PURCHASE AGREEMENT
BY AND BETWEEN
PENWEST PHARMACEUTICALS CO.
AND
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ HOLDING GMBH & CO. KG
TABLE OF CONTENTS
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1. Sale and Delivery of the Assets...................................... 1
1.1 Sale and Delivery of the U.S. Assets........................ 1
1.2 Sale and Delivery of the Subsidiary Shares.................. 3
1.3 Purchase Price.............................................. 3
1.4 Assumption of Liabilities; Etc. ............................ 3
1.5 Allocation of Purchase Price and Assumed Liabilities........ 4
1.6 The Closing................................................. 4
1.7 Post Closing Adjustment..................................... 5
2. Representations and Warranties of the Company........................ 5
2.1 Organization................................................ 5
2.2 Capitalization of the Subsidiaries and Title to the 6
Shares......................................................
2.3 Authorization............................................... 6
2.4 Ownership of the Assets..................................... 6
2.5 Financial Information....................................... 7
2.6 AstraZeneca Payment......................................... 8
2.7 Accounts Receivable......................................... 8
2.8 Absence of Undisclosed Liabilities.......................... 8
2.9 Litigation.................................................. 8
2.10 Insurance................................................... 8
2.11 Inventory................................................... 8
2.12 Fixed Assets................................................ 9
2.13 Leases...................................................... 9
2.14 Change in Financial Condition and Assets.................... 9
2.15 Contracts................................................... 10
2.16 Compliance with Agreements and Laws......................... 11
2.17 Employee Relations.......................................... 11
2.18 Suppliers................................................... 12
2.19 Customers................................................... 12
2.20 Intangible Property......................................... 12
2.21 Employee Benefit Plans...................................... 13
2.22 U.S. Tax Matters............................................ 15
2.23 Environmental Matters....................................... 16
2.24 Special Transactions........................................ 18
2.25 Certain Affiliated Transactions............................. 18
2.26 Disclosure.................................................. 18
3. Representations of the Buyer......................................... 19
3.1 Organization and Authority.................................. 19
3.2 Authorization............................................... 19
3.3 Regulatory Approvals........................................ 19
3.4 Financial Capacity.......................................... 19
3.5 Disclosure.................................................. 19
3.6 Reliance.................................................... 20
4. Access to Information; Public Announcements.......................... 20
4.1 Access to Management, Properties and Records................ 20
4.2 Confidentiality............................................. 20
4.3 Public Announcements........................................ 20
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5. Pre-Closing Covenants of the Parties................................. 21
5.1 Conduct of Business......................................... 21
5.2 Absence of Material Changes................................. 21
5.3 Taxes....................................................... 22
5.4 Special Meeting and Proxy Statement......................... 22
5.5 Compliance with Laws........................................ 23
5.6 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act and Foreign Antitrust Laws............ 23
5.7 Assignment of Contracts..................................... 23
5.8 Employee Matters............................................ 24
5.9 Notification of Changes..................................... 27
6. Satisfaction of Conditions........................................... 28
7. Conditions to Obligations of the Buyer............................... 28
7.1 Continued Truth of Representations and Warranties of the 28
Company; Compliance with Covenants and Obligations..........
7.2 Corporate Proceedings....................................... 28
7.3 Approvals................................................... 28
7.4 Adverse Proceedings......................................... 28
7.5 Closing Deliveries.......................................... 28
8. Conditions to Obligations of the Company............................. 30
8.1 Continued Truth of Representations and Warranties of the 30
Buyer; Compliance with Covenants and Obligations............
8.2 Corporate Proceedings....................................... 30
8.3 Governmental Approvals...................................... 30
8.4 Adverse Proceedings......................................... 30
8.5 Closing Deliveries.......................................... 30
9. Indemnification...................................................... 31
9.1 By the Buyer and the Company................................ 31
9.2 By the Company.............................................. 31
9.3 By the Buyer................................................ 31
9.4 Claims for Indemnification.................................. 31
9.5 Defense by Indemnifying Party............................... 32
9.6 Additional Procedures for Environmental Indemnification..... 32
9.7 Payment of Indemnification Obligation....................... 33
9.8 Limitations on Indemnification.............................. 33
9.9 Additional Limitations on Environmental Indemnification..... 34
9.10 Survival of Representations; Claims for Indemnification..... 35
10. Post-Closing Agreements.............................................. 35
10.1 Non-Competition Agreement, Non-Solicitation................. 35
10.2 Sharing of Data............................................. 35
10.3 Use of Name................................................. 36
10.4 Cooperation in Litigation................................... 36
10.5 Transitional Services and ▇▇▇▇▇▇▇▇▇ Lease................... 36
10.6 Confidentiality Agreements.................................. 36
10.7 Tax Matters................................................. 37
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11. Termination of Agreement............................................. 37
11.1 Termination by Lapse of Time................................ 37
11.2 Termination by Agreement of the Parties..................... 38
11.3 Termination by Reason of Breach............................. 38
11.4 Termination by the Company's Board of Directors............. 38
11.5 Effects of Termination...................................... 38
11.6 Expenses.................................................... 38
12. Transfer and Sales Tax............................................... 39
13. Brokers.............................................................. 40
13.1 For the Company............................................. 40
13.2 For the Buyer............................................... 40
14. Notices.............................................................. 40
15. Successors and Assigns............................................... 40
16. Entire Agreement; Amendments; Attachments............................ 41
17. Legal Fees........................................................... 41
18. Governing Law; Consent to Jurisdiction............................... 41
18.1 Governing Law............................................... 41
18.2 Consent to Jurisdiction..................................... 41
19. Mediation............................................................ 41
20. Arbitration.......................................................... 41
20.1 Normal Arbitration.......................................... 41
20.2 Material Adverse Change..................................... 42
21. Interpretation....................................................... 42
22. Miscellaneous........................................................ 43
22.1 Section Headings............................................ 43
22.2 Severability................................................ 43
22.3 Counterparts................................................ 43
Exhibits
A Form of Promissory Note
B Buyer's Instrument of Assumption of Liabilities
C ▇▇▇▇ of Sale
D Retention Bonus Plan
E Opinion of ▇▇▇▇ and ▇▇▇▇ LLP
F Opinion of ▇▇▇▇▇▇▇ Coie LLP
G Opinion of ▇▇▇▇▇▇ & Bird LLP
H Opinion of Poellath & Partner
I Lease of Patterson Facilities
J Transition Services Agreements
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PURCHASE AGREEMENT
Agreement made as of November 1, 2002, between
Penwest Pharmaceuticals Co.,
a Washington corporation with its principal office at ▇▇▇▇ ▇▇▇▇▇ ▇▇, ▇▇▇▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ (the "Company"), and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ Holding GmbH & Co.
KG, a German limited partnership with its principal office at ▇▇▇▇▇▇▇▇▇▇ ▇,
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ (the "Buyer").
Preliminary Statement
The Company and its subsidiaries Penwest Pharmaceuticals Ltd., Penwest
Pharmaceuticals GmbH and Penwest Pharmaceuticals Oy (collectively, the
"Subsidiaries") are referred to in this Agreement as the "Sellers."
The Buyer desires to purchase, and the Company desires to sell,
substantially all of the assets and business of the Sellers pertaining to the
development, testing, manufacture, distribution and sale of excipient products,
such products being used, inter alia, in the manufacture of tablets by
pharmaceutical and nutritional companies (such assets and business being
referred to as the "Business"), as distinct from controlled release drug
delivery technologies and systems and other products and services (the "Excluded
Lines of Business") and from the Company's administrative functions and
corporate overhead, for the purchase price set forth below and the assumption of
certain of the Sellers' liabilities as set forth below, subject to the terms and
conditions of this Agreement.
In order to effect this transaction, the Company will sell to the Buyer the
Assets described below. The Assets consist of certain assets described below,
owned directly by the Company and located primarily in the United States (the
"U.S. Assets") and all of the outstanding capital stock of the Subsidiaries (the
"Subsidiary Shares").
NOW, THEREFORE, in consideration of the mutual premises hereinafter set
forth and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereby agree as follows:
1. Sale and Delivery of the Assets
1.1 Sale and Delivery of the U.S. Assets.
(a) Subject to and upon the terms and conditions of this Agreement, at
the closing of the transactions contemplated by this Agreement (the
"Closing"), the Company shall sell, transfer, convey, assign and deliver to
the Buyer, and the Buyer shall purchase from the Company, all of the
Company's right, title and interest in and to all of the U.S. Assets,
consisting of (x) the properties, assets and other claims, rights and
interests owned by the Company that pertain to the Business and are
described in Subsections (i) through (x) below (except for those assets
that are listed on Schedule 1.1(a) under the caption "Certain Excluded
Assets"), (y) those properties, assets and other claims, rights and
interests that are listed on Schedule 1.1(a) under the caption "Certain
Included Operating Assets" which pertain both to the Business and the
Excluded Lines of Business but which the parties have agreed shall
constitute Assets and (z) those properties, assets and other claims that
are listed on Schedule 1.1(a) under the caption "Certain Included
Administrative Assets" which are used in the Company's administrative
functions and corporate overhead primarily for the support of the Business
rather than primarily for the support of the Excluded Lines of Business or
for general company-wide purposes, and which the parties have agreed shall
constitute Assets:
(i) the real property and interests therein, options or similar
rights to purchase real property and buildings, structures, facilities,
fixtures and other improvements thereon owned by the Company that are
listed on Schedule 1.1(a)(i) attached hereto (collectively, the "U.S.
Real Property");
(ii) the machinery and equipment, fixtures, furniture, leasehold
improvements, construction in progress, motor vehicles and spare parts,
owned by the Company on the Closing Date (as defined in
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Section 1.6) that are listed on Schedule 1.1(a)(ii) attached hereto
(collectively, the "U.S. Fixed Assets");
(iii) the inventories, finished goods, work in process, raw
materials, office supplies, maintenance parts and supplies, packaging
materials and similar items pertaining to the Business owned by the
Company as they exist on the Closing Date;
(iv) the rights (collectively, the "U.S. Contract Rights") of the
Company under those contracts, agreements, leases, licenses and other
instruments to which the Company is a party and which pertain to the
Business, including without limitation those that are listed on Schedule
2.15(a)(i) attached hereto (collectively, the "U.S. Contracts");
(v) the prepaid expenses, security deposits, other deposits and other
similar assets of the Company pertaining to the Business as they exist
on the Closing Date;
(vi) copies (in hard copy and, if readily available to the Company,
electronic media) of the Company's drug master files, books, records and
accounts, correspondence, manuals, customer lists, employment records
(other than medical or other confidential records of employees who do
not consent to the transfer of such records to the Buyer), studies,
reports or summaries relating to or pertaining to the Business;
(vii) the Company's right, title and interest in and to intangible
property rights pertaining to the Business identified on Schedule
1.1(a)(vii) attached hereto, including inventions, discoveries, trade
secrets, processes, formulas, United States and foreign patents, patent
applications, trade names, trademarks, trademark registrations,
applications for trademark registrations, copyrights, copyright
registrations, owned or, where not owned, used by the Company and
licenses and other agreements to which the Company is a party (as
licensor or licensee) or by which the Company is bound relating to any
of the foregoing kinds of property or rights to any "know-how" or
disclosure or use of ideas (collectively, the "U.S. Intangible
Property");
(viii) the accounts, accounts receivable, notes and notes receivable
pertaining to the Business as they exist on the Closing Date which are
payable to the Company, including any security held by the Company for
the payment thereof and including any accounts receivable or other
rights to receive payment from any of the Subsidiaries (collectively,
the "U. S. Accounts Receivable");
(ix) to the extent transfer is permitted under applicable law or
regulation, Permits (as defined in Section 2.16) that are necessary for
the lawful ownership or operation of the Business or the Assets; and
(x) the goodwill of the Business (as distinct from the goodwill of
the Excluded Lines of Business or the goodwill or going concern value of
the Company as a business organization), including the exclusive right
to represent oneself as the successor to the Business.
As a general principle, in case of doubt it will be presumed that physical
assets belonging to the Company located at its facility at Cedar Rapids, Iowa
and other assets, whether or not physical, which are not listed under the
caption "Certain Excluded Assets" and which pertain primarily to the Business,
are included in the U.S. Assets.
(b) The assets to be transferred to the Buyer from the Company under
this Agreement shall not include:
(i) unless specifically listed on Schedule 1.1(a) under the caption
"Certain Included Operating Assets" or "Certain Included Assets", assets
(including without limitation assets of the types described in Section
1.1(a)above), primarily used or useful in the Excluded Lines of
Business, used in the Company's administrative functions or corporate
overhead activities (unless used solely to support the Business) or
otherwise not pertaining to the Business;
(ii) any cash, bank account balances, negotiable instruments,
securities (other than the Subsidiary Shares) or similar assets;
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(iii) any casualty, liability or other policies of insurance and
rights thereunder or any rights under self insurance programs maintained
or established with respect to the Business;
(iv) any refunds of any Tax (as defined in Section 2.22(a)(ii)),
including, without limitation, any claims for refunds filed prior to the
Closing Date;
(v) any right or franchise of the Company to be a corporation or any
documents pertaining thereto;
(vi) any indemnity or contribution rights granted to or owed by third
parties with respect to liabilities or obligations that do not
constitute Assumed Liabilities (as hereinafter defined), or any rights
or assets arising from and directly related to the defense, release,
compromise, discharge or satisfaction of such liabilities and
obligations;
(vii) any causes of action, judgments, claims or demands of whatever
nature against third parties arising out of or relating to events prior
to the Closing Date;
(viii) any guarantees given by the Company or its affiliates for the
benefit of the Business;
(ix) any rights of the Company under this Agreement;
(x) any names or marks containing the words "Penwest", "TIMERx" ,
"Synchrodose", or "Geminex" (collectively, the "Excluded Marks") or the
Penwest logo, except as set forth in Section 10.3; or
(xi) any assets which pertain to the Business but are nevertheless
listed on Schedule 1.1(a) attached hereto under the caption "Certain
Excluded Assets" (collectively, the "Excluded Assets").
(c) At any time and from time to time after the Closing, at the Buyer's
request and without further consideration, the Company shall promptly
cooperate in executing and delivering such instruments of sale, transfer,
conveyance, name change, assignment and confirmation prepared by the Buyer,
and taking such other action, as the Buyer may with commercial
reasonableness request to more effectively transfer, convey and assign to
the Buyer, and to confirm the Buyer's title to, all of the U.S. Assets, to
put the Buyer in actual possession and operating control thereof, to assist
the Buyer in exercising all rights with respect thereto and to carry out
the purpose and intent of this Agreement.
1.2 Sale and Delivery of the Subsidiary Shares. Subject to the terms and
conditions of this Agreement, at the Closing, the Company shall sell, convey,
assign, transfer and deliver to the Buyer all of the Subsidiary Shares free and
clear of all Encumbrances (as defined in Section 2.4), and the Buyer shall
purchase, acquire and accept the Subsidiary Shares from the Company. The
Subsidiary Shares, together with the U.S. Assets, constitute the assets being
sold to the Buyer (collectively, the "Assets").
1.3 Purchase Price. The "Purchase Price" for the Assets shall be
Forty-One Million Seven Hundred Fifty Thousand Dollars ($41,750,000), payable as
follows: Thirty-Nine Million Five Hundred Thousand Dollars ($39,500,000) payable
in cash and Two Million Two Hundred Fifty Thousand Dollars ($2,250,000) payable
in the form of a promissory note in the form attached as Exhibit A hereto (the
"Promissory Note"). At the Closing, the Buyer shall pay the cash portion of the
Purchase Price by wire transfer of immediately available funds to an account
designated by the Company and shall deliver the Promissory Note. The Purchase
Price shall be subject to subsequent adjustment as provided in Section 1.7
1.4 Assumption of Liabilities; Etc.
(a) At the Closing, the Buyer shall execute and deliver an Instrument of
Assumption of Liabilities (the "Buyer's Instrument of Assumption")
substantially in the form attached hereto as Exhibit B, pursuant to which
it shall assume and agree to perform, pay and discharge the following
(collectively, the "Assumed Liabilities"):
(i) all liabilities and obligations of the Company in respect of the
Business of the same kind and nature as those set forth in the Sellers'
Financial Information (as defined in Section 2.5) including, without
limitation, all accounts payable, accrued expenses, accrued Taxes (as
defined in
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Section 2.22(a)(i)) (other than Taxes imposed upon or measured by net
income), customer charge backs, discounts, commissions, credits and
rebates, customer deposits, amounts owing to any of the Subsidiaries,
and other liabilities which shall not have been discharged prior to the
Closing Date and which are included in the Closing Date Balance Sheet
(as defined in Section 1.7);
(ii) all obligations of the Company arising from and after the
Closing Date under the U.S. Contracts referred to in Section 1.1(a)(iv);
(iii) all obligations to Continuing Employees (as defined in Section
5.8) solely to the extent expressly assumed under Section 5.8; and
(iv) all other liabilities, obligations and commitments of the
Company pertaining to the Business that are listed on Schedule 1.4(a)
attached hereto.
(b) Subject to Sections 1.4(c) and 1.4(d), the Buyer shall not at the
Closing assume or agree to perform, pay or discharge, and the Company shall
remain unconditionally liable for, all obligations, liabilities and
commitments, fixed or contingent, of the Company other than the Assumed
Liabilities. In particular and without limitation, the Buyer shall not
assume any liability with respect to Taxes imposed upon or measured by net
income, Product Liability, Employment Plans or Employees (each as
hereinafter defined), except as otherwise set forth herein.
(c) Notwithstanding any other provisions of this Agreement, the
following obligations, liabilities and commitments of the Company shall be
allocated as follows:
(i) 100% to the Company: all Losses (as defined in Section 9.1) in
respect of product liability claims for personal injuries or property
damage or other Losses (including without limitation, Losses related to
exposure or alleged exposure to any materials contained in such
products) ("Product Liabilities") with respect to products shipped or
otherwise disposed of by the Company prior to the Closing Date;
(ii) 100% to the Buyer: all Losses in respect of Product Liabilities
with respect to products sold or otherwise disposed of on or after the
Closing Date; and
(iii) as provided in Section 5.8: all obligations and liabilities to
Employees (as defined in Section 2.17(a)).
(d) All material agreements and commitments, whether written, oral or
otherwise, which are solely between the Company, on the one hand, and any
of the Subsidiaries (excluding agreements solely between and among the
Subsidiaries (if any)), on the other hand, are set forth on Schedule
1.4(d)and, except as otherwise expressly provided in such Schedule or
elsewhere in this Agreement, all such agreements, etc., whether or not
material, shall be terminated and of no further effect, simultaneously with
the Closing without any further action or liability on the part of the
parties thereto.
1.5 Allocation of Purchase Price and Assumed Liabilities. The aggregate
amount of the Purchase Price and the Assumed Liabilities shall be allocated
among the various categories of U.S. Assets, the Subsidiary Shares and the
covenant not to compete set forth in Section 10.1 as set forth on Schedule 1.5
attached hereto (the "Allocation Schedule"), subject to subsequent adjustment to
the extent required by the calculation of Net Working Capital pursuant to
Section 1.7. The Buyer shall prepare the allocation and submit it to the
Company, which shall not withhold its approval unreasonably. The allocation set
forth in such Allocation Schedule, shall comply with the rules of Section 1060
of the Internal Revenue Code of 1986, as amended (the "Code") and the Treasury
Regulations promulgated thereunder. The Buyer and the Company agree to be bound
by the allocation set forth in the Allocation Schedule for all purposes of Tax
reporting, including the filing of IRS Form 8594 in accordance with the
Allocation Schedule. Neither the Buyer nor the Company shall file a Tax Return
or take any position with any Taxing Authority that is inconsistent with the
Allocation Schedule.
1.6 The Closing. The Closing shall take place at the offices of ▇▇▇▇▇▇ &
Bird LLP, ▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, and shall occur on the first
business day following the later to occur of (i) the
4
satisfaction and/or waiver of the conditions to close set forth in Sections 7
and 8 of this Agreement, and (ii) the date on which the shareholders of the
Company approve the Agreement or on such other date as is mutually agreeable to
the Buyer and the Company (the "Closing Date"). The transfer of the Assets by
the Company to the Buyer shall be deemed to occur at 9:00 a.m.,
New York time,
on the Closing Date. The parties agree to use commercially reasonable efforts to
set the Closing Date on a day within five (5) days of the end of a month. If the
Closing Date falls within said five (5) day period, the parties agree to use the
month end balance sheet of the Business as the Closing Date Balance Sheet as
provided in Section 1.7.
1.7 Post Closing Adjustment. The parties hereto acknowledge that the
Purchase Price assumes that the Assets include net working capital ("Assumed Net
Working Capital") of Thirteen Million Eight Hundred Thousand Dollars
($13,800,000). Within 20 days after the calendar month end following the Closing
Date, the Company shall prepare and deliver to the Buyer a balance sheet of the
Business (reflecting the Assets and the Assumed Liabilities) as of the Closing
Date (the "Closing Date Balance Sheet") and a calculation of Net Working
Capital, as defined under United States generally accepted accounting principles
("GAAP") (the "Calculation"). The Buyer shall provide access to the books and
records of the Business and the services of the accounting personnel of the
Business under the direction of the Company in order to facilitate the
preparation of the Closing Date Balance Sheet and the Calculation. Except as
disclosed on Schedule 2.5(a) or Schedule 2.5(b), the Closing Date Balance Sheet
shall be prepared in accordance with GAAP, consistent with the methods used by
the Company to prepare its financial statements that have been filed with the
Securities and Exchange Commission (the "SEC") and with its "Balance Sheet -
Excipients Business" as of March 31, 2002 previously provided to the Buyer. The
Buyer and its representatives shall have 20 days to inspect the Closing Date
Balance Sheet and the Calculation. If the Buyer disagrees with any items
contained in the Closing Date Balance Sheet or the Calculation, then the Buyer
and the Company shall have 30 days after the delivery of a notice of objection
by the Buyer to come to an agreement as to what the Calculation should have
been. If they are unable to agree within such 30-day period, an accounting firm
of recognized national standing shall be appointed to resolve the dispute
(including, if necessary, auditing the Closing Date Balance Sheet) within 60
days and whose decision shall be final and binding. Promptly upon the
determination of the Net Working Capital, if it is more or less than the Assumed
Net Working Capital, the Purchase Price shall be increased (dollar-for-dollar)
by the amount of any excess amount or reduced (dollar for dollar) by any
shortfall amount, as the case may be. Any excess or shortfall determined by such
accounting firm shall be paid within two working days of said determination, the
excess, if any, to be paid to the Company and the shortfall, if any, to be paid
to the Buyer. The parties shall share the fees of the accounting firm in
proportion to the ratio that the Net Working Capital as determined by the
accounting firm bears to the calculations of the Buyer and the Company,
respectively.
2. Representations and Warranties of the Company
Except as set forth in one or more Schedules attached hereto, the Company
represents and warrants to the Buyer that all of the statements contained in
this Section 2 are true as of the date of this Agreement (or, if made as of a
specified date, as of such date). For purposes of the representations and
warranties of the Company contained herein, disclosure in any of the Schedules
attached hereto of any facts or circumstances shall constitute disclosure for
purposes of any other Schedule (and therefore the corresponding representation
and warranty) if it would be evident on the face of the Schedule to a reader
familiar with the Business that such disclosure is applicable. The inclusion of
any information in any Schedule attached hereto or other document delivered by
the Company pursuant to this Agreement shall not be deemed to be an admission or
evidence of the materiality of such item, nor shall it establish a standard of
materiality for any purpose whatsoever.
2.1 Organization. The Company is a corporation, duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization, and has all requisite power and authority (corporate and other) to
own its properties, to carry on its business as now being conducted, to execute
and deliver this Agreement and the agreements contemplated herein, and to
consummate the transactions contemplated hereby. Schedule 2.1 attached hereto
lists all corporate, partnership, joint venture and other entities in which any
Seller holds, directly or indirectly, a 5% or greater interest. Each of the
Subsidiaries is a corporation or other entity duly organized, validly existing
and in good standing under the laws of the jurisdiction of its
5
incorporation or organization and has all requisite power and authority to own
its properties and to carry on its business as now being conducted. Each of the
Company and each Subsidiary is duly qualified to do business and in good
standing in all jurisdictions in which its ownership of property or the
character of its business requires such qualification, except where the failure
to be so qualified would not have a material adverse effect on the Business.
Copies of the charter, bylaws and other governing instruments of the Company and
each of the Subsidiaries, each as amended to date, have been previously
delivered to the Buyer, are complete and correct, and no amendments have been
made thereto or have been authorized since the date thereof.
2.2 Capitalization of the Subsidiaries and Title to the Shares. Schedule
2.2 attached hereto specifies each Subsidiary's jurisdiction of organization and
sets forth the number of shares of capital stock authorized and the number of
shares outstanding for each Subsidiary. The Company owns (beneficially or of
record) all issued and outstanding shares of stock of each Subsidiary. The
Company has the right to deliver and sell, or to cause to be delivered and sold,
the Subsidiary Shares pursuant to this Agreement. The certificates representing
the Subsidiary Shares are free and clear of all Encumbrances (as defined in
Section 2.4). All the Subsidiary Shares are duly authorized, validly issued,
fully paid and non-assessable. Except as set forth on Schedule 2.2 attached
hereto, as of the date hereof (x) there are no shares of capital stock of the
Subsidiaries authorized, issued or outstanding, and (y) there are no existing
options, warrants, calls, pre-emptive rights, subscriptions or other rights,
agreements, arrangements or commitments of any character relating to the issued
or unissued capital stock of the Subsidiaries obligating the Subsidiaries to
issue, transfer or sell or cause to be issued, transferred or sold, any of its
shares of capital stock.
2.3 Authorization. Except for stockholder approval as contemplated by
Section 5.4, the execution and delivery of this Agreement by the Company, and
the agreements provided for herein to which the Company is a party, and the
consummation by the Company of all transactions contemplated hereby, have been
duly authorized by all requisite corporate action. Upon receipt of stockholder
approval, this Agreement and all such other agreements and obligations entered
into and undertaken in connection with the transactions contemplated hereby and
thereby to which the Company is a party will constitute the valid and legally
binding obligations of the Company, enforceable against the Company in
accordance with their respective terms. The execution, delivery and performance
by the Company of this Agreement and the agreements provided for herein, and the
consummation by the Company of the transactions contemplated hereby and thereby,
will not, with or without the giving of notice or the passage of time or both:
(a) violate the provisions of any law, rule or regulation applicable to the
Company or any other Seller; (b) violate the provisions of the charter, bylaws
or other governing instruments of the Company or any other Seller; (c) violate
any judgment, decree, order or award of any court, governmental body or
arbitrator that names any of the Sellers or is binding on any of the Assets; or
(d) conflict with or result in the breach or termination of any term or
provision of, or constitute a default under, or cause any acceleration under, or
cause the creation of any lien, charge or encumbrance upon the properties or
assets of the Company or any other Seller pursuant to, any indenture, mortgage,
deed of trust or other instrument or agreement to which the Company or any other
Seller is a party or by which the Company or any other Seller or any of their
respective properties is or may be bound, except such violations, breaches or
defaults which (A) would not, individually or in the aggregate, have a material
adverse affect on the Business or on the Company's ability to consummate the
transactions contemplated herein or (B) would become applicable as a result of
the business or activities in which the Buyer is or proposed to be engaged other
than the Business or as a result of any acts or omissions by, or the status of
any facts pertaining to, the Buyer or (C) would arise only if any of the
consents and approvals listed on Schedule 2.3 attached hereto is not obtained.
Schedule 2.3 attached hereto lists the consents and approvals of third parties
that are required in connection with the consummation of the transactions
contemplated by this Agreement and identifies, under the heading "Individually
Material Consents," those consents and approvals which, if not obtained or if
not dealt with in the manner contemplated by the final sentence of Section 5.7,
would individually or in the aggregate, have a material adverse effect on the
Business or on the Company's ability to consummate the transactions contemplated
herein.
2.4 Ownership of the Assets. Schedule 2.4(i) attached hereto lists all
claims, liabilities, liens, pledges, charges and encumbrances affecting the
Assets and the assets of the Subsidiaries (collectively, the "Encumbrances")
having in each instance a value in excess of $50,000. The Company is, and at the
Closing
6
will be, the true and lawful owner of the U.S. Assets, and will have the right
to sell and transfer to the Buyer marketable title to the U.S. Assets, free and
clear of all Encumbrances of any kind, except for (a) liens for Taxes not yet
due and payable or being contested in good faith, (b) Encumbrances that will be
released on the Closing Date, (c) such imperfections of title, easements, or
other non-financial encumbrances, if any, as are not, individually or in the
aggregate, substantial in character, amount or extent and do not materially
interfere with the present use of the property subject thereto or affected
thereby, or otherwise materially impair operation of the Business or (d)
Encumbrances set forth on Schedule 2.4(ii) attached hereto (collectively, the
"Permitted Encumbrances"). The delivery to the Buyer of the instruments of
transfer of ownership contemplated by this Agreement will vest marketable title
to the U.S. Assets in the Buyer, free and clear of all Encumbrances of any kind
or nature whatsoever, except for the Permitted Encumbrances.
Schedule 2.4(iii) attached hereto sets forth a description of all the real
property owned or leased by any Seller and used in the Business. The Sellers
have delivered to the Buyer copies of the most recent title reports and surveys
in their possession, if any, related to real property owned by them. Except as
set forth in Schedule 2.4(iii) attached hereto, with respect to each parcel of
U.S. Real Property and the real property and interests therein, options or
similar rights to purchase real property and buildings, structures, facilities,
fixtures and other improvements thereon that are owned by the Subsidiaries (the
"Non-U.S. Real Property" and, together with the U.S. Real Property, the "Real
Property"):
(i) the identified owner has, or will at Closing have, marketable title
to each such parcel, free and clear of Encumbrances, other than Permitted
Encumbrances;
(ii) there are no (A) pending or, to the Company's knowledge, threatened
condemnation proceedings relating to any such parcel, or (B) pending or, to
the Company's knowledge, threatened litigation or administrative actions
relating to any such parcel;
(iii) there are no leases, subleases, licenses or agreements, written or
oral, granting to any party or parties the right of use or occupancy of any
material portion of such parcel;
(iv) there are no outstanding options or rights of first refusal to
purchase any such parcel, or any portion thereof or interest therein;
(v) to the Company's knowledge, all facilities located on such parcel
are supplied with utilities adequate for the operation of such facilities;
and
(vi) accurate copies of all deeds, surveys, and title insurance
policies, if any, in the Sellers' possession have been delivered to Buyer
to enable Buyer to obtain, at its expense, such title insurance and updated
surveys as Buyer may wish to obtain.
2.5 Financial Information.
(a) Schedule 2.5(a) sets forth financial information with respect to the
revenue, costs and expenses and earnings before interest and taxes of the
Business for the years ended December 31, 1999, 2000 and 2001 and with
respect to assets and liabilities at December 31, 2000 and 2001, and for
the 6 months ended June 30, 2002 (collectively, "Financial Information").
The Financial Information presents fairly the financial condition and
results of operations of the Business as at the respective dates of and for
the periods referred to in such Financial Information, all in accordance
with GAAP and the methods used by the Company to prepare its financial
statements that have been filed with the SEC, except as noted in Schedule
2.5(a). The Financial Information reflects the consistent application of
such accounting principles throughout the periods involved. The Financial
Information has been prepared from and is in accordance with the accounting
records of Seller, which are true and complete in all material respects,
have been maintained in accordance with normal business practices, and
accurately and fairly reflect all properties, assets, liabilities,
transactions and appropriate accruals of the Business in accordance with
GAAP. Except as noted on Schedule 2.5(a), all costs and expenses of any
nature whatsoever associated with the ownership and operation of the
Business and the Assets have been, in all material respects, fully and
properly reflected in the Financial Information, and the Financial
Information includes all expenses incurred by or on behalf of the Business
that are necessary to operate the Business on a stand-alone basis
7
without benefit of any synergies or cost savings attributable to the
Buyer's existing operations ("Stand-Alone Basis"). Except as noted on
Schedule 2.5(a), the expenses allocated to the Business approximate in all
material respects the amounts necessary to operate the Business on a
Stand-Alone Basis.
(b) Schedule 2.5(b) sets forth financial information with respect to the
revenues and gross profits of the Business for the seven months ended July
31, 2002 and the eight months ended August 31, 2002 (collectively, "Recent
Financial Information"). The Recent Financial Information presents fairly
the revenues and gross profits of the Business for the periods referred to
in such Recent Financial Information, in accordance with GAAP, except as
noted in Schedule 2.5(b). The Recent Financial Information reflects the
consistent application of such accounting principles with the Financial
Information. The Recent Financial Information has been prepared from and is
in accordance with the accounting records of Seller, which are true and
complete in all material respects, have been maintained in accordance with
normal business practices, and accurately and fairly reflect all
transactions and appropriate accruals of the Business in accordance with
GAAP, except as noted in Schedule 2.5(b).
2.6 AstraZeneca Payments. The Company has entered into the agreement with
AstraZeneca plc attached hereto as Schedule 2.6, has made the first payment
required thereunder (in the amount of $750,000) and shall pay on or before the
Closing Date the remaining payments (in the total amount of $2,250,000) required
to be paid thereunder.
2.7 Accounts Receivable. Except as set forth on Schedule 2.7 attached
hereto, all accounts receivable of the Business, to the extent uncollected on
the date hereof, represent valid obligations owing by the account debtors
thereof. Except as set forth on Schedule 2.7, there are no refunds, rights of
setoff, discounts or other adjustments payable in respect of any of the accounts
receivable of the Business.
2.8 Absence of Undisclosed Liabilities. Except as and to the extent (a)
reflected and reserved against in the Financial Information or not required to
be reflected therein in accordance with GAAP, (b) set forth on Schedule 2.8
attached hereto, (c) incurred in the ordinary course of business after the date
of the Financial Information or (d) allocated between the Company and the Buyer
pursuant to Section 1.4(c), to the Company's knowledge no Seller (individually)
has, nor do the Sellers (in the aggregate) have, any material liability or
obligation, secured or unsecured, whether accrued, absolute, contingent,
unasserted or otherwise, affecting the Assets. No Seller sells Inventory (as
defined in Section 2.11) pursuant to an agreement or arrangement which obligates
the Seller to accept such Inventory for return (except for failure to conform to
the applicable warranties).
2.9 Litigation. Except as set forth on Schedule 2.9 attached hereto, no
Seller is a party to, or to the Company's knowledge threatened with the
assertion of, and none of the Assets is subject to, any material litigation,
suit, action, investigation, proceeding or controversy before any court,
administrative agency or other governmental authority materially relating to or
affecting the Assets or the Business. To the Company's knowledge, no Seller is
in violation of or in default with respect to any judgment, order, writ,
injunction, decree or rule of any court, administrative agency or governmental
authority or any regulation of any administrative agency or governmental
authority which names any Seller materially relating to or affecting the Assets
or the Business.
2.10 Insurance. A list of all of all material fire, theft, casualty,
general liability, workers compensation, business interruption, environmental
impairment, product liability, automobile and other insurance policies currently
insuring the Assets or the Business have been previously been delivered to the
Buyer. Buyer acknowledges and agrees that effective with the Closing all
insurance policies covering the Business and the Assets owned by the Company and
the Subsidiaries shall terminate and no further liability shall arise to the
insurers under any of such policies which are claims-made policies.
2.11 Inventory. Schedule 2.11 attached hereto lists the inventories,
finished goods, work in process, raw materials, packaging materials and similar
items pertaining to the Business owned by any Seller (the "Inventory") by
category, as of a date not more than 30 days prior to the date hereof, which
Schedule has been prepared on a Seller-by-Seller basis, including a general
description, quantity and cost of such Inventory. All Inventory is properly
labeled, is located at the Company's places of business or is in transit,
8
was acquired in the ordinary course of business, is not the subject of any
consignment arrangement, and at time of Closing appeared to Sellers to be of
good and merchantable quality, useable or saleable in the ordinary course of
business, without markdown, and appeared to Sellers to be not obsolete.
2.12 Fixed Assets. Schedule 2.12 attached hereto lists (a) all Fixed
Assets (as defined below) having an acquisition cost of $25,000 or more and (b)
all categories of Fixed Assets (on a Seller-by-Seller basis) as of the date
hereof, including a description and the book value of each such category. "Fixed
Assets" shall mean the U.S. Fixed Assets, and the equipment, furniture,
leasehold improvements and construction in progress owned by the Subsidiaries on
the Closing Date (the "Non-U.S. Fixed Assets"). The Fixed Assets are being sold
on an "as is, where is" basis except that, unless otherwise indicated on
Schedule 2.12, all material structures and all pieces of machinery and equipment
having an acquisition cost of $100,000 or more included in the Fixed Assets are
operational and usable for the purposes for which they are currently used and
together are adequate for the conduct of the Business, as currently conducted.
2.13 Leases. Schedule 2.13 attached hereto sets forth a list as of the
date hereof of all leases relating to the Business to which any Seller is a
party (the "Leases"), other than leases with annual lease payments of less than
$15,000, identifying separately each Lease. Except as set forth on Schedule
2.13, the Company does not lease any real property other than space in public
warehouses in connection with the conduct of the Business. Copies of the Leases,
and all material amendments and supplemental agreements thereto, have previously
been delivered by the Company to the Buyer. To the Company's knowledge, and
assuming due authorization and execution of such Leases by parties other than
the Sellers, the Leases are in full force and effect, are binding and
enforceable against each of the parties thereto in accordance with their
respective terms and have not been modified or amended since the date of
delivery to the Buyer. No party to any Lease has sent written notice to the
other claiming that such party is in default thereunder, which was not cured
during any applicable cure period. To the Company's knowledge, there has not
occurred any event which would constitute a material breach of or material
default in the performance of any material covenant, agreement or condition
contained in any Lease, nor has there occurred any event which with the passage
of time or the giving of notice or both would constitute such a material breach
or material default. Except as set forth on Schedule 2.13, no Lease has been
assigned and no space leased under any Lease has been subleased.
2.14 Change in Financial Condition and Assets. Except as set forth on
Schedule 2.14 attached hereto, since December 31, 2001) there has been no
transaction or occurrence relating to the Business in which any of the Sellers
has:
(a) suffered any material adverse change in the Business, Liabilities,
Assets or earnings;
(b) written down or written up the value of any material Inventory, or
determined as collectible any accounts receivable or portion thereof
previously considered to be uncollectible;
(c) canceled any material debts or waived any material claims or rights;
(d) disposed of or permitted to lapse any right to the use of any
material item of Intellectual Property or disposed of or, to the Company's
knowledge, disclosed to any Person not authorized to have such information
any material item of Intellectual Property not previously a matter of
public knowledge or existing in the public domain;
(e) sold, transferred or otherwise disposed of any of the material
Assets or material assets which would constitute Assets if still owned by
any of the Sellers (including Inventory) except in the ordinary course of
business consistent with past practice;
(f) suffered any casualty loss or damage in excess of $50,000 in the
aggregate (whether or not insured against);
(g) disposed of any material financial or other records pertaining to
the Business other than records older than 3 years old;
(h) paid any claims other than in the ordinary course of business and
not exceeding $50,000 in the aggregate;
9
(i) breached any agreement or taken any action or failed to take any
action which, with notice and the passage of time, would constitute a
breach of any material agreement or a breach of any representation or
covenant of Sellers contained in this Agreement;
(j) since June 30, 2002, taken any other action which is not either in
the ordinary course of business and consistent with past practice or
provided for in this Agreement;
(k) entered into any collective bargaining or labor agreement (oral or
written) or experienced any organized slowdown, work interruption, strike,
or work stoppage; or
(l) agreed, so as to legally bind any of Sellers, whether in writing or
otherwise, to take any of the actions set forth in this Section 2.14 and
not otherwise permitted by this Agreement.
2.15 Contracts.
(a) Schedule 2.15(a)(i) attached hereto lists and describes all U.S.
Contracts and Schedule 2.15(a)(ii) attached hereto lists and describes all
those contracts, agreements, licenses and other instruments to which the
Subsidiaries are party (the "Non-U.S. Contracts" and, together with the
U.S. Contracts, the "Contracts"), except (in each case and to the extent
entered into in the ordinary course of business) Contracts for (i) orders
or agreements for the purchase of raw materials or supplies used in the
manufacture of the products of the Business, or supplies or services to be
used in the ordinary course of business, in each case with a remaining
balance of $50,000 or less and a remaining term of six months or less; (ii)
orders or agreements from customers for the purchase of products of the
Business, in each case with a remaining balance of $50,000 or less and a
remaining term of six months or less; (iii) agreements for the maintenance
of the facilities of the Business or any part thereof or any equipment of
the Business, in each case with a remaining balance of $50,000 or less and
a remaining term of six months or less; (iv) standard form employment or
confidentiality agreements (provided they do not contain non-solicitation
or non-competition provisions or provisions granting special severance
benefits or a fixed term of employment); (v) non-hazardous waste disposal
agreements which are terminable on two months' notice or less; (vi)
confidentiality agreements with customers of the Business relating to
confidential information disclosed by the parties thereto, which shall not
include agreements containing non-solicitation or non-compete provisions;
and (vii) license and maintenance agreements for standard, off-the-shelf
computer software.
(b) Except as set forth on Schedule 2.15(b) attached hereto:
(i) each Contract is a valid and binding agreement of the applicable
Seller, enforceable against such Seller in accordance with its terms,
and the Company does not have any knowledge that any Contract is not a
valid and binding agreement of the other parties thereto;
(ii) to the Company's knowledge, each Seller has fulfilled all
material obligations required pursuant to the Contracts to have been
performed by such Seller on its part prior to the date hereof;
(iii) to the Company's knowledge, no Seller is in material breach of
or default under any Contract, and no event has occurred which with the
passage of time or giving of notice or both would constitute such a
material default, result in a loss of rights or result in the creation
of any lien, charge or encumbrance, thereunder or pursuant thereto;
(iv) to the Company's knowledge, there is no existing material breach
or material default by any other party to any Contract, and no event has
occurred which with the passage of time or giving of notice or both
would constitute a material default by such other party, result in a
loss of rights or result in the creation of any material lien, charge or
encumbrance thereunder or pursuant thereto; and
(v) no Seller is materially restricted by any Contract from carrying
on the Business anywhere in the world.
(c) Except as set forth on Schedule 2.3 attached hereto or Schedule
2.15(c) attached hereto, the continuation, validity and effectiveness of
each Contract will not be materially and adversely affected by
10
the transfer thereof to Buyer under this Agreement, and all such Contracts
are assignable to Buyer without the consent of any other party.
(d) Copies of all Contracts referred to in Schedule 2.15(a)(i) attached
hereto and Schedule 2.15(a)(ii) attached hereto have previously been
delivered or made available by the Company to the Buyer.
2.16 Compliance with Agreements and Laws. Except as set forth on Schedule
2.16, to the Company's knowledge, each Seller has all requisite licenses,
permits and certificates (excluding environmental, health and safety permits)
from federal, state, foreign and local authorities necessary to conduct the
Business and own and operate the Assets, other than those the failure to obtain
which could not have a material adverse effect on any Seller or its properties
(collectively, the "Permits"), and all Permits are in full force and effect and
not scheduled to expire for at least 3 months from the date hereof. Schedule
2.16(i) attached hereto lists all such Permits, copies of which have previously
been delivered by the Company to the Buyer. Except as set forth on Schedule
2.16(ii) attached hereto, to the Company's knowledge, the Business of each
Seller does not violate in any material respect any federal, state, local or
foreign laws, regulations or orders the enforcement of which would have a
material and adverse effect on the operation of the Business by the Buyer. The
foregoing representations and warranties shall not extend to any matters as to
which liability has been allocated between the Company and the Buyer pursuant to
Section 1.4(c). To the knowledge of the Company, except as set forth on Schedule
2.16(i), all the Permits can be assigned to Buyer without consent of or notice
to the issuing authority.
2.17 Employee Relations.
(a) To the Company's knowledge, as it relates to employees of any Seller
who work primarily in or for the Business ("Employees"), each Seller is in
material compliance with all federal, state, foreign and municipal laws and
regulations (and their foreign equivalents) respecting employment and
employment practices, terms and conditions of employment, immigration,
wages and hours, and statutory benefit requirements, including, but not
limited to, social security and its foreign equivalents; no Seller is
engaged in any unfair labor practice, and there are no arrears in the
payment of wages or social security taxes (or their foreign equivalents).
(b) To the Company's knowledge, with respect to the Business, except as
set forth on Schedule 2.17(b) attached hereto, within the last five years:
(i) none of the Employees is or has been represented by any labor
union;
(ii) there is not and has not been any unfair labor practice
complaint threatened or pending against any Seller before the National
Labor Relations Board or any state, foreign or local agency;
(iii) there is not and has not been any pending or threatened labor
strike or other material labor trouble affecting any Seller (including,
without limitation, any organizational drive);
(iv) there is not and has not been any labor grievance pending
against any Seller;
(v) there is not and has not been any pending or threatened
representation question respecting the Employees; and
(vi) there is not and have not been any pending or threatened
arbitration proceedings arising out of or under any collective
bargaining agreement to which any Seller is a party, or any basis for
which a claim may be made under any collective bargaining agreement to
which any Seller is a party.
(c) Schedule 2.17(c) attached hereto lists (i) the material employee
benefits generally provided by each Seller to its Employees and all written
contracts or agreements and a description of all oral contracts and
agreements between each Seller and its Employees, independent contractors
and consultants, (ii) each Seller's current payroll, including the job
descriptions and salary or wage or commission rates of each of its
Employees, showing separately for each such person the amounts paid or
payable as salary, commission and bonus payments for the year ending
December 31, 2001, as well as the
11
current salary, commission rate and target bonus of each such person and
(iii) each independent contractor or consultant providing services to a
Seller in connection with the Business and a description of the services
and the terms of payment for each such independent contractor or
consultant. Schedule 2.17(c) also sets forth the vacation policy applicable
to each Seller as well as a complete and accurate list of the following
information for each Employee of the Sellers: name, job title, employer,
department, vacation accrued and years of service. Except as disclosed on
Schedule 2.17(c), the employment of each Employee and the engagement of
each independent contractor or consultant of the Sellers is terminable at
will without any penalty, liability, severance or statutory termination
obligation incurred by any Seller. Except as disclosed on Schedule 2.17(c),
no Seller will owe any amounts to any of its Employees, consultants, or
independent contractors as of the Closing Date relating to the Business,
including amounts incurred for any wages, bonuses, fees, commissions,
vacation pay, sick leave, contract notice periods, change of control
payments, severance or statutory termination obligations.
(d) No Seller (with respect to the Business) has experienced a "plant
closing" or "mass layoff" within the meaning of the Worker Adjustment
Retraining and Notification Act (the "WARN Act") or any comparable
employment action under any state or foreign law similar to WARN, and
Sellers shall provide Buyer, upon request, with such information as Buyer
shall reasonably deem necessary to determine Buyer's potential WARN
liability or obligations. Except as disclosed on Schedule 2.17(d), none of
the Sellers' Employees has suffered an "employment loss" (as defined in the
WARN Act) within six months prior to the Closing Date.
(e) To the Company's knowledge, the Sellers are in material compliance
with all federal and foreign immigration laws and regulations. The Company,
upon the request of Buyer, will make available to Buyer prior to the
Closing Date Employees' (as defined in Section 5.8) Form I-9 and all
associated records.
2.18 Suppliers. Schedule 2.18 attached hereto lists the names and
addresses of each of the (a) top ten suppliers of the Sellers by purchase volume
of goods primarily for the Business and (b) suppliers of distributed products,
for the fiscal year ended December 31, 2001 and for the eight month period
ending August 31, 2002, together with the aggregate amount of such purchases
during such periods divided by supplier and product. Except as set forth in
Schedule 2.18, none of such suppliers has given notice to any Seller that it
intends to discontinue or reduce its relationship with the Sellers or official
notice that it will only do future business at higher prices and, to the
Company's knowledge, none of such suppliers intends to discontinue its
relationship with the Sellers, although none (except for those listed on
Schedule 2.3 attached hereto under the heading "Individually Material Consents")
has been asked about its intentions to do business with the Buyer, and there are
no suppliers of raw materials to the Business for which there are not adequate
alternative suppliers of such raw materials on commercially reasonable terms.
2.19 Customers. Schedule 2.19(a) attached hereto lists the names and
addresses of each customer of the Sellers which accounted for more than $10,000
of sales by the Sellers primarily for the Business for the fiscal year ended
December 31, 2001 and for the 8 month period ending August 31, 2002 (but not the
actual amount of such sales). The financial information the Company has provided
to Buyer's adviser, ▇▇▇▇▇▇ LLP, in connection with its financial analysis of
customers with respect to the ten largest customers by purchase volume is
complete and correct. Except as set forth on Schedule 2.19(b), none of such ten
largest customers has given notice to any Seller that it intends to discontinue
its relationship with the Sellers or official notice that it will only do future
business at lower prices and, to the Company's knowledge, none of the customers
intends to discontinue or reduce its relationship with the Sellers, although
none (except for those listed on Schedule 2.3 attached hereto under the heading
"Individually Material Consents") has been asked about its intentions to do
business with the Buyer. Except as set forth on Schedule 2.19(c) attached
hereto, the Sellers have not received prepayments or deposits of more than
$10,000 from any customer or more than $100,000 in the aggregate for products to
be shipped, or services to be performed, at a later date.
2.20 Intangible Property.
(a) Schedule 2.20(a) attached hereto lists and, where appropriate,
describes, all categories and material items of U.S. Intangible Property
and the Subsidiaries' right, title and interest in and to
12
intangible property rights, including but not limited to inventions,
discoveries, trade secrets, processes, formulas, United States and foreign
patents, patent applications, trade names, trademarks, trademark
registrations, applications for trademark registrations, copyrights,
copyright registrations, owned or, where not owned, used by the
Subsidiaries and licenses and other agreements to which the Subsidiaries
are party (as licensor or licensee) or by which the Subsidiaries are bound
relating to any of the foregoing kinds of property or rights to any
"know-how" or disclosure or use of ideas (collectively, the "Non-U.S.
Intangible Property" and, together with the U.S. Intangible Property, the
"Intangible Property"). Copies of all material licenses and other
agreements relating to the Intangible Property have been previously
delivered by the Company to the Buyer.
(b) To the Company's knowledge, except as otherwise disclosed in
Schedule 2.20(b) attached hereto, without material exception, (i) the
Sellers are the owners or licensees of all Intangible Property (as
disclosed on such Schedule); (ii) the Intangible Property owned by the
Sellers is sufficient to conduct the Business in all material respects as
currently conducted and, when transferred to the Buyer pursuant to this
Agreement, will be sufficient to permit the Buyer to conduct the Business
in all material respects as currently conducted by the Sellers; (iii) the
Sellers have received no notice of, and there is no basis for, a claim
against any of them that any of their operations, activities, products or
publications related to the Business infringes any patent, trademark, trade
name, copyright or other property right of a third party, or that any of
them is illegally using the trade secrets, formulae or any property rights
of others; and (iv) no Seller has any disputes with or claims against any
third party for infringement by such third party of any trade name or other
Intangible Property of any Seller.
(c) To the Company's knowledge, no use by any of the Sellers of any
Intangible Property licensed to it materially violates the terms of any
Contract pursuant to which it is licensed. No litigation is pending, or to
the Company's knowledge, threatened, which alleges that any Intangible
Property owned or licensed by a Seller or which a Seller otherwise has the
right to use is invalid or unenforceable by a Seller, nor is any Seller
aware of any such litigation that is unasserted, but the assertion of which
is foreseeable. Except as set forth on Schedule 2.20(c), no Seller
manufactures products in connection with the Business which are the subject
of patents, patent applications, copyrights, copyright applications,
trademarks, trademark applications, trade styles, service marks, or trade
secrets owned by but not licensed from third parties. Except as shown on
Schedule 2.20(c), no royalties or fees are payable by a Seller to anyone
for use of the Intangible Property. All Contracts pursuant to which a
Seller has any license or right to use any Intangible Property are in full
force and effect and there are no existing material defaults, and the
execution of this Agreement will not cause any Seller to be in violation or
default under any such Contract. No Seller has received any notice that the
manufacture, use, or sale by such Seller of its products in connection with
the Business, or any component or part thereof, nor any manufacturing
operation or machinery employed by Seller in connection therewith, violates
or infringes upon any claims of any United States or foreign patent or
patent application owned or held by any third party, nor is Seller aware of
any unasserted Litigation the assertion of which is foreseeable. All
Intangible Property and Contracts related thereto are fully assignable to
the Buyer without the consent of any third party except as shown on
Schedule 2.20(c). Each Seller has taken all reasonable steps to maintain
the confidentiality of the Intangible Property and knows of no Intangible
Property which has been misappropriated since December 31, 1999.
2.21 Employee Benefit Plans.
(a) Except as listed on Schedule 2.21(a) attached hereto, none of the
Sellers now has or contributes to or participates in or has any liability
under any employee benefit plan subject to the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), which covers Employees,
including without limitation any multiemployer pension plan as defined in
Section 4001(a)(3) of ERISA.
(b) Schedule 2.21(b)(i) attached hereto sets forth a true and complete
list of all pension, profit sharing, retirement, deferred compensation,
insurance, health and welfare, flexible spending account, cafeteria plan,
disability, stock option, stock purchase, stock appreciation, phantom stock
or other equity-based, incentive, bonus, vacation pay, severance pay,
termination indemnity, retention, change of control
13
and other similar formal or informal, oral or written, plans, programs,
payroll practices and agreements, relating to any Employees, former
employees, retirees, dependents, spouses, directors, independent
contractors, or other beneficiaries related to the Business by any Seller
or by any other member of any controlled group of corporations, group of
trades or businesses under common control, or affiliated service group (as
defined for purposes of Section 414(b), (c), (m) and (o), respectively, of
the Code (an "ERISA Affiliate"), whether or not covered under ERISA (the
"Employee Plans") and, except as set forth on Schedule 2.21(b)(ii) attached
hereto, no Seller or ERISA Affiliate has any obligations, contingent or
otherwise, past or present, under applicable federal or foreign law or the
terms of any Employee Plan which could be imposed upon Buyer. Seller has
provided to Buyer true, complete and correct copies of (i) each Employee
Plan (or, in the case of any unwritten Employee Plan, a description of its
material terms), (ii) the most recent annual report on Form 5500 filed with
the Internal Revenue Service with respect to each Employee Plan (if any
such report was required), (iii) the most recent summary plan description
for each Employee Plan for which such a summary plan description is
required, (iv) the most recent financial statements for each Employee Plan
for which such statements are required, and (v) any trust agreement or
other funding or financial documents for any Employee Plan.
(c) With the exception of the
Penwest Pharmaceuticals Co. Savings Plan
(the "Company's 401(k) Plan") and except as disclosed on Schedule
2.21(c)attached hereto, no Seller maintains, sponsors or contributes to
currently or, within the past five years has maintained, sponsored or
contributed to, a defined benefit pension plan, defined contribution plan,
termination indemnity plan or any other employee pension benefit plan
(whether funded or unfunded) covering any Employees.
(d) The Company's 401(k) Plan is qualified under Code sections 401(a)
and 401(k) and its attendant trust is exempt from taxation under Code
section 501(a). A copy of the most recent determination letter issued by
the IRS (and any pending application for a determination letter) in
connection with the 401(k) Plan has been provided to Buyer.
(e) Each Employee Plan has been administered in accordance with its
terms in all material respects and in material compliance with all
applicable laws and regulations (including, where applicable, ERISA and the
Code).
(f) Except as set forth on Schedule 2.21(f) attached hereto, all
contributions and payments accrued under each Employee Plan, determined in
accordance with prior funding and accrual practices, as adjusted to include
proportional accruals for the period ending as of the Closing Date, have
been discharged and paid on or prior to the Closing Date or otherwise
properly provided for in the consolidated financial statements or financial
records of the Sellers to the extent required by GAAP.
(g) No liability under Title IV of ERISA has been or is expected to be
incurred by the Company or its ERISA Affiliates and no event has occurred
that could reasonably result in material liability under Title IV of ERISA
being incurred by the Company or its ERISA Affiliates with respect to any
ongoing, frozen, or terminated plan of the Company or of any ERISA
Affiliate and no other liability under Title IV of ERISA can be imposed on
the Buyer as a result of the transactions contemplated by this Agreement.
There has been no "reportable event," within the meaning of ERISA Section
4043 for which the 30-day reporting requirement has not been waived by any
ongoing, frozen, or terminated single employer plan of the Company or of an
ERISA Affiliate.
(h) Except as set forth on Schedule 2.21(h) attached hereto, no Seller
has any liability for retiree health and life benefits under any of the
Employee Plans and there are no restrictions on the rights of such Seller
to amend or terminate any such retiree health or benefit plan without
incurring any liability thereunder except to the extent required under Part
6 of Subtitle B of Title I of ERISA or Code Section 4980B or other similar
law. No material Tax under Code Sections 4980B or 5000 has been incurred
with respect to any Employee Plan and no circumstance exists which could
reasonably be expected to give rise to such Taxes.
(i) Except as set forth on Schedule 2.21(i) attached hereto, neither the
execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (i) result in any
14
payment (including severance, termination indemnity, unemployment
compensation, golden parachute, or otherwise) becoming due to any director,
any Employee or any independent contractor of any Seller from any Seller
under any Employee Plan or otherwise, (ii) increase any benefits otherwise
payable under any Employee Plan or otherwise, or (iii) result in any
acceleration of the time of payment or vesting of any such benefit.
(j) The actuarial present values of all accrued deferred compensation
entitlements (including entitlements under any executive compensation,
supplemental retirement, or employment agreement) of current and former
Employees and current and former independent contractors related to the
Business of any Seller and their respective beneficiaries, other than
entitlements accrued pursuant to funded retirement plans, have been fully
reflected on the Seller's Financial Information to the extent required by
and in accordance with GAAP.
(k) All individuals who render services in connection with the Business
to any Seller and who are authorized to participate in an Employee Plan
pursuant to the terms of such Employee Plan are in fact eligible to and
authorized to participate in such Employee Plan. All individuals
participating in (or eligible to participate in) any Employee Plan are
common-law employees (and not independent contractors) of a Seller.
(l) Neither the Sellers nor any of its ERISA Affiliates has had an
"obligation to contribute" (as defined in ERISA Section 4212) to a
"multiemployer plan" (as defined in ERISA Sections 4001(a)(3) and
3(37)(A)).
(m) Without limiting the foregoing provisions of this Section 2.21,
except as disclosed in Schedule 2.21(m) attached hereto, with respect to
each Employee Plan maintained outside the United States which is mandated
by a government other than that of the United States or subject to foreign
law (collectively, the "Foreign Benefit Plans"), (i) the terms of each
Foreign Benefit Plan and the manner in which it is and has been
administered in operation are in compliance with all applicable laws of the
jurisdiction in which such Foreign Benefit Plan is maintained, (ii) each
Foreign Benefit Plan which is required to be registered with or submitted
to a foreign regulatory authority for tax qualification or other approval
has been so registered or submitted to and each such plan has received such
approval, and the Company is not aware of any circumstances likely to
result in revocation of any such registration or approval, (iii) all
contributions to each Foreign Benefit Plan required to be made through the
Closing Date or required to be made with respect to a period prior to the
Closing Date have been or shall be made by a Seller or, if applicable,
shall be accrued in accordance with applicable international accounting
practices, and (iv) for any Foreign Benefit Plan which, under the laws of
the applicable foreign jurisdiction, is required to be funded, the fair
market value of such Foreign Benefit Plan's assets equals or exceeds the
present value of all benefits (whether vested or not) accrued to date by
all present and former participants in such Foreign Benefit Plan or such
Foreign Benefit Plan is fully insured, in each case based upon generally
accepted local accounting and actuarial practice and procedure.
2.22 U.S. Tax Matters.
(a) As used in this Agreement the following terms shall have the
following meanings:
(i) "Tax Returns" means all reports and returns required to be filed
on or before the Closing Date, whether filed on separate, consolidated,
or combined basis; and
(ii) "Taxes" means all federal, state, or local gross or net income,
gross or net receipts, windfall profits, severance, property, ad
valorem, real estate, capital property (tangible or intangible),
productions, sales use, value added, stamp, duty, business transfer,
wealth, license, excise, franchise, employment, withholding or similar
taxes imposed on the income, properties or operations of the Business,
together with any interest, additions or penalties.
(b) The Sellers have filed all material Tax Returns required to be filed
by them with respect to the Business. All such Tax Returns with respect to
the Business were correct and complete in all material respects. All Taxes
owed by the Sellers have been paid. No claim has been made by an authority
in a
15
jurisdiction where any of the Sellers conducts the Business and does not
file Tax Returns that it is, or may be, subject to taxation by that
jurisdiction based on the conduct of the Business.
(c) Each of the Sellers has withheld and paid all Taxes required to have
been withheld and paid in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholder, or third party
with respect to the Business.
(d) There is no dispute or claim concerning any Tax liability of any of
the Sellers claimed or raised by any authority in writing, nor to the
knowledge of the Company is there any potential dispute or claim concerning
any Tax liability of the Sellers. None of the Sellers has waived any
statute of limitations in respect of Taxes or agreed to any extension of
time with respect to a Tax assessment or deficiency.
2.23 Environmental Matters. For the purpose of this Agreement, the
following terms shall, unless the context clearly requires otherwise, have the
respective meanings set forth below.
"Environmental Liabilities" means any notice, claim, demand, action, suit,
inquiry, proceeding, or investigation under Environmental Law by any third-party
and/or by any federal, state or regulatory entity, incident to (i) the
ownership, operation or use of any site or facility by any of the Sellers or any
predecessor thereof on or prior to the Closing Date for the storage, treatment,
generation, transportation, processing, handling, production or disposal, of any
Hazardous Material (hereinafter defined), or as a landfill or other waste
disposal site or the Release of any Hazardous Material to the environment prior
to the Closing Date at such sites; (ii) human exposure to any Hazardous
Material, noises, vibrations or nuisances of whatever kind to the extent the
same arise from the condition of the ownership, operation, use, sale, transfer
or conveyance thereof by any of the Sellers or any predecessor thereof on or
prior to the Closing Date; (iii) a violation of any applicable Environmental Law
or non-compliance with any environmental permit relating to the ownership,
operation or use of any site or facility by the Sellers or any predecessor
thereof on or prior to the Closing Date; or (iv) any requests for information,
notices of claim, demand letters or other notification received by the Buyer
after the Closing Date from any federal, state or local regulatory entity in
connection with any investigation or clean-up of hazardous or polluting
substances or Release sent directly or indirectly by the Sellers or any
predecessor thereof on or prior to the Closing Date to any site listed or
formally proposed for listing on the National Priority List ("NPL") promulgated
pursuant to the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended ("CERCLA") or the Comprehensive Environmental Response,
Compensation and Liability Information System ("CERCLIS") or to any site listed
on any state list of hazardous substances sites requiring investigation or
clean-up.
"Environmental Laws" means any and all federal, state, local and foreign
laws, rules or regulations, and any orders or decrees in effect as of the
Closing relating to the regulation or protection of the natural environment or
to emissions, discharges, releases or threatened releases of pollutants,
contaminants, chemicals or toxic or hazardous substances or wastes into the
indoor or outdoor environment, including, without limitation, ambient air, soil,
surface water, ground water, wetlands, land or subsurface strata, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of pollutants, contaminants, chemicals or toxic
or hazardous substances or wastes.
"Environmental Representations" means the representations and warranties
set forth in this Section 2.23.
"Hazardous Materials" means, collectively, (a) any petroleum or petroleum
products, flammable explosives, radioactive materials, asbestos in any form that
is or could reasonably become friable, urea formaldehyde foam insulation, and
transformers or other equipment that contain dielectric fluid containing
polychlorinated biphenyls (PCBs), and (b) any chemicals or other materials or
substances which are now or hereafter become defined as or included in the
definition of "hazardous substances", "hazardous wastes", "hazardous materials",
"toxic substances", "toxic pollutants", "contaminants" or "pollutants" under any
Environmental Law.
"Release" means any release, spill, emission, leaking, pumping, injection,
deposit, disposal, discharge, dispersal, leaching or migration into the ambient
environment, including, without limitation, the movement of Hazardous Materials
through ambient air, soil, surface water, ground water, wetlands, land or
subsurface strata.
16
"Remedial Activities" means environmental assessment or remediation
activities required by Environmental Laws.
"Seller Site" means any site or facility previously owned, operated or
leased by any of the Sellers or any predecessor thereof.
Except as set forth in Schedule 2.23 attached hereto:
(a) the Sellers have all environmental, health and safety permits,
licenses and other authorizations (collectively, "Permits") required under
applicable Environmental Laws in connection with the operation of the
Business and Assets as currently operated other than those which the
failure to obtain could not reasonably be expected to have a material
adverse effect on the Business. Each of the Permits is in full force and
effect. The Business of each Seller is in material compliance with the
applicable terms and conditions of the Permits and in material compliance
with all other Environmental Laws;
(b) no pending notice, notification, demand, request for information,
citation, summons or order has been issued, no lawsuit has been filed, no
penalty assessments or demands been assessed and no investigation is
pending or, to the knowledge of the Company, threatened against any Seller
by any governmental entity, with respect to compliance with or any alleged
violation of any Environmental Law in connection with the operation of the
Business or Assets;
(c) the Sellers do not own, operate or lease a treatment, storage or
disposal facility requiring a permit under the Resource Conservation and
Recovery Act of 1976, as amended, or under any comparable state, local or
foreign statute;
(d) to the Company's knowledge, no polychlorinated biphenyls ("PCBs")
are present at any site now owned, operated or leased by any of the Sellers
or have been present at a Seller Site;
(e) to the Company's knowledge, no friable asbestos or friable
asbestos-containing material is present at any Seller Site;
(f) to the Company's knowledge, there are no underground storage tanks
or surface impoundments for Hazardous Materials, active or abandoned, at
any Seller Site;
(g) no Hazardous Materials are being Released at, on or under any Seller
Site or have been Released at, on or under any Seller Site (except as may
be allowed by permit) and, to the Company's knowledge, none of the Seller
Sites are adversely affected by any Release or disposal of Hazardous
Materials originating or emanating from any other property;
(h) to the Company's knowledge, none of the Sellers has transported or
arranged for the transportation of any Hazardous Material to any location
that is the subject of Federal, state, local or foreign enforcement actions
or other investigations that may lead to Environmental Liabilities against
any of Sellers or the Buyer;
(i) to the Company's knowledge, all toxic or hazardous wastes currently
or previously generated by the Sellers or any of them or any predecessor
thereof in connection with the Business and delivered to a transporter or
carrier have been handled and delivered to duly authorized and licensed
carriers authorized to handle and transport such wastes by the governmental
agency with jurisdiction thereof;
(j) no oral or written notification of a Release of a Hazardous Material
has been filed by or on behalf of the Sellers and, to the Seller's
knowledge, no Seller Site is listed or proposed for listing on the NPL,
CERCLIS or any similar state or foreign list of sites requiring
investigation or clean-up;
(k) no liens have arisen under or pursuant to any Environmental Laws on
any Seller Site, and, to the Seller's knowledge, no government action has
been taken or is in process that could subject any such Seller Site to such
liens;
(l) no "jurisdictional wetlands" as defined for purposes of Section 404
of the Clean Water Act are located within any portion of the property
owned, leased or operated by any of the Sellers;
17
(m) none of the Seller Sites is subject to, and the Company has no
knowledge of, any imminent restriction on the ownership, occupancy, use or
transferability thereof (i) arising under any Environmental Law or (ii) in
connection with any Release, threatened Release, or disposal of a Hazardous
Material;
(n) all activities conducted by a Seller pertaining to methane
extraction have been successfully completed and no sampling and/or
monitoring of any methane extraction system is required at Company's Cedar
Rapids, Iowa facility;
(o) without material exception, the Sellers have provided to the Buyer
copies of all Phase 1 environmental reports conducted in relation to any
Seller Site.
(p) as to any Seller Site not located in the United States, the
representations and warranties set forth in this Section 2.23 shall apply
with respect to equivalent laws and regulations in effect in those
jurisdictions.
The Company's representations and warranties as to environmental matters
are only those contained in this Section 2.23. Other representations and
warranties, including, without limitation, those contained in Sections 2.9 and
2.16, do not apply to environmental matters.
2.24 Special Transactions.
(a) None of the Sellers has made any gift or contribution to or on
behalf of or at the direction of any employee of any supplier, customer,
union or governmental agency related to the Business.
(b) Except as specifically disclosed, none of Sellers' sales in
connection with the Business are sales to affiliates or related parties.
None of the Sellers' business relationships in connection with the Business
are dependent on relationships with family members, whether such family
membership is based on consanguinity or marriage.
2.25 Certain Affiliated Transactions. Except as set forth in Schedule
2.25(i) attached hereto, no portion of the Business is conducted by any
shareholder, director, officer or employee of any of the Sellers (in contrast to
being conducted by the Sellers) and all of the assets necessary for or used by
the Sellers in the conduct of the Business as presently conducted are owned by
the Sellers or leased from entities in which no shareholder, director, officer
or employee (or any family member thereof or trust therefor) directly or
indirectly participates other than as a shareholder in a publicly held company
in which he or she owns less than five percent (5%) (collectively, "Permitted
Entities"). Schedule 2.25(ii) lists all contracts relating to the Business
between any Seller, on the one hand, and any of its officers, directors or
employees or any entity other than a Permitted Entity.
2.26 Disclosure. To the Company's knowledge, no representation or
warranty by any of the Sellers in this Agreement or in any Exhibit hereto, or in
any list, statement, document or information set forth in or attached to any
Schedule delivered or to be delivered pursuant to this Agreement, contains or
will contain any untrue statement of a material fact or omits or will omit any
material fact necessary in order to make the statements contained therein not
misleading. No statement with respect to the Assets and the Business in any
document filed by any Seller pursuant to the Securities Act of 1933, as amended
(the "Securities Act") or the Securities Exchange Act of 1934, as amended (the
"Exchange Act") contained, at the time it was made, any untrue statement of a
material fact or omitted to state a material fact required to be stated in such
document or necessary in order to make the statements in such document, in light
of the circumstances under which they were made, not misleading (except as
subsequently corrected or superseded by subsequently filed disclosures). None of
the information supplied or to be supplied by any Seller for inclusion in the
Proxy Statement (as defined in Section 5.4) to be mailed to the Company's
shareholders (the "Company Shareholders") in connection with the Special Meeting
(as defined in Section 5.4), and any other documents to be filed by the Company
thereof with the SEC or any other regulatory or governmental authority in
connection with the transactions contemplated hereby, will, at the respective
time such documents are filed, and with respect to the Proxy Statement, when
first mailed to the Company Shareholders, be false or misleading with respect to
any material fact, or omit to state any material fact necessary to make the
18
statements therein, in light of the circumstances under which they were made,
not misleading, or, in the case of the Proxy Statement or any amendment thereof
or supplement thereto, at the time of the Special Meeting, be false or
misleading with respect to any material fact, or omit to state any material fact
necessary to correct any statement in any earlier communication with respect to
the solicitation of any proxy for the Special Meeting.
3. Representations of the Buyer
The Buyer represents and warrants to the Company that all of the statements
contained in this Section 3 are true as of the date of this Agreement.
3.1 Organization and Authority. The Buyer is a limited partnership duly
organized, validly existing and in good standing under the laws of Germany and
has requisite power and authority (corporate and other) to own its properties
and to carry on its business as now being conducted. The Buyer has full power to
execute and deliver this Agreement, the Promissory Note and the Buyer's
Instrument of Assumption and to consummate the transactions contemplated hereby
and thereby. Certified copies of the charter documents of the Buyer, as amended
to date, have been previously delivered to the Company, are complete and
correct, and no amendments have been made thereto or have been authorized since
the date thereof.
3.2 Authorization. The execution and delivery of this Agreement by the
Buyer, and the agreements provided for herein to which the Buyer is a party
(including, without limitation, the Promissory Note) and the consummation by the
Buyer of all transactions contemplated hereby, have been duly authorized by all
requisite corporate action. This Agreement and all such other agreements and
written obligations entered into and undertaken in connection with the
transactions contemplated hereby and thereby constitute the valid and legally
binding obligations of the Buyer enforceable against the Buyer in accordance
with their respective terms. The execution, delivery and performance of this
Agreement and the agreements provided for herein, and the consummation by the
Buyer of the transactions contemplated hereby and thereby, will not, with or
without the giving of notice or the passage of time or both, (a) violate the
provisions of any law, rule or regulation applicable to the Buyer; (b) violate
the provisions of the Buyer's charter documents; (c) violate any judgment,
decree, order or award of any court, governmental body or arbitrator; or (d)
conflict with or result in the breach or termination of any term or provision
of, or constitute a default under, or cause any acceleration under, or cause the
creation of any lien, charge or encumbrance upon the properties or assets of the
Buyer pursuant to, any indenture, mortgage, deed of trust or other agreement or
instrument to which it or its properties is a party or by which the Buyer is or
may be bound. No consents and approvals of third parties are required in
connection with the consummation by the Buyer of the transactions contemplated
by this Agreement.
3.3 Regulatory Approvals. All consents, approvals, authorizations and
other requirements prescribed by any law, rule or regulation which must be
obtained or satisfied by the Buyer and which are necessary for the consummation
of the transactions contemplated by this Agreement have been obtained and
satisfied, except for those to be obtained in accordance with Section 5.6.
3.4 Financial Capacity. The Buyer has the financial capacity to
consummate the transactions contemplated by this Agreement, including the
payment of the Purchase Price and any adjustments thereto pursuant to Section
1.7. The Buyer's obligations pursuant to this Agreement are not conditioned upon
its obtaining any financing. The Buyer currently contemplates borrowing up to
$31.5 million for this purpose, but its failure to make such borrowings will not
excuse it from its obligations under this Agreement, including its obligation to
purchase the Assets.
3.5 Disclosure. To the Buyer's knowledge, no representation or warranty
by the Buyer in this Agreement or in any Exhibit hereto, or in any list,
statement, document or information set forth in or attached to any Schedule
delivered or to be delivered pursuant hereto, or any statement in any document
filed by the Buyer pursuant to the Exchange Act, contains or will contain any
untrue statement of a material fact or omits or will omit any material fact
necessary in order to make the statements contained therein not misleading. The
Buyer shall use commercially reasonable efforts to ensure that none of the
information supplied or to be supplied by Buyer for inclusion in the Proxy
Statement to be mailed to the Company
19
Shareholders in connection with the Special Meeting, and any other documents to
be filed by the Company with the SEC or any other regulatory or governmental
authority in connection with the transactions contemplated hereby, will, at the
respective time such documents are filed, and with respect to the Proxy
Statement, when first mailed to the Company Shareholders, contain any untrue
statement of a material fact, or omit to state any material fact necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, or, in the case of the Proxy Statement or any amendment
thereof or supplement thereto, at the time of the Special Meeting, contain any
untrue statement of a material fact, or omit to state any material fact
necessary to correct any statement in any earlier communication with respect to
the solicitation of any proxy for the Special Meeting. Notwithstanding the
foregoing, the Buyer shall not be required to provide any information which has
been consistently treated by it as proprietary and confidential, except to the
extent required by applicable Proxy Rules (as defined in Section 5.4(c)) or
requested by the staff of the SEC.
3.6 Reliance. In entering into this Agreement, Buyer acknowledges that it
has relied solely upon the representations and warranties of the Company
specifically referred to in Section 2 of this Agreement. Buyer acknowledges that
it did not rely on the document entitled "The Excipients Business of
Penwest
Pharmaceuticals Co." heretofore provided to Buyer by Banc of America Securities
LLC relating to the Sellers and the Business or the financial estimates and
projections contained therein. The Buyer has conducted, to the extent it deemed
appropriate and sufficient, its own independent investigation, review and
analysis of the business, operations, assets, liabilities, results of
operations, financial condition, technology and prospects of the Sellers. Buyer
acknowledges that it and its representatives have been provided sufficient
access to the personnel, properties, premises and records of the Sellers for
such purpose. No such investigation, review or analysis, whether prior to or
after the date hereof, shall detract from the validity or enforceability of
Seller's representations and warranties set forth herein except if and to the
extent that Buyer has actual knowledge that a representation or warranty made by
the Company is false or incomplete on the date hereof.
4. Access to Information; Public Announcements
4.1 Access to Management, Properties and Records.
(a) Subject to applicable law, from the date of this Agreement until the
Closing Date, the Company shall afford the officers, attorneys, accountants
and other authorized representatives of the Buyer access upon reasonable
notice, during normal business hours, in cooperation with the Company's
personnel, and without disruption of the Company's business operations to
all relevant management personnel, offices, properties, books and records
of the Sellers, so that the Buyer may have an opportunity to make such
investigation as it shall reasonably desire to make of the Business and the
Buyer shall be permitted to make abstracts from, or copies of, all such
books and records at its expense. The Company shall furnish to the Buyer
such financial and operating data and other information as to the Assets
and the Business of the Sellers as the Buyer shall reasonably request.
(b) If reasonably so requested by the Buyer, the Company shall authorize
the release to the Buyer of copies of all files pertaining to the Assets or
the Business held by any federal, state, county or local authorities,
agencies or instrumentalities.
4.2 Confidentiality. The provisions of the Confidentiality Agreement,
dated May 16, 2002 (the "Confidentiality Agreement"), between the Company and
the Buyer, as amended or supplemented, shall remain binding and in full force
and effect, as stated therein.
4.3 Public Announcements. The parties agree that, prior to the Closing
Date, except as otherwise required by law, any and all public announcements or
other public communications concerning this Agreement and the purchase of the
Assets by either party shall be subject to the prior written approval of the
other party.
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5. Pre-Closing Covenants of the Parties
From and after the date hereof and until the Closing Date:
5.1 Conduct of Business. The Company covenants that each Seller shall
carry on the Business substantially in the same manner as heretofore, in the
regular and normal course of business, without material exception. The Sellers
shall be entitled to make or not make previously planned leasehold improvements
and other capital expenditures in their sole discretion. With respect to the
Business, the Sellers shall, without material exception:
(a) maintain the Assets in their present order and condition in
accordance with good business practices, reasonable wear and use excepted,
and deliver the Assets to Purchaser on the Closing Date in such condition;
(b) take all steps reasonably necessary to maintain Sellers' rights in
and to the Intangible Property and other intangible assets of Sellers
related to the Business;
(c) pay all accounts payable in accordance with past practice and
collect all accounts receivable in accordance with past practice, but not
less than in accordance with prudent business practices;
(d) comply with all laws;
(e) use commercially reasonable efforts to preserve the goodwill and
patronage of the customers, Employees and suppliers of the Business and
others having a business relationship with Sellers; and
(f) not authorize, or commit to agree to take, any of the foregoing
actions.
Until the Closing Date, the Company shall provide to the Buyer (i) within
10 business days after the end of each month, unaudited revenue information for
such month and (ii) within 21 business days after the end of each month,
unaudited year-to-date financial information with respect to the revenues and
gross profits of the Business, plus direct costs of those cost centers whose
operating expenses are allocable solely to the Business, together with a letter
identifying any unusual developments in any allocable cost center.
5.2 Absence of Material Changes. Without the prior written consent of the
Buyer, which consent shall not be unreasonably withheld, the Company covenants
that, with respect to the Business, no Seller shall:
(a) voluntarily incur any obligation or liability (absolute or
contingent), except in the ordinary course of business or liability in
excess of $250,000 in the aggregate, whether or not in the ordinary course
of business;
(b) mortgage, pledge, or subject to any lien, charge or any other
Encumbrance any of the Assets, except in the ordinary course of business;
(c) sell, assign, or transfer any of the Assets, except in the ordinary
course of business;
(d) except as set forth on Schedule 5.2(d), cancel or adjust any debts
or claims, except in the ordinary course of business;
(e) acquire, or merge or consolidate with or into, any corporation or
other entity;
(f) make any change either individually or in the aggregate in the
compensation (including bonus or rate of commission) payable or to become
payable to any of its Employees, independent contractors or consultants
(other than periodic increases in the ordinary course of business and
pursuant to any benefit plan existing on the date hereof);
(g) except as permitted under Section 5.2(f), enter into any new
employment, consulting or compensation agreements with employees,
independent contractors or consultants, or modify any such existing
agreements (other than in connection with hiring of new non-management
employees in the ordinary course of business);
(h) materially modify, amend, alter or terminate any of its executory
Contracts of a material value or which are material in amount, except in
the ordinary course of business;
21
(i) take or knowingly permit any act or omission constituting a material
breach or default under any material contract, indenture or agreement by
which it or its properties are bound;
(j) change any of its accounting principles or practices, except as
required by GAAP (in which event the Company shall notify Buyer promptly of
such change);
(k) adopt any new Employee Plan or materially alter the terms, status or
funding condition of any Employee Plan;
(l) make any loans to any person or entity, except in the ordinary
course of business; or
(m) authorize, commit or agree to do any of the foregoing in the future.
5.3 Taxes. The Company covenants that each Seller will, on a timely basis
(including legally permitted extension periods), file all Tax Returns for and
pay any and all Taxes (other than Taxes to the extent such taxes constitute
Assumed Liabilities) which shall become due at any time on account of the
operation of the Business of such Seller or the ownership of the Assets on or
prior to the Closing Date.
5.4 Special Meeting and Proxy Statement.
(a) As promptly as reasonably practicable, but in no event later than
fifteen (15) business days after the execution of this Agreement, the
Company shall, with the assistance and cooperation of the Buyer, prepare
and file with the SEC under the Exchange Act, preliminary proxy materials
(and shall thereafter, as promptly as is reasonably practicable, so file
any definitive proxy materials) for the purpose of soliciting proxies from
the Company Shareholders to vote in favor of approval of the transactions
contemplated by this Agreement at a special meeting of Company Shareholders
to be called and held for such purpose (the "Special Meeting"). Such proxy
materials, together with any accompanying letter to shareholders, notice of
meeting and form of proxy, shall be referred to herein as the "Proxy
Statement". The Company shall provide to the Buyer (and its counsel) with a
reasonable opportunity to review and comment on the Proxy Statement prior
to filing such with the SEC, and shall provide the Buyer with a copy of all
such filings made with the SEC. The Company shall notify the Buyer promptly
upon the receipt of any comments from the SEC or its staff in connection
with the filing of, or amendments or supplements to, the Proxy Statement.
The Company, with the assistance and cooperation of the Buyer, shall
promptly respond to any SEC comments on the Proxy Statement and shall
otherwise use its commercially reasonable efforts to resolve as promptly as
practicable all SEC comments to the satisfaction of the SEC.
(b) On the first business day following the resolution to the
satisfaction of the SEC of all SEC comments on the Proxy Statement (or the
expiration of the ten-day period under Rule 14a-6(a) under the Exchange
Act, if no SEC comments are received by such date), the Company shall
authorize its agents to print and distribute the Proxy Statement to the
Company Shareholders and, pursuant thereto, shall call the Special Meeting
in accordance with the Washington Business Corporation Act and other
applicable Washington laws (the "Washington Law") and solicit proxies from
Company Shareholders to vote in favor of the approval of the transactions
contemplated by this Agreement at the Special Meeting. The Company shall
schedule the Special Meeting on a date that is no later than thirty (30)
calendar days after the date the Proxy Statement is first mailed to the
Company Shareholders and shall hold the Special Meeting on such date unless
delayed by the need to circulated amended or supplemental proxy materials
or other matters.
(c) The Company shall comply with all applicable provisions of and rules
under the Exchange Act and all applicable provisions of Washington Law, its
articles of incorporation and bylaws and any applicable regulations of the
Nasdaq National Market (collectively, the "Proxy Rules") in the
preparation, filing and distribution of the Proxy Statement, the
solicitation of proxies thereunder, and the calling and holding of the
Special Meeting. Without limiting the foregoing, the Company shall use
commercially reasonable efforts to ensure that the Proxy Statement does
not, as of the date on which it is distributed to Company Shareholders, and
as of the date of the Special Meeting, contain any untrue statement of a
material fact or omit to state a material fact necessary in order to make
the statements
22
made, in light of the circumstances under which they were made, not
misleading (provided that the Company shall not be responsible for the
accuracy or completeness of any information furnished by the Buyer in
writing for inclusion in the Proxy Statement).
(d) The Company, acting through its Board of Directors, shall include in
the Proxy Statement the recommendation of its Board of Directors that the
Company Shareholders vote in favor of the approval of the transactions
contemplated by this Agreement, and shall not withdraw, qualify or modify,
or propose publicly to withdraw, qualify or modify, in a manner adverse to
Buyer, such recommendation and shall otherwise use its commercially
reasonable efforts to obtain the requisite stockholder approval, except in
the event that the Board of Directors by a majority vote, after
consultation with its outside legal counsel, determines in good faith that
its fiduciary duties under applicable law prohibit or restrict the Company
from fulfilling any of the foregoing obligations.
(e) The Company covenants that no Seller shall, directly or indirectly,
through any officer, director, agent or otherwise, (i) solicit, initiate or
encourage submission of proposals or offers from any person relating to any
acquisition or purchase, directly or indirectly, of all or a material
portion of the Assets (an "Acquisition Proposal"), or (ii) participate in
any discussions or negotiations regarding, or furnish to any other person,
any non-public information with respect to, or otherwise cooperate in any
way with, or assist or participate in, facilitate or encourage, any effort
or attempt by any other person to make an Acquisition Proposal, except in
the event that the Board of Directors, by a majority vote after
consultation with outside legal counsel, determines in good faith that its
fiduciary duties under applicable law prohibit or restrict the Company from
fulfilling any of the foregoing obligations. As promptly as practicable
after the receipt of an Acquisition Proposal from any person, the Company
shall provide Buyer with oral and written notice of the material terms and
conditions of such Acquisition Proposal and the identity of the person
making such Acquisition Proposal. The Company shall provide Buyer with
forty-eight (48) hours prior notice of any meeting of its Board of
Directors at which its Board of Directors is reasonably expected to discuss
the application of its fiduciary duties and to consider any Acquisition
Proposal.
5.5 Compliance with Laws. The Company covenants that each Seller will
comply in all material respects with all laws and regulations which are
applicable to it in connection with the conduct of the Business or its ownership
of the Assets and will perform and comply in all material respects with all
contracts, commitments and obligations by which it is bound.
5.6 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act and Foreign Antitrust Laws. Each of the Buyer
and the Company shall promptly file any Notification and Report Forms and
related material that it may be required to file with the Federal Trade
Commission and the Antitrust Division of the United States Department of Justice
under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act, shall use its commercially reasonable efforts
to obtain an early termination of the applicable waiting period, and shall make
any further filings or information submissions pursuant thereto that may be
necessary, proper or advisable. The Buyer and the Company shall take all actions
that may be necessary, proper or advisable under any applicable antitrust and
competition laws of the European Union or any country other than the United
States (the "Foreign Antitrust Laws"). Each of the Buyers and the Company shall
comply with any orders issued by the Federal Trade Commission, Department of
Justice, any state attorney general or any foreign antitrust administrator and
accept such conditions, restrictions, limitations, divestiture requirements or
other provisions as may be necessary to resolve any objections that may be
asserted by any such governmental entity under any antitrust law.
5.7 Assignment of Contracts. The assignment of any U.S. Contract, Permit
or other asset to be assigned to Buyer pursuant to the provisions hereof shall
not constitute a contract to assign the same to the extent that an attempted
assignment would constitute a breach thereof or (except in the case of the
AstraZeneca agreement referred to in Section 2.6) give rise to any right of
acceleration or termination. The Company covenants that the Sellers shall use
their commercially reasonable efforts to procure consents to any such
assignment, provided, however, that the Sellers' refusal to provide economic
incentives to induce consent to such assignment or their failure to commence
litigation to compel consent to such assignment shall not be deemed to be a
failure by the Sellers to use commercially reasonable efforts to secure such
consent. If
23
any such consent is not obtained, the Company covenants that the Sellers shall
cooperate with the Buyer in any commercially reasonable arrangement designed to
provide the Buyer the benefit of any such Contract, Permit or other asset,
including enforcement of any and all rights of any Seller against the other
party thereto arising out of breach or cancellation thereof by such party or
otherwise.
5.8 Employee Matters.
(a) Buyer shall, as of the Closing Date, offer employment or, in the
case of Employees of the Subsidiaries, continuing employment, to
substantially all Employees whose names are set forth on Schedule 5.8(a)(i)
attached hereto (the "Target Employees"). Target Employees of the Company
who accept employment with Buyer pursuant to this Section 5.8(a), by
countersigning Buyer's offer letter no later than the date specified
therein, together with the Target Employees of the Subsidiaries as of the
Closing Date, are referred to collectively as "Continuing Employees."
Employees whose names are not set forth on Schedule 5.8(a)(i) or who do not
accept employment with Buyer pursuant to this Section 5.8(a), by
countersigning Buyer's offer letter by the date specified therein, together
with the Employees of the Subsidiaries whose names are not set forth on
Schedule 5.8(a)(i) are referred to collectively as "Retained Employees." On
or prior to the Closing, the Company shall cause the Subsidiaries to
terminate the employment of all Retained Employees employed by the
Subsidiaries. The Company shall use its commercially reasonable efforts
(and cause the Subsidiaries to use their commercially reasonable efforts)
to retain the Target Employees (including by establishment of the
"Retention Bonuses" as defined in paragraph (i) of this Section 5.8) until
the Closing Date and to have the Target Employees accept Buyer's offer of
employment or remain employed by the Subsidiary, as the case may be. If any
Continuing Employee is discharged by Buyer on or after the Closing Date,
then Buyer shall be solely liable for any and all severance costs for such
Continuing Employee under any severance benefit plan maintained by the
Buyer or assumed by the Buyer pursuant to this Agreement (including the U.
S. Severance Pay Plan for Management Employees and the U. S. Severance Pay
Plan for Non-Management Employees) and with respect to the Subsidiaries,
any severance or termination payments, compensation or damages under any
severance plan currently maintained by the Subsidiaries or arising under
foreign law. Notwithstanding the foregoing, Buyer shall not be liable for
and the Company shall retain or assume liability for and indemnify and hold
harmless the Buyer and the Subsidiaries for the payment of severance
compensation or similar termination indemnity payments or benefits arising
under any severance benefits plan maintained by the Company (including the
U. S. Severance Pay Plan for Management Employees and the U. S. Severance
Pay Plan for Non-Management Employees) and with respect to the Subsidiaries
any severance or termination payments, compensation or damages under any
severance plan maintained by the Subsidiaries or arising under foreign law
(i) to the extent such compensation is not deductible solely by reason of
Code Section 280G or (ii) to Retained Employees or Employees who are
terminated or are notified of their termination of employment by the
Company or a Subsidiary on or prior to the Closing Date, whether effective
prior to on or following the Closing Date. Buyer shall be responsible for
and assume all liability for all notices or payments due to any Continuing
Employees, and all notices, payments, fines or assessments due to any
Governmental Entity, pursuant to any applicable foreign, federal, state or
local law, common law, statute, rule or regulation with respect to the
employment, discharge or layoff of the Continuing Employees following the
Closing Date, including without limitation, the WARN Act, Section 4980B of
the Code, Title X of the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended ("COBRA"), and any rules or regulations that have been
issued in connection with the foregoing. The Company acknowledges and
assumes all liabilities, if any, under COBRA or any comparable foreign law
with respect to all of its employees as of the Closing Date (including
Continuing Employees and their "qualified beneficiaries" whose "qualifying
event" (as such terms are defined in Code Section 4980B) occurs on or prior
to the Closing Date), including any notice required by COBRA or comparable
foreign law to Continuing Employees with respect to cessation of coverage
under any group health plan of the Sellers as the result of the
transactions contemplated by this Agreement. The Company shall be
responsible and assume all liability for any obligations or other
violations of the WARN Act or any comparable foreign law, associated with
the sale of the Business or any other event occurring on or prior to the
Closing Date. The foregoing three sentences to the contrary,
notwithstanding, if the Buyer fails to fulfill its obligation set forth in
this
24
paragraph to offer employment to substantially all of the Target Employees
and, as a result of such failure, a violation of the WARN Act or comparable
foreign law occurs, Buyer shall be responsible and assume all liability for
such obligations and other violations.
(b) On and for a period of not less than one year following the Closing
Date, Buyer shall provide, or shall cause to be provided, salary, bonus and
other cash compensation and benefits for Continuing Employees that in the
aggregate are substantially similar to or better than the compensation and
benefits provided to such Continuing Employees under the welfare plans made
available to the employees of the respective Sellers on the day prior to
the Closing Date, but only to the extent commercially available on a fully
insured basis at commercially reasonable rates (it being agreed that the
rates paid by the Sellers on the day prior to the Closing Date shall be
deemed to be commercially reasonable rates) (such substituted benefits
being referred to as "Buyer's Welfare Plans"), which benefits are described
in Schedule 5.8(b) attached hereto. Continuing Employees shall receive
service credit for their service with the Sellers and their respective
predecessors for all purposes under Buyer's Welfare Plans (but only to the
extent such service was taken into account under the comparable benefit
plan made available to the employees of the respective Sellers on the day
prior to the Closing Date). No additional waiting periods, deductibles,
exclusions or benefit limitations for pre-existing conditions shall be
imposed or assessed against such Continuing Employees (or their dependents)
under Buyer's Welfare Plans (other than as would have been applicable to
such Continuing Employees or their dependents under the benefit plans made
available to the Employees of the respective Sellers on the day prior to
the Closing Date) but only to the extent such terms are commercially
available on a fully insured basis at commercially reasonable rates.
Buyer's Welfare Plans shall recognize any expenses paid by such Continuing
Employees (or their dependents) which were applied to meet deductibles and
maximum out-of-pocket limits under the benefit plans for the calendar year
of the Closing as if such expenses had been paid under Buyer's Welfare
Plans for purposes of applying the deductible and maximum out-of-pocket
limits of Buyer's Welfare Plans for such calendar year but only to the
extent such terms are commercially available on a fully issued basis at
commercially reasonable rates. Seller acknowledges that for purposes of
this paragraph (b) of Section 5.8, stock options, stock purchase plans and
similar equity-based compensation plans, programs and arrangements
maintained by Seller or any of the Subsidiaries for the benefit of the
Employees shall be disregarded and Buyer shall not be required under the
terms of this Agreement to provide any such plan, program or arrangement to
the Continuing Employees following the Closing. Prior to the Closing Date,
the Company shall take any and all action necessary to provide that any
unexercised stock options held by Continuing Employees shall become fully
vested on the Closing Date and shall be exercisable by the Continuing
Employees until at least one (1) year following the Closing Date or until
the date the stock option would otherwise expire, if sooner.
(c) (i) Continuing Employees who participate in the Company's 401(k)
Plan or any other qualified retirement plans (the "Qualified Plans") shall
terminate as participants and the Company shall amend its Qualified Plans
to provide that Continuing Employees become fully vested in their accrued
benefits under such plans. Buyer shall permit any such Continuing Employees
to directly roll over any eligible rollover distributions paid in cash from
such plans to a defined contribution plan of Buyer, subject to Buyer's
reasonable satisfaction that such rollover will not adversely affect the
qualified status of Buyer's plan and the tax-exempt status of the
corresponding trust under Sections 401(a) and 501(a), respectively.
(ii) Buyer shall provide, or cause to be provided, matching
contributions for Continuing Employees under Buyer's 401(k) Plan at a
rate that is substantially equivalent to or greater than the matching
contributions rate provided such employees under the Company's 401(k)
Plan, and provide, or cause to be provided, other retirement benefits
for Continuing Employees that in the aggregate are substantially similar
to or better than the retirement benefits provided such employees under
any other Qualified Plans, on the day prior to the Closing Date
("Buyer's Retirement Plans"). Buyer's Retirement Plans shall provide
service credit to such Continuing Employees for eligibility and vesting
purposes for their service with the respective Sellers and their
predecessors, but only to the extent such service was taken into account
for such purposes under the Qualified
25
Plans. Notwithstanding the foregoing, Buyer retains the right to modify,
amend or terminate any of Buyer's Retirement Plans at any time.
(iii) Buyer acknowledges that any participants in the Qualified Plans
who have loans outstanding thereunder will be required to repay such
loans before eligible rollover distributions can be made to such
participants unless the Buyer's Retirement Plan accepts a transfer of
the underlying promissory note. On the Closing Date, the Company shall
cause to be provided to Buyer a list of any such loans outstanding on
the Closing Date. None of Buyer's Retirement Plan shall be required to
hold stock of any Seller or any predecessor company or former parent
company of the Company.
(d) The Company shall take all actions that are necessary or appropriate
to ensure that Buyer shall have no obligation or liability under the WARN
Act or any comparable foreign law or otherwise with respect to any
employees or former employees of the Sellers whose employment is terminated
by any Seller on or prior to the Closing Date or with respect to any
Retained Employee who is terminated prior to, on or after the Closing Date,
including, without limitation, providing to such employees any
notifications required by the WARN Act in a timely manner. Buyer shall take
all such actions to ensure that the Company has no such liability with
respect to Continuing Employees who are terminated by Buyer after the
Closing Date, including, without limitation, providing to such employees
any notifications required by the WARN Act in a timely manner. The Company
shall indemnify and hold harmless Buyer from and against any liability
incurred by Buyer arising out of the termination of employment of any of
the Sellers' employees on or prior to the Closing Date and Buyer shall
indemnify and hold harmless the Company from and against any liability
incurred by the Company arising out of the termination of employment of a
Continuing Employee by Buyer after the Closing Date.
(e) Subject to applicable law, all information and records regarding
employment and personnel matters of Continuing Employees shall be
transferred to Buyer on the Closing Date.
(f) Effective as of the Closing, Buyer shall provide Continuing
Employees with coverage for all workers' compensation benefits, and from
and after the Closing be responsible for all workers' compensation claims
filed by Continuing Employees in connection with events following the
Closing.
(g) From and after the Closing, Buyer shall be responsible for, and
shall indemnify and hold harmless the Company and its officers, directors
and employees from and against any and all claims, losses, damages, costs
and expenses (including attorneys' fees and expenses) and other liabilities
and obligations relating to or arising out of (i) all salaries, wages,
commissions, employee incentive or other compensation, severance, holiday,
vacation, health, dental or retirement benefits accrued after the Closing
Date and (ii) the liabilities assumed by Buyer under this Section 5.8 or
any failure by Buyer to comply with the provisions of this Section 5.8. If,
after the Closing Date, the Company pays any claim made by a Continuing
Employee for medical or dental benefits or for workers' compensation
accrued or incurred following the Closing, Buyer thereby acknowledges and
agrees that it shall reimburse the Company within ten (10) Business Days of
delivery of notice of such payment.
(h) The Company shall be responsible for and shall indemnify and hold
harmless the Buyer and its officers, directors and employees from and
against any claims, losses, damages, costs, and expenses (including
reasonable attorneys' fees and expenses) and other liabilities and
obligations relating to or arising out of (a) the payment of all earned but
unpaid salaries, bonus (including the payment, no later than 30 days after
the Closing Date, of year 2002 bonuses (prorated by multiplying the
annualized amount of such bonuses by a fraction, the numerator of which is
the number of days elapsed in 2002 and 2003 prior to the Closing Date and
the denominator of which is 365) in accordance with its past practices and
without any difference based on the fact that the recipients are no longer
employees of the Company), vacation pay, sick pay, holiday pay, severance
pay and other like obligations and payments to the Employees (including
Continuing Employees) for all events occurring and periods ending on or
prior to the Closing Date, (b) the payment of any amounts due to Employees
(including Continuing Employees) pursuant to the Employee Plans as a result
of the employment of the Employees (including Continuing Employees) on or
prior to the Closing Date, (c) all incurred but unreported or unpaid
medical and workers' compensation claims occurring on or prior to the
Closing Date and for the cost
26
associated with confinement in any medical care, nursing, rehabilitation or
similar facility which commences prior to the Closing Date, (d) liabilities
associated with any leaves taken prior to the Closing Date in connection
with the Family and Medical Leave Act of 1993 or any policy, program or
plan effective on the Closing Date and (e) liabilities assumed or retained
by Sellers under this Section 5.8 or any failure by the Company or the
Subsidiaries to comply with the provisions of this Section 5.8. In
determining bonuses and other similar payments due to Continuing Employees
for any period ended on or prior to the Closing Date, the Company shall, if
payment thereof will occur after the Closing Date, waive any requirement
that such employees be employees of the Company on the date such bonuses or
other similar payments are paid. If, after the Closing Date, the Buyer pays
any claim made by a Continuing Employee for medical or dental benefits or
workers' compensation incurred or accrued on or prior to the Closing Date,
the Company hereby acknowledges and agrees that it shall reimburse the
Buyer within ten (10) Business Days of delivery of notice of such payment.
The Company shall, and hereby does, release all Continuing Employees from
any employment and/or confidentiality agreement previously entered into
between the Company and such Continuing Employees to the extent (but only
to the extent) necessary for Buyer to operate the Business in the same
manner as operated by the Sellers prior to the Closing Date.
(i) Within five (5) days after the date of this Agreement, the Company
shall, and shall cause the Subsidiaries to (i) establish retention bonus
arrangements (the "Retention Bonuses") in the forms attached hereto as
Exhibit C for the benefit of Target Employees whose names are set forth on
Schedule 5.8(i) attached hereto (the "Retention Bonus Employees") and (ii)
announce to the Retention Bonus Employees the terms and conditions of such
Retention Bonuses. The Retention Bonuses shall provide that, if the
Retention Bonus Employee accepts an offer of employment from the Buyer or
one of its affiliates and remains employed by the Buyer or an affiliate six
(6) months after the Closing Date or his or her employment is terminated
without cause by the Buyer or any of its affiliates during such six (6)
month period, then such Employee shall be entitled to receive a retention
bonus at the Company's sole expense in an amount set forth on Schedule
5.8(i), which bonus shall be paid within ten (10) business days after the
six (6) month anniversary of the Closing Date. The Company shall retain or
assume sole responsibility for paying the Retention Bonuses to Retention
Bonus Employees. The Buyer shall administer and make any and all payments
of Retention Bonuses to Retention Bonus Employees provided, however, that
the Company shall retain the economic obligation (including payroll tax
liabilities) with respect to payment of the Retention Bonuses and the
Company shall reimburse Buyer for the cost of such Retention Bonuses
(including payroll tax liabilities) made by Buyer within ten (10) days
after receipt of an invoice evidencing payment by Buyer of such Retention
Bonuses. The Buyer shall take any action reasonably requested by the
Company necessary to permit the Company to realize any tax benefits
associated with the Company's reimbursement to the Buyer for payment of the
Retention Bonuses.
(j) No Continuing Employee or other current or former employee of any of
the Sellers, any affiliate of any of the Sellers (or his/her spouse or
beneficiary), or any other person not a party to this Agreement, shall be
entitled to assert any claim hereunder. This Agreement shall be binding
upon and inure to the benefit only of the parties hereto and their
respective successors and permitted assigns in accordance with Section 15
hereof. Notwithstanding any other provision of this Agreement, except with
respect to such successors or permitted assigns this Agreement is not
intended and shall not be construed for the benefit of any third party or
any person not a signatory hereto. In no event shall this Agreement
constitute a third party beneficiary contract.
(k) Following the Closing, the Company shall permit Continuing Employees
who participate in the Company's dependent care spending account to
continue to receive reimbursements for covered expenses from their account
balance, if any, following the Closing Date through the end of the plan
year in which the Closing Date occurs. No additional contributions shall be
required for such coverage form the Continuing Employees.
5.9 Notification of Changes. Between the date hereof and the Closing
Date, the Company shall promptly notify the Buyer in writing of (i) any material
adverse change, (ii) the institution of or, if known by
27
the Company, the threat of institution of, litigation against any Seller related
to this Agreement, the Business or the Assets, (iii) the occurrence or existence
of any event or circumstance that might reasonably be expected to result in the
institution or assertion of litigation related to this Agreement, the Business
or the Assets against any of the Sellers, (iv) the terms of new material
contracts or material amendments to material contracts (except for aspects of
such matters the disclosure of which the Company believes, after consultation
with its counsel, and consultation by its counsel with counsel for the Buyer, is
impermissible or inadvisable under applicable laws), and (v) any information
that, if known on the date hereof, would have been required to be disclosed on a
Schedule to this Agreement in order for the representations and warranties set
forth in Section 2.26 to be true as of the date hereof.
6. Satisfaction of Conditions.
The Company and the Buyer covenant and agree to use their commercially
reasonable efforts to obtain the satisfaction of the conditions specified in
this Agreement.
7. Conditions to Obligations of the Buyer
The obligations of the Buyer under this Agreement to consummate the Closing
are subject to the fulfillment, at the Closing, of the following conditions
precedent, each of which may be waived in writing in the sole discretion of the
Buyer:
7.1 Continued Truth of Representations and Warranties of the Company;
Compliance with Covenants and Obligations. The representations and warranties
of the Company in this Agreement shall be true in all material respects on and
as of the Closing Date as though such representations and warranties were made
on and as of such date, except for any changes permitted by the terms hereof or
consented to in writing by the Buyer. The Company shall have performed and
complied in all material respects with all terms, conditions, covenants,
obligations, agreements and restrictions required by this Agreement to be
performed or complied with by it prior to or at the Closing Date.
7.2 Corporate Proceedings. All corporate and other proceedings required
to be taken on the part of the Company to authorize or carry out this Agreement
and to convey, assign, transfer and deliver the Assets shall have been taken,
including, without limitation, that the Company Shareholders shall have approved
the transactions contemplated by this Agreement in accordance with the terms of
Section 5.4 hereunder.
7.3 Approvals. The Company shall have obtained (a) all of the consents
listed in Schedule 2.3 attached hereto under the heading "Individually Material
Consents" and (b) all other consents, authorizations, permits or approvals from
all other third parties (including without limitation governmental agencies,
departments, bureaus, commissions and similar bodies), of which the failure to
obtain would cause a materially adverse effect upon the Business if not so
obtained (either individually or in the aggregate). All applicable waiting
periods (and any extensions thereof) under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act and any
applicable Foreign Antitrust Laws shall have expired or otherwise been
terminated.
7.4 Adverse Proceedings. No action or proceeding by or before any court
or other governmental body shall have been instituted by any governmental body
or person whatsoever which shall seek to restrain, prohibit or invalidate the
transactions contemplated by this Agreement or which might affect the right of
the Buyer to own or use the Assets or conduct the Business after the Closing or
claiming damages in connection with the transaction contemplated hereby.
7.5 Closing Deliveries. The Buyer shall have received at or prior to the
Closing each of the following documents:
(a) a ▇▇▇▇ of sale substantially in the form attached hereto as Exhibit
D, executed on behalf of the Company;
(b) such deeds, other instruments of conveyance, assignment and
transfer, and related documents (including, an Iowa real estate transfer
statement), executed and acknowledged in form and substance in conformity
with local customs in the location of each of the U.S. Assets and otherwise
reasonably
28
satisfactory to the Buyer, as shall be appropriate to convey, transfer and
assign to, and to vest in, the Buyer title to the U.S. Assets as provided
in this Agreement, and comply with local law;
(c) such affidavits as Buyer's title company shall reasonably require in
order to omit from its title insurance policy all exceptions for judgments,
bankruptcies or other returns against persons or entities whose names are
the same as or similar to the Company's name and any other Encumbrances
other than Permitted Encumbrances;
(d) checks to the order of the appropriate taxing authority in payment
of all applicable real property transfer taxes and copies of any required
tax returns therefor executed by the Company, which checks shall be
certified or official bank checks if required by the taxing authority;
(e) a certification that the Company is not a non-resident alien for
purposes of Section 1445 of the Internal Revenue Code, signed under penalty
of perjury;
(f) any and all other documents customarily delivered at real estate
closings where the U.S. Real Property is located, and reasonably necessary
to record the deeds and obtain title insurance without payment of special
premium therefor;
(g) copies of such contracts, files and other data and documents
pertaining to the Assets or the Business, that are not located at the
facilities to be transferred to the Buyer under this Agreement, as the
Buyer may reasonably request;
(h) such certificates of the Company's officers and such other documents
evidencing satisfaction of the conditions specified in Section 7 as the
Buyer shall reasonably request;
(i) the Transition Services Agreement and ▇▇▇▇▇▇▇▇▇ Lease (all as
defined in Section 10.5) executed by the Company and accepted by the Buyer;
(j) a notarized document of transfer and assignment with respect to the
ownership interests of Penwest Pharmaceuticals GmbH, a stock transfer form
with respect to the stock of Penwest Pharmaceuticals Ltd. and stock
certificates of the other Subsidiary, duly endorsed for transfer to the
Buyer or accompanied by such stock powers or other documents as shall be
necessary to transfer ownership thereof to the Buyer;
(k) a certificate of the Secretary of State or other appropriate
official of the state or country of organization of each Seller as to the
legal existence and good standing of each Seller in such jurisdiction, and
a certificate of the Secretary of State or other appropriate official of
each jurisdiction in which each Seller is qualified to transact business,
as to the good standing and foreign qualification of each Seller in each
such jurisdiction or, as to Penwest Pharmaceuticals GmbH, a certified copy
of the trade register excerpt for such company;
(l) certificates of the Secretary or other appropriate officer of the
Company attesting to the incumbency of the Company's officers,
respectively, the authenticity of the resolutions authorizing the
transactions contemplated by the Agreement, and the authenticity and
continuing validity of the charter documents delivered pursuant to Section
2.1;
(m) resignations of officers and directors of the Subsidiaries;
(n) UCC-3 release and termination statements and mortgage satisfaction
certificates executed by each Seller's secured creditors which will, when
filed with appropriate authorities, release all Encumbrances against the
Assets except for Permitted Encumbrances;
(o) the opinions of the law firm of ▇▇▇▇ and ▇▇▇▇ LLP and ▇▇▇▇▇▇▇ Coie
LLP in the respective forms attached hereto as Exhibits E and F;
(p) evidence reasonably satisfactory to the Buyer's counsel of transfer
of those material permits whose transfer is permissible and which
constitute Assets;
(q) evidence of payment of all amounts owing to AstraZeneca plc referred
to in Section 2.6;
29
(r) a sales tax clearance certificate issued by appropriate officials of
the State of
New York; and
(s) such other documents, instruments or certificates of the type
customary for transactions similar to the transactions contemplated by this
Agreement as the Buyer may reasonably request.
8. Conditions to Obligations of the Company
The obligations of the Company under this Agreement to consummate the
Closing are subject to the fulfillment, at the Closing Date, of the following
conditions precedent, each of which may be waived in writing at the sole
discretion of the Company:
8.1 Continued Truth of Representations and Warranties of the Buyer;
Compliance with Covenants and Obligations. The representations and warranties
of the Buyer in this Agreement shall be true in all material respects on and as
of the Closing Date as though such representations and warranties were made on
and as of such date, except for any changes consented to in writing by the
Company. The Buyer shall have performed and complied in all material respects
with all terms, conditions, obligations, agreements and restrictions required by
this Agreement to be performed or complied with by it prior to or at the Closing
Date.
8.2 Corporate Proceedings. All corporate and other proceedings required
to be taken on the part of the Buyer to authorize or carry out this Agreement
shall have been taken.
8.3 Governmental Approvals. Without material exception, all governmental
agencies, departments, bureaus, commissions and similar bodies, the consent,
authorization or approval of which is necessary under any applicable law, rule,
order or regulation for the consummation by the Buyer of the transactions
contemplated by this Agreement and whose names are set forth in Schedule
2.3attached hereto under the heading "Individually Material Consents" or the
failure to receive which, although not so listed, would cause a materially
adverse effect upon the Business if not received (either individually or in the
aggregate) shall have consented to, authorized, permitted or approved such
transactions. All applicable waiting periods (and any extensions thereof) under
the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act and all Foreign Antitrust Laws shall have expired or
otherwise been terminated.
8.4 Adverse Proceedings. No action or proceeding by or before any court
or other governmental body shall have been instituted or threatened by any
governmental body or person whatsoever which shall seek to restrain, prohibit or
invalidate the transactions contemplated by this Agreement or which might affect
the right of the Company to transfer the Assets.
8.5 Closing Deliveries. The Company shall have received at or prior to
the Closing each of the following documents:
(a) such certificates of the Buyer's officers and such other documents
evidencing satisfaction of the conditions specified in this Section 8 as
the Company shall reasonably request;
(b) a certificate of the Secretary of State of the state of Delaware as
to the legal existence and good standing (including tax) of the Buyer in
Delaware;
(c) a certificate of the Secretary of the Buyer attesting to the
incumbency of the Buyer's officers, the authenticity of the resolutions
authorizing the transactions contemplated by this Agreement, and the
authenticity and continuing validity of the charter documents delivered
pursuant to Section 3.1;
(d) the Buyer's Instrument of Assumption and the Transition Services
Agreement and ▇▇▇▇▇▇▇▇▇ Lease executed by the Buyer;
(e) opinions of the law firms of ▇▇▇▇▇▇ & Bird LLP and Poellath &
Partner in the respective forms attached hereto as Exhibit G and H;
(f) payment of the Purchase Price as provided in Section 1.3, by wire
transfer and by delivery of the manually executed original of the
Promissory Note; and
(g) such other documents, instruments or certificates of the type
customary for transactions similar to the transactions contemplated by this
Agreement as the Company may reasonably request.
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9. Indemnification
9.1 By the Buyer and the Company. The Buyer on the one hand and the
Company on the other hand each hereby agree to indemnify and hold harmless the
other, any of their respective affiliates and any of such affiliate's respective
directors, employees and agents against all claims, damages, losses,
liabilities, costs and expenses (including, without limitation, settlement costs
and any reasonable legal expenses, accounting expenses or other expenses for
investigating or defending any actions or threatened actions) ("Losses")
reasonably incurred by the Buyer or the Company in connection with each and all
of the following:
(a) any breach by the indemnifying party of any representation or
warranty made by it in this Agreement; and
(b) any breach of any covenant, agreement or obligation of the
indemnifying party contained in this Agreement or any other agreement,
instrument or document contemplated by this Agreement.
9.2 By the Company. The Company further agrees to indemnify and hold
harmless the Buyer, its affiliates and such affiliate's directors, employees and
agents, from any and all Losses reasonably incurred by the Buyer, in connection
with each and all of the following:
(a) the failure of the Buyer to obtain the protections afforded by
compliance with the notification and other requirements of the bulk sales
laws in force in the jurisdictions in which such laws may be applicable to
either the Company or the transactions contemplated by this Agreement;
(b) except for the Assumed Liabilities and for liabilities and
obligations allocated to the Buyer in Section 1.4(c) or elsewhere in this
Agreement, any claims, damages, or liabilities arising out of the operation
of the Business, to the extent such claims accrue or arise out of facts or
circumstances occurring on or before the Closing Date or, if such claims
arise out of liabilities of the Company not constituting Assumed
Liabilities and not allocated to the Buyer in Section 1.4(d) or elsewhere
in this Agreement, occurring on, before or after the Closing Date;
(c) subject to the provisions of Section 9.9, any Environmental
Liabilities;
(d) any Taxes of the Company and the Subsidiaries imposed upon or
measured by net income with respect to any Tax year or portion thereof
ending on or before the Closing Date (or for any Tax year beginning before
and ending after the Closing Date to the extent allocable to the portion of
such period beginning before and ending on the Closing Date), except to the
extent they are already taken into account in determining the Net Working
Capital;
(e) the unpaid Taxes of any person (other than any of the Company and
the Subsidiaries) under Reg. sec.1.1502-6 (or any similar provision of
state, local, or foreign law), as a transferee or successor, by contract,
or otherwise; and
(f) any liabilities and obligations allocated to the Company in Section
1.4(c) or elsewhere in this Agreement (including liabilities and
obligations of Subsidiaries that are allocated to the Company).
9.3 By the Buyer. The Buyer further agrees to indemnify and hold harmless
the Company, its affiliates and such affiliate's directors, employees and
agents, from any and all Losses reasonably incurred by the Company, in
connection with or arising out of (a) the operation of the Business, to the
extent such claims accrue or arise out of facts or circumstances occurring after
the Closing Date, (b) any Assumed Liabilities and (c) any liabilities and
obligations allocated to the Buyer in Section 1.4(c) or elsewhere in this
Agreement (including liabilities and obligations of Subsidiaries that are
allocated to the Buyer).
9.4 Claims for Indemnification. Whenever any claim shall arise for
indemnification hereunder the party seeking indemnification (the "Indemnified
Party"), shall promptly notify the party from whom indemnification is sought
(the "Indemnifying Party") of the claim and, when known, the facts constituting
the basis for such claim. In the event of any such claim for indemnification
hereunder resulting from or in connection with any claim or legal proceedings by
a third party, the notice to the Indemnifying Party shall specify, if known, the
amount or an estimate of the amount of the liability arising therefrom. Failure
to give timely notice of any claim shall not release the Indemnifying Party from
any further liability to the
31
Indemnified Party with respect to such claim except to the extent such failure
materially prejudices the ability of the Indemnifying Party to defend against
such claim.
The Indemnified Party shall not settle or compromise any claim by a third
party for which it is entitled to indemnification hereunder without the prior
written consent of the Indemnifying Party, unless suit shall have been
instituted against it and the Indemnifying Party shall not have taken control of
such suit after notification thereof as provided in Section 9.5 of this
Agreement.
9.5 Defense by Indemnifying Party. In connection with any claim giving
rise to indemnity hereunder resulting from or arising out of any claim or legal
proceeding by a person who is not a party to this Agreement, the Indemnifying
Party at its sole cost and expense may, upon written notice to the Indemnified
Party, assume the defense of any such claim or legal proceeding if it
acknowledges to the Indemnified Party in writing its obligations to indemnify
the Indemnified Party with respect to all elements of such claim. The
Indemnified Party shall be entitled to participate in (but not control) the
defense of any such action, with its counsel and at its own expense. If the
Indemnifying Party does not assume the defense of any such claim or litigation
resulting therefrom within 30 days after the date it is notified that such claim
has been made, (a) the Indemnified Party may defend against such claim or
litigation, in such manner as it may reasonably deem appropriate, including, but
not limited to, settling such claim or litigation, after giving notice of the
same to the Indemnifying Party, on such terms as the Indemnified Party may deem
appropriate, and (b) the Indemnifying Party shall be entitled to participate in
(but not control) the defense of such action, with its counsel and at its own
expense.
9.6 Additional Procedures for Environmental Indemnification.
In addition to the procedures for defense by the Indemnifying Party
specified in Section 9.5, the following additional procedures shall apply to
claims for indemnification under Section 9.1 regarding the Environmental
Representations and Section 9.2 regarding Environmental Liabilities
(collectively "Environmental Claims"):
(a) The Company shall not be responsible for any legal or other expenses
of Buyer or its affiliates incurred in connection with the defense of an
Environmental Claim incurred:
(i) prior to the Buyer's providing notice to the Company and for 30
days thereafter (except for reasonable and necessary costs of
investigation prior to timely notice); or
(ii) after the Company's assumption of control of the defense; or
(iii) during the period following the Company's taking control of the
defense of such claim, except to the extent such action is legally
required.
(b) If the Company has assumed the defense of an Environmental Claim
that involves Remedial Activities on a Seller Site then owned by the Buyer
or one of its affiliates (collectively, the "Facility"):
(i) the Company shall provide the Buyer reasonable notice and
opportunity to comment (at its own cost and expense) upon the Company's
plans for addressing such Environmental Claim;
(ii) the Buyer shall provide the Company reasonable access to the
Facility relating to such Environmental Claim (including, without
limitation, the right to enter, investigate, drill ▇▇▇▇▇ on, take
samples on, excavate, monitor, test, cap and implement remedial or
removal actions, on or at the Facility in compliance with applicable
Environmental Law);
(iii) the Company shall use reasonable efforts to avoid disruption to
the business or operations of the Buyer or its affiliates or damage to
persons or property, and shall take reasonable steps to mitigate and
remedy any such disruption and damage;
(iv) neither the Buyer nor its affiliates shall unreasonably
interfere with or impede any of the Company's remedial, investigatory or
removal actions;
(v) the Buyer or its affiliate may have a representative present to
observe all remediation activities conducted at the Facility;
32
(vi) the Company shall be solely responsible for any necessary
offsite disposal or manifesting of materials, samples taken or waste
generated in connection with the remediation, and, upon Buyer's request,
the Company shall furnish reasonable evidence that such disposal is in
compliance with all applicable Environmental Laws;
(vii) subject to Section 9.9 of this Agreement, all activities
undertaken in connection with the Remedial Activities shall fully comply
with all applicable Environmental Laws and other applicable laws
including those relating to worker safety and to proper disposal of any
disturbed or discarded materials;
(viii) the Company will restore promptly any physical damage on the
Facility caused by the Remedial Activities to the condition existing
prior to such damage;
(ix) each of the Company and its contractors shall have in force at
all times a comprehensive general liability insurance policy, automobile
insurance policy and an errors and omissions policy providing reasonable
coverage and deductibles and worker's compensation insurance in the
statutory amounts, and the Company and Buyer shall be made certificate
holders as additional insured parties under said policies where legally
permissible during the performance of the Remedial Activities; and
(x) subject to the Company's right to control the defense, if the
Company and the Buyer cannot resolve any disagreement as to the
Company's plans for performing such Remedial Activities, the Company and
the Buyer shall resolve such disputes in accordance with Sections 19 and
20 of this Agreement.
(c) If the Company has assumed the defense of the Environmental Claim
(whether or not it involves Remedial Activities at a Facility):
(i) the Company thereafter shall determine, control and undertake the
actions to resolve such claim to the extent required under applicable
Environmental Law;
(ii) the Company shall keep the Buyer reasonably informed about the
defense, and, at Buyer's sole cost and expense (as to out-of-pocket
costs and expenses), shall provide the Buyer with reasonable access to
all data and reports generated in connection with such activities;
(iii) the Buyer shall provide the Company reasonable access to such
employees and advisors of Buyer or its affiliates as may have knowledge
of the relevant Facility or facts relating to such an Environmental
Claim and all relevant documents and records regarding any matter in
respect of which a claim is asserted; and
(iv) the Buyer shall, and shall cause its affiliates to, cooperate
with the Company (as the Company may reasonably direct) in connection
with the prosecution, defense, settlement or performance of the
Company's obligations as set forth in Section 9.1, 9.2 or 9.6.
9.7 Payment of Indemnification Obligation. All indemnification by the
Buyer or the Company hereunder shall be effected by payment of cash or delivery
of a cashier's or certified check in the amount of the indemnification
liability.
9.8 Limitations on Indemnification. No amount of indemnification shall be
payable by an Indemnifying Party in the case of a claim by any Indemnified Party
under Section 9, unless, until and then only to the extent that actual damages
and losses suffered or incurred by the Indemnified Party exceed $250,000 and
then only to the extent such damages and losses exceed such amount. In no event
shall the aggregate indemnity amount payable by any Indemnifying Party under
this Section 9 exceed 25% of the Purchase Price, as adjusted pursuant to Section
1.7. The foregoing limitations on indemnification shall not apply to (a)
intentional breaches of representations or covenants contained in this
Agreement; (b) liabilities not assumed by or allocated to the Buyer under this
Agreement; (c) the adjustment to the Purchase Price by reason of the calculation
of the Net Working Capital; (d) losses arising out of or related to Taxes
payable by any of the Sellers or with respect to any representation or warranty
set forth in Section 2.22; or
33
(e) indemnification claims under Section 9.2(c); and the $250,000 limitation
shall not apply to Losses arising out of (i) the transactions contemplated by
this Agreement violating applicable laws or regulations of the federal Food and
Drug Administration ("FDA") or comparable state agencies or (ii) Penwest's
failure to make any required filings with the FDA or comparable state agencies
with respect to such transactions. Notwithstanding anything to the contrary
contained herein, no party shall be liable for any incidental, consequential,
special, punitive or other similar damages, except that an Indemnifying Party
shall be liable for such damages of those types as are awarded to a third party
pursuant to a claim brought by such third party against an Indemnified Party.
9.9 Additional Limitations on Environmental Indemnification.
(a) Notwithstanding any other provision of this Agreement to the
contrary, the Company shall have no obligation to provide indemnification
or have any other liability under Sections 9.1 or 9.2 for:
(i) Environmental Claims asserted on or after the fifth anniversary
of the Closing Date;
(ii) Environmental Claims related to a Facility unless (1) the
Facility has been operated since the Closing Date solely for commercial
or industrial purposes (including related office, warehouse, sale, and
service activities), (2) the Facility has not been sold or transferred
during such five-year indemnification period, and (3) such Environmental
Claim does not involve conditions and/or Hazardous Materials created,
caused or materially aggravated by the Buyer or any tenant of the Buyer
(other than the Company) following the Closing Date;
(iii) Environmental Claims arising directly or indirectly out of any
drilling, soil or groundwater sampling, or excavation at any Facility
("Post-Closing Investigation") carried out after the Closing Date to the
extent such acts were consented to or allowed, initiated, performed,
sought or caused by Buyer or its affiliates, or a successor owner or
operator of such Facility, except where, and solely to the extent that
the Sellers are provided 30 days prior notice of the intent to
investigate and the Post-Closing Investigation results directly from any
of the following:
(1) a determination (whether by judgment, order, award or other
legal directive) in a judicial, administrative or binding arbitral
proceeding commenced by a third party that Buyer has an obligation to
investigate, remediate or pay damages on account of an Environmental
Claim;
(2) environmental investigations performed upon the demand of a
bona fide prospective purchaser of the Facility; or
(3) activities necessary for the construction, reconstruction,
refurbishment, renovation, expansion, or enlargement of any building
or structure.
(b) The Buyer agrees to place such legal and institutional controls on
any Facility as the Company may determine are reasonably necessary for the
efficient discharge of its indemnification obligations with regard to
Environmental Claims, including, without limitation, activity and use
limitations, deed restrictions, deed notices or government orders
("Institutional Controls"), provided that such Institutional Controls are
not inconsistent with and would not unreasonably interfere with the
continued commercial or industrial use of such Facility.
(c) Pursuant to Sections 9.1 and 9.2, the Company shall be responsible
to conduct, or to pay Losses on account of, any investigation or
remediation of Hazardous Substances at any Facility only to the extent such
investigation or remediation is necessary to render the Facility safe and
useful for its use for industrial and commercial purposes, which rendering
may be premised on industrial or commercial risk-based cleanup standards
and/or placement of Institutional Controls.
(d) If Buyer is nevertheless controlling the defense of an Environmental
Claim, in performing any Remedial Activities response action for which
indemnification may be sought pursuant to 9.1 or 9.2, Buyer shall select
the remedy which most cost effectively achieves the required level of
cleanup with respect to which the Company owes (or is asserted to owe) an
indemnity pursuant to Section 9.1 or 9.2.
34
(e) Buyer's rights to indemnification for Environmental Liabilities are
solely as explicitly set forth in this Agreement, but nothing in this
Agreement shall preclude the Buyer or its officers, directors or agents
from seeking contribution or other recovery or relief, whether in law or
equity, related directly or indirectly to the Business, or operation of the
Business and arising at any time under Environmental Laws. The Parties each
reserve all rights and defenses in respect of any such claims.
9.10 Survival of Representations; Claims for Indemnification. All
representations and warranties made by the parties herein or in any instrument
or document furnished in connection herewith shall survive the Closing and any
investigation at any time made by or on behalf of the parties hereto. All such
representations and warranties shall expire (i) on March 31, 2004 or (ii) twelve
(12) months after the Closing Date, whichever is later, except for (a) claims,
if any, asserted in writing prior to such expiration date, which shall survive
until finally resolved and satisfied in full, (b) representations and warranties
contained in Section 2.22 hereof, which shall first expire three (3) months
after the expiration of the statute of limitations with respect to claims for
non-payment or underpayment of taxes, (c) the Environmental Representations,
which shall first expire five (5) years after the Closing Date, and (d)
representations and warranties with respect to title to the Assets, which shall
not expire. All claims and actions for indemnity pursuant to this Section 9 for
breach of any representation or warranty shall be asserted or maintained in
writing by a party hereto on or prior to the expiration of the applicable
period.
10. Post-Closing Agreements
10.1 Non-Competition Agreement, Non-Solicitation.
(a) Without the prior approval of the Buyer, for a period of five (5)
years after the Closing Date, the Company shall not engage directly or
indirectly in the manufacture or sale of excipient products (whether or not
in bulk) in the United States, the continent of Europe or elsewhere or
assist any other person to be so engaged by intentional disclosure of
confidential information related to the Business; provided, that the sale
of excipients as part of the development, formulation and sale of complete,
controlled release, drug delivery systems shall not be deemed to violate
this Section 10.1. The parties hereto specifically acknowledge and agree
that the foregoing covenant and agreement is made and given by the Sellers
in connection with the sale of the Business and the good will associated
therewith and in order to protect and preserve to the Buyer the benefit of
its bargain in the purchase of such Business and good will.
(b) Without the prior approval of the Buyer, for a period of two (2)
years after the Closing Date, the Company shall not directly or indirectly
solicit for employment or employ in any capacity, including as a consultant
or agent, any Continuing Employee.
(c) The parties hereto agree that the duration and geographic scope of
the provisions set forth in this Section 10.1 are reasonable. If any court
determines that the duration or the geographic scope, or both, are
unreasonable and that such provision is to that extent unenforceable, the
parties hereto agree that these provisions shall remain in full force and
effect for the greatest time period and in the greatest area that would not
render it unenforceable. The parties intend that these provisions shall be
deemed to be a series of separate covenants, one for each and every county
of each and every state of the United States of America and each and every
political subdivision of each and every foreign country and each and every
political subdivision of each. The Company agrees that damages are an
inadequate remedy for any breach of this provision and that the Buyer
shall, whether or not it is pursuing any potential remedies at law, be
entitled to equitable relief in the form of preliminary and permanent
injunctions without bond or other security upon any actual or threatened
breach of these provisions.
10.2 Sharing of Data.
(a) Subject to applicable law, the Company shall have the right for a
period of five years following the Closing Date (and for such longer period
as may be reasonably necessary to enable the Company to deal with
applicable governmental agencies and regulators) to have reasonable access
to such books, records and accounts, including financial and tax
information, correspondence, production records, and other similar
information as are transferred to the Buyer pursuant to the terms of this
Agreement for the
35
purposes of concluding its involvement in the Business prior to the Closing
Date and for complying with its obligations under applicable securities,
tax, environmental, employment or other laws and regulations. Subject to
applicable law, the Buyer shall have the right for a period of five years
following the Closing Date (and for such longer period as may be reasonably
necessary to enable the Buyer to deal with applicable governmental agencies
and regulators) to have reasonable access to those books, records and
accounts, including financial and tax information, correspondence,
employment records and other records which are retained by the Company
pursuant to the terms of this Agreement to the extent that any of the
foregoing relates to the Business transferred to the Buyer hereunder or is
otherwise needed by the Buyer in order to comply with its obligations under
applicable securities, tax, environmental, employment or other laws and
regulations.
(b) The Company and the Buyer agree that from and after the Closing Date
they shall cooperate fully with each other to facilitate the transfer of
the Assets from the Sellers to the Buyer and the operation thereof by the
Buyer.
10.3 Use of Name. The Buyer agrees not to use any of the Excluded Marks
or the Penwest name, corporate name, logo or any variation or derivation thereof
prior to or after the Closing Date in connection with any business related to,
competitive with, or an outgrowth of, the Business conducted on the date hereof;
provided, however, that the Buyer (i) may continue to use any brochures,
packaging or marketing materials included in the Assets containing any Penwest
name, ▇▇▇▇ or logo (but not any of the Excluded Marks) (provided that such
brochures or materials are prominently marked on their cover pages, within 30
days after the Closing Date, to indicate that the Buyer, and not the Company, is
conducting the Business and owns the Subsidiaries) for up to nine months
following the Closing Date and may during such nine-month period reprint and use
additional copies of any of the foregoing of which there is less than a nine
month supply included in the Assets, and (ii) may for up to nine months after
the Closing identify itself in any advertising, brochures, marketing materials
or otherwise as the successor to the Penwest excipients business.
10.4 Cooperation in Litigation. Each party hereto will fully cooperate
with the others in the defense or prosecution of any litigation or proceeding
already instituted or which may be instituted hereafter against or by such party
relating to or arising out of the conduct of the Business prior to or after the
Closing Date (other than litigation or proceedings arising out the transactions
contemplated by this Agreement). The party requesting such cooperation shall pay
the reasonable out-of-pocket expenses (including legal fees and disbursements),
as incurred, of the party providing such cooperation and of its officers,
directors, managers, members, employees and agents reasonably incurred in
connection with providing such cooperation, but shall not be responsible to
reimburse the party providing such cooperation for such party's time spent in
such cooperation or the salaries or costs of fringe benefits or similar expenses
paid by the party providing such cooperation to its officers, directors,
managers, members, employees and agents while assisting in the defense or
prosecution of any such litigation or proceeding.
10.5 Transitional Services and ▇▇▇▇▇▇▇▇▇ Lease. The Company shall (i)
utilize office and research and development space and equipment in ▇▇▇▇▇▇▇▇▇,
New York, pursuant to a lease in the form attached hereto as Exhibit I (the
"▇▇▇▇▇▇▇▇▇ Lease") which provides for two years of occupancy rent-free and
options for three years thereafter at a rental of $12 per square foot and (ii)
utilize its current financial systems information technology services pursuant
to a services agreement in the form attached hereto as Exhibit J (the
"Transition Services Agreement). Likewise the Buyer shall utilize the Seller's
benefits administrative services pursuant to the Transition Services Agreement.
The parties agree to provide, or cause to be provided, these aforementioned
services for up to a twelve-month period after the Closing.
10.6 Confidentiality Agreements. If requested by Buyer, the Company
agrees to enforce confidentiality agreements it has with employees, consultants
and other third parties to protect the Intangible Property sold to the Buyer.
Such enforcement shall be at Buyer's cost, using attorneys selected by Buyer and
reasonably acceptable to the Company. The Buyer shall furthermore reimburse the
Company any reasonable out of pocket expenses it may incur in this respect.
36
10.7 Tax Matters. The following provisions shall govern the allocation of
responsibility as between the Buyer and the Company for certain Tax matters
following the Closing Date:
(a) Tax Periods Beginning Before and Ending After the Closing
Date. Buyer shall prepare or cause to be prepared and file or cause to be
filed any Tax Returns of the Subsidiaries for tax periods which begin
before the Closing Date and end after the Closing Date. Sellers shall pay
to Buyer within fifteen (15) days after the date on which Taxes shown on
such Tax Returns are paid with respect to such periods an amount equal to
the portion of such Taxes which relates to the portion of such taxable
period ending on the Closing Date. For purposes of this Section, in the
case of any Taxes that are imposed on a periodic basis and are payable for
a taxable period that includes (but does not end on) the Closing Date, the
portion of such Tax which relates to the portion of such taxable period
ending on the Closing Date shall (x) in the case of any Taxes other than
Taxes based upon or related to income or receipts, be deemed to be amounts
of such Tax for the entire taxable period multiplied by a fraction the
numerator of which is the number of days in the taxable period ending on
the Closing Date and the denominator of which is the number of days in the
entire taxable period, and (y) in the case of any Tax based upon or related
to income or receipts be deemed equal to the amount which would be payable
if the relevant taxable period ended on the Closing Date. Any credits
relating to a taxable period that begins before and ends after the Closing
Date shall be taken into account as though the relevant taxable period
ended on the Closing Date. All determinations necessary to give effect to
the foregoing allocations shall be made in a manner consistent with prior
practice of the Company and the Subsidiaries.
(b) Cooperation About Tax Matters.
(i) Buyer, the Company and the Subsidiaries shall cooperate fully, as
and to the extent reasonably requested by any other party, in connection
with the filing of Tax Returns pursuant to this Section and any audit,
litigation or other proceeding with respect to Taxes. Such cooperation
shall include the retention and (upon such other party's request) the
provision of records and information which are reasonably relevant to
any such audit, litigation or other proceeding and making employees
available on a mutually convenient basis to provide additional
information and explanation of any material provided hereunder. The
Company and the Buyer agree to retain all books and records with respect
to Tax matters pertinent to the Company and the Subsidiaries relating to
any taxable period beginning before the Closing Date until the
expiration of the statute of limitations (and, to the extent notified by
Buyer to the Company or the Company to the Buyer, any extensions
thereof) of the respective taxable periods, and to abide by all record
retention agreements entered into with any taxing authority, and to give
the other party reasonable written notice prior to transferring,
destroying or discarding any such books and records and, if the other
party so requests, the Company and the Subsidiaries, as the case may be,
shall allow the other party to take possession of such books and
records.
(ii) Buyer and the Company further agree, upon request, to use their
commercially reasonable efforts to obtain any certificate or other
document from any governmental authority or any other person as may be
necessary to mitigate, reduce or eliminate any Tax that could be imposed
(including, but not limited to, with respect to the transactions
contemplated hereby).
(c) Tax Sharing Agreement. All tax sharing agreements or similar
agreements with respect to or involving the Company and the Subsidiaries
shall be terminated as of the Closing Date and, after the Closing Date, the
Company and the Subsidiaries shall not be bound thereby or have any
liability thereunder.
11. Termination of Agreement
11.1 Termination by Lapse of Time. This Agreement shall terminate at 5:00
p.m.,
New York time, on the day which is 90 days from the date hereof, if the
Closing contemplated hereby has not been consummated, unless (a) such date is
extended by the written consent of the Buyer and the Company or (b) the Company
receives written comments from the SEC with respect to the Company's proxy
materials, in
37
which event said termination date shall be extended by an additional 30 days if
the Company so requests within 5 days of its receipt of such comments.
11.2 Termination by Agreement of the Parties. This Agreement may be
terminated by the mutual written agreement of the parties hereto.
11.3 Termination by Reason of Breach. This Agreement may be terminated:
(a) by the Company, if at any time prior to the Closing there shall
occur a material breach of any of the representations, warranties or
covenants of the Buyer or the failure by the Buyer to perform any material
condition or obligation hereunder, which material breach or failure to
perform cannot be or has not been cured within 30 days after the giving of
written notice by one party to the other party specifying such breach or
failure to perform; and
(b) by the Buyer, if at any time prior to the Closing there shall occur
(i) a material breach of any of the representations, warranties or
covenants of the Company or the failure of the Company to perform any
material condition or obligation hereunder, which material breach or
failure to perform cannot be or has not been cured within 30 days after the
giving of written notice by one party to the other party specifying such
breach or failure to perform, or (ii) a material adverse change; provided,
however, if such material breach and/or material adverse change shall have
occurred between the date of this Agreement and the Closing which would
permit the Buyer to terminate this Agreement and nevertheless Buyer does
not terminate this Agreement and continues with the transactions
contemplated hereby, Buyer shall thereby have irrevocably and completely
waived its rights to claim reimbursement of any Losses which Buyer could
reasonably have foreseen as a result of such material breach and/or
material adverse change.
11.4 Termination by the Company's Board of Directors. This Agreement may
be terminated by the Company if the Company receives an Acquisition Proposal and
the Board of Directors determines, in its good faith judgment, after
consultation with legal counsel, that it must consider such Acquisition Proposal
in order to comply with its fiduciary duties, as provided for in Section 5.4(e),
and also that it must terminate this Agreement in order to comply with such
duties.
11.5 Effects of Termination. If this Agreement is terminated pursuant to
this Section 11, all further obligations of the parties under this Agreement
will terminate, except for the obligations set forth in Sections 4.2, 4.3, 11.5,
11.6, 13, 14, 16, 17, 18, 19, 20, 21 and 22 and except for any obligations of
either party to the other arising out of its willful breach of its covenants
contained herein.
11.6 Expenses
(a) Except as otherwise expressly provided herein, the Buyer (on the one
hand) and the Company (on the other hand) shall each pay its own expenses
in connection with this Agreement and the transactions contemplated hereby.
(b) Notwithstanding the foregoing, if:
(i) the Buyer terminates this Agreement as a result of the failure of
the condition set forth in Section 7.2, due to the lack of stockholder
approval for this Agreement, then the Company shall pay to the Buyer an
amount equal to Buyer's reasonable, documented out-of-pocket costs and
expenses (including attorneys' fees) actually incurred by Buyer in
connection with this Agreement and the transactions contemplated hereby
(the "Costs and Expenses"). The Costs and Expenses shall be paid within
two business days from the date of termination of this Agreement; and if
(ii) the Buyer terminates this Agreement pursuant to Section 11.3(b)
(other than as described in clause (iii) below), then the Company shall
pay to the Buyer an amount equal to the Buyer's Costs and Expenses, up
to a maximum amount of $300,000; and if
(iii) (x) the Buyer shall terminate this Agreement pursuant to
Section 11.3(b) as a result of the failure by the Board of Directors to
recommend that the Company Shareholders vote in favor of
38
the approval of the transactions contemplated by this Agreement or as a
result of a material breach by the Company of its obligations under
Section 5.4; or
(y) the Company shall terminate this Agreement pursuant to Section
11.4 as a result of its receipt of an Acquisition Proposal which the
Board of Directors determines, in its good faith judgment, after
consultation with outside legal counsel, that it must consider in order
to comply with its fiduciary duties, as provided for in Section 5.4(e);
then the Company shall pay to Buyer an amount equal to three percent (3%)
of the Purchase Price (the "Termination Fee").
(c) If the Termination Fee shall be payable pursuant to subsection
(b)(iii)(x) of this Section 11.6, the Termination Fee shall be paid two
business days from the date of termination of this Agreement. If the
Termination Fee shall be payable pursuant to subsection (b)(iii)(y) of this
Section 11.6, the Termination Fee shall be paid concurrently with the
delivery of the notice of termination of this Agreement to the Buyer. All
such payments shall be in same-day funds.
(d) Also notwithstanding the foregoing, if the Buyer breaches its
obligation to close the transactions contemplated by this Agreement or
breaches any material representation, warranty or covenant in any material
respect and fails to cure the same within the time allotted, then the Buyer
shall pay to the Company an amount equal to three percent (3%) of the
Purchase Price (the "Company's Termination Fee"). The Company's Termination
Fee shall be paid within two business days from the date of termination of
this Agreement in same day funds.
(e) The parties acknowledge that the agreements contained in paragraphs
(a) through (d) of this Section 11.6 are an integral part of the
transactions contemplated by this Agreement, and that without these
agreements, they would not enter into this Agreement; accordingly, if the
other Party fails to pay promptly any fee payable by it pursuant to this
Section 11.6, then it shall pay to the other Party its costs and expenses
(including attorneys' fees) in connection with collecting such fee,
together with interest on the amount of the fee at the prime rate of Bank
of America, N.A. (in effect on the date such payment was required to be
made) from the date such payment was due under this Agreement until the
date of payment.
(f) Nothing contained in this Section 11.6 shall constitute or shall be
deemed to constitute liquidated damages for the breach by the Company or
the Buyer of the terms of this Agreement. The remedies set forth in this
Section 11.6 shall be the sole and exclusive remedies of the parties and
their respective affiliates, directors, employees and agents for any and
all claims, rights to seek contribution and other recovery or relief
arising in the situations described in this Section 11.6, except for (i)
such equitable remedies as may be granted by a court of competent
jurisdiction and (ii) remedies for claims based on fraud or intentional
breaches.
(g) Notwithstanding any other provision of this Section 11.6, no amount
shall be payable to a Party if it is itself in breach of this Agreement and
any period for cure has passed so that the other Party is under no
obligation to close the transaction contemplated hereby.
12. Transfer and Sales Tax
Notwithstanding any provisions of law imposing the burden of such taxes on
the Company or the Buyer, as the case may be, the party customarily paying
pursuant to local practice shall be responsible for and shall pay (a) all sales,
use, VAT and transfer taxes, stamp duties and notary fees, and (b) all real
estate conveyance fees or governmental charges, if any, upon the sale or
transfer of any of the Assets hereunder. The parties acknowledge that different
local practice shall apply to Patterson,
New York and Cedar Rapids, Iowa. If the
party herein shall fail to pay such amounts on a timely basis, the other party
may pay such amounts to the appropriate governmental authority or authorities,
and the other party shall promptly reimburse the paying party for any amounts so
paid.
39
13. Brokers
13.1 For the Company. The Company represents and warrants that it has not
engaged any broker or finder or incurred any liability for brokerage fees,
commissions or finder's fees in connection with the transactions contemplated by
this Agreement, except for Banc of America Securities LLC, whose fees and
expenses will be paid by the Company in accordance with the Company's agreement
with such firm. The Company agrees to indemnify and hold harmless the Buyer
against any claims or liabilities asserted against it by any person acting or
claiming to act as a broker or finder on behalf of the Company.
13.2 For the Buyer. The Buyer represents and warrants that it has not
engaged any broker or finder or incurred any liability for brokerage fees,
commissions or finder's fees in connection with the transactions contemplated by
this Agreement, except for Altium Capital AG and CFC Capital LLC, whose fees and
expenses will be paid by the Buyer in accordance with the Buyer's agreement with
such firm. The Buyer agrees to indemnify and hold harmless the Company against
any claims or liabilities asserted against it by any person acting or claiming
to act as a broker or finder on behalf of the Buyer.
14. Notices.
All notices, requests, demands, claims, and other communications hereunder
shall be in writing. Any notice, request, demand, claim or other communication
hereunder shall be deemed duly delivered four business days after it is sent by
registered or certified mail, return receipt requested, postage prepaid, or one
business day after it is sent either for next business day delivery via a
reputable nationwide overnight courier service or via telecopier with written
confirmation of transmission, in each case to the intended recipient as set
forth below:
If to the Company: Copy to:
Penwest Pharmaceuticals Co. ▇▇▇▇ and ▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: Chief Financial Officer Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇ ▇▇▇▇▇, Esq.
If to the Buyer: Copy to:
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ Holding GmbH & Co. KG ▇▇▇▇▇▇ & Bird LLP
▇▇▇▇▇▇▇▇▇▇ ▇ ▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Any party may give any notice, request, demand, claim or other
communication hereunder using any other means (including personal delivery,
expedited courier, messenger service, telecopy, telex, ordinary mail or
electronic mail), but no such notice, request, demand, claim or other
communication shall be deemed to have been duly given unless and until it
actually is received by the party for whom it is intended. Any party may change
the address to which notices, requests, demands, claims, and other
communications hereunder are to be delivered by giving the other parties notice
in the manner herein set forth.
15. Successors and Assigns
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns, except that the
Buyer and the Company may not assign their respective obligations hereunder
without the prior written consent of the Company in the case of an assignment by
the Buyer or the Buyer in the case of an assignment by the Company; provided,
however, that the Buyer may assign this Agreement, and its rights hereunder, to
a subsidiary or affiliate, without thereby terminating or limiting its
obligations or liabilities to the Company hereunder. In particular, without
limiting the foregoing, the Buyer hereby represents to Sellers and Sellers
acknowledge that the Buyer intends to assign and/or delegate to one or more of
its affiliates and cause that affiliate or those affiliates to assume, some or
all of the rights and liabilities with respect to the Subsidiary Shares and/or
Assets and Assumed Liabilities and Sellers hereby
40
consent thereto (provided, that no such delegation of obligations shall relieve
the Buyer of continued liability thereafter for such obligations). Any
assignment in contravention of this provision shall be void.
16. Entire Agreement; Amendments; Attachments
This Agreement, all Schedules and Exhibits attached hereto, the
Confidentiality Agreement and all agreements and instruments to be delivered by
the parties pursuant hereto represent the entire understanding and agreement
between the parties hereto with respect to the subject matter hereof and
supersede all prior oral and written and all contemporaneous oral negotiations,
commitments and understandings between such parties. The Buyer and the Company
may amend or modify this Agreement, in such manner as may be agreed upon, by a
written instrument executed by the Buyer and the Company. This Agreement,
including said Schedules and Exhibits, have gone through several revisions; the
parties agree that the deletion of any language from an earlier draft shall not
necessarily be interpreted to indicate the negation of the deleted language.
17. Legal Fees
If legal proceedings are commenced by the Buyer against any of the Sellers,
or by any of the Sellers against the Buyer, in connection with this Agreement or
the transactions contemplated hereby, the party or parties which do not prevail
in such proceedings shall pay the reasonable attorneys' fees and other costs and
expenses, including investigation costs, incurred by the prevailing party or
parties in such proceedings.
18. Governing Law; Consent to Jurisdiction
18.1 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of
New York (without reference to the
conflicts of law provisions thereof).
18.2 Consent to Jurisdiction. For purposes of equitable remedies and
enforcement of awards obtained pursuant to Section 20, each of the parties
hereto (i) consents to submit itself to the personal jurisdiction of the state
and federal courts located in the State of
New York in the event any dispute
that the parties fail to resolve arises out of this Agreement or any of the
transactions contemplated by this Agreement, (ii) agrees that it shall not
attempt to deny or defeat such personal jurisdiction by motion or other request
for leave from any such court and (iii) agrees that it shall not bring any
action relating to this Agreement or any of the transactions contemplated by
this Agreement in any court other than courts set forth above. In any such
proceeding, the parties agree to accept service of process by mail at the
addresses herein provided for notice.
19. Mediation. Neither party shall commence an arbitration proceeding
unless such party shall first give a written notice (a "Dispute Notice") to the
other party setting forth the nature of the dispute. The parties shall attempt
in good faith to resolve the dispute by mediation under the Commercial Mediation
Rules of the American Arbitration Association in effect on the date of this
Agreement. If the parties cannot agree on the selection of a mediator within
twenty (20) days after delivery of the Dispute Notice, the mediator will be
selected by the President of the
New York Bar Association. If the dispute has
not been resolved by mediation as provided above within sixty (60) days after
the delivery of the Dispute Notice, then the dispute shall be determined by
arbitration in accordance with the provisions of Section 20 hereof.
20. Arbitration.
20.1 Normal Arbitration. Any controversy, claim or dispute of whatever
nature arising between the parties, including but not limited to those arising
out of or relating to this Agreement or the construction, interpretation,
performance, breach, termination, enforceability or validity of this Agreement
or the arbitration provisions contained in this Agreement, whether such claim
existed prior to or arises on or after the date of this Agreement, including the
determination of the scope of this agreement to arbitrate, which is not settled
through mediation as provided in Section 19 above shall be determined by
arbitration in
New York City by a panel of three arbitrators in accordance with
the Commercial Arbitration Rules of the American Arbitration Association and its
Supplementary Procedures for Large, Complex Disputes, except that (a) every
person named on all lists of potential arbitrators shall be a neutral and
impartial lawyer with excellent academic and professional credentials (i) who
has practiced law for at least 15 years, specializing in either general
commercial litigation or general corporate and commercial matters, and (ii) who
has had experience, and is
41
generally available to serve, as an arbitrator, and (b) each party shall be
entitled to strike on a peremptory basis, for any reason or no reason, any or
all of the names of potential arbitrators on any list submitted to the parties
by the AAA as well as any person selected by the AAA to serve as an arbitrator
by administrative appointment. If the parties cannot agree on the selection of
the arbitrator(s) from one or more lists submitted by the AAA within 30 days
after the AAA transmits to the parties its first list of potential arbitrators,
the President of the
New York Bar Association shall nominate three persons who,
in his or her opinion, meet the criteria set forth herein, which nominees may
not include persons named on any list submitted by the AAA. Each party shall be
entitled to strike one of such three nominees on a peremptory basis within 10
days after its receipt of such list of nominees, indicating its order of
preference with respect to the remaining nominees. If two such nominees have
been stricken by the parties, the unstricken nominee shall be the arbitrator.
Otherwise, the selection of the arbitrator shall be made by the AAA from the
remaining nominees in accordance with the parties' mutual order of preference,
or by random selection in the absence of a mutual order of preference. The
arbitrator(s) shall base their award on applicable law and judicial precedent,
shall include in such award the findings of fact and conclusions of law upon
which the award is based and shall not grant any remedy or relief a court could
not grant under applicable law, provided, however, the arbitrators(s) may
include all or a portion of the expenses (including reasonable legal fees) of
the prevailing party in the award. Judgment on the award rendered by the
arbitrator(s) may be entered in any court having jurisdiction thereof.
20.2 Material Adverse Change. If the controversy, claim or dispute
pertains primarily to whether there has been a "material adverse change" or "the
existence or occurrence of a circumstance or event that is material and adverse"
as described in Section 5.9 hereof, then (i) either party may proceed with
arbitration pursuant to Section 20.1 without having complied with Section 19,
(ii) the arbitration shall be conducted by a panel of one arbitrator, (iii) the
time for selection of the arbitrator shall be reduced from 30 days to 5 days and
for peremptory strikes shall be reduced from 10 days to 3 days, and (iv) the
parties shall use their commercially reasonable efforts to achieve a resolution
of the controversy, claim or dispute as quickly as possible.
21. Interpretation.
(a) As used in this Agreement, the phrase "to the knowledge of the
Company" or any phrase of similar import shall refer to the actual
knowledge of the following executive officers of the Sellers: ▇▇▇ ▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ and ▇▇▇ ▇▇▇▇▇▇▇▇.
(b) For purposes of Section 9.8 (but not for the purposes of other
portions of Article IX), in determining the amount of damages or losses
caused by the breach of any representation or warranty of Sellers, any
qualification or limitation of such representation or warranty by reference
to the materiality of matters stated therein or as to matters having or not
having a material adverse effect, or by reference to the Sellers' knowledge
(except for the knowledge qualifications contained in Sections 2.4(ii),
2.20(c) and 2.26 and the initial knowledge qualification contained in
Section 2.9) shall be disregarded, in determining the amount of damages or
losses caused by any inaccuracy, untruth, incompleteness or breach thereof
for purposes of Section 9.8.
(c) As used in this Agreement, an effect shall not be considered to be
material and adverse, if it is due to (a) general economic conditions, or
economic or other conditions in and affecting generally the pharmaceutical
industry or the excipient products segment of that industry (except if and
to the extent such conditions affect the Sellers disproportionately) or (b)
actions taken by the Buyer.
(d) As used in Section 11.3(b)(ii), the terms "material," "material
adverse change" and "material and adverse" include both changes in and
matters affecting the Business and external changes in and matters which
affect the Business (other than those referred to in Section 21(c)) and
they shall be deemed material, so that the Buyer shall be entitled to
terminate this Agreement pursuant to Section 11.3(b)(ii), only if they
would reduce the fair market value of the Business by ten percent (10%) or
more, where "fair market value" has the meaning set forth in Revenue Ruling
59-60. As used in Section 11.6(b)(iii)(x), the term "material breach" shall
mean a breach which results in shareholder approval of the transactions
contemplated by this Agreement not being obtained within the time period
42
contemplated by this Agreement. In determining the materiality of various
matters, the parties intend that materiality be assessed in the context of
what a reasonable businessperson would consider to be material.
(e) As used in this Agreement, the term "including" shall mean
"including, without limitation."
(f) If an event or action causes damages to or reduces the value of the
Business, it will be presumed to be "in connection with" or "related to"
the Business for purposes of representations and warranties which are
expressly "in connection with" or "relating to" the Business.
22. Miscellaneous.
22.1 Section Headings. The section headings are for the convenience of
the parties and in no way alter, modify, amend, limit, or restrict the
contractual obligations of the parties.
22.2 Severability. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
22.3 Counterparts. This Agreement and any amendment hereto may be
executed in one or more counterparts, each of which shall be deemed to be an
original, but all of which shall be one and the same document.
IN WITNESS WHEREOF, this Agreement has been duly executed by the parties
hereto as of and on the date first above written.
(Corporate Seal)
PENWEST PHARMACEUTICALS CO.
ATTEST: By: /s/ ▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-----------------------------------------
Title: Chief Executive Officer
---------------------------------------
/s/ ▇▇▇▇▇▇▇▇ ▇. GOOD
--------------------------------------------
Chief Financial Officer
BUYER:
(Seal) ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ HOLDING GMBH & CO. KG
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
-----------------------------------------
Title: Duly Authorized
---------------------------------------
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
-----------------------------------------
Title: Duly Authorized
---------------------------------------
43