commitment, Binding Secondary Commitment
and Replenishment Forecast (as those terms are defined in the Supply Agreement)
to be delivered to Buyer at Closing under the Supply Agreement either (a) within
six (6) months
after the Effective Time or (b) over a period longer than six (6) months with
respect to those items described on Section 4.10 of the Disclosure Schedule. All
items included in the Purchased Inventories meet all applicable specifications
of Seller or the purchasers under the Assumed Supply Contracts related thereto.
4.11 Contracts. To the Best Knowledge of Seller, Section 4.11 of
---------
the Disclosure Schedule lists, among other Contracts, all Contracts (except for
Real Property Leases and except for commitments under purchase orders to
purchase raw materials ("Raw Materials Purchase Orders")) (i) that involve the
expenditure by any party of more than $500,000 following the Closing Date, or
that involve the provision by any party of services having a value of more than
$500,000 following the Closing Date; (ii) that are not terminable by either
party without penalty on 90 days' notice or less; or (iii) that have a remaining
term in excess of twelve months beyond the Closing Date. Section 4.11 of the
Disclosure Schedule also lists, among other Raw Materials Purchase Orders, all
Raw Materials Purchase Orders (i) that involve an expenditure by Buyer of more
than $2,000,000 following the Closing Date; (ii) that are not terminable by
Buyer without penalty on 90 days' notice or less; or (iii) that have a remaining
term in excess of twelve months beyond the Closing Date. The Contracts and Raw
Materials Purchase Orders listed on Section 4.11 of the Disclosure Schedule are
referred to collectively as the "Material Contracts." The Contracts, except for
the Raw Materials Purchase Orders, not listed in Section 4.11 of the Disclosure
Schedule will not, in the aggregate, require Buyer to
make payments or provide services or create any liability on the part of Buyer
having a value in excess of $500,000 in the aggregate following the Closing
Date. The Contracts which are Raw Materials Purchase Orders not listed in
Section 4.11 of the Disclosure Schedule will not, in the aggregate, require
Buyer to make payments in excess of $2,000,000 following the Closing Date.
Seller has delivered to Buyer or made available for review by Buyer true and
complete copies of all written Material Contracts (including Raw Materials
Purchase Orders) listed on Section 4.11 of the Disclosure Schedule and true and
complete memoranda of all oral Material Contracts listed on Section 4.11 of the
Disclosure Schedule, including any and all amendments and other modifications
thereto. Each of the Contracts is valid, binding and enforceable in accordance
with its terms except that enforceability thereof may be limited by bankruptcy,
insolvency, reorganization or other similar laws affecting creditors' rights
generally and by principles of equity regarding the availability of remedies and
except for any instances of unenforceability that would not, either individually
or in the aggregate, have a Material Adverse Effect. Each of the Contracts is in
full force and effect except for any instances to the contrary that would not,
either individually or in the aggregate, have a Material Adverse Effect. There
are no existing defaults by Seller and, to the Best Knowledge of Seller, there
are no existing defaults by any other party nor any events or circumstances have
occurred which, with or without notice or lapse of time or both, would
constitute defaults, under any of the Contracts, which would have a Material
Adverse Effect or require the expenditure of more than $50,000 individually or
in the aggregate. The assignment of the Contracts by Seller to Buyer will not,
with respect to any Contract, (i) constitute a default thereunder, (ii) require
the consent of any person or party, except for the Required Consents or (iii)
affect the continuation, validity and effectiveness thereof or the terms
thereof, except with respect to clauses (i) through (iii) for such defaults,
consents and effects as do not and will not have a Material Adverse Effect or
require the expenditure of more than $50,000 individually or in the aggregate
4.12 Intellectual Property. Seller owns all right, title and
---------------------
interest in and to each item included in the Transferred Intellectual Property.
Seller has not licensed any of the Transferred Intellectual Property to any
third party, and to the Best Knowledge of Seller no third party has any right to
use any of the Transferred Intellectual Property.
(a) The Transferred Intellectual Property and the Retained
Intellectual Property and the rights sublicensed under Section 14.3(b) of
the Supply Agreement constitute all Intellectual Property owned or used by
Seller at the Effective Time and which is necessary to (i) manufacture and
supply the Products for Seller in accordance with present product
Specifications (as defined in the Supply Agreement), including Products
manufactured under the Supply Agreement pursuant to third party
manufacturing agreements. The Assumed Supply Contracts provide rights to
all Intellectual Property owned or used by Seller and necessary to
manufacture the Assigned Products under the Assumed Supply Contracts.
(b) Except as described in Section 4.12(b) of the Disclosure Schedule,
Seller has not received notice from any third party that the Operation of
the Facility, including the manufacture and sale of any of the Products or
the Assigned Products, infringes or misappropriates the intellectual
property of any person or entity or constitutes unfair competition or trade
practices under the laws of any jurisdiction;
(c) Except as listed in Section 4.12(c) of the Disclosure Schedule,
there are no contracts, licenses and agreements between Seller and any
third party with respect to the Transferred Intellectual Property or
Retained Intellectual Property under which there is any dispute known to
Seller regarding the scope of such agreement, or performance under
such agreement including with respect to any payments to be made or
received by Seller thereunder;
(d) To the Best Knowledge of Seller, no third party has infringed or
misappropriated or is infringing or misappropriating any of the Transferred
Intellectual Property; and
(e) No Transferred Intellectual Property or Retained Intellectual
Property is subject to any outstanding decree, order, judgment or
stipulation restricting in any manner the use or licensing thereof by
Seller, or which may affect the validity, use or enforceability of such
Transferred Intellectual Property or Retained Intellectual Property.
Except for the warranties set forth in this Section 4.12, SELLER EXPRESSLY
DISCLAIMS ALL WARRANTIES WITH RESPECT TO THE TRANSFERRED INTELLECTUAL PROPERTY,
WHETHER EXPRESS OR IMPLIED, INCLUDING THE IMPLIED WARRANTIES OF MERCHANTABILITY
AND FITNESS FOR A PARTICULAR PURPOSE. This Section 4.12 contains all warranties
of Seller with respect to the Transferred Intellectual Property and is the sole
and exclusive source of remedies for Buyer with respect thereto. Pursuant to the
Supply Agreement to be executed at the Closing, Seller will license to Buyer
certain rights in the Retained Intellectual Property which are necessary for
Buyer to perform its obligations under the Supply Agreement.
4.13 Legal Proceedings. Except as described in Section 4.13 of
-----------------
the Disclosure Schedule, there are no actions, suits, claims, governmental
investigations or proceedings instituted, pending or, to the Best Knowledge of
Seller, threatened against Seller or with respect to any Purchased Asset or the
Operation of the Facility which, if decided adversely, would have a
Material Adverse Effect, or require the expenditure of more than $50,000,
individually or in the aggregate, except for those concerning Pre-Existing
Environmental Conditions, if any, which shall be the sole responsibility of
Seller. There are no actual or, to the Best Knowledge of Seller, threatened
actions, suits or proceedings which present a claim to restrain or prohibit the
transactions contemplated herein, or in the Escrow Agreement.
4.14 Permits. Seller has obtained all Permits currently required
-------
for the Operation of the Facility by Seller (except for those Permits the
absence or violation of which does not have a Material Adverse Effect or require
an expenditure of more than $50,000, individually or in the aggregate). All
Permits of Seller are described in Section 2.2(g) and Section 2.3(j) of the
Disclosure Schedule. Seller has furnished, or will furnish prior to Closing, a
true, correct and complete copy of each of the Permits to Buyer. No proceedings
are pending or, to the Best Knowledge of Seller, threatened, to revoke or limit
any Permit. To the extent permitted by law, all of the Transferred Permits will
be assigned and transferred to Buyer at the Closing. No rights in the
Nontransferable Permits will be assigned or transferred to Buyer at the Closing.
4.15 Taxes. Seller has completed and duly and timely filed in
-----
correct form with the appropriate Governmental Body, all returns, reports and
declarations of estimated tax related to Taxes (the "Tax Returns") required to
be filed by it. Seller has paid in full or made adequate provision in its
financial statements for all amounts shown to be due on the Tax Returns. There
are no tax liens (other than Liens for Taxes for current and subsequent years
which are not yet due and payable) upon any of the Purchased Assets.
4.16 Insurance. Section 4.16 of the Disclosure Schedule
---------
describes all insurance
policies maintained by Seller with respect to the Operation of the Facility and
the Purchased Assets. Except as described in Section 4.16 of the Disclosure
Schedule, no claims have been filed since January 1, 1995, or, to the Best
Knowledge of Seller, are anticipated to be filed with respect to the Operation
of the Facility or the Purchased Assets under any of said policies. All premiums
due on said policies have been paid and will be paid through the Effective Time.
4.17 Labor and Employment Matters. With respect to employment
----------------------------
matters:
(a) No employees of Seller who work at the Facility are currently
represented by a union or other labor organization or covered by any
collective bargaining agreement, and to the Best Knowledge of Seller, no
union is attempting to organize any such employees.
(b) There is no labor strike, work slowdown, work stoppage or similar
interruption of work pending or, to the Best Knowledge of Seller,
threatened, against Seller and affecting the Facility.
(c) To the Best Knowledge of Seller, Seller has not used, in any
capacity associated with or related to the manufacture of the Products, the
services of any person who has been, or is in the process of being,
debarred under 21 U.S.C. (S) 335a(a) or (b), nor, to the Best Knowledge of
Seller, has Seller or any of its officers, consultants or any current
Greenville Employee been convicted of an offense under either federal or
state law that is cited in 21 U.S.C. (S) 335a as a ground for debarment,
denial of approval or suspension.
4.18 Employees; Compensation; Benefit Plans.
--------------------------------------
(a) Compensation, Agreements. Seller has previously delivered to
------------------------
Buyer a
complete and correct list of the name, position, date of hire, rate
of compensation, and any incentive compensation arrangements, bonuses or
commissions of each current Greenville Employee as of February 24, 1997.
(b) Employee Benefit Plans. Section 4.18 of the Disclosure Schedule
----------------------
contains an accurate and complete list of Seller's health and welfare
benefit plans, pension benefit plans and other qualified benefit plans in
which Greenville Employees currently participate ("Plan" or "Plans").
Buyer will not have, as a consequence of the transactions contemplated
hereby, any liability or obligation with respect to or under any Plan or
other benefit arrangements or practices of Seller with respect to
Greenville Employees or any other employees of Seller or any affiliate
thereof. Seller has complied and will comply with the health care
continuation requirements of COBRA with respect to Greenville Employees and
their spouses, former spouses and dependents. Each Plan has been
maintained and administered by Seller at all times substantially in
compliance with its terms and all applicable laws, rules and regulations,
including but not limited to ERISA and the Code, applicable to such Plan.
None of the Plans or any of the employee benefit plans maintained by the
Seller or any entity which, in the last five years, has been in common
control of or affiliated with the Seller, in which any Greenville Employee
is or was eligible to participate within the last five years are subject to
Title IV of ERISA or are "multi-employer plans" as such term is defined in
ERISA Section 3(37).
4.19 Absence of Certain Changes. Except as described in
--------------------------
subsections of Section 4.19 of the Disclosure Schedule, since December 31, 1996,
Seller has not:
(a) Suffered any damage, destruction or loss to any of the Purchased
Assets, or any state of circumstances or facts that would have or
reasonably would be expected to have a Material Adverse Effect or result in
an expenditure of more than $50,000 individually or in the aggregate to
remedy or repair;
(b) Sold, transferred, distributed or otherwise disposed of any assets
used in the Operation of the Facility except for (i) assets consumed or
disposed of in the ordinary course of business; or (ii) assets disposed of
in connection with the acquisition of replacement property of equivalent
kind and value;
(c) Amended or terminated any Material Contract;
(d) Introduced any new method of management or accounting; or
(e) incurred, assumed or guaranteed any indebtedness for borrowed
money with respect to the Facility, other than in the ordinary course of
business and in amounts and on terms consistent with past practices, but in
any event not exceeding $50,000 in the aggregate;
(f) created or otherwise incurred any Lien on any Purchased Asset,
other than Permitted Liens in the ordinary course of business consistent
with past practices;
(g) made any change in compensation payable to any Greenville Employee
except changes made prior to February 24, 1997;
(h) experienced any labor dispute, other than routine individual
grievances, or any activity or proceeding by a labor union or
representative thereof to organize any Greenville Employees or any
lockouts, strikes, slowdowns, work stoppages or threats thereof by or with
respect to such employees;
(i) made any capital expenditure, or commitment for a capital
expenditure, for additions or improvements to property, plant and equipment
for which total project costs exceed $10,000;
(j) entered into any license or assignment with respect to any of the
Transferred Intellectual Property (except as contemplated pursuant to this
Agreement); or
(k) Agreed to do any of the foregoing.
4.20 Names. During the past five years, the Facility has not
-----
been operated under any name other than Glaxo Wellcome Inc., Glaxo Wellcome USA
Inc. or Burroughs Wellcome Co.
4.21 Brokers. Seller has retained no finder, broker, agent or
-------
other intermediary to act for or on behalf of Seller in connection with the
negotiation or consummation of this Agreement, and no party has made any claims
for any brokerage commission, finder's fee or similar payment due from Seller.
4.22 Environmental Matters.
---------------------
(a) Condition of the Purchased Assets. Except as provided in Section
---------------------------------
4.22 of the Disclosure Schedule, to the Best Knowledge of Seller, no
Environmental Condition is present in or about the Purchased Assets or at
any other real property to which Hazardous Material generated with respect
to the Operation of the Facility has been delivered. To the Best Knowledge
of Seller, there is no Continuing Release present on the Purchased Assets.
(b) Compliance With Environmental Laws. Except as provided in
----------------------------------
Section 4.22 of the Disclosure Schedule, to the Best Knowledge of Seller,
the Purchased Assets
and the Operation of the Facility (including without limitation any
Remedial Activity conducted in connection therewith) have complied and
currently comply, in all material respects, with all applicable
Environmental Laws (provided that no representation is made in this
sentence with respect to laws concerning asbestos or asbestos-containing
materials). All storage tanks containing Hazardous Materials present on the
Owned Real Property at the Effective Time comply and are being used in
compliance with applicable Environmental Laws in all material respects.
(c) Environmental Permits. All of the permits, authorizations,
---------------------
certificates, approvals, licenses, exemptions, or classifications required
(i) under any Environmental Law applicable to the Purchased Assets or the
Operation of the Facility (including any Remedial Activity conducted on the
Purchased Assets), or (ii) with respect to any Pre-Existing Environmental
Condition or Remedial Activity conducted with respect thereto, are
described in Section 4.22 of the Disclosure Schedule ("Existing
Environmental Permits"). All of said Existing Environmental Permits are in
full force and effect, and the Purchased Assets, the current Operation of
the Facility and the Remedial Activities being conducted in connection
therewith, comply with them in all material respects. To the Best
Knowledge of the Seller, no fact or circumstance peculiar to the Seller, or
applicable as of the Effective Time to the Purchased Assets or the
Operation of the Facility, exists which could cause any Existing
Environmental Permit to be revoked or not to be reissued to Buyer as of the
Effective Time on the same terms and conditions in all material respects
that are currently set forth in said permits. Any Remedial Activity
conducted under an Existing Environmental Permit complies with any consent
decrees,
settlement agreements, approvals, plans, agreements and memoranda of
understanding issued by or entered into with any Governmental Authority
concerning such Remedial Activity.
(d) CERCLA Liabilities. Except as provided in Section 4.22 of the
------------------
Disclosure Schedule, to the Best Knowledge of Seller, no Hazardous Material
generated during the Operation of the Facility, or otherwise attributable
to the Operation of the Facility or in the course of any Remedial Activity
conducted by Seller, Seller's agents, employees, consultants, contractors,
or hazardous waste hauler or handlers prior to the Effective Time, has been
delivered (i) to any real property that is listed on the National
Priorities List pursuant to CERCLA, or (ii) to any other location with
respect to which Seller has received notice from the owner or from any
Governmental Body that the location is contaminated or is not otherwise
operating in compliance with applicable Environmental Laws in any material
respect.
(e) Environmental Liabilities. Except as provided in Section 4.22
-------------------------
of the Disclosure Schedule, no suit, proceeding, administrative action,
writ, injunction, or claim by a Governmental Body or third party under any
Environmental Law (i) is pending or, to the Best Knowledge of Seller,
threatened against Seller, or (ii) to the Best Knowledge of Seller, is
pending or threatened against Seller's agents, employees, consultants,
contractors or hazardous waste haulers or handlers, in either case with
respect to the Purchased Assets, the Operation of the Facility, the Pre-
Existing Environmental Conditions, and/or the Existing Environmental
Permits (including without limitation any Remedial Activity conducted in
connection with any of the foregoing). Further, to the
Best Knowledge of Seller, no Purchased Asset is subject to any Lien under
any Environmental Law, and no action or investigation by a Governmental
Body or third party action has been taken or is in the process of being
taken.
(f) Environmental Reports. To the Best Knowledge of Seller, the
---------------------
reports, audits, tests, assessments, reviews, sampling analysis, and
studies described in Section 4.22 of the Disclosure Schedule are in all
material respects all of the reports, audits, tests, assessments, reviews,
sampling analysis, and studies prepared by third parties or Seller, which
(i) are in the possession or control of Seller, or (ii) were prepared at
the request of Seller, and which, in either case, meet one of the following
criteria: (A) were prepared in the last three years concerning a Pre-
Existing Environmental Condition or other Environmental Condition existing
prior to the Effective Time on or about the Facility or (B) were prepared
in the last three years with respect to any Remedial Activity conducted on
or about the Purchased Assets by or for the benefit of Seller, its agents,
employees, consultants, or contractors (herein collectively "Environmental
Reports"). True, complete and correct copies of all of the foregoing have
been made available for copying by Buyer. For the purpose of the foregoing,
Seller shall be required to only identify, provide or deliver the final
documents of the Environmental Reports and not any prior drafts of such
reports.
4.23 Employee Health and Safety Matters. Except as described in
----------------------------------
Section 4.23 of the Disclosure Schedule, the Operation of the Facility is in
compliance with applicable laws, regulations, rules, ordinances, codes or
requirements of any Governmental Body relating to health, sanitation, fire,
building and occupational safety and health, including, but not limited to,
requirements under the state and federal Occupational Safety and Health Acts,
except where the failure to be in compliance would not have a Material Adverse
Effect or require expenditure of more than $50,000, individually or in the
aggregate.
4.24 Seller Financial Condition. Seller had free cash flow
--------------------------
(within the meaning of US GAAP) [*].
4.25 Multisite Contracts. To the Best Knowledge of Seller,
-------------------
Section 2.3(l) of the Disclosure Schedule lists all contracts of Seller for the
provision of goods or services which apply to other facilities or sites of
Seller in addition to the Facility (the "Multisite Contracts") as of the date of
this Agreement, except for those Multisite Contracts that pertain to
Intellectual Property or to the leasing of tangible personal property, and
except for Multisite Contracts the lack of which would not have a Material
Adverse Effect.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER AND PARENT
Buyer and Parent jointly and severally represent and warrant to Seller as
follows:
5.1 Organization and Good Standing. Each of Buyer and Parent is a
------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. Buyer is, or will be at the Closing, duly qualified
to do business as a foreign corporation and in good standing in North Carolina
and in all other jurisdictions in which the ownership of the Purchased Assets or
the operation of the Facility by it make such qualification necessary. True,
correct and complete copies of the Certificate of Incorporation and Bylaws of
Buyer and Parent have previously been delivered to Seller; however, Buyer and
Parent are
[*] = Certain information on this page has been omitted and filed separately
with the Commission. Confidential treatment has been requested with
respect to the omitted portions.
amending their respective Certificates of Incorporation to increase the
authorized number of shares of capital stock and create new series of capital
stock as necessary to complete the transactions contemplated by this Agreement
(the "Amendments").
5.2 Authority. Each of Buyer and Parent has all requisite power and
---------
authority to execute and deliver this Agreement and the Transaction Agreements
and to perform the transactions contemplated hereby and thereby. The execution,
delivery and performance of this Agreement and the Transaction Agreements
(including, without limitation, the issuance of the Buyer Preferred Stock and
the Warrants to Seller) have been duly and validly authorized by all necessary
corporate action, and as of the Effective Time all necessary stockholder action,
on the part of Buyer and Parent. This Agreement and the Transaction Agreements
have been, or at Closing will be, duly executed and delivered by Buyer and/or
Parent, as the case may be, and each constitutes, or when executed and delivered
will constitute, a valid and binding obligation of Buyer and/or Parent, as the
case may be, enforceable against Buyer or Parent in accordance with its terms,
except that enforceability thereof may be limited by bankruptcy, insolvency,
reorganization or other similar laws affecting creditors' rights generally and
by principles of equity regarding the availability of remedies.
5.3 No Conflict or Breach. The execution, delivery and performance
---------------------
of this Agreement and the Transaction Agreements by Buyer and/or Parent, as the
case may be, do not and will not (a) conflict with or constitute a violation of
the Certificate of Incorporation or Bylaws of Buyer or Parent; (b) assuming
compliance with the requirements of the HSR Act and the FD&C Act, conflict with
or constitute a violation of any law, statute, judgment, order, decree or
regulation of any Governmental Body applicable to or relating to Buyer or
Parent; or (c)
conflict with, constitute a default under, result in a breach or acceleration of
or require notice to or the consent of any third party under any contract,
agreement, commitment, mortgage, note, license or other instrument or obligation
to which Buyer or Parent is party or by which it is affected which would have a
Material Adverse Effect on Buyer or Parent.
5.4 Consents and Approvals. No (a) consent, approval, authorization,
----------------------
registration or filing with any Governmental Body other than as required under
the HSR Act and the FD&C Act or (b) consent, approval, authorization of or
notice to any other third party (other than the Required Consents), is required
in connection with the valid execution and delivery by Buyer or Parent, as the
case may be, of this Agreement and the Transaction Agreements or in connection
with the consummation by Buyer or Parent of the transactions contemplated herein
or therein, except such consents and approvals as are required under the
Securities Laws in connection with the issuance of equity securities by Parent
to Morgan Stanley Capital Partners III, L.P. and affiliated funds and the
issuance of the Warrants to be delivered to Seller, or by the stockholders of
Parent and Buyer under Delaware law, and except that Buyer will be required to
obtain its own permits in place of the Nontransferable Permits and the Existing
Environmental Permits.
5.5 Capital Structure of Parent and Buyer.
-------------------------------------
(a) Parent. After the Amendments, the authorized capital stock of
------
Parent will consist of (i) 120,000,000 shares of Parent Common Stock, of
which 19,397,074 shares were issued and outstanding on December 31, 1996;
(ii) 30,000,000 shares of Parent Class A Common Stock, none of which were
issued and outstanding on December 31, 1996; (iii) 17,000,000 shares of
Parent Class B Common Stock, none of which were
issued or outstanding on December 31, 1996; and (iv) 5,000,000 shares of
Parent Undesignated Preferred Stock, none of which were issued or
outstanding on December 31, 1996. All outstanding shares of Parent Common
Stock have been duly authorized and are validly issued, fully paid and
nonassessable. A sufficient number of shares of Parent Common Stock have
been reserved for the conversion of the Buyer Preferred Stock to be issued
as provided in Section 3.3 of this Agreement and for the Warrants to be
issued as provided in Section 3.4 of this Agreement, and such shares are
free of any Rights and have not been reserved for any other purpose. Such
shares of Parent Common Stock are available for issuance as provided
pursuant to the terms of the Stock Purchase Agreement and Warrant Purchase
Agreement and, when issued, will be duly authorized, validly issued, fully
paid and nonassessable. No holders of the capital stock of Parent have any
preemptive rights, or rights of first refusal which have not been or will
not have been exercised or waived as of the Closing Date.
(b) Buyer. After the Amendments, the authorized capital stock of
-----
Buyer will consist of (i) 25,000,000 shares of Buyer Common Stock, of which
800,000 shares were issued and outstanding on December 31, 1996, and (ii)
20,000,000 shares of Buyer Preferred Stock, $.001 par value, 3,400,000 of
which are designated as Series A Preferred Stock, and were issued and
outstanding on December 31, 1996; 150,000 of which are designated as Series
B Preferred Stock, and were issued and outstanding on December 31, 1996;
and 12,000,000 of which are designated as Series C Preferred Stock, none of
which are issued and outstanding and 250,000 of which are designated as
Series I Junior Preferred Stock, none of which are issued and outstanding.
All outstanding shares of
Buyer Common Stock and any other class of capital stock of Buyer have been
duly authorized and are validly issued, fully paid and nonassessable. All
outstanding shares of Buyer Common Stock are owned beneficially and of
record by Parent, and none of such shares are subject to any Liens. The
shares of Buyer Preferred Stock to be issued as provided in Section 3.3 of
this Agreement will be free of any Rights and have not been reserved for
any other purpose. Such shares of Buyer Preferred Stock are available for
issuance as provided pursuant to this Agreement and, when issued, will be
duly authorized, validly issued, fully paid and nonassessable. No holders
of the capital stock of Buyer have any preemptive rights, or rights of
first refusal which have not been or will not have been exercised or waived
as of the Closing Date.
(c) Stock Options. Following the Amendments, the authorized capital
-------------
stock of each of Parent and Buyer will include a number of shares
sufficient to cover (i) all stock options to be issued by Buyer to the New
Employees within six months after the Effective Time and all other
obligations to issue capital stock pursuant to this Agreement or the
Transaction Agreements or the transactions contemplated hereby or thereby,
and (ii) all other options, warrants and Rights to purchase capital stock
within six months after the Effective Time.
5.6 Financial Statements. Buyer has previously delivered to Seller
--------------------
true and complete copies of (a) the audited balance sheets of Parent as of
December 31, 1994, December 31, 1995, and December 31, 1996, and the related
statements of operations, stockholders' equity and cash flows for the fiscal
years then ended, including the footnotes thereto, additional or supplemental
information supplied therewith and the report prepared in
connection therewith by the independent certified public accountants reviewing
such financial statements; (b) interim unaudited financial statements of Parent
prepared for the quarter ended March 31, 1997; (c) the audited financial
statements of Buyer as of December 31, 1995 and 1996; and (d) interim unaudited
financial statements of Buyer prepared for the quarter ended March 31, 1997. All
of the documents described in clauses (a) through (d):
(a) have been prepared in accordance with the books and records of
Parent or Buyer, as the case may be;
(b) present fairly the assets, liabilities and financial condition of
Parent or Buyer, as the case may be, as of the respective dates thereof,
and the results of operations for the periods then ending; and
(c) have been prepared in accordance with US GAAP applied on a
consistent basis throughout the periods involved; provided that the
quarterly statements, as interim financial statements, do not reflect year-
end closing adjustments and procedures, and the unaudited statements do not
contain explanatory notes.
Parent had no material liability or obligation as of December 31, 1996 that is
not reflected or reserved against in its December 31, 1996 balance sheet, except
for those that are not required by US GAAP to be included therein.
5.7 Material Adverse Change. Since December 31, 1996, except
-----------------------
for this Agreement and the Transaction Agreements, neither Buyer, Parent, nor
any of the Parent Subsidiaries has incurred any material liability except for
and as described in this Agreement or as disclosed on Parent's most recent
financial statements delivered to Seller, or entered into any transactions with
Buyer's Affiliates or Parent's Affiliates, other than in the ordinary course of
business consistent with past practices, nor has there been any material adverse
change, or any event involving a prospective material adverse change, in the
business, financial condition or results of operations of Buyer, Parent or the
Parent Subsidiaries which has had, or is reasonably likely to have, a material
adverse effect on Buyer or Parent, except that Parent and Buyer have continued
to incur, and expect to incur for at least the next two fiscal quarters,
operating losses, and Buyer and Seller have incurred obligations for significant
expenses associated with this Agreement.
5.8 Financial Plans. Parent has previously delivered to Seller true,
---------------
correct and complete copies of (a) the Parent's pro forma balance sheets
(including statements of stockholders' equity) and statements of operations and
(b) pro forma statements of operations and cash flows for the Facility, in each
case on a fiscal year basis for the period from June 30, 1997 through December
31, 2007. Such items so delivered to Seller are representative of and prepared
on a consistent basis with those delivered to Buyer's and Parent's investors and
lenders. The business plans have been prepared based on information provided in
good faith by Parent and Buyer. With respect to projections and forecasts
contained in the business plans (the "Projections"), Buyer and Parent represent
only that the Projections were prepared in good faith and on what Buyer and
Parent believe is a reasonable basis. The Projections are based upon a number of
assumptions and estimates that, while presented with numerical specificity and
considered reasonable by Buyer and Parent when taken as a whole, are inherently
subject to significant business, economic and competitive uncertainties and
contingencies, many of which are beyond the control of Buyer and Parent, and are
based upon specific assumptions with respect to future business decisions, some
of which will change. Projections are necessarily
speculative in nature, and it can be expected that some or all of the
assumptions underlying the Projections will not materialize or will vary
significantly from actual results. Accordingly, the Projections are only
estimates. Actual results will vary from the Projections and the variations
will be material and will increase over time. Consequently, the inclusion of
the Projections is not a representation by Buyer or Parent or any other person
of results that will actually be achieved.
5.9 Securities Documents. Parent has timely filed, and heretofore
--------------------
delivered to Seller, all Securities Documents required by the Securities Laws
since December 31, 1993. As of their respective dates of filing, such
Securities Documents were prepared in accordance with the Securities Laws as
then in effect, and did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading.
5.10 Legal Proceedings. There are no actions, suits, claims,
-----------------
governmental investigations or proceedings instituted, pending or, to the Best
Knowledge of Buyer or Parent, threatened against Buyer, Parent or any of the
Parent Subsidiaries or against any asset, interest or right of any of them, or
against any officer, director or employee of any of them that in any such case,
if decided adversely, would have a material adverse effect on Buyer's, Parent's,
or the Parent Subsidiaries' business, financial condition or results of
operations. There are no actions, suits or proceedings instituted, pending or,
to the Best Knowledge of Buyer or Parent, threatened against any present or
former director or officer of Buyer, Parent, or any of the Parent Subsidiaries
that would reasonably be expected to give rise to a claim against Buyer, Parent
or any of the Parent Subsidiaries for indemnification. There are no actual or to
the Best Knowledge of Buyer or Parent threatened actions, suits or proceedings
against Buyer or Parent which present
a claim to restrain or prohibit the transactions contemplated herein, or in the
Escrow Agreement.
5.11 No Other Representations. Each of Buyer and Parent
------------------------
acknowledges that neither it nor any of its representatives may rely on any
representation or warranty, express or implied, regarding the Facility or the
Purchased Assets which is not included in this Agreement or the Transaction
Agreements.
5.12 FDA. Neither Buyer, Parent or, to the Best Knowledge of
---
Buyer or Parent, any of their affiliates, has been or is in the process of being
debarred under 21 U.S.C. (S) 335a(a) or (b), nor does any one of them use, in
any capacity, the services of any person who (a) has been, or is in the process
of being, so debarred, or (b) has been convicted of an offense under either
federal or state law that is cited in 21 U.S.C. (S) 335a as a ground for
debarment, denial of approval or suspension.
5.13 Financing. Parent has entered into a definitive Investment
---------
Agreement with Morgan Stanley Capital Partners III, L.P. and affiliated funds
and a binding commitment letter with The Chase Manhattan Bank, which are subject
to certain conditions set forth or referred to therein, copies of which are
attached hereto as Exhibits H and I, setting forth their commitments to provide
to Parent and Buyer equity and debt financing, respectively, to enable Buyer to
acquire the Purchased Assets and to provide working capital to Buyer.
5.14 Brokers. No finder, broker, agent or other intermediary has
-------
acted for or on behalf of Buyer or Parent in connection with the negotiation or
consummation of this Agreement, and there are no claims for any brokerage
commission, finder's fee or similar payment due from Buyer or Parent, except
that Parent will issue 150,000 shares of Common Stock to Lehman Brothers, Inc.
for financial advisory services and Buyer will incur fees payable in connection
with the debt financing incurred in connection with the consummation of this
Agreement.
ARTICLE VI
COVENANTS OF SELLER
Seller covenants and agrees with Buyer as follows:
6.1 Conduct of Business. Between the date of this Agreement and the
-------------------
Closing Date, Seller shall, except as described in Section 6.1 of the Disclosure
Schedule or otherwise specifically consented to in writing by Buyer:
(a) Conduct the Operation of the Facility in all material respects in
the same manner as it has been conducted during the past twelve months;
provided, however, that inventory levels will reflect stocking levels
consistent with expected market demands, Seller's product transfer
activities and preparation for an orderly transfer of the Purchased
Inventories to Buyer, and provided that Seller shall provide written notice
to Buyer describing any reduction in inventory levels outside of the
ordinary course of business which Seller makes under the foregoing proviso.
(b) Maintain and keep the tangible Purchased Assets in the same
condition as on the date of this Agreement, ordinary wear and tear
excepted;
(c) Keep in full force and effect the insurance coverages described in
Section 4.16 of the Disclosure Schedule;
(d) Perform all of its obligations under all Contracts and not amend,
alter or modify any provision except in the ordinary course of business;
(e) Not create or permit to exist any Lien with respect to any of the
Purchased Assets, except for the Liens described in Section 4.6 of the
Disclosure Schedule, all of which will be removed at or prior to the
Closing, and except for the Permitted Liens;
(f) Not sell, transfer or dispose of any Purchased Assets, except in
the ordinary course of business of the Facility; and
(g) Promptly advise Buyer of any change in the list of employees
referred to in Section 4.18(a) and not make any material change in the base
salary or base hourly wage payable to any such employee (except for any
compensation adjustments made in connection with job promotions or similar
changes as to which Buyer shall promptly be notified.)
6.2 Access and Information. Following execution of this Agreement,
----------------------
Seller shall permit Buyer and its counsel, accountants, environmental
consultants, building inspectors, representatives of Morgan Stanley Capital
Partners III, L.P., representatives of The Chase Manhattan Bank and other
Buyer's representatives and counsel to the foregoing (the "Representatives")
full access during normal business hours to all the properties, assets, books,
records, agreements and other documents of Seller reasonably necessary to Buyer
or the Representatives relating to the Operation of Facility or the Purchased
Assets (including access sufficient to permit Buyer and the Representatives to
perform an environmental assessment or to comply with requests from any
regulatory body), and Seller shall furnish to Buyer and its Representatives all
information concerning the Purchased Assets or the Operation of the Facility as
Buyer or its representatives may reasonably request; provided that no medical
records or personnel files for Greenville Employees and no information or
documents included in the New
Drug Applications relating to products manufactured at the Facility shall be
disclosed to Buyer or the Representatives, and provided further that only such
information as is prepared by the management and employees of Seller in the
ordinary course of business will be provided to Buyer or the Representatives.
Any investigation by Buyer or the Representatives pursuant to this Section shall
be conducted in such manner as not to interfere unreasonably with the normal
Operation of the Facility. Buyer and the Representatives shall be accompanied on
any visits to the premises of Seller by representatives of Seller. Buyer and the
Representatives shall not conduct interviews with any employees of Seller
without the prior written consent of Seller, which shall not be unreasonably
withheld or delayed.
6.3 No Other Solicitations. Seller agrees that it will not, until
----------------------
the occurrence of the Closing or July 31, 1997, whichever occurs first, directly
or indirectly solicit or entertain offers from, provide information to,
negotiate with or in any manner encourage, accept or consider any proposal from
any person other than Buyer or persons designated by Buyer relating to the
acquisition of the Purchased Assets or the manufacture of Products in lieu of
the arrangements described in the Supply Agreement.
6.4 Future Cash Flows. Seller agrees that in the event of any
-----------------
corporate reorganization, recapitalization, restructuring or transfer or sale of
assets involving Seller, it will retain sufficient assets and operations to
generate free cash flows (within the meaning of US GAAP) in excess of
[*] for ten years following the Closing Date.
6.5 Environmental Reports. Seller shall furnish to Buyer, as
---------------------
promptly as practicable following execution of this Agreement, copies of all
environmental reports which would have been required to be described in Section
4.22 of the Disclosure Schedule if the
[*] = Certain information on this page has been omitted and filed separately
with the Commission. Confidential treatment has been requested with
respect to the omitted portions.
representations in Section 4.22(f) were not limited to matters prepared in the
last three years.
6.6 Financial Statements. As soon as practicable following June 30,
--------------------
1997, Seller shall deliver to Buyer year-to-date actual historical financial
information as of and for the six months ended June 30. When delivered, such
financial information will be subject to the same representations and warranties
of Seller as are set forth in the second paragraph of Section 4.5(a) of this
Agreement, as if the references to the five months ended May 31, 1997 were
references to the six months ended June 30, 1997.
6.7 Multisite Contracts. Between the date of this Agreement and the
-------------------
Closing Date, Seller will (a) notify Buyer of any additional Multisite Contracts
of which it becomes aware which would have been required to be listed in Section
2.3(l) of the Disclosure Schedule if known to Seller on the date of this
Agreement, and (b) use commercially reasonable efforts to contact the providers
of goods and services, including Materials (as defined in the Supply Agreement)
under such Multisite Contracts on behalf of Buyer to facilitate Buyer's
procurement of goods or services or other benefits comparable to those that are
the subject of the Multisite Contracts. If any Multisite Contract provides for
the purchase of Materials that are essential to the manufacture of the Products,
Buyer will use its best efforts to procure the same or comparable Materials for
its own account. If Buyer cannot procure the same or comparable Materials under
any circumstance, and such condition would place Buyer in "Supplier Breach" as
defined in the Supply Agreement, then Seller will intervene with the supplier of
Material on behalf of Buyer and assign to Buyer Seller's rights to its Multisite
Contracts where legally possible.
ARTICLE VII
COVENANTS OF BUYER AND SELLER
Buyer and Seller covenant and agree as follows:
7.1 Access. Following the Closing, Buyer shall grant to Seller and
------
its representatives full access during normal business hours to all records,
documents and information (whether in hard copy form or accessible by software
or other technology applications) transferred to it by Seller relating to the
ownership of the Purchased Assets and the Operation of the Facility prior to the
Closing Date, and shall permit Seller, at Seller's expense, to make copies of
the same. Any investigation by Seller pursuant to this Section shall be
conducted in such manner as not to interfere unreasonably with Buyer's normal
operation of the Facility. Seller and its representatives shall be accompanied
on any visits to the premises of Buyer by representatives of Buyer. Buyer will
not destroy any records, documents or other media related to the ownership of
the Purchased Assets and the Operation of the Facility by Seller prior to the
Effective Time, even if such destruction would otherwise be in accordance with
Buyer's record retention schedules unless Buyer gives Seller not less than
twenty days advance notice and an opportunity to reclaim any materials prior to
destruction. Buyer further agrees not to alter any of the records, documents or
information that is transferred to it by Seller, except for records, documents
or information altered in the ordinary course of business and consistent with
applicable law.
7.2 Employee Terminations. In the event that, following the
---------------------
Effective Time, Buyer shall cease to employ any one or more of the Greenville
Employees who become "New
Employees" as described in Section 8.1 below, Buyer shall be solely responsible
for all obligations owed to such New Employees as a result of the termination of
employment of such New Employees, including but not limited to compensation
earned following the Effective Time, any severance pay entitlements, and all
liabilities and costs under COBRA (including liabilities for violations thereof)
for all "qualifying events" (as defined in COBRA) occurring with respect to New
Employees and their dependents after the Effective Time. Seller shall be
responsible after the Closing Date for the COBRA continuation coverage of all
Greenville Employees, dependents and former spouses of Greenville Employees who
elect or become entitled (because of the occurrence of a qualified event on or
before the Effective Time) to elect such coverage at or before the Effective
Time or who do not become New Employees.
7.3 Establishment Registration and AFT Permit. Buyer shall file a
-----------------------------------------
permit application with the U.S. Department of Treasury, Bureau of Alcohol,
Tobacco and Firearms, within ten days after the Closing Date, and Seller will
file its related letter. Buyer shall file an establishment registration with
the FDA immediately following the Closing under this Agreement, and in no event
later than the fifth day following the Closing Date. Buyer shall deliver a copy
of its establishment registration materials to Seller for Seller's approval
prior to delivery of the same to the FDA.
7.4 Covenant Not to Compete.
-----------------------
(a) General. Each of Buyer and Parent acknowledge that an important
-------
part of the benefits that Seller will recognize in connection with the
transactions contemplated by this Agreement is the Buyer's commitment of a
substantial part of its resources at the Facility to the production of
Seller's Products under the Supply Agreement and not to the
development or production of competing products in the Facility. As a
result, as a separate and independent covenant, each of Buyer and Parent
agree that for the period described below, at the Facility, it will not
develop or manufacture for any party other than Seller or Seller's
Affiliates, and it will not, directly or indirectly, as an owner, member,
affiliate, operator, agent, consultant, lender or independent contractor of
or to any entity, develop any prescription or over the counter formulation
of, any Product of Seller or Seller's Affiliates that is produced at the
Facility during the term of the Supply Agreement, or formula, component,
agent, reagent or other ingredient used therein, or marketable byproduct
thereof, to which Seller has legally protectable proprietary rights,
excluding from the noncompetition provisions any Products manufactured
under the Supply Agreement pursuant to third party manufacturing
agreements.
(b) Time Period. Buyer's and Parent's obligations under this Section
-----------
7.4 shall remain in effect until the end of the calendar month in which
Buyer's aggregate "Conversion Charges" under the Supply Agreement during
the immediately preceding eleven calendar months are less than $18,000,000.
Notwithstanding the foregoing, the period of time during which this
covenant shall be in effect shall be extended by any length of time during
which Buyer or Parent is in breach of the terms of this Section 7.4; and in
no event shall this covenant be in effect in excess of ten years following
the Closing Date.
(c) Remedies. Each of Buyer and Parent acknowledges that its failure
--------
to comply with the provisions of this Section 7.4 will result in
irrevocable and continuing damage to the Seller for which there will be no
adequate remedy at law and that, in the
event of a failure by Buyer or Parent to comply with this Section 7.4,
Seller and Seller's Affiliates and their successors, legal representatives
and assigns shall be entitled to injunctive relief and to such other and
further relief as may be proper and necessary to ensure compliance with the
provisions of this Section 7.4.
7.5 Retained Product Inventories. Following the Closing Date, Buyer
----------------------------
shall maintain custody of the Retained Product Inventories as Seller's bailee,
and shall store, ship or destroy the Retained Product Inventories at the
direction of and at the expense of Seller. Buyer agrees to execute such
documents as are necessary to evidence Seller's ownership of the Retained
Product Inventories and to prevent the Retained Product Inventories from
becoming subject to Liens of Buyer's lenders.
ARTICLE VIII
MUTUAL COVENANTS
8.1 Employment Matters.
------------------
(a) Employment. Buyer agrees to make offers of employment as of the
----------
Effective Time to the vast majority of the Greenville Employees. Buyer
expects to hire approximately the number of persons described and
identified by job category in Section 8.1(a)(1) of the Disclosure Schedule.
Such offers of employment shall be made in each case for a position that
bears a base salary or hourly wage rate that is no less than that paid by
Seller immediately prior to the Closing. At least twenty days prior to
Closing, Buyer shall notify Seller of the names of each Greenville Employee
to whom it intends to offer employment (the "Prospective Employees").
Seller will not take any action to
impede, hinder or interfere with Buyer's efforts to hire the Prospective
Employees. Prospective Employees who accept Buyer's offer of employment and
become employees of Buyer on or after the Effective Time are referred to as
"New Employees." At least ten days prior to the Closing, Buyer shall notify
Seller of the name of each Prospective Employee who has accepted the offer
of employment made by Buyer. In addition, Buyer shall notify Seller within
fifteen days following the Closing Date of the names of all persons who
have then become New Employees. Seller shall not submit, disclose or
transfer to Buyer any personnel files or medical records about any
Greenville Employee prior to the Closing Date. Upon receipt of notice from
Buyer listing those individuals who have become New Employees of Buyer and
requesting that the records of such individuals be transferred to Buyer,
Seller shall transfer the personnel files of such New Employees to Buyer in
accordance with the Personnel Files Transfer Agreement and any and all
applicable laws, and Seller shall transfer certain agreed portions of
medical records related to such New Employees to Buyer in accordance with
the Medical Records Transfer Agreement and any and all applicable OSHA
regulations and other applicable laws. Nothing contained in this Agreement
is intended or shall be deemed to (a) require Buyer to employ New Employees
for any fixed or predetermined time, or (b) confer upon any New Employee
any rights of employment of any nature, it being understood and agreed that
the provisions of this Agreement are intended to set forth an agreement
among Buyer, Seller and Parent, and are not intended to benefit any persons
not party to this Agreement, including such employees. Seller shall be
responsible for any Plan obligations or employment contracts (including
responsibility for any bonuses and
commissions accrued or payable with respect to any period ending on or
before the Closing Date) that arise from the acts of Seller relating to
Greenville Employees and that accrue or become payable on or before the
Closing Date. Seller shall be liable with respect to any discrimination or
other employment-based claims that arise from the acts of Seller brought at
any time by a Greenville Employee to the extent that such claims accrue or
arise before the Closing Date, and Buyer shall be liable with respect to
any discrimination or other employment-based claims that arise from acts of
Buyer brought at any time by a New Employee to the extent that such claims
accrue or arise after the Closing Date. Seller shall pay to all Greenville
Employees, in accordance with its ordinary practice, any liability arising
under Seller's policies or practices for accrued vacation, flexible time
off or similar benefits that accrue on or before the Closing Date.
(b) Retirement and Benefit Plans; Incentives. Prior to Closing,
----------------------------------------
Buyer shall establish for New Employees those retirement, benefit and
incentive compensation plans described in Section 8.1(b) of the Disclosure
Schedule.
(c) Service Credit for New Employees. Buyer shall recognize all
--------------------------------
prior service of New Employees with the Seller and any affiliate that is
aggregated with the Seller under Section 414(b), 414(c) or 414(m) of the
Code (including Burroughs Wellcome Co.) for vacation pay purposes only,
under Buyer's corresponding vacation plans, policies or practices listed in
Section 8.1(b) of the Disclosure Schedule as in effect on the Closing Date.
(d) General. Seller and Buyer shall give any notices required by law
-------
and take whatever other actions with respect to the plans described in this
Section as may be
necessary to carry out the arrangements described in this Section 8.1.
Seller and Buyer shall provide each other with such plan documents and
descriptions, employee data and other information as may reasonably be
required to carry out the arrangements described in this Section. If any
arrangement in this Section is determined by the Internal Revenue Service
or other Governmental Body to be prohibited by law, Seller and Buyer shall
modify such arrangement to as closely as possible retain the intent of the
parties, as reflected herein, in a manner that is not so prohibited.
(e) WARN Act. Seller shall be responsible for giving the
--------
notifications, if any, required by the WARN Act with respect to any
Greenville Employees who experience an employment loss within the meaning
of the WARN Act prior to the Effective Time, and Seller shall be
responsible for and assumes any liability arising from any failure to
provide such notifications. Buyer shall be responsible for giving the
notifications, if any, required by the WARN Act with respect to New
Employees who experience an employment loss within the meaning of the WARN
Act following the Effective Time, and Buyer shall be responsible for and
assumes any liability arising from any failure to provide such
notifications.
(f) Tax Reporting. Buyer shall prepare and furnish to all New
-------------
Employees Forms W-2 which shall reflect all wages and compensation paid to
such employees for that portion of the calendar year in which the Closing
Date occurs during which such employees were employed by Seller. Seller
shall furnish to the Buyer the most current on file Forms W-4 and W-5 of
each New Employee as of the Closing Date. Seller shall send to the
appropriate Social Security Administration office a duly completed Form W-3
and
accompanying copies of the duly completed Form W-2. It is the intent of the
parties that the obligations of Buyer and Seller under this Section 8.1(f)
shall be carried out in accordance with Section 5 of the Internal Revenue
Service's Revenue Procedure 96-60.
(g) No Third Party Beneficiaries. Nothing in this Section 8.1 or
----------------------------
elsewhere in this Agreement shall be deemed to make any employee of Seller
a third party beneficiary of this Agreement.
8.2 Environmental Indemnification.
-----------------------------
(a) Seller's Environmental Indemnity. Seller shall protect,
--------------------------------
indemnify, defend (as provided under Article XII) and hold harmless Parent,
Buyer, Parent's Affiliates and their respective shareholders, directors,
officers, employees, lessees, lenders, successors and assigns, and each of
them (each of the foregoing with Buyer herein referred to as a "Buyer
Indemnitee") from and against any Environmental Claim, whether known or
unknown as of the Effective Time, to the extent arising at any time out of,
in connection with or resulting from (i) a Pre-Existing Environmental
Condition; (ii) any breach in the representations in Section 4.22 or this
Section 8.2, the Environmental Agreement, or the Memorandum of
Understanding; (iii) the active negligence or willful misconduct of Seller
or Seller's agents in the course of any activity conducted with respect to
a Pre-Existing Environmental Condition; (iv) the Exacerbation of a Post-
Closing Environmental Condition, to the extent the Exacerbation is caused
by the negligent activities of Seller or its agents, employees,
consultants, contractors, or hazardous waste haulers or handlers; and/or
(v) Exacerbation of a Pre-Existing Environmental Condition (except for such
Exacerbation as described in Section 8.2(b)(iii) below); excepting, in any
case, to the extent the Environmental Claim is caused by or results from
(A) Exacerbation of an Environmental Condition as a consequence of the
negligent activities of a Buyer Indemnitee or its agents, employees,
consultants, contractors, or hazardous waste haulers or handlers, (B) the
gross negligence or willful misconduct of a Buyer Indemnitee, or (C) a
Buyer Indemnitee's breach of any obligations under Section 8.2 of this
Agreement, the Memorandum of Understanding or the Environmental Agreement.
The foregoing are collectively referred to herein as "Seller's
Environmental Indemnity Obligations."
(b) Buyer's Environmental Indemnity. Buyer shall protect, indemnify,
-------------------------------
defend (as provided under Article XII) and hold harmless Seller, Seller's
Affiliates and their respective shareholders, directors, officers,
employees, agents, lessees, lenders, successors and assigns, and each of
them (each of the foregoing with Seller herein referred to as a "Seller
Indemnitee"), from and against any Environmental Claim, whether known or
unknown as of the Effective Time, to the extent arising at any time out of,
in connection with or resulting from a (i) a Post-Closing Environmental
Condition; (ii) any breach in the representations in this Section 8.2, the
Environmental Agreement, or the Memorandum of Understanding; (iii)
Exacerbation of a Pre-Existing Environmental Condition, to the extent
caused by the operations of the Facility, Repair Activity, activities,
negligence or Construction Activity of Buyer or its agents, employees,
consultants, contractors or hazardous waste haulers or handlers; (iv)
subject to Section 8.2(c)(1) and (6), any disturbance or invasion of
subsurface conditions or soil in connection with a Construction Activity in
a "Prohibited Area" (as defined below); and/or
(v) the Exacerbation of a Post-Closing Environmental Condition; excepting,
in any case, to the extent the Environmental Claim is caused by or results
from (A) Exacerbation of an Environmental Condition as a consequence of the
negligent activities of a Seller Indemnitee or its agents, employees,
consultants, contractors, or hazardous waste haulers or handlers, (B)
Exacerbation caused by performance of Repair Activities conducted with due
care under the circumstances, (C) the gross negligence or willful
misconduct of a Seller Indemnitee, or (D) a Seller Indemnitee's breach of
any obligations under Section 8.2 of this Agreement, the Memorandum of
Understanding and/or the Environmental Agreement. The foregoing are
collectively referred to herein as "Buyer's Environmental Indemnity
Obligations."
Neither the knowledge nor lack of knowledge of Seller or Buyer
shall limit in any manner the inclusion of any matters as a Seller's
Environmental Indemnity Obligations or a Buyer's Environmental Indemnity
Obligations.
(c) Future Construction and Repair and Maintenance Activities.
---------------------------------------------------------
(1) Prohibited Areas. Except with the consent of Seller or as
----------------
is necessary for a Repair Activity, Buyer agrees that it will not
disturb or invade subsurface conditions or the soil when undertaking
Construction Activity in those areas delineated on Section 8.2(c)(1)
of the Disclosure Schedule (the "Prohibited Areas"), and described
with more particularity in the restrictive covenant to be recorded as
set forth below. The parties intend that this provision is a covenant
running with the land and will apply to Buyer's successors and assigns
and subsequent purchasers. The parties agree to execute at the Closing
all appropriate
documents to be filed with the Pitt County Register of Deeds to
reflect this covenant in the public record and to ensure that this
covenant runs with the land. An unintentional or intentional violation
of this Section 8.2(c)(1) constitutes a breach of contract.
Notwithstanding the foregoing, upon commencement of a Construction
Activity in violation of this Section 8.2(c)(1), subject to Section
8.2(c)(6) below, Seller shall be released from conducting Seller's
Obligatory Remediation of the soil and/or subsurface conditions at the
Construction Activity site which were disturbed or invaded, but Seller
shall nevertheless pay to Buyer the amount Buyer proves Seller would
have had to incur to complete Seller's Obligatory Remediation of said
soils and subsurface conditions had the breach not occurred.
If at any time after the Effective Time, Buyer, its
successors and assigns or subsequent purchasers, provides to Seller
evidence that an Environmental Condition no longer exists in a
Prohibited Area, Seller agrees that if (A) the appropriate
Governmental Body is in full agreement that the evidence establishes
that an Environmental Condition no longer exists in the Prohibited
Area, (B) Seller, in its sole and reasonable judgment, believes that
the evidence establishes that an Environmental Condition no longer
exists in the Prohibited Area, and (C) Buyer (or its successor or
assign, as the case may be) delivers to Seller a full and complete
release from any obligations for Seller's Obligatory Remediation,
payment of Incremental Construction Costs and Seller's Environmental
Indemnity Obligations for the soil and subsurface conditions with
respect to the Prohibited Area, as well as an agreement to indemnify
Seller from any Environmental Conditions related to the soil and
subsurface conditions with respect to the Prohibited Area, then Seller
shall execute all necessary documentation, including documents to be
filed with the Pitt County Register of Deeds, to remove the
restrictions imposed on the Prohibited Area under this Agreement or
any recorded restriction.
(2) Initiation of Construction Activity After Notice and Testing.
------------------------------------------------------------
If Buyer undertakes Construction Activity on the Purchased Assets
which involves disturbance or invasion of subsurface conditions or
soils (other than in the Prohibited Areas), and prior to initiation of
such Construction Activity, (a) Buyer conducts testing in the proposed
construction area, (b) such testing demonstrates that the proposed
construction area contains a Pre-Existing Environmental Condition, (c)
Buyer provides Seller with notice of such Pre-Existing Environmental
Condition in accordance with and subject to Sections 12.3 and 12.4 of
this Agreement, and (d) Buyer provides notice to Seller of said
Construction Activity in the manner provided in Section 14.7, then
Seller shall promptly and diligently conduct Seller's Obligatory
Remediation of the Pre-Existing Environmental
Condition identified by the testing and shall reimburse Buyer for any
and all Incremental Construction Costs resulting from such
Construction Activity. Alternatively, if so elected by Buyer, (i)
Seller, upon Buyer's request, shall pay to Buyer the amount Seller
would have had to incur to complete Seller's Obligatory Remediation of
any Pre-Existing Environmental Condition in the soil or subsurface
conditions at the Construction Activity site identified by the
testing, and (ii) Buyer shall proceed with the Remedial Activities of
such Pre-Existing Environmental Condition in the soil or subsurface
conditions in accordance with the requirements of Section 8.2(e) of
this Agreement; and (iii) after payment to Buyer of the amounts
payable by Seller pursuant to subpart (i) of this sentence, Buyer
shall forever release Seller, subject to the limitations set forth in
paragraph (6), from Seller's Obligatory Remediation of the Pre-
Existing Environmental Condition in the soil or subsurface conditions
for which Seller has made payment to Buyer pursuant to the foregoing.
(3) Effect of Construction. If (A) Buyer undertakes Construction
----------------------
Activity on the Purchased Assets (other than in the Prohibited Areas)
which invades or disturbs soil or subsurface conditions, and prior to
initiation of Construction Activity, either fails to demonstrate that
such soil and subsurface conditions in the area of planned
construction is, immediately prior to Construction Activity, not in
compliance with Environmental Laws or provide Seller with notice of
Buyer's planned Construction Activity as required under Section
8.2(c)(2) or (B) Buyer undertakes Construction Activity which invades
or disturbs soil or subsurface conditions in an area where Seller has
completed Seller's Obligatory Remediation, Buyer agrees that such
Construction Activity deems Seller forever released from Seller's
Obligatory Remediation for soil and subsurface conditions in the
particular area constructed on by Buyer; provided however that Seller
shall not be released from its obligations under paragraphs
(1), (2) or (4) for any Seller's Obligatory Remediation resulting from
an Environmental Condition that (a) was not known prior to the
Effective Time, (b) existed as of the time of the Construction
Activity, and (c) was not caused or Exacerbated by the operations,
activities, Construction Activity or negligence of Buyer, Buyer's
agents, employees, consultants, contractors or hazardous waste haulers
or handlers.
(4) Repairs. Seller agrees to reimburse Buyer for Incremental
-------
Construction Costs incurred by Buyer during the performance of Repair
Activities. If the area where Buyer is performing a Repair Activity is
an area affected by a Pre-Existing Environmental Condition, Seller
shall promptly and diligently conduct Seller's Obligatory Remediation
following delivery to Seller of notice in accordance with Section
14.7. Alternatively, if so elected by Buyer, (a) Seller, upon Buyer's
request, shall pay to Buyer the amount Seller would have had to incur
to complete Seller's Obligatory Remediation of any Pre-Existing
Environmental Condition in the soil and subsurface conditions at the
Repair Activity site in accordance with Section 8.2(d) of this
Agreement, and (b) Buyer shall proceed with the Remedial Activities of
such Pre-Existing Environmental Condition in the soil and subsurface
conditions to fulfill the Remedial Action requirements of Section
8.2(e) of this Agreement as if such Pre-Existing Environmental
Condition in soil or subsurface conditions was within Buyer's
Environmental Indemnity Obligations; and (c) after payment to Buyer of
the amounts payable by Seller pursuant to subpart (a) of this
sentence, Buyer shall
forever release Seller, subject to the limitations set forth in
Section 8.2(c)(6) below, from Seller's Obligatory Remediation of the
Pre-Existing Environmental Condition in the soil and subsurface.
(5) Further Assurances. Buyer and Seller agree to execute
------------------
appropriate documents to memorialize the releases under Section
8.2(c)(1), (2), (3), and (4) above, and any modifications and change
in responsibility for completing Remedial Activities, including
without limitation, such amendments to the Environmental Agreement and
Memorandum of Understanding, and any other documents necessary to
effectuate the releases of liability as set forth in paragraphs (2),
(3), and (4).
(6) Groundwater and Seller's Exacerbation. Notwithstanding
-------------------------------------
anything to the contrary in this Agreement, Seller shall remain
responsible under all circumstances for performance of Seller's
Obligatory Remediation of a Pre-Existing Environmental Condition in
groundwater (without regard to whether there has occurred any
Exacerbation of said Pre-Existing Environmental Condition due to the
acts of Buyer or otherwise). However, if and to the extent that (i)
the conduct by Buyer or its agents, employees, consultants,
contractors, or hazardous waste haulers or handlers or any
Construction Activity (whether intentional, unintentional, or
conducted with or without due care) or any Repair Activity conducted
without due care, or (ii) the operation of the Facility by Buyer
results in Exacerbation of a Pre-Existing Environmental Condition in
groundwater, then Buyer shall pay to Seller any amounts reasonably
incurred by
Seller to conduct Seller's Obligatory Remediation of the Pre-Existing
Environmental Condition in groundwater in excess of the amount Seller
would have had to otherwise incur to conduct Seller's Obligatory
Remediation of the said Pre-Existing Environmental Condition in the
absence of such Exacerbation. Further no release of Seller pursuant to
this Subsection 8.2(c) shall release Seller from any of Seller's
Environmental Indemnity Obligations under Section 8.2(a)(iv) with
respect to Exacerbation of a Post-Closing Environmental Condition.
(7) Characterization of Certain Amounts. Any amount Buyer incurs
-----------------------------------
to perform Remedial Activities of Environmental Conditions pursuant to
the foregoing, in excess of any payment for Seller's Obligatory
Remediation with respect thereto as set forth above, shall constitute
Incremental Construction Costs.
(8) Limitations on Incremental Construction Costs. Buyer will be
---------------------------------------------
entitled to reimbursement from Seller for Incremental Construction
Costs up to an aggregate amount of $7,500,000. Thereafter, Seller
shall have no further obligation to Buyer for Incremental Construction
Costs. The right to receive Incremental Construction Costs is
personal to Buyer and shall not be assignable, with the sole exception
that such right may be assigned to Buyer's lenders and such lender's
successors and assigns, but Seller shall in no event be obligated to
make any payments to any such lender, lender's successors or assigns
for any Incremental Construction Costs incurred for any work performed
following the 54 month anniversary of the Closing Date.
(9) Inapplicability of Certain Limitations. Any Seller's
--------------------------------------
Obligatory Remediation that Seller must conduct in accordance with
Seller's Environmental Indemnity Obligations is not subject to the
$7,500,000 limitation for Incremental Construction Costs. Neither (i)
such Seller's Obligatory Remediation nor (ii) any of Seller's
Environmental Indemnity Obligation or Buyer's Environmental Indemnity
Obligation for any matter described in subpart (iv) of the definition
of Environmental Claim shall be subject to the $1,000,000 threshold
requirement contained in Section 12.6 nor the $200,000,000 maximum
limit on liability contained in Section 12.8. All other matters
included within Seller's Environmental Indemnity Obligations or
Buyer's Environmental Indemnity Obligations are subject to the
$1,000,000 threshold requirement contained in Section 12.6 and the
$200,000,000 maximum limit on liability contained in Section 12.8.
(d) Seller's Obligation to Perform Remedial Activities. With respect
--------------------------------------------------
to an Environmental Claim for Remedial Activities that constitutes a
Seller's Environmental Indemnity Obligation, Seller shall (1) perform any
and all Seller's Obligatory Remediation, except to the extent that Seller
is released from such obligation pursuant to Subsections (c)(1), (2), (3),
or (4) above, (2) take, to the extent legally permitted, all "generator"
responsibility for Hazardous Material created by the performance of
Remedial Activities, and (3) enter, and obtain, if necessary, and comply
with any permits, authorizations or approvals necessary to conduct such
Seller's Obligatory Remediation to the extent legally required.
Buyer shall notify Seller in accordance with and subject to
Sections 12.3 and 12.4 of this Agreement of Seller's Obligatory
Remediation. In that event, Seller shall promptly and diligently undertake
and complete such Seller's Obligatory Remediation in accordance with and
after execution of a mutually agreed upon site access agreement to be
entered into between Seller and Buyer. Seller agrees to consult fully with
Buyer with respect to any proposed Remedial Activities and the plans
therefor arising from the Seller's Obligatory Remediation and Seller and
Buyer agree to use good faith best efforts to reach mutual agreement on any
such Remedial Activities and plans. If mutual agreement cannot be reached
between Seller and Buyer, the parties agree that Seller may submit to the
applicable Governmental Body a proposed plan for Seller's Obligatory
Remediation as required to meet any deadlines not subject to extension, to
avoid fines and penalties, or for the protection of human health and Seller
may also proceed with implementation of any such plan as required to meet
any deadlines, not subject to extension, to avoid fines and penalties or
for the protection of human health. Such action, however, shall not
relieve Seller of its obligation to fulfill Seller's Obligatory
Remediation, nor limit Buyer's rights to object to the plan so submitted to
or approved by the applicable Governmental Body, nor Buyer's exercise of
any other rights or remedies (including injunctive relief) available under
law by reason of such actions by Seller, including without limitation those
arising from a cause of action for Seller's breach of this Agreement.
(e) Buyer's Obligation to Perform Remedial Activities. With respect
-------------------------------------------------
to an Environmental Claim for Remedial Activities that constitutes a
Buyer's Environmental
Indemnity Obligation, Buyer shall (i) perform Remedial Activities required
by Environmental Law, including any consent decree, settlement agreement,
permit, approval, plan, agreement, or memorandums of understanding issued
by or entered into with any Governmental Body, for Post-Closing
Environmental Conditions, (ii) take, to the extent legally permitted, all
"generator" responsibility for Hazardous Material created by the
performance of Remedial Activities, and (iii) enter, and obtain, if
necessary, and to comply with any permits, authorizations or approvals
necessary to perform Buyer's Environmental Indemnity to the extent legally
required.
Buyer shall promptly and diligently undertake and complete any
Remedial Activities required to fulfill its Environmental Indemnity
Obligations. If Seller is conducting Seller's Obligatory Remediation at the
time Buyer is undertaking Remedial Activity in accordance with the
foregoing to fulfill its Environmental Indemnity Obligations, Buyer agrees
to consult fully with Seller with respect to any proposed Remedial
Activities arising from the Buyer's Environmental Indemnity Obligation
which will affect Sellers' Obligatory Remediation, and in such case Seller
and Buyer agree to use good faith best efforts to reach mutual agreement on
a plan for such Remedial Activities by Buyer. If mutual agreement cannot
be reached between Seller and Buyer, the parties agree that Buyer may
submit to the applicable Governmental Body its proposed plan as required to
meet any deadlines not subject to extension, to avoid fines and penalties
or for the protection of human health and Buyer may also proceed with
implementation of any such plan as required to meet any deadlines not
subject to extension, to avoid fines and penalties or for the protection of
human health. Such action
however shall not relieve Buyer of its obligation to complete such Remedial
Activities nor limit Seller's rights to object to the plan submitted to or
approved by the applicable Governmental Body nor Seller's exercise of any
other rights or remedies available under law, by reason of such actions by
Buyer, including without limitation those arising from a cause of action
for Buyer's breach of this Agreement.
(f) The Procedure for Tendering An Indemnified Claim. Environmental
------------------------------------------------
Claims covered by an indemnity obligation which are asserted by a
Governmental Body or any third party shall be tendered in accordance with
Sections 12.3 and 12.4 of this Agreement.
(g) Time for Indemnified Claims. Environmental Claims (other than
---------------------------
for Seller's Obligatory Remediation) that are covered by an indemnity
obligation under Section 8.2 and that arise out of, in connection with or
as a result of a (i) Seller's breach of a representation contained in
Section 4.22, or (ii) a Pre-Existing Environmental Condition described in
subparts (1) or (2) of the definition of Pre-Existing Environmental
Condition or that has resulted or hereafter results from the migration or
transformation of any Environmental Condition described in such subparts
(1) or (2), and which is not disclosed in Section 4.22 of the Disclosure
Schedule are not recoverable unless notice of the general circumstances
giving rise to the Environmental Claim is provided on or before the tenth
anniversary of the Closing Date. Otherwise, there shall be no limitation
on the time for tendering an Environmental Claim, whether tendered by Buyer
or Seller or any Buyer Indemnitee or Seller Indemnitee. Notwithstanding
the foregoing provisions of this subsection (g), there shall be no
limitation on the time for tendering an
Environmental Claim that is based on human exposure to an Environmental
Condition.
(h) No Recovery for Loss of Profits. In no event shall Seller or
-------------------------------
Buyer be liable to the other, or have any obligation to indemnify the other
under this Section 8.2, from any loss of profits however caused and on any
theory of liability; provided, however, that the foregoing shall not limit
Buyer's rights with respect to reduction in available Reactor Gallons (as
defined in the Supply Agreement) under Section 2.5 of the Supply Agreement.
Further, in no event shall Seller be liable to Buyer, or have any
obligation to indemnify Buyer under this Section 8.2, from any reduction in
the value of the Owned Real Property as a consequence of the inability of
Buyer to use or operate the Owned Real Property for purposes other than
pharmaceutical and intermediate manufacturing and dosage formulation
including without limitation the inability to use the Owned Real Property
for residential uses, agricultural uses, public recreation or public park
uses and commercial food facilities that are open to the public.
(i) Independent Covenants. The rights and obligations of the parties
---------------------
under Section 8.2, Section 8.4, Section 12.1(c) and Section 12.2(c) of
this Agreement and under the Memorandum of Understanding, the Environmental
Agreement and the Asbestos Release (collectively herein the "Environmental
Provisions") are in addition to, and independent and severable from, all
other rights and obligations of the parties under the provisions of this
Agreement (other than said Sections 8.2, 8.4, 12.1(c) and 12.2(c) hereof),
the Supply Agreement, and any other agreements now or hereafter entered
into between them. It is expressly acknowledged by all parties hereto that
any failure of any condition or breach of any covenant or representation
which is not included in the
Environmental Provisions shall not in any manner impair the right of the
parties and their respective permitted successors and assigns to enforce
any covenant, indemnity, defense obligation, hold harmless covenant,
release, waiver and/or other agreement contained in the Environmental
Provisions; it being understood that the Environmental Provisions are given
in consideration of the closing of the transaction and not for any future
performance of any agreement not included in the Environmental Provisions
and that the Environmental Provisions are intended to allocate the risk of
loss, and to create rights and obligations between the parties, with
respect to environmental matters without regard to the breach or status of
any other agreement.
(j) Notice of Environmental Occurrences. Notwithstanding any other
-----------------------------------
provision of this Agreement, and without regard to a party's intent to seek
indemnity or exercise any other rights or remedies with respect to the
matter in question, each party to this Agreement shall give notice to the
other parties to this Agreement within ten days following the occurrence of
any spill, leak, discharge or other event or activity occurring in
connection with the use, ownership or operation of the Facility that
involves the presence of a Hazardous Material in the soil, groundwater,
surface water or air of the Facility, including as a consequence of
migration, at any concentration that: (i) requires investigation,
monitoring, remediation or removal under the Environmental Laws, or that
may adversely affect any solid waste management units on the Owned Real
Property or any Remedial Activity or (ii) is required to be reported to
such party's insurance carrier. Any party entitled to notice under this
Section 8.2(j) shall be relieved of its indemnity obligations under this
Section 8.2 and under Article XII only to the extent that it is
prejudiced by any failure or delay of the other party or parties to give
such notice.
8.3 Best Efforts; Regulatory Approvals. Each party hereto agrees to
----------------------------------
use its best efforts to satisfy the conditions to the Closing set forth in this
Agreement and otherwise to consummate the transactions contemplated by this
Agreement by July 31, 1997. Specifically, but without limiting the generality
of the foregoing, each of Buyer and Seller shall use its best efforts to make or
obtain all consents, transfers, approvals, authorizations, registrations and
filings with all Governmental Bodies as are required in connection with the
consummation of the transactions contemplated by this Agreement. Buyer agrees
to pursue the issuance of new permits to Buyer in lieu of the Nontransferable
Permits and permits issued to Seller under the Environmental Laws (none of which
are transferrable), and Seller will cooperate with Buyer in its efforts to
obtain new permits. Buyer and Seller shall, as promptly as practicable
following the execution of this Agreement, in cooperation with each other,
complete and file with the appropriate authorities the premerger notification
forms and any other documents required under the HSR Act.
8.4 SWMU.
----
(a) SWMU Remedial Activity. As described in Section 4.22 of the
----------------------
Disclosure Schedule, certain Pre-Existing Environmental Conditions are and
will be present at the Facility as of the Effective Time, involving soil
and groundwater on and underlying the Facility emanating from solid waste
management units (SWMUs), identified and described in the RFI Report.
Seller will perform all Remedial Activities for such Pre-Existing
Environmental Conditions as required by DEHNR, or other applicable
Governmental Body, and in compliance with applicable Environmental Laws,
and,
following the Effective Time, the Environmental Agreement and the
Memorandum of Understanding. The parties intend that, following the
Effective Time, the terms of the Environmental Agreement will govern the
process and procedures for the SWMUs and in the event there is a conflict
between this Agreement and the Environmental Agreement, the Environmental
Agreement governs the process and procedures for the SWMUs identified and
described in the RFI Report.
(b) Future Remediation of Pre-Existing Environmental Conditions.
-----------------------------------------------------------
Buyer and Seller have entered into or will at Closing enter into, an
Environmental Agreement and a Memorandum of Understanding with respect to
Remedial Activities for Pre-Existing Environmental Conditions at several
SWMUs at the Facility. Buyer and Seller agree to execute appropriate
documents to memorialize the responsibility for completing such Remedial
Activities and for Remedial Activities for any other Environmental
Condition at the Facility requiring such activities, consistent with this
Agreement, the Environmental Agreement, and the Memorandum of
Understanding.
8.5 Termination of Confidentiality Agreement. The parties have
----------------------------------------
previously entered into a Mutual Confidential Disclosure Agreement dated as of
October 17, 1996. The parties agree that such Mutual Confidential Disclosure
Agreement, as it may have been amended, shall terminate as of the Effective
Time, and that the rights and obligations of the parties with regard to
confidentiality requirements shall be governed by Section 8.6 below.
8.6 Confidentiality.
---------------
(a) General. At all times following the execution of this Agreement,
-------
Buyer, Parent and Parent's Affiliate shall treat all Seller Confidential
Information, and Seller and
Seller's Affiliates shall treat all Buyer Confidential Information, in
accordance with the requirements of this Section 8.6. For convenience,
Seller Confidential Information and Buyer Confidential Information are both
referred to herein as "Confidential Information" for purposes of
establishing the obligations of each party with regard to the other party's
Confidential Information.
(b) Nondisclosure. Confidential Information of the other party shall
-------------
be kept strictly confidential by the receiving party and, except as
expressly permitted herein, shall not be disclosed to any third party by
the receiving party in any manner whatsoever, in whole or in part, without
first obtaining the other party's prior written consent to such disclosure.
The standard of care required of each party in protecting the
confidentiality of the other party's Confidential Information shall be at
least the same standard of care that the receiving party uses in protecting
its own confidential and trade secret information, but in no event shall
either party use less than a reasonable standard of care. Confidential
Information may be used by the receiving party only for the purpose of
performing under this Agreement. Buyer represents and warrants that prior
to the date of this Agreement, it has not used or disclosed to any third
party any Seller Confidential Information, except as would be permitted
hereunder.
(c) Permitted Exceptions. Each party may disclose the other party's
--------------------
Confidential Information only to its employees or outside advisors and
financing sources in connection with this Agreement or the Transaction
Agreements who reasonably need to know such information for the purpose of
advising or assisting it in connection with this Agreement (each, an
"Advisor"). Prior to disclosing any Confidential Information to
any Advisor, the receiving party will inform such Advisor of the
proprietary nature of the Confidential Information and will require such
Advisor to agree in writing (except in the case of outside legal advisors,
who may orally agree) to be bound by the requirements of this Section 8.6
and not to use or disclose the Confidential Information except as permitted
herein. Each party agrees to be responsible for any breach of these
confidentiality obligations by its Advisors. It is specifically agreed that
(i) Seller may disclose Buyer Confidential Information to any Seller's
Affiliate under the same conditions provided in this Section 8.6 on a need-
to-know basis and (ii) Buyer may disclose Seller Confidential Information
to Parent or any Parent's Affiliate under the same conditions provided in
this Section 8.6 on a need-to-know basis.
(d) Consent. Confidential Information of the other party shall not
-------
be utilized by a receiving party except as expressly permitted herein,
without first obtaining the other party's prior written consent to such
utilization and without first entering into a separate agreement duly
executed by authorized representatives of the parties hereto.
(e) Excluded Information. Notwithstanding any provision herein to
--------------------
the contrary, the requirements of this Section 8.6 shall not apply to any
information of either party which:
(i) at the time of disclosure hereunder is generally available to
the public;
(ii) after disclosure hereunder becomes generally available to
the public, except through breach of this Section 8.6 by the receiving
party or its Advisors;
(iii) was not acquired directly or indirectly from the
disclosing party or its Affiliates and which the receiving party
lawfully had in its possession prior to disclosure by the disclosing
party;
(iv) is independently developed by employees or agents of the
receiving party without the use of the Confidential Information of the
disclosing party; or
(v) becomes available to the receiving party from a third party
that is not legally prohibited from disclosing such Confidential
Information, provided such information was not acquired directly or
indirectly from the disclosing party or its Affiliates.
(f) Notification of Mandatory Disclosure.
------------------------------------
(i) Procedures. In the event that either party is required by
----------
applicable law or regulation or by judicial or administrative process
to disclose any part of the other party's Confidential Information,
such party shall (A) promptly notify the other party of each such
requirement and identify the documents so required thereby, so that
the other party may seek an appropriate protective order or other
remedy and/or waive compliance by the first party with the provisions
of this Section 8.6, (B) consult with the other party on the
advisability of taking legally available steps to resist or narrow the
scope of such requirement, (C) assist the other party in seeking a
protective order or equivalent, and (D) comply with any applicable
protective order or equivalent.
(ii) Limitations. If, in the absence of such a protective order
-----------
or such a waiver by the other party of the provisions of this Section
8.6, the first party is nonetheless required by mandatory applicable
law to disclose any part of the other party's Confidential
Information, the first party may disclose such of the other party's
Confidential Information without liability under this Agreement,
except that the first party shall (i) furnish only that portion of the
other party's Confidential Information which is legally required and
(ii) use its best efforts to obtain an order or other reliable
assurances that confidential treatment will be accorded to the portion
of such Confidential Information so required to be disclosed.
(g) Publicity. Neither Buyer, Parent or any Parent's Affiliate will
---------
issue any press release or otherwise make any public statement or
advertisement with respect to this Agreement, the Transaction Agreements or
the transactions contemplated by this Agreement or the Transaction
Agreements without the prior written consent of Seller, and Seller will not
issue any press release or otherwise make any public statement with respect
to this Agreement or the Transaction Agreements without the prior written
consent of Buyer or Parent, provided, however, that either party shall be
entitled to make a public announcement of this Agreement after giving prior
written notice to the other party hereto, if, in the opinion of the
disclosing party's legal counsel, such announcement is required to comply
with applicable laws and provided to the extent practicable the other party
has received at least two (2) days' notice. Once consent is given by
Seller for a required disclosure in a filing made with the Securities and
Exchange Commission,
Buyer may make additional disclosures in other filings made with the
Securities and Exchange Commission that do not materially differ therefrom
without any further consents, provided that the surrounding circumstances
have not changed.
(h) Return of Confidential Information. At any time upon the request
----------------------------------
of the other party, to the extent such Confidential Information is not
reasonably necessary to enable a party to perform its obligations under
this Agreement, the receiving party shall promptly return to the other
party or destroy the other party's Confidential Information, and shall
destroy all copies thereof, together with all notes, drawings, abstracts
and other information relating to the other party's Confidential
Information prepared by the receiving party or any of its Representatives,
regardless of the medium in which such information is stored; provided,
however, that the receiving party may maintain a single archival copy of
the other party's Confidential Information in its files for purposes of
establishing the extent of disclosures by the other party under this
Agreement. At either party's written request, such party's Confidential
Information that is otherwise required to be returned to it shall be
destroyed by the receiving party and such destruction shall be certified in
writing by an authorized officer of the receiving party. The return and/or
destruction of such Confidential Information as provided above shall not
relieve the receiving party of its other obligations under this Section
8.6.
8.7 Additional Material Contracts. Seller is presently negotiating
-----------------------------
arrangements whereby Seller may enter into contract manufacturing agreements
with certain third parties, either before or after the Closing Date. Certain of
these proposed contract manufacturing arrangements would be incidental to the
transfer of ownership rights in Seller
products to the third parties in question. Buyer and Seller agree that, if
Seller enters into any contract manufacturing agreements, whether before or
after the Closing Date, the provisions of this Section 8.7 shall apply. If the
terms and conditions thereof are commercially reasonable to Buyer in its
reasonable discretion, Seller may, in its discretion, either subcontract or
assign such contract manufacturing agreements to Buyer and Buyer will assume the
same. Seller's present preference as to subcontracting or assigning certain of
such agreements is indicated in Section 8.7 of the Disclosure Schedule. If the
terms and conditions of any contract manufacturing agreement are not
commercially reasonable to Buyer in its sole discretion, Seller will subcontract
such agreements to Buyer and Buyer will assume the same; provided, however, that
(a) the terms of such subcontracting arrangements are not materially different
from the terms upon which Buyer has agreed to perform third party manufacturing
agreements included in Exhibit B to the Supply Agreement, (b) Buyer otherwise
would be required to produce the volumes of products thereunder in accordance
with the Supply Agreement, and (c) Seller shall pay to Buyer the applicable
"Conversion Charges" (as defined in the Supply Agreement) for any such products.
Buyer and Seller agree that, with respect to contract manufacturing agreements
entered into prior to the Closing Date, those agreements that are to be
subcontracted to Buyer shall be added to Section 2.3(1) of the Disclosure
Schedule and will be considered as Excluded Assets, and those agreements that
are to be assigned to Buyer shall be added to Section 1.1(a) and Section 4.11 of
the Disclosure Schedule and will be considered Material Contracts and Assumed
Contracts. Section 8.7 of the Disclosure Schedule summarizes the ongoing
negotiations with respect to these contract manufacturing agreements, as well as
other potential transactions that could result in the assignment or
subcontracting of contract manufacturing
agreements to Buyer.
8.8 Unemployment Accounts. Seller agrees to cooperate with Buyer to
---------------------
facilitate Buyer's assumption of a proportionate amount of Seller's unemployment
experience rating with the North Carolina Employment Security Commission.
8.9 Asbestos. Notwithstanding any other provisions of this
--------
Agreement, Buyer will assume, as of the Effective Time, all responsibility for
the presence of any asbestos or asbestos-containing material in the
Improvements, Utilities, fixtures, equipment or other Tangible Personal
Property, whether such presence arose or existed before or after the Effective
Time and will release Seller from any and all claims with respect thereto;
provided, however, that Seller shall retain full responsibility for any
workplace asbestos exposure, to the extent that such exposure occurred prior to
the Effective Time, of certain persons as provided in Section 12.1(c) hereof.
At the Closing, Buyer will execute a general release in favor of Seller, in the
form attached hereto as Exhibit J (the "Asbestos Release"), to memorialize the
agreement and release described in this Section 8.9 and in Section 12.1(c). For
and in consideration of the foregoing release by Buyer and the assumption by
Buyer of the responsibility for asbestos as described in this Section, Seller
has agreed to reduce the Cash Purchase Price hereunder by the amount of
$6,400,000 (the "Asbestos Consideration").
8.10 Information Technology Matters. The parties have worked
------------------------------
together to create the "IT Transition Plan," which is attached hereto as
Schedule 15.3 to the Supply Agreement. The IT Transition Plan includes, among
other items, provisions regarding: (a) the transfer of Seller data and systems
from the Facility to Seller; and (b) provisions regarding the transfer of
responsibility for support of IT systems at the Facility from Seller to Buyer.
Each
party agrees to perform the pre-Closing tasks assigned to it in the IT
Transition Plan. In addition, although the parties have reached agreement on the
current version of the IT Transition Plan, they acknowledge that it requires
refinement in several respects, and agree that it shall serve as a basis for a
more definitive and complete IT Transition Plan. The parties agree to work
together and agree in writing on a revised IT Transition Plan on or before
Closing, which will be deemed to supersede and replace the current IT Transition
Plan upon such agreement.
8.11 Maintenance of Representations and Warranties. Each of Seller
---------------------------------------------
and Buyer agrees that from the date of this Agreement to the Closing Date (it)
it will refrain from taking any action that would result in a breach of its
representations and warranties contained in Article IV (Buyer's Representations
and Warranties) or Article V (Seller's Representations and Warranties), as the
case may be, and (ii) in the event it learns of an occurrence giving rise to a
breach of any of its representations or warranties, it shall promptly notify the
other party.
8.12 Supply Agreement Charges. The parties acknowledge their mutual
------------------------
preference to establish conversion and materials charges under the Supply
Agreement at Seller's 1997 Product Standard Charges as reflected in Sections
5.1(a), 5.1(b) and 5.2 of Exhibit E hereto. The parties acknowledge, however,
that additional time is required to assess the appropriate conversion, materials
and other charges contained in Sections 5.1(a), 5.1(b) and 5.2 and Article XVIII
of Exhibit E. Seller agrees to provide to Buyer all information available to
Seller regarding the charges as reflected in Exhibit E, and Buyer agrees to use
reasonable efforts to evaluate and, if appropriate, agree to the provisions of
Section 5.1(a), 5.1(b) and 5.2 and Article XVIII as they are set forth in
Exhibit E. If Buyer cannot so agree, however, the parties agree to work together
to establish mutually acceptable conversion, materials and other charges
under Sections 5.1 (a), 5.1(b), and 5.2 and Article XVIII. If the
parties have not reached agreement on these charges by the time all conditions
to Closing are satisfied or waived, (i) the parties shall proceed with the
Closing and (ii) the parties shall execute and deliver the Supply Agreement in
the form attached as Exhibit E at the Closing with only such changes as are
necessary and mutually agreed to reflect the provisions of the following
sentence. The parties shall continue to work together to establish mutually
acceptable charges as provided in this Section 8.12. If the parties have not
reached agreement on those charges by December 31, 1997, the conversion changes
for subsequent periods shall be based on 1996 Conversion Charges, declining over
time as agreed by the parties, until the parties establish mutually acceptable
conversion, materials and other charges under Sections 5.1(a), 5.1(b), 5.2 and
Article XVIII. The parties acknowledge that any alterations must have an impact
on Buyer, including the timing of cash flows, that is no less favorable than
contemplated if 1996 standards had been utilized with quarterly guaranteed
payments.
8.13 Warren Encroachment. The parties acknowledge that Mr. and Mrs.
-------------------
Warren, landowners adjoining the Owned Real Property, have constructed certain
structures that encroach on the Owned Real Property. Seller agrees that, prior
to the Closing Date, it will contact the Warrens to discuss the possibility of
quitclaiming or otherwise transferring to them the portion of the Owned Real
Property on which the encroachments exist. Buyer agrees to consent to such
transfer, the terms of which shall be mutually satisfactory to Buyer and Seller.
ARTICLE IX
CONDITIONS PRECEDENT TO BUYER'S AND PARENT'S OBLIGATIONS
The obligations of each of Buyer and Parent to consummate its
obligations in connection with the transactions contemplated by this Agreement
are subject to the satisfaction of the following conditions on or before the
Closing Date, unless specifically waived in writing by Buyer or the Parent prior
to the Closing Date:
9.1 Representations and Warranties. The representations and
------------------------------
warranties of Seller contained in this Agreement shall have been true and
correct on the date of this Agreement and shall be true and correct in all
material respects on the Closing Date as though made on and as of the Closing
Date.
9.2 Compliance with Covenants. Seller shall have duly performed and
-------------------------
complied with in all material respects all covenants, agreements and obligations
required by this Agreement to be performed or complied with by it on or prior to
the Closing Date.
9.3 Absence of Litigation. No action or proceeding shall be pending
---------------------
by or before any Governmental Body seeking to restrain, prohibit or invalidate
the transactions contemplated by this Agreement.
9.4 Absence of Material Change. Between the date of this Agreement
--------------------------
and the Closing, no material adverse change shall have occurred in the condition
of the Purchased Assets or the Operation of the Facility.
9.5 Consents and Approvals and Permits. All (a) Required Consents
----------------------------------
shall have been obtained, or in the case of Required Consents that have not been
obtained, Seller shall have made arrangements reasonably acceptable to Buyer in
the exercise of its good faith business judgment, to provide to Buyer goods or
services and other benefits comparable to those that would have been provided by
the party whose consent was not obtained; (b) all other required or
mandated orders or notifications of, or registrations, declarations or filings
with, or expiration of waiting periods imposed by, any applicable Governmental
Body in connection with the consummation of the transactions contemplated by of
this Agreement shall have been made or obtained or shall have occurred,
including without limitation the expiration or early termination of the waiting
period under the HSR Act; and (c) Buyer shall have been assigned or issued all
Permits described in Section 2.3(j) of the Disclosure Schedule and all
environmental permits and any other permits required by Buyer for the operation
of the Facility and performance of the Supply Agreements and Assumed Supply
Contracts, except any such Permits, other permits and environmental permits that
Buyer's failure to obtain will not cause a Material Adverse Effect; provided,
however, that if in Buyer's good faith business judgment any such Permits, other
permits or environmental permits could be obtained within 60 days, Buyer shall
have the option in its sole discretion to extend the Closing for up to 60 days
(but in no event beyond September 30, 1997) to allow Buyer to obtain them.
9.6 Title Insurance; Survey. Buyer shall have obtained at its own
-----------------------
expense a title insurance policy in form and with endorsement acceptable to
Buyer and Buyer's lenders in amount no less than $100,000,000 insuring good and
marketable title in fee simple absolute to all the Owned Real Property, free and
clear of all title defects, objections or Liens of any nature whatsoever, except
for Liens described in Section 2.4(a) of this Agreement. Correct surveys,
reasonably acceptable to Buyer and Buyer's lenders, shall have been certified to
Buyer at Buyer's own expense showing the boundaries of and the location of the
Owned Real Property and the locations of all Improvements, showing no
encroachment by the Improvements on property of others.
9.7 Removal of Liens. All Liens described in Section 4.6 of the
----------------
Disclosure Schedule and any other Lien that is not a Permitted Lien shall have
been removed, and Seller shall have provided to Buyer evidence of such removal.
9.8 Financing. Buyer shall have obtained the necessary financing to
---------
fund the Cash Purchase Price.
9.9 Legal Opinion. Buyer shall have received the legal opinion of
-------------
Seller's counsel in a form to be agreed upon by the parties.
9.10 Physical Condition of Purchased Assets. The physical condition
--------------------------------------
of the Purchased Assets shall be substantially the same on the Closing Date as
on the date of Buyer's execution of this Agreement, reasonable wear and tear and
(subject to the provisions of Section 14.3 below) loss by casualty or
condemnation excepted.
9.11 Litigation. As of the Closing, there shall be no litigation or
----------
administrative agency or other governmental proceeding, pending or, to the Best
Knowledge of Buyer, threatened, which after Closing would materially adversely
affect the ownership, use or value of the Purchased Assets or the ability of
Buyer to operate the Facility as presently operated or to perform its
obligations under the Supply Agreement.
9.12 Transaction Agreements. Buyer and Seller shall have entered into
----------------------
all of the Transaction Agreements.
ARTICLE X
CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS
The obligations of Seller to consummate the transaction contemplated
by this Agreement are subject to the satisfaction of each of the following
conditions on or before the Closing Date, unless specifically waived in writing
by Seller prior to the Closing:
10.1 Representations and Warranties. The representations and
------------------------------
warranties of Buyer and Parent contained in this Agreement shall have been true
and correct on the date of this Agreement, and shall be true and correct in all
material respects on the Closing Date as though made on and as of the Closing
Date.
10.2 Compliance with Covenants. Buyer and Parent shall have duly
-------------------------
performed and complied with in all material respects all covenants, agreements
and obligations required by this Agreement to be performed or complied with by
them on or before the Closing Date.
10.3 Absence of Litigation. No action or proceeding shall be pending
---------------------
by or before any Governmental Body seeking to restrain, prohibit or invalidate
the transactions contemplated by this Agreement.
10.4 Consents and Approvals. All (a) Required Consents and (b) other
----------------------
required or mandated orders or notifications of, or registrations, declarations
or filings with, or expiration of waiting periods imposed by, any applicable
Governmental Body in connection with the consummation of the transactions
contemplated by of this Agreement shall have been made or obtained or shall have
occurred, including without limitation the expiration or early termination of
the waiting period under the HSR Act.
10.5 Legal Opinion. Seller shall have received the legal opinion of
-------------
Buyer's and Parent's counsel in a form to be agreed upon by the parties.
10.6 Transaction Agreements. Seller and Buyer shall have entered
----------------------
into all of
the Transaction Agreements.
10.7 Insurance Coverages. Buyer shall have delivered evidence to
-------------------
Seller that Buyer (i) has obtained all insurance coverages required to be
maintained by Buyer pursuant to the Supply Agreement; (ii) has named Seller as
an additional insured party under the product liability insurance required
thereunder; and (iii) has waived all subrogation rights under such policies.
ARTICLE XI
CLOSING
11.1 Closing. The Closing shall take place at the offices of
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Womble Carlyle Sandridge & Rice in Research Triangle Park, North Carolina (or
such other place as the parties may mutually agree) at 10:00 a.m., local time,
on July 31, 1997, or such other date as may be mutually agreed upon in writing
by the parties hereto; provided, however, that (a) if one or more conditions to
this Agreement is not satisfied by such date, the party benefitting from such
condition may elect, in its sole discretion, one or more postponements of the
Closing for the purpose of enabling such condition to be satisfied; and (b)
notwithstanding the provisions of the preceding subparagraph (a), in no event
may the Closing be postponed beyond September 30, 1997. The Closing when
completed shall be deemed to have occurred at the Effective Time. If the Closing
takes place on the last day of a month, the Effective Time shall be 11:59 p.m.
that day. If the Closing takes place on a day other than the last day of a
month, such day shall be a Monday, and the Effective Time shall be 12:01 a.m.
that day.
11.2 Deliveries by Seller. At the Closing, Seller shall deliver or
--------------------
cause to be
delivered to Buyer the following:
(a) A certificate of an officer of Seller confirming the satisfaction
of the conditions set forth in Sections 9.1, 9.2, 9.3, 9.4, 9.5 (as to
Required Consents), 9.7, 9.10 and 9.11 hereof.
(b) A copy of all corporate resolutions authorizing the execution,
delivery and performance of this Agreement and the Transaction Agreements,
and the consummation of the transactions contemplated herein and therein,
accompanied by the certification of the Secretary or an Assistant Secretary
of Seller to the effect that such resolutions are in full force and effect
and have not been amended, modified or rescinded.
(c) Evidence of the removal of Liens, as described in Section 9.7.
(d) Evidence that all Required Consents have been obtained or
satisfied.
(e) A special warranty deed and a quitclaim deed in substantially the
forms attached hereto as Exhibit K transferring fee simple title to the
Owned Real Property.
(f) Certificates of title, duly endorsed for transfer and including
odometer readings, with respect to all titled motor vehicles included in
the Purchased Assets.
(g) Bills of Sale and Assignment and other such documents as may be
legally required to convey and vest in Buyer all of Seller's right, title
and interest in and to all of the remaining Purchased Assets, in
substantially the form attached hereto as Exhibit L.
(h) The legal opinion of Seller's counsel referred to in Section 9.9.
(i) A Certificate from the Secretary of State or other appropriate
government official of the State of North Carolina indicating that, as of
five business days prior to the Closing Date, there are no filings against
Seller in the office of the Secretary of State or
other government official under the Uniform Commercial Code of the State of
North Carolina which would be a Lien on any Purchased Assets, other than
any filings which are released as of the Closing.
(j) To the extent held by or under the control of Seller (a) the
originals of the building permits and certificates of occupancy for the
Improvements; and (b) the operating manuals, guaranties and warranties for
the Tangible Personal Property.
(k) An Affidavit, duly executed by Seller, attesting that Seller is
not a "foreign person" within the meaning of Section 1445(e)(3) of the Code
and is not subject to withholding under any state or U.S. tax law, in form
reasonably acceptable to Buyer.
(l) A closing statement in form and content satisfactory to Buyer and
Seller indicating the prorations for costs and expenses as described in
Section 3.8.
(m) The Asbestos Release, which is delivered in exchange for the
Asbestos Consideration.
(n) Such other documents as are reasonably requested by Buyer's
lenders to complete the debt financing and by the title insurance company
in connection with issuing the policy referred to in Section 9.6, so long
as such documents are customary in transactions of this nature and are
consistent with the terms of this Agreement and the Transaction Agreements,
and so long as execution and delivery of the same by Seller do not involve
unreasonable expense or actions on the part of Seller.
11.3 Deliveries by Buyer and Parent. At the Closing, Buyer and
------------------------------
Parent shall deliver or cause to be delivered to Seller the following:
(a) A certificate of an officer of each of Buyer and Parent confirming
the satisfaction of the conditions set forth in Sections 10.1, 10.2 and
10.3 hereof.
(b) A copy of all corporate resolutions of Buyer and Parent
authorizing the execution, delivery and performance of the Buyer
Transaction Agreements, and the consummation of the transactions
contemplated herein and therein, accompanied by the certification of the
Secretary or Assistant Secretary of the corporation adopting the same to
the effect that such resolutions are in full force and effect and have not
been amended, modified or rescinded.
(c) An Instrument of Assumption of the liabilities to be assumed by
Buyer pursuant to Section 2.4, in substantially the form attached hereto as
Exhibit M.
(d) The Cash Purchase Price, evidenced by a wire transfer of
immediately available funds from Buyer.
(e) 250,000 shares of Buyer Preferred Stock of Buyer, as described in
Section 3.3.
(f) The legal opinion of Buyer's counsel referred to in Section 10.5.
(g) The Asbestos Release, which is delivered in exchange for Asbestos
Consideration.
(h) Insurance certificates showing compliance with Section 10.7.
(i) The Warrants.
(j) Documents evidencing the restrictive covenants for the Prohibited
Areas, as described in Section 8.2(c)(1) of this Agreement.
11.4 Deliveries by Seller and Buyer. Each of Seller and Buyer shall
------------------------------
execute
and deliver, or cause to be executed and delivered, to the other the following:
(a) The Supply Agreement.
(b) Joint instructions to the Escrow Agent for the release of the
Escrow Amount to Seller, to be applied to the Cash Purchase Price.
(c) Evidence of expiration or early termination of the waiting period
under the HSR Act.
(d) The License Agreement.
(e) The Environmental Agreement.
(f) The Memorandum of Understanding.
(g) The Personnel Files Transfer Agreement.
(h) The Medical Records Transfer Agreement.
11.5 Further Assurances. Seller shall, at any time on or after the
------------------
Closing Date, take any and all steps reasonably requested by Buyer to place
Buyer in possession, ownership and operating control of the Purchased Assets and
the Facility, and will do, execute, acknowledge and deliver all such further
acts, deeds and instruments as may be required for the more effective transfer
to and reduction to possession of Buyer, or its successors or assigns, of any of
the Purchased Assets.
ARTICLE XII
INDEMNIFICATION
12.1 Indemnification by Seller. Seller shall indemnify, defend and
-------------------------
hold harmless Buyer, Parent and Parent's Affiliates and their respective
officers, directors and
employees (the "Buyer Indemnitees") from, against, and with respect to any and
all losses, damages, claims, obligations, suits, judgments, fines, liabilities,
costs and expenses (including without limitation reasonable attorneys' fees and
costs and expenses incurred in investigating, preparing, defending against or
prosecuting any litigation, claim, proceeding or demand), of any kind or
character (a "Loss") to the extent such Loss arises out of or in connection with
any of the following:
(a) any breach of any of the representations or warranties of Seller
contained in this Agreement;
(b) any failure by Seller to perform or observe, or to have performed
or observed, any covenant, agreement or condition to be performed or
observed by it pursuant to this Agreement;
(c) any adverse health effect, reproductive effect or bodily injury
(i) to any person engaged in the Operation of the Facility on the Owned
Real Property or engaged in any other activity conducted on the Owned Real
Property prior to the Effective Time (including, without limitation, full
time employees, temporary employees, or independent contractors of Seller
or Seller's Affiliates, agents or contractors, whether or not manifested at
the Effective Time, as a consequence of the exposure of such person (a) on
or before the Effective Time to asbestos (including, without limitation,
asbestos and asbestos-containing material which is Buyer's responsibility
under Section 8.9), a Hazardous Material or Pre-Existing Environmental
Condition located on the Purchased Assets or (b) on or before the Effective
Time to a product, or any material used to produce a product, stored, used,
consumed or manufactured at the Facility; or (ii) to any
person retained or used by Seller or Seller's Affiliates, agents or
contractors following the Effective Time to conduct Remedial Activity or
discharge Seller's Environmental Indemnity Obligations on the Owned Real
Property as a consequence of the exposure of such person to the
Environmental Condition that such person is engaged in remediating;
(d) any product liability claim or intellectual property claim arising
from the Purchased Inventories;
(e) any severance pay, WARN Act liability or damages, discrimination
or other employee related claims or damages to the extent that they arise
from Seller's actions prior to, on or after the Closing Date, except to the
extent Buyer has indemnified Seller for such actions pursuant to Section
12.2;
(f) any Excluded Liability; or
(g) any failure to comply with the bulk sales laws of any jurisdiction
in connection with the sale of the Purchased Assets hereunder.
12.2 Indemnification by Buyer and Parent. Buyer and Parent, jointly
-----------------------------------
and severally, shall indemnify, defend and hold harmless Seller and Seller's
Affiliates and their respective officers, directors and employees (the "Seller
Indemnitees") from, against and with respect to any Loss to the extent such Loss
arises out of or in connection with any of the following:
(a) any breach of any of the representations and warranties of Buyer
or Parent contained in this Agreement;
(b) any failure by Buyer or Parent to perform or observe, or to have
performed or observed any covenant, agreement or condition to be performed
or observed by it
pursuant to this Agreement;
(c) any adverse health effect, reproductive effect or bodily injury,
whether or not manifested at the Effective Time, to any person (including,
without limitation, full time employees, temporary employees or independent
contractors of Buyer or Buyer's Affiliates, agents or contractors, without
regard to whether such person was previously employed by Seller as a full
time, temporary employee or independent contractor) engaged in the
operation of the Facility by Buyer or any other activity conducted on the
Owned Real Property after the Effective Time, as a consequence of the
exposure of such person after the Effective Time to (i) asbestos, a
Hazardous Material or any Environmental Condition on the Owned Real
Property or (ii) a product, or any material used to produce a product
stored, used, consumed or manufactured at the Facility by Buyer; and
provided, however, that this Section 12.2(c) shall also not cover any
adverse health effect, reproductive effect or bodily injury to any person
to the extent that such effect or injury is described in Section
12.1(c)(ii) above;
(d) failure of Buyer to perform the obligations under the Assumed
Liabilities;
(e) any alleged or actual use by Buyer of information provided by
Seller, Seller's employees or Seller's records (including the personnel
files transferred pursuant to the Personnel Files Transfer Agreement), or
Buyer's involvement of Seller, Seller's employees or Seller's records
(including the personnel files transferred pursuant to the Personnel Files
Transfer Agreement), in the process of making decisions regarding the
organizational structure of Buyer's operations at the Facility, the number
of employees to be employed by Buyer at the Facility, the identity of
persons to be made offers of
employment by Buyer, the terms and conditions of employment to be offered
by Buyer to the New Employees or Buyer's employment policies, procedures or
practices applicable to New Employees; provided, however, that Buyer shall
be relieved of its obligations under this subsection (e) to the extent that
Buyer relied on information in such records that was false or was
incomplete in any material respect so as to make such records misleading;
(f) any alleged or actual involvement of Seller, at Buyer's request,
in any communication made by Buyer to Greenville Employees or New
Employees, or any alleged or actual direct communication by Seller, at
Buyer's request, to Greenville Employees or New Employees; provided that
Seller's communications are not materially inconsistent with those
communications of Buyer that are known to Seller;
(g) any submission, disclosure or transfer requested by Buyer of
personnel records, medical records or other employment-related or health-
related information to Buyer about any Greenville Employee;
(h) any severance pay, WARN Act liability or damages, discrimination,
labor law or other employee related claims or damages to the extent that
they arise from Buyer's actions prior to, on, or after the Closing Date
with respect to New Employees; or
(i) except to the extent Buyer would be entitled to indemnity from
Seller under this Agreement and the Environmental Agreement or be excused
from indemnifying Seller pursuant to Section XXI of the Supply Agreement,
Buyer's operation of the Facility and ownership of the Purchased Assets
after the Effective Time.
12.3 Notice of Claim. Any party seeking to be indemnified under this
---------------
Agreement (the "Indemnified Party") shall, reasonably promptly following
discovery of the matters giving rise to a Loss or Environmental Claim (and in
any event no later than ten days following discovery of matters as provided in
Section 8.2(j) which may give rise to an Environmental Claim or a Loss covered
by Section 12.1(c) or 12.2(c) hereof, notify the party from whom indemnity is
sought (the "Indemnity Obligor") in writing of any Loss or Environmental Claim,
specifying in reasonable detail the nature of the Loss or Environmental Claim
and, to the extent possible, the amount of the liability estimated to arise
therefrom. If the Indemnified Party does not so notify the Indemnity Obligor
within the time period specified above of its discovery of a claim for recovery,
such delay shall not relieve the Indemnity Obligor of its obligations hereunder
except to the extent that the Indemnity Obligor is prejudiced by such delay.
The Indemnified Party shall provide to the Indemnity Obligor as promptly as
practicable thereafter all unprivileged information and documentation reasonably
requested by the Indemnity Obligor to verify the claim asserted.
12.4 Defense.
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(a) Third Party Claims. If the facts pertaining to a Loss or
------------------
Environmental Claim arise out of the claim of any Governmental Body or
other third party (a "Third Party Claim"), the Indemnity Obligor shall
assume the defense or the prosecution thereof, including the employment of
counsel or accountants at its cost and expense; provided, however, that
during the interim the Indemnified Party shall use its best efforts to take
all action (not including Obligatory Remediation or settlement) reasonably
necessary to protect against further damage or loss with respect to the
Loss or Environmental Claim and all costs reasonably incurred by the
Indemnified Party shall be reimbursed to the
Indemnified Party by the Indemnity Obligor not more frequently than
quarterly; provided, however, that the Indemnity Obligor shall be relieved
of its obligations hereunder on account of the Indemnified Party's failure
to take such action only to the extent of any prejudice caused thereby. The
Indemnified Party shall have the right to employ counsel separate from
counsel employed by the Indemnity Obligor in any such action and to
participate therein, but the fees and expenses of such counsel shall be at
the Indemnified Party's own expense. All the parties hereto shall cooperate
in the defense or prosecution thereof and shall furnish such unprivileged
records, information and testimony and shall attend such conferences,
discovery proceedings and trials as may be reasonably requested in
connection therewith. The Indemnity Obligor shall not be liable for any
settlement of any such claim effected without its prior written consent. In
the event of payment by the Indemnity Obligor to the Indemnified Party in
connection with any Loss or Environmental Claim arising out of a Third
Party Claim, the Indemnity Obligor shall be subrogated to and shall stand
in the place of the Indemnified Party as to any events or circumstances in
respect of which the Indemnified Party may have any right or claim against
such third party (other than a parent, affiliate or subsidiary of the
Indemnified Party) relating to such indemnified matter. The Indemnified
Party shall reasonably cooperate with the Indemnity Obligor in prosecuting
any subrogated claim, provided that the Indemnity Obligor shall reimburse
the Indemnified Party for out-of-pocket costs necessarily incurred in
connection with such cooperation.
(b) Indemnitee's Right to Assume Defense. Notwithstanding the
------------------------------------
foregoing, the Indemnitee may elect to defend itself from any Third Party
Claim or to take any other
action which would be required to discharge an indemnification obligation
of its Indemnitor hereunder, if (i) the Loss or Environmental Claim (or the
resolution thereof) involves performance (other than the mere payment of
money), and (ii) in the case of Loss or Environmental Claim retained by the
Buyer, Parent or their successors or assigns, as the indemnitee, the Loss
or Environmental Claim is not for performance of the Seller's obligations
under the Environmental Agreement or the Memorandum of Understanding, and
(iii) in the case of Losses or Environmental Claims retained by the Seller,
or its successors or assigns, as the Indemnitee, the Claim is for
performance of the Seller's obligations under the Environmental Agreement
or the Memorandum of Understanding. Notwithstanding the foregoing, it is
expressly agreed that in the event of any Third Party Claim by an employee
of the Indemnitee at the time of the Claim, the Indemnitee, shall have the
absolute right to elect to defend itself from such Claim.
In either of the foregoing cases where the Indemnitee may elect to
defend itself, the Indemnitee may employ its own counsel, and defend, pay,
and/or settle such Third Party Claim on terms and conditions acceptable to
the Indemnitee in its sole discretion and the cost reasonably incurred by
the Indemnitee in taking such action shall be reimbursed by the Indemnitor
to the Indemnitee upon demand; provided, however, that the amount of the
fees and expenses of counsel incurred by the Indemnitee or the amount of
any other payment, defense or settlement by the Indemnitee shall not be
determinative of the liability of the Indemnitor to the Indemnitee pursuant
to this Agreement, and said liability of the Indemnitor shall be limited to
the reasonable amount that the Indemnitor would have incurred to discharge
its indemnity obligations with respect to the matters
addressed by the Indemnitee, if the Indemnitor had acted to discharge such
obligations in accordance with the terms of this Agreement.
(c) Indemnitor's Failure to Assume Defense of Third Party Claim. If
-----------------------------------------------------------
the Indemnitor does not timely accept the tender of a Third Party Claim
covered by its indemnity obligations and tendered to it pursuant to the
foregoing, the Indemnitee may take such action (including any Remedial
Activity) to discharge, defend or settle such Third Party Claim as it deems
appropriate and, upon demand, the Indemnitor shall discharge, for the
benefit of the Indemnitee, the amount of any settlement of, or judgment
entered on, the Third Party Claim, and shall reimburse the Indemnitee for
all attorneys' fees and other costs and expenses incurred by the Indemnitee
with respect to the Third Party Claim.
(d) Statutes of Limitations. In any instance in which the Indemnitee
-----------------------
defends any Third Party Claim, it shall assert as a defense any applicable
statutes of limitation or statutes of repose respecting such Third Party
Claim, and the Indemnity Obligor shall be relieved of its indemnity
obligations hereunder to the extent that it is prejudiced by the
Indemnitee's failure to assert such defense.
12.5 Time for Claims. Any claim asserted with respect to the items
---------------
enumerated in Sections 12.1 or 12.2 must be submitted to the Indemnity Obligor
in writing, or invoked in official proceedings, within two years after the
Closing Date, except for claims resulting: (a) from a breach of Seller's
representations and warranties concerning title to the assets as set forth in
Section 4.6, which may be made at any time prior to the fifth anniversary of the
Closing Date; (b) from any Taxes of Seller which are Excluded Liabilities, which
may be made at any time
within the statutes of limitations applicable to such claims; (c) from a product
liability claim arising from the Purchased Inventories under Section 12.1(d) or
from Section 12.1(c) or (f), or Section 12.2(c), (d) or (i) which may be made at
any time; (d) from an intellectual property claim arising from the Purchased
Inventories under Section 12.1(d) or from Section 12.1(e) or Section 12.2(e),
(f), (g) or (h), which may be made prior to the fifth anniversary of the Closing
Date; (e) from the representations and warranties contained in Section 4.2 and
Section 5.2 with respect to the authority of the parties and the enforceability
of this Agreement and the Transaction Agreements which may be made at any time;
and (f) from any claim under Section 12.1(b) or 12.2(b) with respect to a
covenant, agreement or condition required to be performed by a party following
the Closing Date, which may be made at any time that such performance is
required. If the matters giving rise to the claim occur prior to the end of the
time limits specified above, and if a notice of the claim is presented within
such time limits, then the Indemnity Obligor shall be entitled to recover any
Losses (whenever incurred) related to such claim.
12.6 Limitation.
----------
(a) Notwithstanding the provisions of Section 12.1, and subject to
Section 12.12 below, Seller shall not have any indemnification obligation
under this Agreement unless and until the aggregate amount of the Losses of
the Indemnified Party exceeds $1,000,000 in the aggregate, whereupon Seller
shall be liable to indemnify the Indemnified Party for all of such Losses.
(b) Notwithstanding the provisions of Section 12.2, and subject to
Section 12.12 below, Buyer shall not have any indemnification obligation
under Sections 12.2(a)
or (b) of this Agreement unless and until the aggregate amount of the
Losses of the Indemnified Party exceeds $1,000,000 in the aggregate,
whereupon Buyer shall be liable to indemnify the Indemnified Party for all
such Losses.
12.7 Reduction by Insurance Proceeds. The amount payable by an
-------------------------------
Indemnity Obligor to an Indemnified Party with respect to a Loss shall be
reduced by the amount of any insurance proceeds actually received by the
Indemnified Party with respect to the Loss, and each of the parties hereby
agrees to use its reasonable commercial efforts to collect any and all insurance
proceeds to which it may be entitled in respect of any Loss; provided, however,
that insurance proceeds need not be collected prior to submission and payment of
a claim by the Indemnity Obligor for such Loss. Each party further agrees that
in the event of payment of insurance proceeds, the Indemnified Party who
receives such insurance proceeds shall promptly notify the Indemnity Obligor,
and, if the Indemnity Obligor has made a payment for a Loss, then the
Indemnified Party shall promptly remit to the Indemnity Obligor the amount of
insurance proceeds.
12.8 Maximum Indemnity Amount.
------------------------
(a) Subject to Section 12.12 below, in no event shall the amount for
which Seller shall be liable as an Indemnity Obligor hereunder exceed
$200,000,000.
(b) Subject to Section 12.12 below, in no event shall the amount for
which Buyer shall be liable as an Indemnity Obligor hereunder exceed
$200,000,000.
12.9 Known Matters. Seller shall not be required to indemnify any
-------------
Buyer Indemnitee for any Loss resulting from the breach of a representation or
warranty of Seller set forth in the first sentence of Section 4.9, the first two
sentences of Section 4.14 or the first two
sentences of Section 4.22(c) if Seller proves that a Buyer Indemnitee knew and
Seller did not know at the time of Closing of the existence of the facts or
circumstances giving rise to such breach. The knowledge of any Buyer Indemnitee
as to any other matter shall not be a defense to a claim for indemnity by any
Buyer Indemnitee.
12.10 Exclusive Remedy. Except as expressly described in this
----------------
Agreement and the Transaction Agreements, neither Buyer or any Buyer Indemnitee
nor Seller or any Seller Indemnitee shall have any remedies (statutory,
equitable, common law or other) against the other with respect to any Loss or
Environmental Claim, including, without limitation, any right of recovery
against any other party for any Environmental Claim under any Environmental Law,
including, without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act and the North Carolina Air Pollution and
Hazardous Substances Control Act.
12.11 Indemnities Related to Purchased Inventories. In the event
--------------------------------------------
that Buyer brings an indemnification claim for breach of Seller's
representations in Section 4.10 with respect to the period of time in which
items included in the Purchased Inventories (including, without limitation,
those items listed on Section 4.10 of the Disclosure Schedule) are useable or
saleable, Buyer's sole remedy shall be as follows: Seller shall refund to Buyer
the amount of the Purchase Price paid by Buyer for such Purchased Inventories.
Seller may direct Buyer to ship such Purchased Inventories to Seller or a Seller
Affiliate, to hold the Purchased Inventories on behalf of Seller for future use,
or destroy the Purchased Inventories, in each case at Seller's cost. If Seller
directs destruction of a portion of the Purchased Inventories, Seller shall
reimburse the Buyer's actual out-of-pocket cost of the lawful destruction.
12.12 Exceptions.
----------
(a) The limitations set forth in Section 12.6 and 12.8 shall not apply
to any claims of any Buyer Indemnitee arising out of the following: (i) any
Excluded Liability; (ii) any severance pay or WARN Act liability or
damages, to the extent they arise from Seller's actions prior to, on or
after the Closing Date; (iii) any product liability claim arising from the
Purchased Inventories; (iv) any matter described in Section 12.1(c); or (v)
any matter described in subpart (iv) of the definition of Environmental
Claim.
(b) The limitations set forth in Sections 12.6 and 12.8 shall not
apply to any claims of any Seller Indemnitee arising out of the following:
(i) any failure of Buyer to perform the obligations under the Assumed
Liabilities; (ii) any severance pay or WARN Act liability or damages, to
the extent that they arise from Buyer's actions prior to, on or after the
Closing Date with respect to New Employees; (iii) except to the extent
Buyer would be entitled to indemnity from Seller under this Agreement and
the Environmental Agreement or be excused from indemnifying Seller pursuant
to Article XXI of the Supply Agreement, Buyer's Operation of the Facility
and ownership of the Purchased Assets after the Effective Time; (iv) any
matter described in Section 12.2(c); or (v) any matter described in subpart
(iv) of the definition of Environmental Claim.
ARTICLE XIII
TERMINATION
13.1 Termination. This Agreement may be terminated at any time prior
-----------
to the Closing:
(a) By the mutual written consent of Seller and Buyer;
(b) By Seller, if Buyer shall (i) breach any of its covenants
contained in Article VII entitled "Covenants of Buyer and Seller" or
Article VIII entitled "Mutual Covenants," or (ii) breach of any of its
obligations contained in Section 8.1, 8.3, 8.6, 8.10 or 8.11, which breach
or failure is not cured within ten days after Seller has notified Buyer of
its intent to terminate this Agreement pursuant to this subparagraph;
(c) By Buyer, if Seller shall (i) breach any of its covenants
contained in Article VI entitled "Covenants of Seller," Article VII
entitled "Covenants of Buyer and Seller," or Article VIII entitled "Mutual
Covenants," or (ii) breach of any of its obligations contained in Section
8.1, 8.3, 8.6, 8.10 or 8.11, which breach or failure is not cured within
ten days after Buyer has notified Seller of its intent to terminate this
Agreement pursuant to this subparagraph;
(d) By either Seller or Buyer, if there shall be any order, writ,
injunction or decree of any Governmental Body binding on Seller or Buyer
which prohibits or restrains Seller or Buyer from consummating the
transactions contemplated hereby; or
(e) By either Seller or Buyer, if the Closing has not occurred by
September 30, 1997, for any reason other than delay or nonperformance of
the party seeking such termination.
13.2 Effect on Obligations. Termination of this Agreement
---------------------
pursuant to this Article shall terminate all obligation of the parties
hereunder, except for the obligations under Sections 14.5 (with respect to
expenses) and 14.6 (with respect to publicity); provided, however, that
termination pursuant to subparagraphs (b) or (c) of Section 13.1 shall not
relieve the
defaulting or breaching party from any liability to the other party hereto; and
provided, further, that the parties' obligations under Section 8.5 of this
Agreement shall survive any such termination. The effect of termination of the
Agreement on the Escrow Amount shall be as provided in the Escrow Agreement.
ARTICLE XIV
MISCELLANEOUS
14.1 Survival of Representations. All representations and
---------------------------
warranties of the parties hereto contained in this Agreement shall survive the
Closing, and any claim made with respect to such representations and warranties
must be made within the period described in Section 12.5 of this Agreement, or
be forever barred.
14.2 Bulk Sales. Buyer acknowledges that Seller will not comply
----------
with the provisions of any bulk sales laws of any jurisdiction in connection
with the sale of the Purchased Assets hereunder.
14.3 Risk of Loss.
------------
(a) Material. In the event of any casualty loss, damage or
--------
destruction of the Purchased Assets which is of such a magnitude that, were
it not remedied, it would prevent Buyer from producing Products with
"Conversion Charges" that would be equivalent to five percent or more of
the "Guaranteed Revenues" (each as defined in the Supply Agreement) for the
period consisting of the first six months following the anticipated Closing
Date, the parties agree that (i) they will attempt in good faith to
renegotiate for a period of 15 days following the occurrence of the
casualty loss to
renegotiate this Agreement and the Supply Agreement to reflect new terms
that are mutually acceptable to the parties in light of the casualty loss
and (ii) if they are unable to reach mutually acceptable new terms within
such 15-day period, any party may, at its option, terminate this Agreement.
(b) Not Material. In the event of any casualty loss, damage or
------------
destruction of the Purchased Assets which does not meet the description set
forth in Section 14.3(a) above, then (i) the parties shall proceed to close
under this Agreement; (ii) Buyer shall undertake the repair, restoration
and replacement of any damaged Purchased Assets after the Closing Date in
as prompt a manner as is practicable; (iii) Seller shall assign to Buyer
the right to receive all insurance proceeds payable in connection with such
damage and reimburse Buyer for any costs of such repair, restoration or
replacement not covered by such proceeds; (iv) the "Guaranteed Revenues"
shall be reduced by an amount equal to 40% of the "Conversion Charges"
(each as defined in the Supply Agreement) that would have been payable by
Seller under the Supply Agreement for Products, if any, that Buyer is
prevented from producing as a result of the casualty loss or damage; and
(v) the parties shall make such other adjustments to the terms of the
Supply Agreement as are appropriate to reflect the occurrence of the
casualty loss or damage.
14.4 Tax Filings. Each of the parties acknowledges its understanding
-----------
of the requirement under Section 1060 of the Code for the filing by each of Form
8594 for their respective tax years in which the Closing occurs. Each of Seller
and Buyer agrees to timely file all forms and information required by said
Section 1060 and the regulations promulgated thereunder, and to show the
allocation of the Purchase Price among the Purchased Assets in
accordance with the Exhibit described in Section 3.7. In the event that Buyer is
required by any taxing authority to make any changes in the amounts so
allocated, it shall within 30 days following its agreement to such adjustment
notify Seller of the adjustment.
14.5 Expenses. Each party will pay its own direct costs and
--------
expenses, including the fees of attorneys, accountants, brokers and other
advisors, incurred in connection with the negotiation and consummation of this
Agreement and the transactions contemplated hereby. Seller will pay all sales,
use and transfer taxes (including excise or transfer taxes on the transfer of
the Owned Real Property) arising in North Carolina. Buyer will pay all
recording, filing, title and registration fees in connection with the Closing,
as well as its filing fees under the HSR Act and transfer taxes arising outside
of North Carolina.
14.6 Publicity. No public announcement of the parties' negotiations,
---------
the signing of this Agreement or any of the terms, conditions or other aspects
of the transactions proposed in this Agreement shall be made by either party
without the prior written consent of the other; provided, however, that either
party shall be entitled to make a public announcement of the proposed
transaction after giving prior written notice to the other party hereto, if, in
the opinion of the disclosing party's legal counsel, such announcement is
required to comply with applicable laws and provided to the extent practicable
the other party has received at least two days' notice.
14.7 Notices. All notices, demands and other communications made
-------
hereunder shall be in writing and shall be given either by personal delivery, by
nationally recognized overnight courier (with charges prepaid) or by facsimile
transmission (with telephone confirmation), and shall be deemed to have been
given or made if personally delivered, on the day of such personal delivery; if
sent by overnight courier, on the next business day following
the date deposited with such overnight courier service; or if by facsimile
transmission, on the business day transmitted to receiving facsimile machine
with receipt confirmed by telephone, in each case addressed to the respective
parties at the following addresses (or such other address for a party as shall
be specified by like notice):
If to the Seller:
Glaxo Wellcome Inc.
Five Moore Drive
Research Triangle Park, North Carolina 27709
Attention: Richard J. Wallace, Vice President, Business
Development
Telephone: (919) 483-7430
Facsimile: (919) 483-0768
With a copy (which shall not constitute notice) to:
Glaxo Wellcome Inc.
Five Moore Drive
Research Triangle Park, North Carolina 27709
Attention: General Counsel
Telephone: (919) 483-2106
Facsimile: (919) 315-0478
If to Buyer:
Catalytica Pharmaceuticals, Inc.
430 Ferguson Drive
Mountain View, California 94043
Attention: Chief Executive Officer and Chief Financial Officer
Telephone: (415) 960-3000
Facsimile: (415) 968-8754
Catalytica Pharmaceuticals, Inc.
Intersection of U.S. 13/N.C. 11 and Hwy. 264
Greenville, NC 27834
Attention: President
Telephone: (919) 758-3436
Facsimile: (919) 707-7050
With a copy (which shall not constitute notice) to:
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, California 94304-1050
Attention: Barry E. Taylor, Esq.
Telephone: (415) 493-9300
Facsimile: (415) 496-4092
If to Parent:
Catalytica, Inc.
430 Ferguson Drive
Mountain View, California 94043
Attention: Chief Executive Officer and Chief Financial Officer
Telephone: (415) 960-3000
Facsimile: (415) 968-8754
With a copy (which shall not constitute notice) to:
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, California 94304-1050
Attention: Barry E. Taylor, Esq.
Telephone: (415) 493-9300
Facsimile: (415) 496-4092
14.8 Governing Law. This agreement is entered into in the State of
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North Carolina and shall be governed by the laws of the State of North Carolina
applicable to agreements made and to be performed entirely within the State of
North Carolina.
14.9 Jurisdiction. Any action or proceeding seeking to enforce any
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provision of, or based on any right arising out of, this Agreement may be
brought against any of the parties in the courts of the State of North Carolina,
County of Wake, or, if it has or can acquire jurisdiction, in the United States
District Court for the Middle District of North Carolina, and each of the
parties consents to the jurisdiction of such courts (and of the appropriate
appellate courts) in any such action or proceeding and waives any objection to
venue laid therein. Process
in any action or proceeding referred to in the preceding sentence may be served
on any party anywhere in the world.
14.10 Counterparts. This Agreement may be executed in one or more
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counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
14.11 Assignment. This Agreement shall be binding upon and inure
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to the benefit of the parties hereto and their respective successors and
permitted assigns. Neither this Agreement nor any of the rights, interest or
obligations hereunder shall be assigned by any of the parties hereto without the
prior written consent of all other parties hereto, and any purported assignment
without such consent shall be void. Notwithstanding the provisions of this
Section, Buyer shall be permitted to assign its rights and obligations under
this Agreement to any Parent's Affiliate, provided that Parent agrees to
guarantee, assume and discharge any and all liabilities, obligations, duties and
covenants assumed by such Parent's Affiliate hereunder, as if such liabilities,
obligations, duties and covenants were expressly required to be performed or
discharged directly by Parent. Furthermore, Buyer shall be permitted, in
connection with the Closing, to assign its rights under Article XII and under
Sections 8.2 through 8.4 and other rights to payment or performance by Seller
under this Agreement, and its rights to enforce such rights to payment or
performance, to its lenders (or the financial institution acting as agent for
such lenders) and such lenders' successors and assigns.
14.12 Third Party Beneficiaries. Except for certain parties
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entitled to indemnification under Section 8.2, Section 12.1 and Section 12.2,
none of the provisions of this Agreement or any document contemplated hereby is
intended to grant any right or benefit to any
person or entity which is not a party or a permitted assignee (as described in
Section 4.11) to this Agreement.
14.13 Headings. The article and section headings contained in this
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Agreement are solely for the purpose of reference, are not part of this
Agreement and shall not in any way affect the meaning or interpretation of this
Agreement.
14.14 Amendments. Any waiver, amendment, modification or
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supplement of or to any term or condition of this Agreement shall be effective
only if in writing and signed by all parties hereto, and the parties hereto
waive the right to amend the provisions of this Section orally.
14.15 Severability. In the event that any provision in this
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Agreement shall be determined to be invalid, illegal or unenforceable in any
respect, the remaining provisions of this Agreement shall not be in any way
impaired, and the illegal, invalid or unenforceable provision shall be fully
severed from this Agreement and there shall be automatically added in lieu
thereof a provision as similar in terms and intent to such severed provision as
may be legal, valid and enforceable.
14.16 Entire Agreement. This Agreement and the Schedules and
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Exhibits hereto constitute the entire contract between the parties hereto
pertaining to the subject matter hereof, and supersede all prior and
contemporaneous agreements and understandings between the parties with respect
to such subject matter including without limitation the Letter of Intent dated
February 5, 1997, which are hereby expressly terminated.
14.17 Drafting Ambiguities. Each party to this Agreement and its
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counsel have reviewed and revised this Agreement. The normal rule of
construction to the effect that any
ambiguities are to be resolved against the drafting party shall not be employed
in the interpretation of this Agreement or of any amendments, Schedules or
Exhibits to this Agreement.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be signed by its duly authorized officer as of the date first above
written.
SELLER:
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GLAXO WELLCOME INC.
By: \S\ Robert A. Ingram
___________________________________
Name: Robert A. Ingram
Title: President and Chief Executive
Officer
BUYER:
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CATALYTICA PHARMACEUTICALS, INC.
By: \s\ James A. Cusumano
__________________________________
Name: James A. Cusumano
Title: President and CEO
PARENT:
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CATALYTICA, INC.
By: \s\ Ricardo B. Levy
__________________________________
Name: Ricardo B. Levy
Title: President, CEO