================================================================================
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
DYNAGEN, INC.,
DYNAGEN ACQUISITION CORP.,
SUPERIOR PHARMACEUTICAL COMPANY
AND
THE STOCKHOLDERS OF SUPERIOR PHARMACEUTICAL COMPANY
DATED AS OF MARCH 7, 1997
================================================================================
AGREEMENT AND PLAN OF MERGER
Table of Contents
Page
ARTICLE I - THE MERGER............................................................................................1
SECTION 1.1. The Merger.......................................................................................1
SECTION 1.2. Effective Time...................................................................................1
SECTION 1.3. Effect of the Merger.............................................................................2
SECTION 1.4. Certificate of Incorporation; By-Laws............................................................2
SECTION 1.5. Directors and Officers...........................................................................2
SECTION 1.6. (Intentionally Omitted)..........................................................................2
SECTION 1.7. Certain Other Agreements.........................................................................2
SECTION 1.8. Taking of Necessary Action; Further Action.......................................................2
ARTICLE II - CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES...................................................3
SECTION 2.1. Definitions......................................................................................3
SECTION 2.2. Merger Consideration; Conversion or Cancellation of Company Common Stock.........................3
SECTION 2.3. Exchange of Certificates.........................................................................3
SECTION 2.4. Tangible Net Worth Requirement...................................................................4
SECTION 2.5. Additional Consideration.........................................................................5
SECTION 2.6. Incentive Payments...............................................................................6
SECTION 2.7. No Fractional Shares.............................................................................6
SECTION 2.8. Checks or Certificates in Other Names............................................................7
SECTION 2.9. Distributions with Respect to Unexchanged Shares of Parent Common Stock..........................7
SECTION 2.10. Stock Transfer Books.............................................................................7
SECTION 2.11. Lost, Stolen or Destroyed Certificates...........................................................7
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF THE COMPANY.......................................................8
SECTION 3.1. Corporate Existence and Power....................................................................8
SECTION 3.2. Corporate Authorization..........................................................................8
SECTION 3.3. Governmental Authorization.......................................................................8
SECTION 3.4. Non-Contravention................................................................................8
SECTION 3.5. Capitalization...................................................................................9
SECTION 3.6. Subsidiaries.....................................................................................9
SECTION 3.7. Financial Statements.............................................................................9
SECTION 3.8. Absence of Undisclosed Liabilities..............................................................10
SECTION 3.9. Title and Condition of Assets...................................................................10
SECTION 3.10. Real Property...................................................................................11
SECTION 3.11. Condition of Tangible Assets....................................................................11
SECTION 3.12. Subsequent Events...............................................................................11
SECTION 3.13. Legal Proceedings...............................................................................13
SECTION 3.14. Material Contracts..............................................................................13
SECTION 3.15. Employees.......................................................................................14
SECTION 3.16. Transactions with Affiliates....................................................................15
SECTION 3.17. Insurance Coverage..............................................................................15
SECTION 3.18. Compliance with Laws............................................................................15
SECTION 3.19. Accounts Receivable; Inventories................................................................15
-i-
SECTION 3.20. Finders' Fees..................................................................................16
SECTION 3.21. Employee Benefit Plans.........................................................................16
SECTION 3.22. Taxes..........................................................................................17
SECTION 3.23. Environmental Matters..........................................................................19
SECTION 3.24. Intellectual Property..........................................................................19
SECTION 3.25. (Intentionally Omitted)........................................................................19
SECTION 3.26. Certain FDA Matters............................................................................19
SECTION 3.27. Stockholder Representations....................................................................20
SECTION 3.28. Title..........................................................................................21
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB....................................................21
SECTION 4.1. Corporate Existence and Power...................................................................21
SECTION 4.2. Corporate Authorization.........................................................................21
SECTION 4.3. Governmental Authorization......................................................................22
SECTION 4.4. Non-Contravention...............................................................................22
SECTION 4.5. Capitalization..................................................................................22
SECTION 4.6. Legal Proceedings...............................................................................23
SECTION 4.7. Compliance with Laws............................................................................23
SECTION 4.8. SEC Documents...................................................................................23
SECTION 4.9. Board Recommendation............................................................................24
SECTION 4.10. Finders' Fees...................................................................................24
SECTION 4.11 (Intentionally Omitted).........................................................................24
SECTION 4.12. Interim Operations of Sub.......................................................................24
ARTICLE V - COVENANTS OF ALL PARTIES.............................................................................24
SECTION 5.1. Cooperation.....................................................................................24
SECTION 5.2. Other Required Information......................................................................24
SECTION 5.3. Confidentiality.................................................................................25
SECTION 5.4. Public Announcements............................................................................25
SECTION 5.5. Miscellaneous Agreements and Consents...........................................................25
SECTION 5.6. Board Representation............................................................................26
SECTION 5.7. Best Efforts and Further Assurances.............................................................26
SECTION 5.8. Operations Following Closing....................................................................26
SECTION 5.9. Guaranties of the Company.......................................................................26
ARTICLE VI - COVENANTS OF THE COMPANY............................................................................27
SECTION 6.1. Preservation of Business Organization...........................................................27
SECTION 6.2. Carry on in Regular Course......................................................................27
SECTION 6.3. Consents........................................................................................27
SECTION 6.4. Company Stockholders Meeting....................................................................28
SECTION 6.5. Access..........................................................................................28
SECTION 6.6. Documents and Information to be Furnished.......................................................28
SECTION 6.7. Notices of Certain Events.......................................................................28
SECTION 6.8. Accuracy of Representations and Warranties......................................................28
SECTION 6.9. No Solicitation.................................................................................28
SECTION 6.10. Non-Disturbance Agreement.......................................................................29
ARTICLE VII - COVENANTS OF PARENT AND SUB........................................................................29
-ii-
SECTION 7.1. Preservation of Business Organization...........................................................29
SECTION 7.2. Consents........................................................................................29
SECTION 7.3. Notices of Certain Events.......................................................................29
SECTION 7.4. Nasdaq SmallCap Market Listing..................................................................30
SECTION 7.5. Accuracy of Representations and Warranties......................................................30
SECTION 7.6. Documents and Information to be Furnished.......................................................30
SECTION 7.7. Indemnification.................................................................................30
SECTION 7.8. Non-Solicitation................................................................................30
SECTION 7.9. Compliance with Lease Terms.....................................................................30
ARTICLE VIII - CONDITIONS OF CLOSING.............................................................................30
SECTION 8.1. Conditions to Obligations of Parent, Sub, Stockholders and the Company..........................30
SECTION 8.2. Additional Conditions Applicable to Parent and Sub..............................................31
SECTION 8.3. Additional Conditions Applicable to the Stockholders and Company................................33
ARTICLE IX - TERMINATION.........................................................................................34
SECTION 9.1. Termination.....................................................................................34
SECTION 9.2. Certain Remedies Upon Termination...............................................................34
SECTION 9.3. Survival Upon Termination.......................................................................35
SECTION 9.4. Effect of Termination...........................................................................35
ARTICLE X -- SURVIVAL; INDEMNIFICATION...........................................................................35
SECTION 10.1. Survival.......................................................................................35
SECTION 10.2. Mutual Indemnification.........................................................................35
SECTION 10.3. Third Person Claims............................................................................36
SECTION 10.4. Limitations on Indemnification.................................................................37
SECTION 10.5. Method of Payment..............................................................................37
SECTION 10.6. Resolutions of Conflicts; Arbitration..........................................................37
SECTION 10.7. Remedies.......................................................................................38
ARTICLE XI - MISCELLANEOUS.......................................................................................39
SECTION 11.1. Specific Performance...........................................................................39
SECTION 11.2. Expenses.......................................................................................39
SECTION 11.3. Further Assurances.............................................................................39
SECTION 11.4. Parties in Interest............................................................................39
SECTION 11.5. Entire Agreement...............................................................................39
SECTION 11.6 Amendment or Modification......................................................................40
SECTION 11.7. Waiver.........................................................................................40
SECTION 11.8. Assignability..................................................................................40
SECTION 11.9. Headings and Interpretation....................................................................40
SECTION 11.10. Notices........................................................................................40
SECTION 11.11. Law Governing..................................................................................41
SECTION 11.12. Invalidity of Provisions.......................................................................41
SECTION 11.13. Counterparts...................................................................................41
-iii-
EXHIBITS
EXHIBIT A FORM OF SECURED PROMISSORY NOTE
EXHIBIT B FORM OF PLEDGE AGREEMENT
EXHIBIT C FORM OF REGISTRATION RIGHTS AGREEMENT
EXHIBIT D FORM OF EMPLOYMENT AGREEMENT, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ AND ▇▇▇▇▇▇ ▇▇▇▇▇
EXHIBIT E FORM OF EMPLOYMENT AGREEMENT, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-iv-
AGREEMENT AND PLAN OF MERGER
Agreement and Plan of Merger dated as of March 7, 1997 (this
"AGREEMENT") by and among DynaGen, Inc., a Delaware corporation ("PARENT");
DynaGen Acquisition Corp., a Delaware corporation and a direct, wholly-owned
subsidiary of Parent ("SUB"); Superior Pharmaceutical Company, an Ohio
corporation (the "COMPANY"); and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇▇▇▇▇"), ▇▇▇▇▇▇
▇▇▇▇▇ ("▇▇▇▇▇") and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ("CANNING"), the stockholders of the Company.
Each of Hagerstrand, ▇▇▇▇▇ and Canning are hereinafter collectively referred to
as the "STOCKHOLDERS".
WITNESSETH:
WHEREAS, the respective Boards of Directors of Parent, Sub and the
Company have each determined that it is advisable and in the best interests of
each company and its respective stockholders for Parent to enter into a business
combination with the Company upon the terms and subject to the conditions set
forth herein; and
WHEREAS, in furtherance of such combination, the respective Boards of
Directors of Parent, Sub and the Company have each approved the merger (THE
"MERGER") of Sub with and into the Company in accordance with the applicable
provisions of the General Corporation Law of the State of Delaware ("DELAWARE
LAW") and the Ohio General Corporation Law ("OHIO LAW") upon the terms and
conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this
Agreement, the parties hereto agree as follows:
ARTICLE I
THE MERGER
SECTION 1.1. THE MERGER. Upon the terms and subject to the conditions
set forth in this Agreement, and in accordance with Delaware Law and Ohio Law,
at the Effective Time (as defined in Section 1.2), Sub shall be merged with and
into the Company. As a result of the Merger, the separate corporate existence of
Sub shall cease and the Company shall continue as the surviving corporation of
the Merger (the "SURVIVING CORPORATION"). The name of the Surviving Corporation
shall be Superior Pharmaceutical Company.
SECTION 1.2. EFFECTIVE TIME. Unless this Agreement shall have earlier
terminated and the transactions herein contemplated shall have been abandoned
pursuant to Section 9.1 hereof, the closing of the Merger (the "CLOSING") will
take place as promptly as practicable (and in any event within two business
days) after the satisfaction or, if permissible, waiver of the conditions set
forth in Article VIII hereof, at the offices of ▇▇▇▇, Stettinius & Hollister,
1800 Star Bank Center, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, unless another
date, time or place is agreed to in writing by the parties hereto. The date upon
which the Closing occurs is herein referred to as the "CLOSING DATE." On the
Closing Date, the parties hereto shall cause the Merger to be consummated by
filing a certificate of merger (the "CERTIFICATE OF MERGER") with the Secretary
of State of the State of Delaware and the Secretary of State of the State of
Ohio, in such form as required by Delaware Law and Ohio Law (the date and time
of such filings being the "EFFECTIVE TIME").
Agreement and Plan of Merger - Page 2
SECTION 1.3. EFFECT OF THE MERGER. At the Effective Time, the effect of
the Merger shall be as provided in the Certificate of Merger and applicable
provisions of Ohio Law. At the Effective Time, all the property, rights,
privileges, powers and franchises of Sub and the Company shall vest in the
Surviving Corporation, and all debts, liabilities and duties of Sub and the
Company shall become the debts, liabilities and duties of the Surviving
Corporation.
SECTION 1.4. CERTIFICATE OF INCORPORATION; BY-LAWS. Unless otherwise
determined by Parent prior to the Effective Time, at the Effective Time, the
Articles of Incorporation and the Regulations of the Company, as in effect
immediately prior to the Effective Time, shall be the Articles of Incorporation
and the Regulations of the Surviving Corporation.
SECTION 1.5. DIRECTORS AND OFFICERS. Effective as of the Closing,
Parent shall appoint a total of five (5) directors to the board of directors of
the Surviving Corporation to hold office for one year and until their successors
shall have been duly elected and qualified. Two of the directors shall be
Hagerstrand and ▇▇▇▇▇. Parent shall select the remaining directors in its sole
discretion. Effective as of the Closing, Hagerstrand and ▇▇▇▇▇ shall also be
appointed officers of the Surviving Corporation.
SECTION 1.6. [INTENTIONALLY OMITTED.]
SECTION 1.7. CERTAIN OTHER AGREEMENTS. Concurrently with the execution
and delivery of this Agreement or prior to the Closing, the following agreements
(collectively, the "Operative Documents") shall be executed and delivered by
Stockholders and Parent, as the case may be:
(i) a Secured Promissory Note in the form of Exhibit A
(the "NOTE"), duly executed by Parent and delivered
to each of the Stockholders;
(ii) a Pledge Agreement in the form of Exhibit B (the
"PLEDGE AGREEMENT"), duly executed and delivered by
each of the Stockholders and Parent;
(iii) a Registration Rights Agreement in the form of
Exhibit C (the "REGISTRATION RIGHTS AGREEMENT") duly
executed and delivered by each of the Stockholders
and Parent;
(iv) Employment Agreements with each of Hagerstrand and
▇▇▇▇▇ in the form of Exhibit D (the "EMPLOYMENT
AGREEMENTS"), duly executed and delivered by the
Company and each of Hagerstrand and ▇▇▇▇▇; and
(v) an Employment Agreement with Canning in the form of
Exhibit E (the "CANNING AGREEMENT"), duly executed
and delivered by the Company and Canning.
SECTION 1.8. TAKING OF NECESSARY ACTION; FURTHER ACTION. Each of
Parent, Sub and the Company will take all such reasonable and lawful action as
may be necessary or appropriate in order to effectuate the Merger in accordance
with this Agreement as promptly as possible. If, at any time after the Effective
Time, any such further action is necessary or desirable to carry out the
purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of the Company and Sub, the officers and directors of the Company
and Sub immediately prior to the Effective Time are fully authorized in the name
of their respective corporations or otherwise to take, and will take, all such
lawful and necessary action.
Agreement and Plan of Merger - Page 3
ARTICLE II
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
SECTION 2.1. DEFINITIONS.
"COMPANY COMMON STOCK" shall mean the Common Stock, no par
value, of the Company.
"MERGER CONSIDERATION" shall mean (i) $6,500,000 in cash, (ii)
Notes in the aggregate principal amount of $5,000,000 and (iii) 1,666,667 shares
of Parent Common Stock.
"OUTSTANDING SHARES" shall mean the aggregate number of shares
of Company Common Stock outstanding immediately prior to the Effective Time.
"PARENT COMMON STOCK" shall mean the Common Stock, par value
$.01 per share, of Parent.
SECTION 2.2. MERGER CONSIDERATION; CONVERSION OR CANCELLATION OF
COMPANY COMMON STOCK. (a) At the Effective Time, by virtue of the Merger and
without any action on the part of Parent, Sub, the Company or the holders of any
shares of Company Common Stock, each of the Outstanding Shares shall be
converted into the right to receive a pro rata amount of the Merger
Consideration, based on each Stockholder's equity interest in the Company.
(b) If between the date of this Agreement and the Effective
Time, the outstanding shares of Parent Common Stock shall have been changed into
a different number of shares or a different class by reason of a stock dividend,
subdivision, reclassification, recapitalization, split-up or combination, the
number of shares of Parent Common Stock included in the Merger Consideration
shall be appropriately adjusted.
(c) At the Effective Time, each share of Company Common Stock
issued and outstanding and owned by Parent or any of its subsidiaries (including
Sub) or held in the treasury of the Company immediately prior to the Effective
Time shall, by virtue of the Merger and without any action on the part of the
holder thereof, cease to be outstanding, be canceled and retired without payment
of any consideration therefor and cease to exist.
(d) At the Effective Time, each share of Sub Common Stock, par
value $.01 per share, issued and outstanding immediately prior to the Effective
Time shall thereupon be converted into and become one (1) share of Common Stock
of the Surviving Corporation.
SECTION 2.3. EXCHANGE OF CERTIFICATES. (a) Prior to the Effective Time,
Parent will appoint its transfer agent (the "Exchange Agent") to effectuate the
delivery of the consideration provided for in Section 2.2 to holders of Company
Common Stock upon surrender of certificates which immediately prior to the
Effective Time represented all Outstanding Shares of Company Common Stock
("Certificates").
Agreement and Plan of Merger - Page 4
(b) Upon surrender of a Certificate to the Exchange Agent, the
holder of such Certificate shall be entitled to receive in exchange therefor the
Merger Consideration provided for in Section 2.2(a), and the Certificate so
surrendered shall forthwith be canceled.
(c) Subject to Sections 2.4, 2.5 and 2.6, all Merger
Consideration issued upon conversion of the shares of Company Common Stock in
accordance with the terms hereof shall be deemed to have been issued in full
satisfaction of all rights pertaining to such shares of Company Common Stock.
(d) Neither Parent, Sub nor the Company shall be liable to any
holder of shares of Company Common Stock for any Merger Consideration delivered
to a public official pursuant to any abandoned property, escheat or similar law.
From and after the Effective Time, and until surrendered in accordance with the
provisions of Section 2.3, each Certificate representing Outstanding Shares
shall represent, for all purposes, only the right to receive the Merger
Consideration.
(e) Parent shall be entitled to deduct and withhold from the
consideration otherwise payable to any holder of shares of Company Common Stock
such amounts as Parent is required to deduct and withhold with respect to the
making of any such payment under the Internal Revenue Code of 1986, as amended
(the "CODE"), or any provision of state, local or foreign tax law. To the extent
that amounts are so withheld by Parent, such withheld amounts shall be treated
for all purposes of this Agreement as having been paid to the holder of the
shares of Company Common Stock in respect of which such deduction and
withholding was made by Parent.
SECTION 2.4 TANGIBLE NET WORTH REQUIREMENT
(a) As of the Closing Date, the Company shall have Tangible
Net Worth (as defined in this Section 2.4) of at least $2,750,000. If the
Tangible Net Worth of the Company as set forth on the balance sheet contained in
the Closing Financial Statements (as defined in this Section 2.4) is less than
$2,750,000 as of the Closing Date, Parent shall withhold the amount of such
shortfall, pro rata from the Stockholders, from the first payment of principal
under the Notes. If the Tangible Net Worth of the Company as set forth on the
balance sheet contained in the Closing Financial Statements is greater than
$2,750,000 as of the Closing Date, Parent shall distribute the amount of such
excess, pro rata among the Stockholders, at the time of the first payment of
principal under the Notes.
(b) For purposes hereof, the term "Tangible Net Worth" shall
mean the net worth of the Company as determined in the audited balance sheets of
the Company as of December 31, 1996 (under the caption "Stockholders' Equity"),
as adjusted for transactions through the Closing Date, in all cases of the type
which would be set forth on a balance sheet of the Company in accordance with
generally accepted accounting principles consistently applied.
(c) As promptly as practicable after the Closing Date but in
no event later than forty-five (45) days thereafter, Parent shall oversee and
cause to be prepared by the Company's auditors (▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP) and
delivered to Parent and the Stockholders a reviewed balance sheet of the Company
as at the close of business on the Closing Date and a reviewed statement of
earnings and cash flows from January 1, 1997 to the Closing Date, together with
the review report of the Company's auditors, addressed to Parent and the
Stockholders, stating that its review of the Closing Financial Statements was
made in accordance with statements on standards for accounting and review
services issued by the American Institute of Certified Public Accountants. The
reviewed Closing Statements will be presented in accordance with generally
accepted accounting principles and applied on a basis consistent with such U.S.
generally
Agreement and Plan of Merger - Page 5
accepted accounting principles and the financial statements of the Company for
the fiscal years December 31, 1994, 1995 and 1996, previously furnished to
Parent. Such financial statements, as so reviewed, are referred to herein as the
"Closing Financial Statements." The cost of such review and the preparation of
the Closing Financial Statements by the Company's auditors shall be borne by
Parent.
(d) The calculation of Tangible Net Worth set forth in the
balance sheet contained in the Closing Financial Statements shall be deemed to
be conclusive and binding upon the parties, unless at or prior to the fifth
business day following the completion of the Closing Financial Statements and
their delivery to Parent and the Stockholders, Parent or the Stockholders shall
give written notice to the other that it objects to the valuation, inclusion or
omission of any item. Such notice shall specify Parent's or the Stockholders'
objections to the computation of Tangible Net Worth, citing the items or
principles disputed. In the event that Parent and the Stockholders are unable to
mutually agree upon the valuation or amount of any disputed item set forth in
such notice within twenty (20) days after the receipt thereof by the
non-objecting party, the parties shall submit the unresolved items to
arbitration by a firm of independent public accountants to be selected jointly
by Parent and the Stockholders. Such accounting firm shall be requested to
consider the respective positions of the parties and render an opinion as to the
valuation or amount of the disputed items. The determination of such jointly
selected accounting firm shall be conclusive and binding upon the parties
hereto. The cost of such accounting firm shall be paid by the non-prevailing
party. A party shall be deemed to have prevailed with regard to disputed matters
if its last offer or demand immediately prior to submission to such accounting
firm is closer to the final resolution of the disputed matters than the other
party's offer or demand.
SECTION 2.5.ADDITIONAL CONSIDERATION. If at the first twelve-month
anniversary of the Closing, the average closing bid price of Parent Common Stock
for the ten (10) trading days immediately preceding such anniversary (the "FAIR
MARKET VALUE") multiplied by the aggregate number of shares of Parent Common
Stock delivered at the Closing equals an amount less than $5,000,000 (the
"DEFICIENCY"), then Parent, within forty-five (45) days of such anniversary
shall deliver to the Stockholders, pro rata based on the Outstanding Shares,
that number of shares of Parent Common Stock equal to the Deficiency divided by
the Fair Market Value, if the Fair Market Value is a trading price equal to or
greater than $1.50 per share of DynaGen Common Stock. To the extent the Fair
Market Value is less than $1.50 per share of DynaGen Common Stock, Parent shall
also pay to the Stockholders in immediately available funds the extent of the
additional Deficiency below the $1.50 trading price. By way of illustration and
example: (a) if the Fair Market Value as determined above is $2.00, the
aggregate number of shares of DynaGen Common Stock to be issued shall be the
product obtained by dividing the Deficiency of $1,666,666 [$5,000,000 less
1,666,667 x $2.00 (FMV) = $5,000,000 less $3,333,334 = $1,666,666 of Deficiency]
by the Fair Market Value of $2.00 ($1,666,666 (184) $2.00 = 833,333 additional
shares of DynaGen Common Stock); under such example, Parent shall issue 833,333
additional shares of DynaGen Common Stock.
(b) If the Fair Market Value is under $1.50 per share of DynaGen Common
Stock, Parent will then issue (in the aggregate to all Stockholders) an
additional 1,666,667 shares of DynaGen Common Stock. The remaining amount of the
Deficiency, calculated following the issuance of the additional 1,666,667 shares
of DynaGen Common Stock, shall be an amount equal to $5,000,000 less 3,333,334
shares of DynaGen Common Stock multiplied by the Fair Market Value. Such
remaining Deficiency amount shall be then paid to the Stockholders in
immediately available funds.
The shares of Parent Common Stock which may be issued pursuant to the
foregoing provisions are referred to as the "ADJUSTMENT SHARES."
Agreement and Plan of Merger - Page 6
SECTION 2.6. INCENTIVE PAYMENTS. (a) Subject to Section 2.6(b) below,
if the Surviving Corporation achieves Net Sales (as defined below) for the years
ending December 31, 1997, 1998 and 1999 equal to or greater than $32 million,
$35 million, and $39 million respectively (the "NET SALES TARGETS"), then Parent
or the Surviving Corporation shall pay to the Stockholders, pro rata based on
the Outstanding Shares, an aggregate of $550,000 for each such year that these
Net Sales Targets have been achieved ("TARGET PAYMENTS"). Any such payment shall
be paid to the Stockholders within forty-five (45) days after Parent's
independent accountants have issued their report on the Parent's audited
financial statements for such period. "NET SALES" means the net sales of the
Surviving Corporation determined in accordance with generally accepted
accounting principles ("GAAP") applied on the basis consistent with the
Company's audited statements of earnings for the year ended December 31, 1996
attached hereto as part of Schedule 3.7.
(b) Upon a Change in Control (as hereinafter defined) which
occurs prior to December 31, 1999, the Target Payments and all unpaid principal
and interest on the Notes shall, immediately prior to consummation of the Change
in Control, accelerate and become fully vested and payable to the Stockholders;
provided, however, that the Parent or Surviving Corporation shall not be
required to pay any Target Payment with respect to any year which was completed
prior to the Change in Control and for which the Net Sales Targets were not
achieved. For purposes of the foregoing, "CHANGE IN CONTROL" shall mean the
acquisition of the Parent or the Surviving Corporation by (i) the sale,
issuance, exchange or transfer, in a single transaction or a series of related
transactions, of greater than fifty percent (50%) of the outstanding capital
stock of the Parent or the Surviving Corporation to a third party in connection
with any business combination or other acquisition and in which such third party
has the right to elect, and does elect, a majority of the Parent's Board of
Directors, (ii) the sale of all or substantially all of the assets of the Parent
or the Surviving Corporation to a third party, or (iii) a merger, consolidation
or other reorganization involving the Parent and one or more other entities in
which the shares of the Parent's or Surviving Corporation's outstanding capital
stock immediately prior to such transaction are converted into, exchanged for or
represent less than a majority of the voting power of the surviving or resulting
entity.
(c) In the event any of Hagerstrand or ▇▇▇▇▇ is terminated without
"cause" under such Stockholder's Employment Agreement (as defined in the
Stockholder's Employment Agreement), then the Target Payments shall, immediately
upon such termination, accelerate and become fully vested and payable to all
Stockholders; provided, however, that the Parent or Surviving Corporation shall
not be required to pay any Target Payment with respect to any year which was
completed prior to the date of termination and for which the Net Sales Targets
were not achieved. In the event of any termination of Hagerstrand or ▇▇▇▇▇ for
cause (as defined in such Stockholder's Employment Agreement), such Stockholder
shall continue to be entitled to receive his pro rata share of any Target
Payment otherwise payable in the absence of any such termination; provided,
however, that the Parent or Surviving Corporation shall not be required to pay
any Target Payment with respect to any year which was completed prior to the
date of termination and for which the Net Sales Targets were not achieved. In
the event of any voluntary termination of employment by any Stockholder, such
Stockholder shall not receive his pro rata share of any Target Payment otherwise
payable in the absence of any such termination.
SECTION 2.7. NO FRACTIONAL SHARES. No certificates or scrip for
fractional shares of Parent Common Stock will be issued, no Parent stock split
or dividend shall relate to any fractional share interest, and no such
fractional share interest shall entitle the owner thereof to vote or to any
rights of or as a stockholder of Parent. In lieu of such fractional shares
(after taking into account all shares of Company Common Stock then held by any
such holder), any holder of Company Common Stock who
Agreement and Plan of Merger - Page 7
would otherwise be entitled to a fraction of a share of Parent Common Stock (or
any other Person who is the record holder of certificates for shares of Parent
Common Stock into which such shares of Company Common Stock have been converted)
will, upon surrender of his Certificate or Certificates, be paid the cash value
of such fraction (without interest and rounded to the nearest cent), which shall
be equal to the fraction multiplied by the closing bid price per share of Parent
Common Stock on the day preceding the Closing.
SECTION 2.8.CHECKS OR CERTIFICATES IN OTHER NAMES. If any check or any
certificate evidencing shares of Parent Common Stock is to be issued in a name
other than that in which the Certificate surrendered in exchange therefore is
registered, it shall be a condition of the issuance thereof that the Certificate
so surrendered shall be properly endorsed and otherwise in proper form for
transfer and that the Person requesting such exchange establish to the
satisfaction of the Exchange Agent or of Parent acting solely in its corporate
capacity, as the case may be, that any transfer or other taxes required by
reason of the issuance of a check or a certificate for shares of Parent Common
Stock in any name other than that of the registered holder of the Certificate
surrendered or otherwise required has been paid or is not payable.
SECTION 2.9. DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES OF PARENT
COMMON STOCK. No dividends or other distributions declared or made after the
Effective Time with respect to Parent Common Stock with a record date after the
Effective Time shall be paid to the holder of any unsurrendered Certificate with
respect to the shares of Parent Common Stock evidenced thereby, and no other
part of the Merger Consideration shall be paid to any such holder, until the
holder of such Certificate shall surrender such Certificate. Subject to the
effect of applicable laws, following surrender of any such Certificate, there
shall be paid to the holder of the certificates evidencing whole shares of
Parent Common Stock issued in exchange therefor, without interest, (i) promptly,
the amount of any cash payable with respect to a fractional share of Parent
Common Stock to which such holder is entitled pursuant to Section 2.7 and the
amount of dividends or other distributions with a record date after the
Effective Time theretofore paid with respect to such whole shares of Parent
Common Stock, and (ii) at the appropriate payment date, the amount of dividends
or other distributions, with a record date after the Effective Time but prior to
surrender and a payment date occurring after surrender, payable with respect to
such whole share of Parent Common Stock.
SECTION 2.10. STOCK TRANSFER BOOKS. At the Effective Time, the stock
transfer books of the Company shall be closed and there shall be no further
registration of transfers of shares of Company Common Stock thereafter on the
records of the Company or the Surviving Company. On or after the Effective Time,
any Certificates presented to the Exchange Agent or Parent for any reason shall
be converted into the Merger Consideration.
SECTION 2.11. LOST, STOLEN OR DESTROYED CERTIFICATES. In the event any
Certificates shall have been lost, stolen or destroyed, the Exchange Agent shall
make payment in exchange for such lost, stolen or destroyed Certificates, upon
the making of an affidavit of that fact by the holder thereof, for the pro rata
amount of the Merger Consideration; provided, however, that Parent may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of any such lost, stolen or destroyed Certificate or Certificates having
an aggregate value of $100,000 or more to deliver a bond in such sum as Parent
may reasonably direct as indemnity against any claim that may be made against
Parent or the Exchange Agent with respect to the Certificates alleged to have
been lost, stolen or destroyed.
Agreement and Plan of Merger - Page 8
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
With the exceptions of the representations and warranties set forth in
Section 3.22(d) and (e), 3.27 and 3.28, which are expressly stated to be made in
the respective Stockholder's individual capacity only, each of the Company and
the Stockholders hereby severally, but not jointly, represent and warrant to
each of Parent and Sub that except as set forth in the written disclosure
schedule previously delivered by the Company to Parent (the "Company Disclosure
Schedule"):
SECTION 3.1. CORPORATE EXISTENCE AND POWER. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Ohio and has all requisite corporate power and authority to
own, lease or operate its properties and assets and to carry on its business as
now being conducted, and is duly qualified to do business and is in good
standing in each jurisdiction where the character of the property owned or
leased by it or the nature of its activities makes such qualification necessary,
other than in such jurisdictions where the failure to be so qualified would not,
individually or in the aggregate, have a Material Adverse Effect (as defined
below) on the Company. The Company has heretofore delivered to Parent and Sub
true and complete copies of its Articles of Incorporation and Code of
Regulations, as amended to date and as currently in effect. For purposes of this
Agreement, a "MATERIAL ADVERSE CHANGE" or a "MATERIAL ADVERSE EFFECT" shall
mean, with respect to Parent on the one hand and the Company on the other hand,
the result of one or more events, changes or effects which, individually or in
the aggregate, would have a material adverse effect or impact on the business,
assets, results of operations, prospects or financial condition of such party
and its subsidiaries, taken as a whole, or is reasonably likely to delay
substantially or prevent the consummation of the transactions contemplated
hereby.
SECTION 3.2. CORPORATE AUTHORIZATION. The execution, delivery and
performance by the Company of this Agreement and the consummation by the Company
of the Merger are within the Company's corporate power and authority and,
subject to the approval of the Merger by the Company's stockholders (the
"COMPANY STOCKHOLDER APPROVAL"), have been duly authorized by all necessary
corporate action of the Company. This Agreement has been duly authorized,
executed and delivered by the Company and constitutes a valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms, subject to the Company Stockholder Approval.
SECTION 3.3. GOVERNMENTAL AUTHORIZATION. Except as set forth on
Schedule 3.3, the execution, delivery and performance by the Company of this
Agreement and the consummation of the Merger and the other transactions
contemplated by this Agreement by the Company, do not and will not require any
consent, approval or action by or in respect of, or any declaration, filing or
registration with, any governmental or regulatory authority (each, a
"GOVERNMENTAL AUTHORITY"), other than (i) routine filings with the Secretary of
State of Ohio and the Secretary of State of Delaware necessary to consummate the
Merger and (ii) such filings or notifications which would not prevent or delay
consummation of any of the transactions contemplated hereby in any material
respect, or otherwise prevent the Company from performing its obligations under
this Agreement in any material respect.
SECTION 3.4. NON-CONTRAVENTION. The execution, delivery and performance
by the Company of this Agreement and the consummation by the Company of the
Merger and other transactions contemplated by this Agreement, do not and will
not, with or without the giving of notice, the lapse of time or both: (i)
contravene or conflict with the Articles of Incorporation or Code of
Agreement and Plan of Merger - Page 9
Regulations of the Company, (ii) assuming compliance with the matters referred
to in Section 3.3, contravene or conflict with or constitute a violation of any
provision of any law, rule, regulation, judgment, injunction, order or decree
currently in effect and binding upon or applicable to the Company, (iii) except
as set forth on Schedule 3.4, require any consent, approval or other action by
any individual, corporation, partnership, joint venture, limited liability
company, limited liability partnership, association, trust or other entity or
organization, including a Governmental Authority (a "PERSON"), contravene or
conflict with or constitute a violation of or a default under, or give rise to
any right of termination, cancellation or acceleration of any right or
obligation of the Company or to a loss of any benefit to which the Company is
entitled under any material provision of (A) any agreement binding upon the
Company, or (B) assuming compliance with the matters referred to in Section 3.3,
any material license, franchise, permit or other similar authorization held by
the Company, or (iv) create or result in any mortgage, lien, pledge, claim,
charge, security interest, easement, assessment, restrictive covenant,
reservation, restriction or encumbrance of any kind ("LIEN") on any asset of the
Company, except in the case of clauses (ii), (iii) and (iv), for such matters as
would not have a Material Adverse Effect on the Company.
SECTION 3.5. CAPITALIZATION. The authorized capital stock of the
Company consists of (i) 750 shares of Company Common Stock, no par value, of
which 200 shares are issued and outstanding as of the date hereof. Schedule 3.5
sets forth the name and address of all stockholders of the Company and the
number of shares of Common Stock held by each stockholder of the Company. All
issued and outstanding shares of Company Common Stock are duly authorized,
validly issued, fully paid and nonassessable, and have not been issued in
violation of any preemptive, first refusal or other rights of any stockholder of
the Company or any other Person. Except as set forth in Schedule 3.5, there are
no outstanding (i) shares of capital stock or other voting securities of the
Company, (ii) securities of the Company convertible into or exchangeable for
shares of capital stock or voting securities of the Company or (iii) options,
warrants, exchange rights, subscription rights or other agreements, commitments
or rights to purchase or otherwise acquire from the Company, or agreements,
commitments or obligations of the Company to issue or sell, any capital stock or
securities convertible into or exchangeable for capital stock of the Company
(the items in clauses (i), (ii) and (iii) being referred to collectively as the
"COMPANY SECURITIES"). Except as set forth in Schedule 3.5 or as contemplated by
this Agreement, there are no outstanding obligations of the Company to sell,
issue or deliver, or to repurchase, redeem or otherwise acquire, any of the
Company Securities. Schedule 3.5 sets forth a complete and correct list
(including number of shares and exercise price) of all Company Securities
described in clauses (ii) and (iii) of the definition of Company Securities.
SECTION 3.6. SUBSIDIARIES. The Company does not hold or own, directly
or indirectly, any equity or ownership interest in any corporation, association,
partnership, joint venture or other Person.
SECTION 3.7. FINANCIAL STATEMENTS. Attached hereto as Schedule 3.7 are
the following financial statements of the Company (collectively, the "Financial
Statements"):
(i) the audited balance sheet as of December 31, 1994 and
the related audited statements of earnings, retained
earnings and cash flows for the year ended December
31, 1994 (together with the notes thereto, audited
by, and accompanied by the report thereon, of ▇▇▇▇▇
▇▇▇▇▇▇▇▇ LLP);
(ii) the audited balance sheet as of December 31, 1995 and
the related audited statement of earnings, retained
earnings and cash flows for the year ended
Agreement and Plan of Merger - Page 10
December 31, 1995 (together with the notes thereto,
audited by, and accompanied by the report thereon, of
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP); and
(iii) the audited balance sheet as of December 31, 1996
(the "BALANCE SHEET") and the related audited
statements of earnings, retained earnings and cash
flows for the year ended December 31, 1996 (together
with the notes thereto, audited by, and accompanied
by the report thereon, of ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP).
Each of the Financial Statements has been prepared in accordance with GAAP
applied on a consistent basis and fairly presents the financial position of the
Company as of its date or the results of operations or changes in financial
position of the Company for the periods then ended. Except as may be set forth
in the Financial Statements, all of the revenues and expenses of the Company
reflected in the Financial Statements were derived or incurred in the ordinary
course of business of the Company. The account records underlying the Financial
Statements accurately and fairly reflect, in reasonable detail and in all
material respects, the transactions of the Company, and the Company's books of
account have been maintained in accordance with GAAP applied on a consistent
basis. All accounts, notes and other receivables of the Company are valid and
enforceable, are not subject to any valid defense, set off, counterclaim or
claim for returns or refunds, and are collectible in full in accordance with
their terms in the ordinary course of business of the Company, except to the
extent of any reserves therefor reflected on the Balance Sheet or taken in the
ordinary course of business consistent with past practice which, in the
aggregate, are not materially adverse to the Company.
SECTION 3.8. ABSENCE OF UNDISCLOSED LIABILITIES. To the best knowledge
of the Company and the Stockholders, the Company has no liabilities or
obligations which are, or reasonably could be expected to be, in the aggregate,
material to the business, assets, results of operation, prospects or financial
condition of the Company, except those liabilities or obligations which are (a)
fully reflected or adequately reserved against in the Balance Sheet, (b)
disclosed in this Agreement or in Schedule 3.8 or (c) incurred in the ordinary
course of business consistent with past practice since December 31, 1996 (the
"BALANCE SHEET DATE"). For the purposes of this Agreement, the phrase
"LIABILITIES OR OBLIGATIONS" shall include any direct or indirect indebtedness,
claim, loss, damage, deficiency (including deferred income tax and other net tax
deficiencies), cost, expense, obligation, guarantee, or responsibility, whether
accrued, absolute or contingent, fixed or unfixed, liquidated or unliquidated,
secured or unsecured.
SECTION 3.9. TITLE AND CONDITION OF ASSETS. The assets and properties
owned, leased or subleased by the Company constitute, and on the Closing Date
will constitute, all of the assets and properties used or held for use in the
conduct of the business of the Company, and are, and on the Closing Date will
be, generally adequate to conduct the business of the Company as currently
conducted. The Company has, and on the Closing Date will have record and
marketable title to, or valid leasehold interests in, all of its assets and
properties, whether real, personal or mixed, tangible or intangible, and whether
now owned, leased or subleased or acquired after the date of this Agreement,
including all assets and properties identified on the Balance Sheet, except for
assets and properties sold since the Balance Sheet Date in the ordinary course
of business consistent with past practices and as permitted by this Agreement.
Except as disclosed in the Financial Statements or in Schedule 3.9, none of such
assets and properties is, or on the Closing Date will be, subject to any Liens,
except for (i) Liens incurred in the ordinary course of business which are not
yet due and payable, (ii) Liens which do not materially detract from the value
of or interfere with the present use of the property affected thereby and which
do not, individually or in the aggregate, have a Material Adverse Effect on the
Company and (iii) liens securing the repayment of the Credit Facility of the
Company (the "PERMITTED LIENS").
Agreement and Plan of Merger - Page 11
SECTION 3.10. REAL PROPERTY. Set forth on Schedule 3.10 is an accurate
and complete list and summary description of all real property currently owned
or leased by the Company and, except as set forth on Schedule 3.10, none of the
described leases require any consent to the transactions contemplated by this
Agreement. The Company has previously delivered to Parent and Sub accurate and
complete copies of all leases listed and described on Schedule 3.10. The Company
has possession of each of the aforementioned properties and, to the knowledge of
the Company, no event has occurred which, with the lapse of time or notice or
both, could reasonably be expected to result in a material default under any of
the described leases. All rents or other material payment obligations which have
become due in respect of each of such leased properties have been paid, the
Company has complied in all material respects with its obligations under the
said leases and the Company has not received any notice of any breach of its
obligations under any covenants, agreements, statutory requirements, planning
consents, by-laws, orders and regulations affecting any of such properties
(whether owned or leased), their use and any business of the Company there
carried on.
SECTION 3.11. CONDITION OF TANGIBLE ASSETS. Except as set forth on
Schedule 3.11, all material tangible property, including the real property and
structures thereon, of the Company is in good operating condition, reasonable
wear and tear excepted, and the operation and use of such property in the
business of the Company conforms in all material respects to all applicable
laws, ordinances, regulations, permits, licenses and certificates.
SECTION 3.12. SUBSEQUENT EVENTS. Except as disclosed in Schedule 3.12,
since the Balance Sheet Date, the business of the Company has been conducted in
the ordinary course of business consistent with past practices and the Company
has not:
(a) Incurred any Material Adverse Change.
(b) Amended or otherwise changed its Articles of Incorporation
or Code of Regulations in any manner which would reasonably be expected to
result in a Material Adverse Change.
(c) Declared, set aside or paid any dividend or other
distribution with respect to any of the Company Securities, or repurchased,
redeemed or otherwise acquired any outstanding shares of capital stock or other
securities of, or other equity or ownership interests in, the Company (including
the Company Securities) or issued or sold any Company Securities.
(d) Amended the term of any outstanding security of the
Company.
(e) Incurred any indebtedness for borrowed money or guaranteed
any such indebtedness of another Person, issued or sold any debt securities or
warrants or other rights to acquire any debt securities of the Company,
guaranteed any debt securities of another Person, entered into any "keep well"
or other agreement to maintain any financial statement condition of another
Person or entered into any arrangement having the economic effect of any of the
foregoing, except for borrowings under its existing credit facility with The
Huntington Bank for secured indebtedness, whether a term loan or line of credit
(the "CREDIT FACILITY"), the endorsement of checks in the normal course of
business, and the extension of credit to the Company by suppliers in the normal
course of business.
(f) Created or assumed or permitted to exist any Lien on any
asset, other than Permitted Liens .
(g) Made any loan or capital contribution to or investment in
any Person.
Agreement and Plan of Merger - Page 12
(h) Entered into any lease or acquisition of any capital asset
or made any other investment for aggregate consideration in excess of $10,000.
(i) Sold, leased, pledged, transferred or otherwise disposed
of any capital asset with an aggregate fair market value in excess of $10,000.
(j) Entered into any agreement or transaction, or made any
commitment, relating to its assets or business (including the acquisition or
disposition of any assets or business) or relinquished any contract or other
right, other than transactions, commitments and relinquishments in the ordinary
course of business consistent with past practices and those contemplated by this
Agreement.
(k) Changed any method or practice of financial or tax
accounting or any method of maintaining books and records.
(l) (i) Granted any severance or termination pay to any
director or officer of the Company or, except in the ordinary course of business
consistent with past practice, to any employee of the Company, (ii) entered into
any employment, severance, consulting, deferred compensation or other similar
agreement (or any amendment to any agreement) with any director or officer of
the Company or, except in the ordinary course of business consistent with past
practice, with any employee of the Company, (iii) changed any benefits payable
under existing severance or termination pay policies or employment, severance,
consulting or other similar agreements, or (iv) changed the compensation, bonus
or other benefits payable to directors, officers or employees of the Company
other than periodic increases in the ordinary course of business consistent with
past practice.
(m) Paid, discharged, settled or satisfied any claim, Lien or
liability, other than those (i) which were reflected or reserved against in the
Balance Sheet and in the ordinary course of business consistent with past
practice, or (ii) which were incurred since the Balance Sheet Date in the
ordinary course of business consistent with past practice.
(n) Written down the value of any inventory or written off as
uncollectible any notes, accounts or other receivables or any portion thereof
other than in the ordinary course of business consistent with past practice.
(o) Entered into any transaction with any affiliates of the
Company, other than in the ordinary course of, and pursuant to the reasonable
requirements of, the business of the Company and upon terms that were no less
favorable to the Company than it could have obtained in a comparable transaction
with a Person who was not an affiliate.
(p) Entered into any agreement, undertaking or commitment to
do any of the foregoing.
(q) Suffered any damage, destruction or other casualty loss
not covered by insurance affecting the business or assets of the Company which
has had or would reasonably be expected to result in or have a Material Adverse
Effect on the Company.
SECTION 3.13. LEGAL PROCEEDINGS. Except as set forth on Schedule 3.13,
there is no action, suit, litigation, governmental investigation or other
proceeding pending or, to the knowledge of the Company, threatened against or
relating to the Company or any of its properties or businesses, or the
Agreement and Plan of Merger - Page 13
transactions contemplated by the Agreement which could reasonably be expected to
have a Material Adverse Effect and, to the knowledge of the Company, no basis
for any such action exists.
SECTION 3.14. MATERIAL CONTRACTS. (a) Except for agreements, contracts,
plans, leases, arrangements or commitments disclosed in Schedule 3.14 or any
other Schedule to this Agreement, the Company is not a party to or subject to:
(i) any collective bargaining agreement;
(ii) any agreements that contain any material unpaid
severance liabilities or obligations;
(iii) any bonus, deferred compensation, incentive
compensation, pension, profit-sharing or retirement
plans, or any other employee benefit plans or
arrangements;
(iv) any employment or consulting agreement, contract or
commitment with an employee or individual consultant
or salesperson or consulting or sales agreement,
contract or commitment with a firm or other
organization not terminable by the Company on 90
days' notice without liability except to the extent
applicable local law and/or general principles of
wrongful termination law may limit the Company's
ability to terminate such agreements, contracts or
commitments;
(v) agreement or plan, including, without limitation, any
stock option plan, stock appreciation right plan or
stock purchase plan, any of the benefits of which
will be increased, or the vesting of benefits of
which will be accelerated, by the occurrence of any
of the transactions contemplated by this Agreement or
the value of any of the benefits of which will be
calculated on the basis of any of the transactions
contemplated by this Agreement;
(vi) any fidelity or surety bond or completion bond;
(vii) any lease of personal property having a remaining
value individually in excess of $10,000;
(viii) any agreement of indemnification or guaranty;
(ix) any agreement, contract or commitment containing any
covenant limiting the freedom of the Company to
engage in any line of business or compete with any
Person;
(x) any agreement, contract or commitment relating to
capital expenditures and involving future obligations
in excess of $10,000;
(xi) any agreement, contract or commitment relating to the
disposition or acquisition of assets not in the
ordinary course of business or any ownership interest
in any corporation, partnership, joint venture or
other business enterprise;
Agreement and Plan of Merger - Page 14
(xii) any mortgages, indentures, loans or credit
agreements, security agreements or other agreements
or instruments relating to the borrowing of money or
extension of credit, including guaranties referred to
in clause (viii) hereof;
(xiii) any purchase order or contract for the purchase of
raw materials or acquisition of assets involving
$50,000 or more;
(xiv) any distribution, joint marketing, supply or
development agreement; or
(xv) any other agreement, contract or commitment which
involves payment by the Company of $25,000 or more
and is not cancelable without penalty within thirty
(30) days.
The Company has not breached, or received in writing any claim or threat
that it has breached, any of the terms or conditions of any other agreement,
contract or commitment in such a manner as would permit any other party to
cancel or terminate the same or would permit any other party to seek damages
from the Company that could reasonably be expected to have a Material Adverse
Effect. Each agreement, contract or commitment set forth in any of the Company's
schedules is in full force and effect and, except as otherwise disclosed in such
schedule, to the knowledge of the Company and the Stockholders, each such
agreement, contract or commitment is not subject to any material default
thereunder by any party obligated to the Company pursuant thereto. The Company
has obtained, or will obtain prior to the Effective Time, all necessary
consents, waivers and approvals as are required in connection with the Merger
under any of the Company's material agreements.
(b) There is no contract, agreement, commitment or obligation to
which the Company is a party or is bound that, at the time it was entered into
or made was, or is currently, known or expected by the Company to result in any
material loss to the Company upon completion or performance thereof, or any bid,
offer or proposal which, if accepted would result in such a contract, agreement,
commitment or obligation.
(c) Except as disclosed in Schedule 3.14, the Company is not a
party to any agreement with any of its securityholders or optionholders, or any
affiliate thereof, nor, to the knowledge of the Company, without inquiry by the
Company, is any securityholder or optionholder of the Company a party to any
agreement with any other such securityholder or optionholder relating to the
Company or any of its securities.
SECTION 3.15. EMPLOYEES. Schedule 3.15 sets forth a true and complete
list of (a) the names, titles, annual salaries and other compensation of all
employees of the Company (the "EMPLOYEES") and the location at which such
Employees regularly perform services for the Company and (b) the wage rates for
non-salaried Employees of the Company (by classification). Any agreements,
commitments or understandings between the Company and any Employee concerning
such Employee's future salary, compensation or terms of employment are described
in Schedule 3.15. Except as set forth on Schedule 3.15, none of such Employees
has indicated to the Company that he or she intends to resign or retire as a
result of the transactions contemplated by this Agreement or otherwise. The
Company is in compliance with all currently applicable laws respecting
employment and employment practices, terms and conditions of employment and
wages and hours, and is not engaged in any unfair labor practice, failure to
comply with which or engagement in which, as the case may be, has had, or could
reasonably be expected to have, a Material Adverse Effect on the Company. There
is no unfair labor practice
Agreement and Plan of Merger - Page 15
complaint pending or, to the knowledge of the Company, threatened against the
Company before the National Labor Relations Board.
SECTION 3.16. TRANSACTIONS WITH AFFILIATES. Except as set forth in
Schedule 3.16, since January 1, 1993, there have been and are no agreements or
other continuing transactions between the Company, on the one hand, and any
affiliate of the Company, any of the stockholders of the Company, any affiliate
of any stockholder of the Company, or any member of any such stockholder's
family, on the other hand. Except as set forth in Schedule 3.16, to the
knowledge of the Company, none of the officers or directors of the Company (a)
has any material direct or indirect interest in any entity which does business
with the Company or any property, asset or right which is used by the Company;
or (b) has any contractual relationship with the Company.
SECTION 3.17. INSURANCE COVERAGE. The Company has furnished to Parent a
list of, and true and complete copies of, all insurance policies and fidelity
bonds covering the assets, business, equipment, properties, operations,
employees, officers and directors of the Company (including without limitation
any policies pertaining to product liability). There is no claim by the Company
pending under any of such policies or bonds as to which coverage has been
questioned, denied or disputed by the underwriters of such policies or bonds.
All premiums payable under all such policies and bonds have been paid and the
Company is otherwise in compliance in all material respects with the terms and
conditions of all such policies and bonds. Such policies of insurance and bonds
(or other policies and bonds providing substantially similar insurance coverage)
have been in effect since January 1, 1995 and remain in full force and effect.
SECTION 3.18. COMPLIANCE WITH LAWS. The Company is not in violation of
any applicable provisions of any law, statute, ordinance, regulation, judgment,
order, injunction, permit, license, certificate or other authorization, or its
governing instruments, except for violations that have not had and could not
reasonably be expected to have a Material Adverse Effect on the Company.
SECTION 3.19. ACCOUNTS RECEIVABLE; INVENTORIES. (a) Except as set forth
on Schedule 3.19(a), the accounts receivable of the Company, including the
accounts receivable reflected on the Balance Sheet and accounts receivable
acquired by the Company between the Balance Sheet Date and the Closing Date, are
valid and existing and represent bona fide claims against debtors for sales and
other charges, and were acquired in the ordinary course of business and have
been collected, or are expected to be collected in the ordinary course of
business within a period not exceeding 90 days from invoice date, in full and in
accordance with their terms at their recorded amounts, subject only to the
reserve for receivables as reflected on the face of the Balance Sheet, and
(subject to the aforesaid reserves) are subject to no refunds, discounts (except
for normal cash and immaterial trade discounts) or other adjustments and, to the
best knowledge of the Company, to no defenses, rights of setoff, counterclaims,
encumbrances or conditions affecting any thereof. The accounts receivable have
been accrued on the books of the Company in the ordinary course of business
consistent with past practices in accordance with GAAP, and the amount reserved
for doubtful accounts and allowances disclosed in the Balance Sheet or accrued
on such books is consistent with past practices.
(b) Schedule 3.19(b) sets forth a detailed list of all inventory
of the Company. All of the inventories that are reflected in Schedule 3.19(b)
(i) were purchased or acquired in the ordinary course of the Company's business
and in a manner consistent with the regular inventory practices of the Company,
(ii) have been or will be used or sold in the ordinary course of business and in
a manner consistent with its regular inventory practices, (iii) are not in
excess of the Company's reasonable requirements, and (iv) are or will be
reflected in the Company's financial statements in accordance with GAAP
consistently
Agreement and Plan of Merger - Page 16
applied. Since the Balance Sheet Date, due provision was made on the books of
the Company in the ordinary course of business consistent with past practices to
provide for all slow-moving, obsolete or unusable inventories to their estimated
useful or scrap values and such inventory reserves are adequate to provide for
such slow-moving, obsolete or unusable inventory and inventory shrinkage.
(c) Except as disclosed on Schedule 3.19(b), the inventory does
not consist of any damaged or obsolete inventory or inventory not fit for use in
the ordinary course of business, including without limitation (i) raw materials
or work-in-process that are not used in current formulations of the Company's
products, (ii) any raw materials or work-in-process that, according to the
production schedule of the business, would not reasonably be expected to be used
within six months after the Closing Date or, if earlier, the end of such raw
material's or work-in-process' useful life, (iii) any finished goods that
represent products returned prior to November 1, 1996, (iv) any finished goods
for which no sales are forecast in the Company's sales plan, (v) any finished
goods not salable in the ordinary course of business at the Company's published
prices without additional manufacturing or packaging cost, (vi) any finished
goods that are "remnant", and (vii) any raw materials, work-in-process or
finished goods that, as a result of any judgment, order, decree or settlement
relating to product labeling or otherwise, may not be used in current product
formulation. All inventory has been stored, shipped and otherwise handled in
compliance in all material respects with all applicable federal and state law,
rules and regulations (including, without limitation those promulgated by the
U.S. Food and Drug Administration ("FDA")).
SECTION 3.20. FINDERS' FEES. There is no investment banker, broker,
finder or other intermediary that has been retained by or is authorized to act
on behalf of the Company who might be entitled to any fee or commission from
Parent or any of its subsidiaries or the Company upon consummation of the Merger
and the transactions contemplated by the Operative Documents.
SECTION 3.21. EMPLOYEE BENEFIT PLANS. Except as set forth in Schedule
3.21 neither the Company nor any Person that together with the Company would be
treated as a single employer under Section 414 of the Code (an "ERISA
AFFILIATE") has established or maintains or is obligated to make contributions
to or under or otherwise participate in (a) any bonus or other type of incentive
compensation plan, program, agreement, policy, commitment, contract or
arrangement (whether or not set forth in a written document), (b) any pension,
profit-sharing, retirement or other plan, program or arrangement, or (c) any
other employee benefit plan, fund or program, including, but not limited to,
those described in Section 3(3) of the Employment Retirement Income Security Act
of 1974, as amended ("ERISA"). All such plans (individually, a "PLAN" and
collectively, the "PLANS") have been operated and administered in all material
respects in accordance with, as applicable, ERISA, and the Code, and the related
rules and regulations adopted by those federal agencies responsible for the
administration of such laws. No act or failure to act by the Company has
resulted in, nor does the Company have knowledge of a "prohibited transaction"
(as defined in ERISA) with respect to the Plans that is not subject to a
statutory or regulatory exception. No "reportable event" (as defined in ERISA)
has occurred with respect to any of the Plans which is subject to Title IV of
ERISA. At the Effective Time, the fair market value of the assets of any Plan
which is subject to Title IV of ERISA will exceed the present value of all
benefits accrued under such Title IV Plan, determined on a termination basis
using assumptions established by the Pension Benefit Guaranty Commission as in
effect on that date. Neither the Company nor any ERISA Affiliate has (i) engaged
in, or is a successor or parent corporation to an entity that has engaged in, a
transaction described in Section 4069 of ERISA, or (ii) incurred, or reasonably
expects to incur prior to the Effective Time, any liability under Title IV of
ERISA arising in connection with the termination of, or complete or partial
withdrawal from, any Plan covered or previously covered by Title IV or ERISA
that could become a liability of the Parent or Sub or any of their ERISA
Affiliates after the
Agreement and Plan of Merger - Page 17
Effective Time. The Company has not previously made, is not currently making,
and is not obligated in any way to make, any contributions to any multi-employer
plan within the meaning of the Multi-Employer Pension Plan Amendments Act of
1980.
SECTION 3.22. TAXES. (a) The term "TAXES" as used herein means all
federal, state, local, foreign and other net income, gross income, gross
receipts, sales, use, ad valorem, transfer, franchise, profits, license, lease,
service, service use, withholding, payroll, employment, excise, severance,
stamp, occupation, premium, property, windfall profits, customs duties, or other
taxes, fees, assessments or other charges of any kind whatever, together with
any interest and any penalties, additions to tax or additional amounts with
respect thereto. The term "Returns" as used herein, means all returns,
declarations, reports, statements and other documents required to be filed in
respect of Taxes, and "RETURN" means any one of the foregoing returns. All
citations to the Code, or the Treasury regulations promulgated thereunder, shall
include any amendments or any substitute or successor provisions thereto.
(b) The Company has filed all Returns required to be filed and
has paid all Taxes owed (whether or not shown as due on such Returns),
including, without limitation, all Taxes which the Company is obligated to
withhold for amounts owing to employees, creditors and third parties. All such
Returns were complete and correct in all material respects. All Taxes with
respect to which the Company has become obligated have been paid and adequate
reserves have been established for all Taxes accrued but not yet payable
(including any Taxes arising out of the transactions contemplated by this
Agreement). To the knowledge of the Company and the Stockholders, no issues have
been raised (and are currently pending) by any taxing authority in connection
with any of the Returns. No waivers of statutes of limitation with respect to
any of the Returns have been given by or requested from the Company. All
deficiencies asserted or assessments made as a result of any examinations have
been fully paid, or are fully reflected as a liability in the financial
statements of the Company, or are being contested and an adequate reserve
therefor has been established and is fully reflected in the financial statements
of the Company. There are no liens for Taxes (other than for current Taxes not
yet due and payable) upon the assets of the Company. All material elections with
respect to Taxes affecting the Company, as of the date hereof, are set forth in
the financial statements of the Company, or are annexed hereto in Schedule 3.22.
The Company is not a party to any agreement, contract, arrangement or plan that
has resulted or would result, separately or in the aggregate, (i) in the payment
of any "excess parachute payments" within the meaning of Section 280G of the
Code (without regard to the exception in Sections 280G(b)(4) and 280G(b)(5) of
the Code) or (ii) in any payment which would not be deductible under Sections
162 and 404 of the Code. The Company has not agreed to make any adjustment under
Section 481(a) of the Code (or any similar provision of law or regulations) by
reason of a change in accounting method or otherwise, and the Company will not
be required to make any such adjustment as a result of the transactions set
forth in this Agreement. The Company does not have and has not had a permanent
establishment in any foreign country, as defined in any applicable Tax treaty or
convention between the United States of America and such foreign country. The
Company does not own any interest in any entity which is characterized as a
partnership for federal, state, local, foreign or other Tax purposes. The
Company is not and has not been a United States real property holding
corporation during the applicable period specified in Section 897(c)(1)(A)(ii).
The Company has not participated in or cooperated with any international
boycott, within the meaning of Section 999 of the Code.
(c) Set forth on Schedule 3.22 is a complete and accurate
description of the Company's (i) tax basis in its assets, (ii) tax elections,
(iii) methods of accounting, and (iv) agreements with respect to Taxes.
Agreement and Plan of Merger - Page 18
(d) The Company has never filed a consent pursuant to Section
341(f) of the Code, relating to collapsible corporations. The Company and its
stockholders made (i) a valid election for the Company to be treated as an "S
corporation", as that term is defined in Section 1361(a) of the Code and (ii) a
similar valid election under the laws of the State of Ohio or any other
applicable governmental authority, and all of such elections will be in effect
at the Effective Time. An election under Section 1362(a) of the Code (and any
similar election under the laws of the State of Ohio or any other applicable
Governmental Authority) has been in effect with respect to the Company (and any
predecessor corporation) for each of its taxable years (within the meaning of
Section 1374(c) of the Code). Schedule 3.22 lists each such election and a true
copy of each such election is attached thereto; there are no grounds for the
revocation of any such election and no such election will be revoked
retroactively or otherwise except at the Effective Time by reason of the Merger.
The Company has not taken any action that would cause, or would result in, the
termination of the S corporation status of the Company, other than pursuant to
this Agreement. Each of the Stockholders hereby individually represents that he
has not taken any action that has caused, would cause, or would result in, the
termination of the S Corporation status of the Company prior to the date hereof,
other than pursuant to this Agreement. Neither the Company nor any predecessor
has ever (i) been a party to any merger or consolidation nor acquired
substantially all of the assets of any Person, (ii) adopted a plan of
liquidation, or (iii) made any election under Section 936 or 992 of the Code.
There will be no tax imposed by Section 1374 of the Code and any corresponding
provisions of the laws of the State of Ohio or any other applicable Governmental
Authority in connection with the Merger.
(e) Each of the Stockholders hereby individually represents
that he has timely filed all Returns with respect to Taxes required to be paid
by a Stockholder attributable to items of income, gain, deductions, losses and
credits of the Company, and has timely paid all such Taxes (whether or not shown
on such Returns); there has not been any audit of any Return filed by such
Stockholder, or to the Company's knowledge, any previous shareholder of the
Company, with respect to, or which may relate to, items of income, gain,
deduction, loss or credit of the Company; no such audit of any such Stockholder
is in progress and such Stockholder has not been notified by any Governmental
Authority that any such audit is contemplated or pending.
(f) In the event that it is determined, either (i) by a
finding or order in connection with any government or judicial audit or
proceeding to which the Company or the Stockholders are a party or (ii) by the
Company's independent accountants, that the Company's S election pursuant to
Section 1362 of the Code (or any corresponding election under the laws of the
State of Ohio or any other applicable governmental authority) was not validly in
effect for any period after such election was purportedly made, then the
Stockholders of the Company shall promptly remit to the Company in cash, any
foreign, federal, state and/or local Tax liability (including any penalties,
additions to Tax or interest assessed with respect thereto) of the Company in
connection with any Taxes which may be imposed on the Company as a result of
such invalid election. To the extent Tax deductions or losses, which were
originally treated as Company "S" corporation Tax deductions or losses, become
Company Tax deductions or losses as a result of such invalid election and, under
the applicable Tax laws, are disallowed to the Company (but otherwise would have
been allowed if the Company had never made an S election), the Stockholders
agree to pay to the Company in cash an amount equal to the difference between
the Company's actual Tax liability and the Company's Tax liability had such
amounts not been so disallowed. Such payment shall be made within 15 days of the
date the Company's Tax liability has been determined by the Company's
accountants.
SECTION 3.23. ENVIRONMENTAL MATTERS. Except as set forth in Schedule
3.23, and except in all cases as, in the aggregate, have not had and could not
reasonably be expected to have a Material
Agreement and Plan of Merger - Page 19
Adverse Effect, the Company: (i) has obtained all approvals which are required
to be obtained under all applicable federal, state, foreign or local laws or any
regulation, code, plan, order, decree, judgment, notice or demand letter issued,
entered, promulgated or approved thereunder relating to pollution or protection
of the environment, including laws relating to emissions, discharges, releases
or threatened releases of pollutants, contaminants, or hazardous or toxic
materials or wastes into ambient air, surface water, ground water, or land or
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport, or handling of pollutants, contaminants or
hazardous or toxic materials or wastes by the Company or its agents
("ENVIRONMENTAL LAWS"); (ii) are in compliance in all material respects with all
terms and conditions of such required approvals, and also are in compliance in
all material respects with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules and timetables
contained in applicable Environmental Laws; (iii) as of the date hereof, is not
aware of nor has received notice of any past or present violations of
Environmental Laws or any event, condition, circumstance, activity, practice,
incident, action or plan which is reasonably likely to interfere with or prevent
continued compliance with or which would give rise to any material common law or
statutory liability, or otherwise form the basis of any material claim, action,
suit or proceeding, against the Company based on or resulting from the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling, or the emission, discharge or release into the
environment, of any pollutant, contaminant or hazardous or toxic material or
waste; and (iv) has taken all actions necessary under applicable Environmental
Laws to register any products or materials required to be registered by the
Company (or any of their respective agents) thereunder.
SECTION 3.24. INTELLECTUAL PROPERTY. Schedule 3.24 lists all Intellectual
Property Rights owned and/or used by the Company in the conduct of its business.
The Company owns or has a valid license to use from third parties such
Intellectual Property Rights. To the best knowledge of the Company and the
Stockholders, the Company's Intellectual Property Rights do not violate,
infringe upon or misappropriate the Intellectual Property Rights of any Person
where such violation or infringement would have a Material Adverse Effect.
"INTELLECTUAL PROPERTY RIGHT" means any trademark, service ▇▇▇▇, registration
thereof or application for registration therefor, trade name, invention, patent,
patent application, trade secret, know-how, copyright, copyright registration,
application for copyright registration, or any other similar type of proprietary
intellectual property right, in each case which is owned or licensed by the
Company and used or held for use by the Company.
SECTION 3.25 (INTENTIONALLY OMITTED).
SECTION 3.26. CERTAIN FDA MATTERS. (a) The Company has not made any untrue
statement of a material fact or fraudulent statement to the FDA, failed to
disclose a fact required to be disclosed to FDA, or committed any act, made any
statement, or failed to make any statement that could provide a basis for FDA to
invoke its policy respecting "Fraud, Untrue Statements of Material Facts,
Bribery, and Illegal Gratuities," set forth in 56 Fed.
Reg 46191 (September 10, 1991).
(b) The Company has provided to Parent for review, all
correspondence to or from FDA, the U.S. Drug Enforcement Agency ("DEA") and any
other state agency regulating the affairs of the Company (the "LOCAL AGENCIES"),
minutes of meetings with FDA, the DEA and any Local Agency, any existing written
reports of phone conversations, visits or other contracts with FDA, the DEA, and
any Local Agency, notices of inspectional observations, establishment inspection
reports, and all other documents in its possession concerning communications to
or from FDA, the DEA and any Local Agency, (including without limitation any
Form 482's issued by the FDA), or prepared by FDA, the DEA and any Local Agency
which bear in any way on the Company's compliance with FDA, DEA and state
regulatory requirements.
Agreement and Plan of Merger - Page 20
(c) The Company has provided to Parent for review of all documents
reflecting conclusions, opinions, or suggestions of Company officers, employees,
or agents, in-house or outside attorneys, or outside consultants, which bear in
any way on the Company's compliance with FDA, DEA and state regulatory
requirements.
(d) The Company is not aware of any information, whether or not in
written form, that it has not provided in the course of the review, which bears
in any way on the Company's compliance with FDA, DEA and state regulatory
requirements.
SECTION 3.27. STOCKHOLDER REPRESENTATIONS. (a) Each Stockholder hereby
individually represents and warrants that (i) it is his original, present
intention to acquire the Parent Common Stock for his own account and that the
Parent Common Stock is being and will be acquired for the purpose of investment
and not with a view to distribution or resale except as provided herein; (ii)
due to his business and financial experience and his status as an "accredited
investor" under Regulation D of the Securities Act of 1933, as amended (the
"SECURITIES ACT"), each Stockholder has the ability to protect his own interests
in connection with the transactions contemplated hereby and is generally
familiar with the business, operations and financial condition of the Parent,
and (iii) he understands that the shares of Parent Common Stock being acquired
hereunder may only be resold in compliance with applicable federal and state
securities laws, including Rule 144 of the Securities Act.
(b) Each Stockholder individually understands and agrees that,
until registered under the Securities Act or transferred pursuant to the
provisions of Rule 144 as promulgated by the Securities and Exchange Commission,
the Parent Common Stock issuable pursuant to this Agreement shall bear a legend,
prominently stamped or printed thereon, reading substantially as follows:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933 and any applicable state
securities laws. These securities have been acquired for investment and
not with a view to distribution or resale. These securities may not be
offered for sale, sold, delivered after sale or transferred in the
absence of an effective registration statement covering such securities
under the Act and any applicable state securities laws, or the
availability, in the opinion of counsel reasonably satisfactory to the
Company, of an exemption from registration thereunder."
(c) Each Stockholder, in his individual capacity, has had access
to information relative to the Parent's business, financial condition, and
results of operations prior to the purchase of the Parent Common Stock. Each
Stockholder, in his individual capacity, has such knowledge and experience in
financial and business matters that he is capable of evaluating the merits and
risks of the acquisition of the Parent Common Stock. Each Stockholder, in his
individual capacity, can bear the economic risks of this investment and can
afford a complete loss of this investment.
(d) Each Stockholder, in his individual capacity, understands
that: the Parent Common Stock has not been registered under the Securities Act
and applicable state securities laws, and, therefore, cannot be resold unless
they are subsequently registered under the Securities Act and applicable state
securities laws or unless an exemption from such registration is available; and
no state or governmental authority has made any finding or determination
relating to the fairness of the terms of the acquisition of the Parent Common
Stock. Each Stockholder, in his individual capacity, agrees not to resell or
otherwise dispose of all or any part of the Parent Common Stock purchased by
such Stockholder, except as permitted by law, including, without limitation, any
regulations under the Securities Act and applicable
Agreement and Plan of Merger - Page 21
state securities laws. Each Stockholder, in his individual capacity, also
understands that any routine sales of the Parent Common Stock in reliance upon
Rule 144 under the Act, if the provisions of Rule 144 should then be available
as to the Parent Common Stock, can be made only after the holding period
specified in Rule 144, in limited amounts, and in accordance with all the terms
and conditions of Rule 144.
(e) Each Stockholder hereby individually represents and warrants
that he has no present need for liquidity in connection with the purchase of the
Parent Common Stock. The acquisition of the Parent Common Stock by each
Stockholder is consistent with the general investment objectives of each
Stockholder. Each Stockholder hereby individually represents and warrants that
he understands that the purchase of the Parent Common Stock involves a high
degree of risk.
SECTION 3.28. TITLE. Except as set forth on Schedule 3.28, each
Stockholder hereby individually represents and warrants that he is the sole
record and beneficial owner of, and has good, valid and marketable title to, the
shares of Company Common Stock to be sold by him, free and clear of any and all
liens, security interests, pledges, encumbrances, claims, equities, defects in
title, rights and other restrictions of any nature on transfer or voting held by
any third party (collectively "ENCUMBRANCES"). Each Stockholder individually
represents and warrants that the performance by him of his obligations hereunder
will be effective to transfer good, valid and marketable title to the shares to
be sold by him hereunder, free and clear of any and all Encumbrances, other than
those that may be imposed under federal or state securities laws, and that the
consummation of the transactions herein contemplated will not result in a breach
or default of the terms and provisions of any stockholder agreement, stock
pledge, guaranty, loan or other agreement to which the Stockholder is a party,
or of any order, rule or regulation of any court, regulation body or
administrative agency applicable to the Stockholder.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Parent and Sub hereby jointly and severally represent and warrant to
the Company as follows:
SECTION 4.1. CORPORATE EXISTENCE AND POWER. Each of Parent and Sub is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware and has all requisite power and authority to own,
lease or operate its properties and assets and to carry on its business as now
being conducted. Each of Parent and Sub is duly qualified to do business and is
in good standing in each jurisdiction where the character of the property owned
or leased by it or the nature of its activities makes such qualification
necessary, other than in such jurisdictions where the failure to be so qualified
would not, individually or in the aggregate, have a Material Adverse Effect on
Parent. Each of Parent and Sub has heretofore made available to the Company true
and complete copies its Certificate of Incorporation and By-Laws, as amended to
date and as currently in effect.
SECTION 4.2. CORPORATE AUTHORIZATION. The execution, delivery and
performance by Parent and Sub of this Agreement and the Operative Documents to
which they are parties and the consummation by Parent and Sub of the Merger and
the other transactions contemplated by this Agreement and the Operative
Documents are within the corporate power and authority of Parent and Sub and
have been duly authorized by all necessary corporate action. Each of the
Operative Documents has been duly authorized, executed and delivered by each of
Parent and Sub (to the extent a party thereto)
Agreement and Plan of Merger - Page 22
and constitutes a valid and binding obligation of Parent and Sub, enforceable
against each of Parent and Sub in accordance with its terms.
SECTION 4.3. GOVERNMENTAL AUTHORIZATION. The execution, delivery and
performance by Parent and Sub of this Agreement and the Operative Documents (to
the extent a party thereto) and the consummation by Parent and Sub of the Merger
and the other transactions contemplated by this Agreement and Operative
Documents, do not and will not require any consent, approval or action by or in
respect of, or any declaration, filing or registration with a Governmental
Authority, other than (i) routine filings with the Secretary of State of
Delaware and the Secretary of State of Ohio necessary to consummate the Merger,
(ii) compliance with the applicable requirements of the Securities Act, the
Securities Exchange Act of 1934 (the "EXCHANGE ACT") and any applicable Blue Sky
Laws in connection with the offering, sale and delivery of the shares of Parent
Common Stock to be issued in the Merger and filings with the NASD and the Nasdaq
SmallCap Market in connection with listing the shares of Parent Common Stock to
be issued in the Merger on the Nasdaq SmallCap Market, and (iii) such filings or
notifications which would not prevent or delay consummation of any of the
transactions contemplated hereby in any material respect, or otherwise prevent
Parent or Sub from performing its obligations under this Agreement in any
material respect.
SECTION 4.4. NON-CONTRAVENTION. The execution, delivery and performance
by Parent and Sub of this Agreement and the Operative Documents (to the extent a
party thereto) and the consummation by Parent and Sub of the Merger and other
transactions contemplated by this Agreement and the Operative Documents do not
and will not, with or without the giving of notice, the lapse of time or both:
(i) contravene or conflict with the Certificate of Incorporation or By-Laws of
Parent or any of its subsidiaries, (ii) assuming compliance with the matters
referred to in Section 4.3, contravene or conflict with or constitute a
violation of any provision of any law, rule, regulation, judgment, injunction,
order or decree currently in effect and binding upon or applicable to Parent or
any of its subsidiaries or any of their respective properties, (iii) require any
consent, approval or other action by any Person, contravene or conflict with or
constitute a violation of or a default under, or give rise to any right of
termination, cancellation or acceleration of any right or obligation of Parent
or any of its subsidiaries or to a loss of any benefit to which Parent or any of
its subsidiaries is entitled, under any material provision of (A) any agreement
binding upon Parent or any of its subsidiaries, or (B) assuming compliance with
the matters referred to in Section 4.3, any license, franchise, permit or other
similar authorization held by Parent or any of its subsidiaries, or (iv) create
or result in any Lien on any asset of Parent or any of its subsidiaries, except
in the case of clauses (ii), (iii) and (iv), for such matters as would not have
a Material Adverse Effect on Parent.
SECTION 4.5. CAPITALIZATION. (a) (i) As of January 31, 1997, the
authorized capital stock of Parent consisted of (i) 10,000,000 shares of
preferred stock, par value $.01 per share, although no shares of preferred stock
were issued and outstanding or held in the treasury of Parent as of such date,
and (ii) 75,000,000 shares of Common Stock, of which 30,112,706 shares were
issued and outstanding and no shares were held in the treasury of Parent. As of
January 31, 1997, there were reserved for issuance pursuant to (a) Parent's
various stock plans and option agreements (the "PARENT PLANS") an aggregate of
up to 4,102,800 shares of Common Stock, (b) warrants issued by Parent for an
aggregate of up to 2,178,588 shares of Common Stock, and (c) a note issued by
Parent which is convertible into approximately 465,000 shares of Common Stock.
Except as provided in the immediately preceding sentence of this Section 4.5, as
of January 31, 1997, there were no outstanding options, warrants, calls, rights,
commitments or agreements to which Parent is a party or by which Parent is bound
obligating Parent to (x) issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of capital
Agreement and Plan of Merger - Page 23
stock of Parent or (y) grant, extend or enter into any such option, warrant,
call, right, commitment or agreement.
(b) All outstanding shares of Parent Common Stock are duly
authorized, validly issued, fully paid and nonassessable, and are not subject to
preemptive rights. The shares of Parent Common Stock to be issued and exchanged
for shares of Company Common Stock in the Merger pursuant to this Agreement
will, at the Effective Time, be (i) duly authorized, validly issued, fully paid
and nonassessable and will not be subject to preemptive rights, and (ii)
authorized for listing on the Nasdaq SmallCap Market.
(c) The authorized capital stock of Sub consists of 100 shares
of Common Stock, par value $.01 per share, all of which shares are issued and
outstanding and owned of record by Parent. All issued and outstanding shares of
Common Stock, par value $.01 per share, of Sub are validly issued, fully paid
and nonassessable, and have not been issued in violation of any preemptive,
first refusal or other subscription rights of any stockholder of Sub or any
other Person.
SECTION 4.6. LEGAL PROCEEDINGS. There is no action, suit, investigation
or other proceeding pending or, to the knowledge of Parent, threatened against
or relating to Parent or any of its subsidiaries or any of their respective
properties or businesses, or the transactions contemplated by this Agreement
which may have a Material Adverse Effect, and, to the knowledge of the Parent,
no basis for any action exists.
SECTION 4.7. COMPLIANCE WITH LAWS. Except as disclosed in the Parent
SEC Documents (as defined in Section 4.8 below), neither Parent nor any of its
subsidiaries has violated, or is in violation of, any applicable laws,
regulations and ordinances relating to its business and operations, or any
judgment, order or injunction, and to Parent's knowledge, there is no pending
inspection or investigation relating to any violation thereof, except for
violations which have not had, and (if determined adversely to Parent and its
subsidiaries) could not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on Parent.
SECTION 4.8. SEC DOCUMENTS. Parent has made available to the Company a
true and complete copy of the following Parent documents: (i) its annual report
on Form 10-K for the fiscal year ended June 30, 1996; (ii) its quarterly report
on Form 10-Q for the fiscal quarter ended September 30, 1996; (iii) its current
reports on Form 8-K dated (i) August 19, 1996, as amended, and (ii) January 15,
1997; (iv) the proxy statement dated December 27, 1996; and (v) each report,
schedule, registration statement and definitive proxy filed by Parent with the
U.S. Securities and Exchange Commission (the "SEC") since June 30, 1996 and
publicly available prior to the Effective Date (collectively, the "PARENT SEC
DOCUMENTS"), which are all of the documents (other than preliminary material)
that Parent was required to file with the SEC since such date. As of their
respective dates, the Parent SEC Documents complied in all material respects
with the requirements of the Securities Act, or the Exchange Act, as the case
may be, and the rules and regulations of the SEC thereunder applicable to such
Parent SEC Documents, and none of the Parent SEC Documents, as of their
respective dates, contained any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. None of Parent's subsidiaries is required to file any forms,
reports or other documents with the SEC. The consolidated financial statements
of Parent and its subsidiaries included in the Parent SEC Documents complied as
to form in all material respects with the published rules and regulations of the
SEC with respect thereto, were prepared in accordance with GAAP applied on a
consistent basis during the periods involved (except as may be indicated in the
notes thereto or, in the case of the unaudited
Agreement and Plan of Merger - Page 24
statements, as permitted by Rule 10-01 of Regulation S-X of the SEC) and fairly
present in accordance with applicable requirements of GAAP (subject, in the case
of the unaudited statements, to normal recurring adjustments, none of which will
be material) the consolidated financial position of Parent and its subsidiaries
as of their respective dates and the consolidated results of operations and the
consolidated cash flows of Parent and its subsidiaries for the periods presented
therein.
SECTION 4.9. BOARD RECOMMENDATION. The Board of Directors of each of
Parent and Sub, at a meeting duly called and held, has by the vote of those
directors present determined that this Agreement and the transactions
contemplated hereby, including the Merger, the execution and delivery of the
Operative Documents and the other agreements and arrangements contemplated
hereby and thereby, taken together, are fair to and in the best interests of the
stockholders of Parent and Sub and has approved the same.
SECTION 4.10. FINDERS' FEES. Except for fees payable by Parent to
Mazier Partners, there is no investment banker, broker, finder or other
intermediary that has been retained by or is authorized to act on behalf of
Parent or Sub who might be entitled to any fee or commission from the Parent or
any of its subsidiaries upon consummation of the Merger and the other
transactions contemplated by the Operative Documents.
SECTION 4.11. (INTENTIONALLY OMITTED).
SECTION 4.12. INTERIM OPERATIONS OF SUB. Sub was formed solely for the
purpose of engaging in the transactions contemplated hereby and has not engaged
in any business activities or conducted any operations other than in connection
with the transactions contemplated hereby.
ARTICLE V
COVENANTS OF ALL PARTIES
Each of the parties hereto hereby covenants and agrees with the other
parties as follows:
SECTION 5.1. COOPERATION. It shall cooperate fully with the other
parties hereto in furnishing any information or performing any action reasonably
requested by any such party, which information or action is necessary to the
speedy and successful consummation of the transactions contemplated by this
Agreement or is necessary, appropriate or desirable for the respective corporate
purposes of Parent, Sub and the Company.
SECTION 5.2. OTHER REQUIRED INFORMATION. It shall furnish to the other
parties hereto any application or statement, and all information concerning
itself and its Affiliates as is required to be set forth in any application or
statement to be filed with any Governmental Authority in connection with the
transactions contemplated by this Agreement. "AFFILIATE" means, with respect to
a specified Person, any Person that directly, or indirectly through one or more
intermediaries, controls, is controlled by, or is under common control with, the
Person specified.
SECTION 5.3. CONFIDENTIALITY. (a) All information furnished by one
party (the "DISCLOSING PARTY") to any other party (the "RECEIVING PARTY") in
connection with this Agreement and the Operative Documents and the transactions
contemplated hereby and thereby shall be kept confidential by the receiving
party (and shall be used by it only in connection with this Agreement and the
transactions
Agreement and Plan of Merger - Page 25
contemplated hereby), except to the extent that such information (i) is or
becomes generally available to the public other than as a direct or indirect
result of disclosure by the receiving party (or any of its directors, officers,
employees, agents, advisors or Affiliates (the "AGENTS")), (ii) was within the
possession of the receiving party prior to its being furnished to the receiving
party by or on behalf of the disclosing party (provided that the source of such
information is not known by the receiving party to be bound by a confidentiality
agreement with or other contractual, legal or fiduciary obligation of
confidentiality to the disclosing party or any other Person with respect to such
information), (iii) becomes available to the receiving party on a
non-confidential basis from a source other than the disclosing party or any of
its Agents (provided that such source is not known by the receiving party to be
bound by a confidentiality agreement with or other contractual, legal or
fiduciary obligation of confidentiality to the disclosing party or any other
Person with respect to such information), or (iv) is required to be disclosed in
any document filed with the SEC or any other Governmental Authority.
(b) If the receiving party or any of its Agents is requested
or required (by oral questions, interrogatories, requests for information or
documents in legal proceedings, subpoena, civil investigative demand or other
similar process) to disclose any of the confidential information, the receiving
party shall use all reasonable efforts to provide the disclosing party with
prompt written notice of any such request or requirement so that the disclosing
party may seek a protective order or other appropriate remedy and/or waive
compliance with the provisions of this Agreement. If, in the absence of a
protective order or other remedy or the receipt of a waiver by the disclosing
party, the receiving party or any of its Agents are nonetheless, based on the
advice of counsel, required to disclose confidential information to any tribunal
or else stand liable for contempt or suffer other censure or penalty, the
receiving party or its Agents may, without liability hereunder, disclose to such
tribunal only that portion of the confidential information which such counsel
advises the receiving party is legally required to be disclosed. The receiving
party shall exercise its best efforts to preserve the confidentiality of the
confidential information, including by cooperating with the disclosing party to
obtain an appropriate protective order or other reliable assurance that
confidential treatment will be accorded the confidential information by such
tribunal.
(c) If the transactions contemplated by this Agreement shall
fail to be consummated, the receiving party shall promptly cause all copies of
documents or extracts thereof containing information and data as to the
disclosing party to be returned to the disclosing party.
SECTION 5.4. PUBLIC ANNOUNCEMENTS. Parent and Sub, on the one hand, and
the Company, on the other hand, will consult with each other before issuing, and
provide each other the opportunity to review and comment upon, any press release
or other public statements with respect to the transactions contemplated by this
Agreement, and shall not issue any such press release or make any such public
statement prior to such consultation, except upon the advice of counsel that
such a release is required by or is appropriate under applicable law, policy or
regulation of the SEC, court process or by obligations pursuant to any listing
agreement with any national securities exchange or national securities quotation
system.
SECTION 5.5. MISCELLANEOUS AGREEMENTS AND CONSENTS. Subject to the
terms and conditions provided in this Agreement, each party shall use all
reasonable efforts to take, or cause to be taken, all action, and to do, or
cause to be done, all things necessary, appropriate or desirable under
applicable laws and regulations to consummate the transactions contemplated by
this Agreement. Each party shall, and shall cause each of its Affiliates to, use
their respective reasonable efforts to obtain consents of all third parties and
Governmental Authorities necessary, appropriate or desirable for the
consummation of the transactions contemplated by this Agreement.
Agreement and Plan of Merger - Page 26
SECTION 5.6. BOARD REPRESENTATION. Effective as of the Closing, Parent
shall appoint to Parent's board of directors one (1) individual designated by
the Stockholders and reasonably acceptable to Parent to hold office for one year
or until the next annual meeting of stockholders of Parent. Any appointments for
a succeeding term for the designee of the Stockholders shall be made in
accordance with Parent's By-Laws.
SECTION 5.7. BEST EFFORTS AND FURTHER ASSURANCES. Each of the parties
to this Agreement shall use its best efforts to effectuate the transactions
contemplated hereby and to fulfill and cause to be fulfilled the conditions to
closing under this Agreement. Each party hereto, at the reasonable request of
another party hereto, shall execute and deliver such other instruments and do
and perform such other acts and things as may be necessary or desirable for
effecting completely the consummation of this Agreement and the transactions
contemplated hereby. Subject to its further rights under this Agreement, each
party shall use all reasonable efforts to cause the Closing to occur at the
earliest practicable time.
SECTION 5.8. OPERATIONS FOLLOWING CLOSING. From and after the Closing,
Parent agrees to establish a separate working capital account for the benefit of
the operations of the Surviving Corporation. Such account will be managed by
▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇; provided such individuals will inform
Parent's management of the status of such working capital account as requested
from time to time by Parent. All cash flow from the operations of the Surviving
Corporation will be used to finance the continuing operations of the Surviving
Corporation, including accounts receivable, accounts payable and payroll. Any
capital expenditures and extraordinary expenses (excluding purchases of
inventory) not already budgeted for or approved by the board of the Surviving
Corporation shall require the prior written consent of the Parent, which shall
not be unreasonably withheld or delayed. At the end of each calendar quarter,
and subject in all instances to compliance at all times with the financial and
other required covenants of any holder of indebtedness for borrowed money, and
the prior payment of principal and interest on such indebtedness, the Surviving
Corporation shall pay to the Stockholders all required payments of principal and
interest on the Notes then payable to the Stockholders. To the extent there is
surplus cash flow from operations following payment of all required principal
and interest on outstanding indebtedness (including the Notes), the surplus cash
flow from operations shall, at Parent's option, be transferred to Parent. To the
extent there is any working capital deficit, including any deficit regarding
payments of outstanding indebtedness for borrowed money and the Notes of the
Stockholders, Parent shall advance funds to the Surviving Corporation from time
to time necessary to fund such working capital deficit.
SECTION 5.9. GUARANTIES OF THE COMPANY. The parties hereto shall use
their best efforts to obtain terminations, signed by the respective lender, of
the Company's guaranties, other than in connection with the Credit Facility, in
favor of The Huntington National Bank and ▇▇▇▇▇▇▇▇ County Development Co., Inc.
In addition, the parties shall use their best efforts to obtain amendments to
the 504 Loan Documents (as defined in Schedule 3.3 to this Agreement) which will
provide that the Surviving Corporation shall have no liability to ▇▇▇▇▇▇▇▇
County Development Co., Inc. as a result of such loan. If the parties are
unsuccessful in obtaining such terminations and amendments, the Stockholders
shall cause SPC Properties Limited ("SPC") to enter into an amendment as of the
Closing (the "Lease Amendment") to the Commercial Lease Agreement dated March 9,
1995 (the "Lease") regarding the payment of the Surviving Corporation's monthly
rental obligation. The Lease Amendment shall provide that the Surviving
Corporation shall pay directly to the mortgagees of the leased property the
Surviving Corporation's rental obligation. To the extent the rental obligation
exceeds the monthly obligations of SPC to the mortgagees, the Surviving
Corporation shall pay such excess to SPC.
Agreement and Plan of Merger - Page 27
Notwithstanding the foregoing, SPC must ensure that by March 31, 2000, the
Surviving Corporation shall have no obligation to the Huntington National Bank
and ▇▇▇▇▇▇▇▇ County Development Co. in connection with the loans to SPC
regarding the land associated with the Lease.
ARTICLE VI
COVENANTS OF THE COMPANY
The Company hereby covenants and agrees with Parent and Sub that, from
and after the date hereof to the Closing Date:
SECTION 6.1. PRESERVATION OF BUSINESS ORGANIZATION. The Company shall
use all reasonable efforts to preserve without material impairment its business
organization and its goodwill as to suppliers, distributors, clients and others
having business relations with the Company.
SECTION 6.2. CARRY ON IN REGULAR COURSE. (a) The Company shall carry on
its business in the ordinary and usual course in a manner consistent with its
past practices. Notwithstanding the foregoing, the Company shall not, directly
or indirectly, do, or propose to do or make any commitment or obligation, with
respect to (i) any act or activity referenced in Section 3.12(a) - (p), or (ii)
enter into any agreement, undertaking or commitment to do any of the foregoing
without the prior written consent of Parent, which shall not be unreasonably
withheld or delayed, or except as specifically provided for in Section 6.2(b).
(b) Between the date hereof and the Closing, the Company may make the
following distributions to the Stockholders: (i) compensatory bonuses to the
Stockholders consistent with past practice; (ii) contributions to the 401(k)
accounts of the Company's employees consistent with its 401(k) plan and past
practice; (iii) dividends to the Stockholders in order to pay tax obligations
with respect to the subchapter S corporation earnings of the Company for the
year ended December 31, 1996 and the stub period ending immediately prior to the
Closing Date; and (iv) any payments otherwise required to be paid (consistent
with past practice) to a former stockholder of the Company, ▇▇▇▇▇▇ ▇▇▇▇▇.
In no event shall the Company payout any extraordinary or additional
bonuses nor shall the Company incur any indebtedness to satisfy the payouts
pursuant to this Section 6.2(b), except as set forth on Schedule 6.2(b).
SECTION 6.3. CONSENTS. The Company shall use all reasonable efforts to
obtain consents in writing to the transactions contemplated by this Agreement
and/or such amendments, assignments or modifications of such documents or
instruments as may be required so that the transactions contemplated by this
Agreement shall not result in any default with respect to any law, rule,
regulation, order, decree, license, agreement or commitment to which the Company
is a party or its assets is bound. Without limiting the foregoing, the Company
shall use its commercially reasonable efforts to assist Parent and Sub to
transfer the rights and obligations of the Revolving Line of Credit to the
Surviving Corporation and to assist Parent and Sub in securing any replacement
or additional line of credit which Parent and Sub believes is required to fund
adequately the business of the Surviving Corporation.
SECTION 6.4. COMPANY STOCKHOLDERS MEETING. The Company shall, as soon
as practicable, duly call, give notice of, convene and hold a meeting of its
stockholders for purposes of approving this Agreement, the Merger and the
transactions contemplated hereby and thereby, or, if permitted under Ohio Law,
the Stockholders shall approve this Agreement and the Merger by unanimous
written consent.
Agreement and Plan of Merger - Page 28
SECTION 6.5. ACCESS. The Company shall (i) permit officers, employees,
agents, attorneys and accountants and other Persons designated by Parent full
access (after reasonable notice to the Company) during normal business hours to
the properties, books, contracts, commitments, tax returns, examination reports
and surveys of Governmental Authorities (including the IRS) and other records of
the Company, and (ii) furnish to such designees of Parent such financial and
operating data and other information relating to the assets and business of the
Company as such designees may reasonably request. Unless prohibited by law or
contract, such designees of Parent shall be furnished with accurate and complete
copies of such contracts, commitments and other books and records and all other
information with respect to the assets and business of the Company as such
designees may reasonably request. The Company shall cause its respective
employees, accountants, attorneys, financial advisors and other agents or
representatives to cooperate with Parent in its due diligence investigation.
From the date hereof until the Effective Time, Parent and the Company shall
confer on a regular and frequent basis with one or more representatives of the
other party to report operational matters of materiality and the general status
of ongoing operations.
SECTION 6.6. DOCUMENTS AND INFORMATION TO BE FURNISHED. Prior to the
Closing, the Company shall deliver to Parent promptly after such documents are
available its unaudited monthly financial reports and all other documents,
financial statements, budgets, proxy or information statements, reports,
correspondence, notices and other items it delivers, or is required to deliver,
to any of its stockholders or directors.
SECTION 6.7. NOTICES OF CERTAIN EVENTS. The Company shall promptly
notify Parent of: (i) any notice or other communication from any Person alleging
that the consent of such Person is or may be required in connection with the
transactions contemplated by this Agreement, which consent has not otherwise
been disclosed to Parent pursuant to this Agreement; (ii) any notice or other
communication from any Governmental Authority in connection with the
transactions contemplated by this Agreement; (iii) any action, suit, claim,
investigation or proceeding commenced relating to or involving or otherwise
affecting the Company that, if it had existed on the date of this Agreement,
would have been required to have been disclosed pursuant to this Agreement, or
that relates to the consummation of the transactions contemplated by this
Agreement; or (iv) any matter arising or discovered after the date of this
Agreement that, if existing or known on the date of this Agreement, would have
been required to be disclosed pursuant to this Agreement, or that constitutes a
breach or prospective breach of this Agreement by the Company.
SECTION 6.8. ACCURACY OF REPRESENTATIONS AND WARRANTIES. The Company
shall not take or agree or commit to take any action (or omit to take any
action) that would make any representation and warranty of the Company in this
Agreement inaccurate in any material respect as of the Closing Date.
SECTION 6.9. NO SOLICITATION. From and after the date of this Agreement
until the earlier of the Effective Time or termination of this Agreement
pursuant to its terms, the Company and the Stockholders shall not, and will
instruct their respective directors, officers, employees, representatives,
investment bankers, agents and Affiliates not to, directly or indirectly,
initiate, solicit, encourage or participate in discussions with, provide
information to, or approve transactions with, any Person or group concerning any
merger, purchase or sale of business combination assets, sale of shares of
capital stock (or securities convertible or exchangeable or otherwise
evidencing, or any agreement or instrument evidencing, the right to acquire
capital stock) or similar business combination involving the Company (all such
transactions being referred to herein as "ACQUISITION PROPOSALS"). The Company
will
Agreement and Plan of Merger - Page 29
immediately cease any and all existing activities, discussions or negotiations
with any parties conducted heretofore with respect to any of the foregoing. The
Company will (i) notify Parent as promptly as practicable if any inquiry or
proposal is made or any information or access is requested in writing in
connection with an Acquisition Proposal or potential Acquisition Proposal and
(ii) as promptly as practicable, notify Parent of the significant terms and
conditions of any such Acquisition Proposal. In addition, subject to the other
provisions of this Section 6.9, from and after the date of this Agreement until
the earlier of the Effective Time and termination of this Agreement pursuant to
its terms, the Company will not, and will instruct their respective directors,
officers, employees, investment bankers, agents and Affiliates not to, directly
or indirectly, make or authorize any public statement, recommendation or
solicitation in support of any Acquisition Proposal made by any Person or group.
SECTION 6.10 NON-DISTURBANCE AGREEMENT. The Company shall use its best
efforts to obtain and deliver to Parent an agreement from each holder of any
mortgage or deed of trust affecting the properties in which the Company has a
leasehold interest, which provides that if such holder forecloses such mortgage
or deed of trust (or takes a deed in lieu of foreclosure or otherwise succeeds
to the rights of the landlord thereunder) or otherwise exercises its rights,
such holder shall (i) not disturb the Surviving Corporation's occupancy under
its Lease, (ii) shall not join the Surviving Corporation in any foreclosure
actions, and (iii) shall be bound by the obligations of the landlord under the
Lease between the Surviving Corporation and the landlord, in each case for so
long as the Surviving Corporation continues to honor and fulfill in all material
respects its obligations under the Lease.
ARTICLE VII
COVENANTS OF PARENT AND SUB
Parent and Sub hereby covenant and agree with the Company as follows:
SECTION 7.1. PRESERVATION OF BUSINESS ORGANIZATION. Prior to the
Closing, Parent and Sub shall use all reasonable efforts to cause to preserve
without material impairment the business organization of Parent, Sub and
Parent's subsidiaries and their goodwill as to payors, providers, suppliers,
distributors, clients and others having business relations with Parent, Sub and
Parent's subsidiaries.
SECTION 7.2. CONSENTS. Parent and Sub shall use all reasonable efforts
to obtain consents in writing to the transactions contemplated by this Agreement
and/or such amendments, assignments or modifications of such agreements as may
be required so that the transactions contemplated by this Agreement shall not
result in any default with respect to any law, rule, regulation, order, decree,
license, agreement or commitment to which Parent or Sub is a party or by which
any of their respective assets is bound.
SECTION 7.3. NOTICES OF CERTAIN EVENTS. Prior to Closing, Parent shall
promptly notify the Company of: (i) any notice or other communication from any
Person alleging that the consent of such Person is or may be required in
connection with the transactions contemplated by this Agreement, which consent
has not otherwise been obtained or disclosed to the Company pursuant to this
Agreement; (ii) any notice or other communication from any Governmental
Authority in connection with the transactions contemplated by this Agreement;
(iii) any action, suit, claim, investigation or proceeding commenced relating to
or involving or otherwise affecting Parent or any of its subsidiaries that, if
it had existed on the date of this Agreement, would have been required to have
been disclosed pursuant to this Agreement, or that relates to the consummation
of the transactions contemplated by this Agreement; or
Agreement and Plan of Merger - Page 30
(iv) any matter arising or discovered after the date hereof that, if existing or
known on the date of this Agreement, would have been required to be disclosed
pursuant to this Agreement, or that constitutes a breach or prospective breach
of this Agreement by Parent or Sub.
SECTION 7.4. NASDAQ SMALLCAP MARKET LISTING. Parent shall use all
reasonable efforts to have the shares of Parent Common Stock to be issued in the
Merger accepted for listing on the Nasdaq SmallCap Market within forty-five (45)
days following the Merger.
SECTION 7.5. ACCURACY OF REPRESENTATIONS AND WARRANTIES. Parent and Sub
shall not (a) take or agree or commit to take any action (or omit to take any
action) that would make any representation and warranty of Parent or Sub in this
Agreement inaccurate in any material respect as of the Closing Date.
SECTION 7.6. DOCUMENTS AND INFORMATION TO BE FURNISHED. Prior to the
Closing, Parent shall deliver to the Company promptly after such documents are
available all documents, financial statements, proxy or information statements,
reports, correspondence, notices and other items it delivers, or is required to
deliver, to its stockholders as a group.
SECTION 7.7. INDEMNIFICATION. Subject to applicable law, Parent shall
and shall cause the Surviving Corporation to honor and fulfill in all respects
the obligations of the Company pursuant to indemnification agreements with the
Company's directors and officers existing at or before the Effective Time.
SECTION 7.8. NON-SOLICITATION. If the transactions contemplated by this
Agreement are not consummated, Parent and its Affiliates shall not, for a period
of one year from the date of this Agreement, directly or indirectly solicit any
employee of the Company to terminate such employee's employment with the
Company. Nothing herein shall prevent Parent from hiring any such employee
provided Parent has not violated the first sentence of this Section 7.8.
SECTION 7.9. COMPLIANCE WITH LEASE TERMS. Parent shall cause the
Surviving Corporation to honor and fulfill in all respects the obligations of
the Surviving Corporation pursuant to the Lease.
ARTICLE VIII
CONDITIONS OF CLOSING
SECTION 8.1. CONDITIONS TO OBLIGATIONS OF PARENT, SUB, STOCKHOLDERS AND
THE COMPANY. The obligations of each of the parties hereto under this Agreement
to consummate the Merger and the other transactions to be consummated at the
Closing are subject to the satisfaction or waiver of the following conditions:
(a) COMPANY STOCKHOLDER APPROVAL. This Agreement and the
Merger shall have been adopted and approved by the Stockholders as required by
Ohio Law.
(b) GOVERNMENTAL APPROVALS. Parent, Sub and the Company shall
have received all approvals or requirements of Governmental Authorities to
permit the consummation of the transactions contemplated by this Agreement and
the Operative Documents and to permit Parent and Sub to own the assets of, and
to operate the businesses of, the Company after the Closing. Each such
Agreement and Plan of Merger - Page 31
approval shall be in form and substance reasonably satisfactory to Parent and
shall remain in full force and effect at the Closing Date.
(c) LITIGATION; INJUNCTIONS. No action, suit, litigation,
injunction, restraining order, proceeding or investigation shall (i) have been
instituted and be pending, or (ii) be threatened by any Person or Governmental
Authority, which would materially and adversely affect the Merger and the other
transactions contemplated by this Agreement and the Operative Documents. On the
Closing Date, there shall not be in force any proceeding, order or decree
restraining or enjoining consummation of the Merger or the other transactions
contemplated by this Agreement or the Operative Documents, or placing any
limitation upon such consummation or to invalidate, suspend or require
modification of any provision of this Agreement or the Operative Documents.
(d) PLEDGE AGREEMENT. Parent and the Stockholders shall have
executed and delivered the Pledge Agreement.
(e) REGISTRATION RIGHTS AGREEMENT. Parent and the Stockholders
shall have executed and delivered the Registration Rights Agreement.
(f) EMPLOYMENT AGREEMENTS. The Company shall have entered into
the Employment Agreements with each of ▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇.
(g) CANNING AGREEMENT. The Company shall have entered into the
Employment Agreement with ▇▇▇▇▇▇ ▇▇▇▇▇▇▇.
SECTION 8.2. ADDITIONAL CONDITIONS APPLICABLE TO PARENT AND SUB. The
obligations of Parent and Sub under this Agreement to consummate the Merger and
the other transactions contemplated by this Agreement and the Operative
Documents are subject to the satisfaction or waiver of the following conditions:
(a) PERFORMANCE OF THIS AGREEMENT. All the terms, covenants
and conditions of this Agreement to be complied with and performed by the
Company (and/or the Stockholders) on or before the Closing Date shall have been
complied with and performed in all material respects.
(b) ACCURACY OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of the Company (and/or the Stockholders) set
forth in this Agreement shall be true and correct in all material respects as of
the Closing Date with the same force and effect as if such representations and
warranties were made anew at and as of the Closing Date, except: (i) to the
extent such representations and warranties are by their express provisions made
as of the date of this Agreement or another specified date; and (ii) for the
effect of any activities or transactions which may have taken place after the
date of this Agreement which are expressly contemplated by this Agreement in
order to effect the transactions contemplated by this Agreement.
(c) NO MATERIAL ADVERSE CHANGE. Since the date of this
Agreement, there shall have been no material adverse change in the business,
assets, results of operations, prospects or financial condition of the Company,
other than as a result of events or conditions affecting the generic drug
industry generally or general economic conditions.
Agreement and Plan of Merger - Page 32
(d) CLOSING CERTIFICATES. Parent shall have received
certificates dated the Closing Date, signed by the chief executive officer and
the chief financial officer of the Company, to the effect that the conditions
set forth in Sections 8.2(a) through 8.2(c) have been satisfied.
(e) OPINION OF COMPANY COUNSEL. Parent and Sub shall have
received from counsel to the Company an opinion dated the Closing Date with
respect to matters reasonably requested by Parent, which shall be in form and
substance reasonably satisfactory to Parent.
(f) REQUIRED CONSENTS. The holders of any note, guarantee or
other evidence of indebtedness (whether for money borrowed or otherwise) of any
of the Company, the lessors of any material real or personal property or assets
leased by the Company, the parties to any commitment or agreement to which the
Company is a party which is material to the conduct of the Company's business,
and any other Person (other than Governmental Authorities) which owns or has
authority to grant any material franchise, license, permit, easement, rights or
other authorization necessary for the business or operations of the Company, to
the extent that their consent or approval of the transactions contemplated by
this Agreement is required under the pertinent lease, contract, commitment or
agreement or other document or instrument or under applicable laws, rules or
regulations for the consummation of the transactions contemplated shall have
granted such consent or approval and no condition to such consent or approval
shall exist which is materially adverse to the conduct of the Company's business
or results in additional material obligations to Parent.
(g) FINANCING OF PARENT. Parent shall have received or have a
legally binding commitment to receive, not less than an aggregate of $6,500,000
of equity capital or debt financing, or a combination thereof.
(h) FINANCING OF THE SURVIVING CORPORATION. Parent and the
Surviving Corporation shall have secured, or have a legally binding commitment
for, a line of credit or a similar arrangement for the Surviving Corporation in
an amount equal to or exceeding $7,000,000.
(i) TAX MATTERS. The Company shall have provided to Parent a
clearance certificate or similar document that may be required by any state
taxing authority and the Stockholders shall have provided to Parent a properly
executed Form W-8 or W-9, as applicable.
(j) DECEMBER 31, 1996 AUDITED FINANCIAL STATEMENTS. Parent
shall have received the audited balance sheet as of December 31, 1996 and the
related audited statement of earnings, retained earnings and cash flows for the
year ended December 31, 1996 (together with the notes thereto, audited by, and
accompanied by the report thereon, of ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP) and such audited
financial statements shall include an unqualified opinion with respect to the
financial statements from ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP and reveal no Material Adverse
Change since the Balance Sheet Date.
(k) GUARANTY OF THE COMPANY. The Company shall have delivered
to Parent a termination, signed by The Huntington National Bank, of the
Company's guaranty, in favor of The Huntington National Bank, relating to the
loan to the Stockholders to fund payments required under the Stock Purchase and
Separation Agreement and General Release of Claims dated January 13, 1995 among
the Stockholders, ▇▇▇▇▇▇ ▇▇▇▇▇, the Company and certain other parties.
(l) PLEDGE OF THE OUTSTANDING SHARES. The Company and the
Stockholders shall have delivered to Parent a termination, signed by The
Huntington National Bank, of the pledge of the Outstanding Shares to The
Huntington National Bank.
Agreement and Plan of Merger - Page 33
(m) CONSENT OF LANDLORD. The Company shall have delivered to
Parent a consent of SPC Properties Limited to the Merger and the other
transactions contemplated by this Agreement, which consent shall contain
representations that no Event of Default, as defined in the Commercial Lease
Agreement dated March 9, 1995 between SPC Properties Limited and the Company,
has occurred or is continuing and that no condition exists that, with the
passage of time, will become an Event of Default.
SECTION 8.3. ADDITIONAL CONDITIONS APPLICABLE TO THE STOCKHOLDERS AND
THE COMPANY. The obligations of the Stockholders and the Company (and/or the
Stockholders) under this Agreement to consummate the Merger and the other
transactions contemplated to be consummated at the Closing are subject to the
satisfaction or waiver of the following conditions:
(a) PERFORMANCE OF THIS AGREEMENT. All the terms, covenants
and conditions of this Agreement to be complied with and performed by Parent and
Sub on or before the Closing Date shall have been complied with and performed in
all material respects.
(b) ACCURACY OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of Parent and Sub set forth in this Agreement
shall have been true and correct as of the Closing Date with the same force and
effect as if such representations and warranties were made anew at and as of the
Closing Date, except: (i) to the extent such representations and warranties are
by their express provisions made as of the date of this Agreement or another
specified date; and (ii) for the effect of any activities or transactions which
may have taken place after the date of this Agreement which are expressly
contemplated by this Agreement in order to effect the transactions contemplated
by this Agreement.
(c) OFFICERS' CERTIFICATE. The Company shall have received a
certificate dated the Closing Date, signed by the chief executive officer of
Parent, to the effect that the conditions set forth in Sections 8.3(a) and (b)
hereof have been satisfied.
(d) OPINION OF PARENT COUNSEL. The Company shall have received
from counsel to Parent and Sub an opinion dated the Closing Date with respect to
matters reasonably requested by the Company, which shall be in form and
substance reasonably satisfactory to the Company.
(e) REQUIRED CONSENTS. Parent and Sub shall have received all
material consents or approvals of the Merger or any other transactions
contemplated by this Agreement required under any material commitment or
evidence of indebtedness of Parent or any of its subsidiaries, or any lease of
any material real property of Parent and its subsidiaries, or under applicable
law for the consummation of the transactions contemplated hereby.
(f) GUARANTIES OF THE STOCKHOLDERS. Parent shall have
delivered to the Stockholders terminations of the Stockholders' guaranties in
favor of The Huntington National Bank relating to the Credit Facility.
Agreement and Plan of Merger - Page 34
ARTICLE IX
TERMINATION
SECTION 9.1. Termination. This Agreement may be terminated and the
transactions contemplated hereby abandoned at any time prior to the Effective
Time, whether before or after approval of the matters presented in connection
with the Merger by the stockholders of the Company:
(a) by written mutual consent of Parent and the Company for
any reason, or by mutual action of their respective Boards of Directors;
(b) at the option of Parent, by written notice from Parent to
the Company if (i) a material breach by the Company or the Stockholders of any
of their respective representations, warranties or agreements contained in this
Agreement occurs, (ii) Parent has notified the Company in writing of the
existence of such breach, and (iii) the Company or the Stockholders have failed
to cure such breach within 10 days after receiving such notice (or if such
breach is not capable of being cured within such 10 day period, but is capable
of being cured within 30 days, the breaching party shall have commenced good
faith steps to promptly cure such breach);
(c) at the option of the Company or the Stockholders, by
written notice from the Company to Parent if (i) a material breach by Parent or
Sub of any of their representations, warranties or agreements contained in this
Agreement occurs, (ii) the Company has notified Parent and Sub in writing of the
existence of such breach, and (iii) Parent and Sub have failed to cure such
breach within 10 days after receiving such notice (or if such breach is not
capable of being cured within such 10 day period, but is capable of being cured
within 30 days, the breaching party shall have commenced good faith steps to
promptly cure such breach);
(d) at the option of Parent, by Parent if the Stockholders
fail to approve any matter required to be approved by such Stockholders in order
to consummate the transactions contemplated by this Agreement by April 30, 1997;
(e) by either Parent or the Company if a court of competent
jurisdiction or governmental, regulatory or administrative agency shall have
issued a non-appealable final order, decree or ruling or taken any other action,
in each case having the effect of permanently restraining, enjoining or
otherwise prohibiting the Merger;
(f) at the option of Parent, by Parent if there shall have
occurred a Material Adverse Change with respect to the Company;
(g) by the Company if the Closing has not occurred by May 30,
1997 if the sole reason for the failure to close is due to Parent having failed
to satisfy either condition to Closing set forth in Section 8.2(g) or (h); or
(h) by Parent, if the results of Parent's due diligence
investigation of the Company and its business (to be completed prior to February
28, 1997) prove unsatisfactory in any material respect.
SECTION 9.2. CERTAIN REMEDIES UPON TERMINATION. If this Agreement is
terminated: (i) pursuant to Section 9.1(a) (due to the mutual consent of the
parties), no special expense
Agreement and Plan of Merger - Page 35
reimbursement shall apply and all expenses will be paid as provided in Section
11.2; (ii) pursuant to Section 9.1(b), 9.1(d) or 9.1(f) [due to a breach of
representations and warranties by the Company or the Stockholders, a failure by
the Stockholders to approve the transactions contemplated herein, or a Material
Adverse Change in the business of the Company], the Company shall pay to Parent
within five days of such termination, an amount in cash sufficient to reimburse
Parent and Sub for all reasonable expenses incurred in connection with
attempting to consummate the Merger and the other transactions contemplated
hereby (including without limitation reasonable legal, accounting and investment
banking expenses) (the "TRANSACTION EXPENSES") up to a maximum amount of
$50,000; provided that Parent shall provide reasonable evidence of the
incurrence of such expenses.
(b) If the Agreement is terminated pursuant to Section 9.1(c) or
(g) [due to a breach of Parent's representations or warranties, or Parent's
failure to obtain financing for this transaction], Parent shall pay to the
Company within five days of such termination the Company's Transaction Expenses
up to a maximum amount of $50,000; provided that the Company shall provide
reasonable evidence of the incurrence of such expenses.
(c) If the Agreement is terminated pursuant to Section 9.1(e), the
party not principally the cause of any order decree or ruling shall pay the
Transaction Expenses of the other party; provided that such party shall provide
reasonable evidence of the incurrence of such expenses.
SECTION 9.3. SURVIVAL UPON TERMINATION. If this Agreement is
terminated, the agreements of the Company and Parent contained in Sections 5.3,
5.4, 9.1, 9.2, 9.3 and 11.2 shall survive such termination.
SECTION 9.4. EFFECT OF TERMINATION. In the event of the termination of
this Agreement, nothing shall relieve any party from liability for any material
breach by any party hereof.
ARTICLE X
SURVIVAL; INDEMNIFICATION
SECTION 10.1. SURVIVAL. The covenants, agreements, representations and
warranties of the Parent, Company and the Stockholders contained in this
Agreement shall survive the Closing until the earlier to occur of (i) the
fifteenth calendar month anniversary of the Closing or (ii) the release by
Parent of audited financial statements that include the combined operations of
the Surviving Corporation and the Parent for the year ended December 31, 1997;
provided, however, that the representations and warranties of the Company and
the Stockholders set forth in Sections 3.22(d) and (e) and 3.28 shall survive
until the third anniversary of the Closing. Notwithstanding the preceding
sentences, any covenant, agreement, claim, representation or warranty in respect
of which a claim of indemnity may be sought under Section 10.2 shall survive the
time at which it would otherwise terminate pursuant to the preceding sentences,
if notice of the inaccuracy or breach thereof giving rise to such right to a
claim of indemnity shall have been given to the party against whom such
indemnity may be sought prior to such time, and any obligation of indemnity
shall survive until such claim of indemnity is resolved.
SECTION 10.2. MUTUAL INDEMNIFICATION. (a) By their approval of this
Agreement, the Stockholders, severally (based on their ownership interest in the
Company), agree to indemnify, defend, protect, and hold harmless each of Parent,
Sub and the Surviving Corporation (each in its capacity as an indemnified party,
and for purposes of this paragraph, an "INDEMNITEE"), and shall reimburse the
Agreement and Plan of Merger - Page 36
Indemnitee for, at all times from and after the date of this Agreement from and
against all claims, damages, losses, liabilities, actions, suits, proceedings,
demands, assessments, adjustments, costs and expenses (including specifically,
but without limitation, reasonable attorneys' fees and expenses of
investigation) (collectively "DAMAGES") incurred by such Indemnitee as a result
of or incident to (i) any breach of any representation or warranty of the
Company or any of the Stockholders set forth herein, or in any other document
delivered in connection herewith or with respect to which a claim for
indemnification is brought by an Indemnitee within the applicable survival
period described in Section 10.1 (including any accounts receivable reflected
(net of reserves) on the balance sheet of the Company dated December 31, 1996
which are not collected prior to April 30, 1997), (ii) any breach or
nonfulfillment by the Company or any of the Stockholders, or any noncompliance
by the Company or any of the Stockholders with, any covenant, agreement, or
obligation contained herein or other document delivered in connection herewith,
except to the extent waived by Parent, or (iii) any claim by a current or former
stockholder of the Company or any other person, firm, corporation or entity,
seeking to assert, or based upon: (A) ownership or rights of ownership to any
shares of capital stock of the Company; (B) any rights of the stockholder (other
than the right to receive the Merger consideration pursuant to this Agreement or
appraisal rights under the applicable provisions of Ohio Law), including any
option, preemptive rights, or rights to notice or to vote; (C) any rights under
the charter or bylaws of the Company; (D) any claim that his, her or its shares
were wrongfully repurchased by the Company, regardless of whether an action,
suit or proceeding can or has been made against the Company; or (E) any Excess
Expenses, as defined in Section 11.2 below.
(b) Parent agrees to indemnify the Company and the
Stockholders (for purposes of this paragraph, each in its capacity as an
indemnified party, an "INDEMNITEE") and shall reimburse the Indemnitee for all
Damages incurred by such Indemnitee as a result of or incident to (i) any breach
of any representation or warranty of Parent set forth herein, or in any other
document delivered in connection herewith or with respect to which a claim for
indemnification is brought by the Company or the Stockholder as an Indemnitee
within the applicable survival period described in Section 10.1, or (ii) any
breach or nonfulfillment by Parent or any noncompliance by Parent with any
covenant, agreement or obligation contained herein required to be performed or
other document delivered in connection herewith, except to the extent waived by
the Company or Stockholders holding a majority of the outstanding shares of
Company Common Stock.
SECTION 10.3. THIRD PERSON CLAIMS. Promptly after an Indemnitee has
received notice of or has knowledge of any claim by a person not a party to this
Agreement ("THIRD PERSON") or the commencement of any action or proceeding by a
Third Person, the Indemnitee shall, as a condition precedent to a claim with
respect thereto being made under this Agreement, give the Stockholders written
notice of such claim or the commencement of such action or proceeding; provided,
however that the failure to give such notice will not affect the Indemnitee's
right to indemnification hereunder, except to the extent that the Stockholders
have been actually prejudiced as a result of such failure. If the Stockholders
notify the Indemnitee within 30 days from the receipt of the foregoing notice
that the Stockholders wish to defend against the claim by the Third Person, then
the Stockholders shall have the right to assume and control the defense of the
claim by appropriate proceedings with counsel reasonably acceptable to the
Indemnitee. The Indemnitee may participate in the defense, at its sole expense,
of any such claim for which the Stockholders shall have assumed the defense
pursuant to the preceding sentence, provided that counsel for the Stockholders
shall act as lead counsel in all matters pertaining to the defense or settlement
of such claims, suit or proceedings; provided, however, that Indemnitee shall
control the defense of any claim or proceeding that in Indemnitee's reasonable
judgment could reasonably be expected to have a material and adverse effect on
Indemnitee's business apart from the payment of money damages. The Indemnitee
shall be entitled to indemnification for the reasonable fees
Agreement and Plan of Merger - Page 37
and expenses of its counsel for any period during which the Stockholders have
not assumed the defense of any claim. Whether or not the Stockholders shall have
assumed the defense of any claim, neither the Indemnitee nor the Stockholders
shall make any settlement with respect to any such claim, suit or proceeding
without the prior consent of the other, which consent shall not be unreasonably
withheld or delayed. It is understood and agreed that in situations where
failure to settle a claim expeditiously would reasonably be expected to have an
adverse effect on the party wishing to settle, the failure of the other party to
act upon a request for consent to such settlement within ten (10) business days
of receipt of notice thereof shall be deemed to constitute consent to such
settlement for purposes of this Article X.
SECTION 10.4. LIMITATIONS ON INDEMNIFICATION. (a) No Indemnitee shall
be entitled to indemnification for Damages pursuant to Sections 10.2(a)(i) or
10.2(a)(ii) until the aggregate amount of Damages incurred exceeds $100,000 (the
"THRESHOLD"), and then shall be entitled only to the amount of Damages in excess
of the Threshold. All claims for Damages shall be net of, and offset by, any
insurance proceeds, reduction of tax liabilities or receipt of tax benefit
actually received by Parent or the Surviving Corporation that are attributable
to such Damages. Any liability for indemnification under this Article X shall be
reduced to the extent any Damages are reduced by such a recovery or reduction.
(b) The Stockholders' maximum aggregate liability for claims
made pursuant to Section 10.2(a)(i) and (ii) shall not exceed $4,000,000 in the
aggregate; provided, however, that such maximum aggregate liability shall be
increased, to not more than $6,500,000 in the aggregate, to the extent of each
claim representing a breach or non-fulfillment pursuant to Section 10.2(a)(i) or
10.2(a)(ii) which the Stockholders had knowledge of prior to the Closing (or
after reasonable inquiry and investigation, should have had knowledge of prior
to the Closing). The Parent's maximum aggregate liability for claims made
pursuant to Section 10.2(b) shall not exceed $4,000,000 in the aggregate.
(c) The limitations provided in Section 10.4(a) on the
Threshold and Section 10.4(b) regarding maximum aggregate liability and on an
Indemnitee's right to indemnification under this Article X shall not apply to
Damages for any matters set forth in Section 10.2(a)(iii) or any claim for
Damages under Sections 3.20, 3.22 and 3.28, or for Excess Expenses under Section
11.2.
SECTION 10.5. METHOD OF PAYMENT. Subject to the limitations on the
amount of Damages set forth in Section 10.4, and subject to the provisions of
Section 10.6, any claims for indemnification pursuant to this Article X shall be
satisfied by withholding the amount of the claim from any remaining payment
obligation on the then outstanding principal amount of the Notes in inverse
order of maturity; provided, however, that no Stockholder shall be liable for an
amount in excess of the value of the sum of the Merger Consideration and the
additional consideration, if any, paid pursuant to Section 2.5 received by such
Stockholder in the Merger.
SECTION 10.6. RESOLUTIONS OF CONFLICTS; ARBITRATION. The following
provisions shall apply with respect to the assertion of claims and the
indemnification provisions of this Article X.
(a) The Stockholders and Parent shall attempt promptly and in
good faith to agree upon the rights of the parties with respect to any disputed
claims. If the Stockholders and the Parent should so agree, a memorandum setting
forth such agreement shall be prepared and signed by both parties and the
Stockholders shall satisfy the claim in accordance with the terms thereof.
(b) Any dispute or controversy concerning the indemnity
obligations of this Article X not agreed to by the parties pursuant to Section
10.6(a) shall be resolved in good faith by mediation among the Stockholders and
the senior executive officers of Parent. If such dispute can not be
Agreement and Plan of Merger - Page 38
resolved by mediation within 30 days, then except for the right of either party
to apply to a court of competent jurisdiction for a temporary restraining order,
preliminary injunction, or other equitable relief to preserve the status quo or
prevent irreparable harm pending the selection and confirmation of an
arbitrator, any continuing dispute, controversy or claim arising out of, in
connection with, or in relation to the indemnity obligations under this Article
X shall be settled by arbitration in accordance with Section 10.6(c) below.
(c) If no agreement can be reached after good faith attempts
pursuant to Section 10.6(a) and 10.6(b) within 90 days from the commencement of
any dispute or controversy, either Parent or the Stockholders may demand
arbitration of the matter unless the amount of the damage or loss is at issue in
pending litigation with a third party, in which event arbitration shall not be
commenced until such amount is ascertained or both parties agree to arbitration;
and in any such event the matter shall be settled by arbitration conducted by a
single arbitrator mutually agreeable to the Stockholders and the Parent, or if a
single arbitrator cannot be agreed to by the parties within thirty (30) days,
then by three arbitrators. In the event of three arbitrators, Parent and the
Stockholders shall each select one arbitrator, and the two arbitrators so
elected shall select a third arbitrator. The decision of the arbitrators so
selected as to the validity and amount of any claim in dispute shall be binding
and conclusive upon the parties to this Agreement, and the parties shall act in
accordance with such decision and satisfy any such claim in accordance
therewith. Judgment upon any award rendered by the arbitrators may be entered in
any court having jurisdiction. Any mediation or arbitration shall be held in
Cincinnati, Ohio. Any arbitration shall be conducted under the rules then in
effect of the American Arbitration Association, and shall be based on the
provisions and limitations of this Article X. The arbitrators shall have
relevant experience in the industry of the Company and, to the extent possible,
familiarity with acquisitions and business combinations. The parties agree to
compel the arbitrator(s) to resolve the arbitration within 120 days of the
commencement of arbitration.
Notwithstanding anything contained herein to the contrary, no claim for
Damages, nor ability of Parent to settle any claim against the Parent Common
Stock or payment obligations on the Notes under Section 10.5, may be made until
such claim is finally resolved pursuant to the process and procedures set forth
above in this Section.
SECTION 10.7 REMEDIES. The indemnification provisions of this Article X
are the sole and exclusive remedy of any party to this Agreement for a breach of
any representation, warranty or covenant contained herein, except with respect
to any claim based on intentional misrepresentation, fraud in the inducement, or
a similar theory. Notwithstanding the preceding sentence, from and after the
execution and delivery of this Agreement and until the Closing, each of the
parties acknowledges and agrees that the other parties hereto would be damaged
irreparably in the event any of the provisions of this Agreement are not
performed in accordance with their specific terms or otherwise are breached.
Accordingly, each of the parties hereto agrees the other parties hereto shall be
entitled to an injunction to prevent breaches of the provisions of this Article
X and to enforce specifically this Agreement and the terms and provisions of
Article X in any competent court having jurisdiction over the parties, in
addition to any other remedy to which they may be entitled at law or in equity.
Agreement and Plan of Merger - Page 39
ARTICLE XI
MISCELLANEOUS
SECTION 11.1. SPECIFIC PERFORMANCE. Each of the parties to this
Agreement hereby acknowledges that the other parties will have no adequate
remedy at law if it fails to perform any of its obligations under this
Agreement. In such event, each of the parties agrees that the other parties
shall have the right, in addition to any other rights it may have (whether at
law or in equity), to specific performance of this Agreement, except as set
forth to the contrary herein.
SECTION 11.2. EXPENSES. Except as set forth in Section 9.2, all costs
and expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expense; provided,
however that if this Agreement is not terminated and the Closing shall occur,
all such costs and expenses incurred directly on behalf of the Company and which
are customarily incurred by and on behalf of the Company (including without
limitation accounting, legal and other professional services of a routine and
recurring nature (for example, annual auditing expenses)) shall be paid or
reimbursed by the Parent. The Parent will reimburse the Company following the
Closing for all reasonable and itemized fees and expenses incurred by the
Company to ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ relating to the resolution of tax issues
of this transaction beneficial to the Stockholders (including, for example,
subchapter S distributions, depreciation recapture, Section 338(h)(10) Election,
401-K distributions and similar tax issues) if the transactions contemplated by
this Agreement are consummated. All other costs and expenses incurred by the
Company for the benefit of the Stockholders or the Company, or by the
Stockholders directly (including without limitation legal and professional fees
incurred by the Company or the Stockholders in connection with the negotiation
of the transactions contemplated by this Agreement), shall be paid or reimbursed
by the Stockholders from the Merger Consideration to be delivered at Closing
(the "EXCESS EXPENSES").
SECTION 11.3. FURTHER ASSURANCES. If at any time after the Closing,
Parent or Sub shall consider it advisable that any further conveyance,
agreements, documents or instruments or any other things are necessary or
desirable to vest, perfect, confirm or record in the Surviving Corporation, the
title to any property, rights, privileges, powers and franchises of the Company,
the officers of the Company last in office and such other Persons, if any, as
the Board of Directors of the Company last in office may authorize, shall
execute and deliver, upon Parent's reasonable request, any and all proper
conveyances, agreements, documents and instruments, and do all things necessary
or proper to vest, perfect, confirm or record title to such property, rights,
privileges, powers and franchises in the Surviving Corporation, and otherwise to
carry out the provisions of this Agreement.
SECTION 11.4. PARTIES IN INTEREST. All the terms and provisions of this
Agreement shall be binding upon, shall inure to the benefit of and shall be
enforceable by the respective successors and permitted assigns of the parties
hereto. Except as set forth in Section 7.8(e), nothing expressed or implied in
this Agreement is intended or shall be construed to confer upon or give any
Person other than the parties hereto, their permitted successors or assigns, and
their respective stockholders any rights or remedies under or by reason of this
Agreement or any transaction contemplated hereby or thereby.
SECTION 11.5. ENTIRE AGREEMENT. This Agreement and the other Operative
Documents, together with the Exhibits and Schedules hereto and thereto,
supersede any other agreement, whether written or oral, that may have been made
or entered into by Parent, Sub and the Company (or by any officers, directors,
stockholders or partners of any of such parties) relating to the matters
contemplated hereby. This Agreement and the other Operative Documents, together
with the Exhibits and Schedules
Agreement and Plan of Merger - Page 40
hereto and thereto, constitute the entire agreement by the parties, and there
are no agreements or commitments except as set forth herein or therein.
SECTION 11.6 AMENDMENT OR MODIFICATION. This Agreement may be amended
only with the written consent of Parent, Sub, the Stockholders and the Company.
SECTION 11.7. WAIVER. Any party to this Agreement may, by written
notice to the other parties to this Agreement, (a) extend the time for the
performance of any of the obligations or other actions of the other parties for
its benefit under this Agreement; (b) waive any inaccuracies in the
representations or warranties of the other parties made to it contained in this
Agreement; (c) waive compliance with any of the conditions or covenants of the
other parties for its benefit contained in this Agreement; or (d) waive or
modify performance of any of the obligations of the other parties for its
benefit under this Agreement. Except as provided in the preceding sentence, no
action taken pursuant to this Agreement including any investigation by or on
behalf of any party, shall be deemed to constitute a waiver by the party taking
such action of compliance with any representations, warranties, covenants,
conditions or agreements contained in this Agreement. The failure of any party
hereto to enforce at any time any of the provisions of this Agreement shall in
no way be construed to be a waiver of any such provision, nor in any way to
affect the validity of this Agreement or any part hereof or thereof or the right
of such party thereafter to enforce each and every such provision. No waiver of
any breach of or non-compliance with this Agreement shall be held to be a waiver
of any other or subsequent breach or non-compliance.
SECTION 11.8. ASSIGNABILITY. Neither this Agreement nor any rights
hereunder shall be assignable, except (i) by the Company with the prior written
consent of Parent, or (ii) by Parent or by Sub with the prior written consent of
the Company.
SECTION 11.9. HEADINGS AND INTERPRETATION. The headings contained in
this Agreement are for reference purposes only and shall not affect the meaning
or interpretation of this Agreement. Terms such as "herein", "hereof",
"hereinafter" refer to this Agreement in which they appear as a whole and not to
the particular sentence or paragraph where they appear, unless the context
otherwise requires. Unless the context otherwise requires, (i) terms used in the
plural include the singular, and vice versa, and (ii) words in the masculine
gender include the feminine, and vice versa. References in this Agreement to
Articles, Sections, Exhibits or the Schedules shall be to Articles, Sections,
Exhibits or the Schedules in this Agreement, unless otherwise indicated.
SECTION 11.10. NOTICES. All notices and other communications under this
Agreement shall be in writing and shall be delivered by hand or overnight
courier service, mailed or sent by graphic scanning or other telegraphic
communications equipment of the sending party, as follows:
If to Parent or Sub:
c/o DynaGen, Inc.
▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Agreement and Plan of Merger - Page 41
with a copy to:
▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, LLP
High Street Tower
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Company:
Superior Pharmaceutical Company
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇
1800 Star Bank Center
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other address as any party may have furnished to the others in
writing in accordance herewith, except that notices of change of address shall
only be effective upon receipt. All notices and other communications given to
any party hereto in accordance with the provisions of this Agreement shall be
deemed to have been given on the date of receipt if delivered by hand or
overnight courier service or sent by facsimile, or on the date five business
days after dispatch by certified or registered mail if mailed, in each case
delivered, sent or mailed (properly addressed) to such party as provided in this
Section 11.10 or in accordance with the latest unrevised direction from such
party given in accordance with this Section 11.10.
SECTION 11.11. LAW GOVERNING. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of Delaware,
without giving effect to the principles of conflicts of law thereof.
SECTION 11.12. INVALIDITY OF PROVISIONS. Each of the provisions
contained in this Agreement is distinct and severable and a declaration of
invalidity or unenforceability of any such provision or part thereof by a court
of competent jurisdiction shall not affect the validity or enforceability of any
other provision hereof or thereof.
SECTION 11.13. COUNTERPARTS. This Agreement may be executed
simultaneously in one or more counterparts, each of which shall be deemed to be
an original but all of which together shall constitute one and the same
instrument.
IN WITNESS WHEREOF, this Agreement and Plan of Merger has been duly
executed and delivered by the parties on the date first above written.
DYNAGEN, INC.
Attest:
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇ /s/ ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
______________________________ By: _______________________________
Name: ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Executive Vice President
DYNAGEN ACQUISITION CORP.
Attest:
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇ /s/ ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
______________________________ By: _______________________________
Name: ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Executive Vice President
SUPERIOR PHARMACEUTICAL COMPANY
Attest:
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
______________________________ By: _______________________________
Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
Title: Vice President and CFO
STOCKHOLDERS:
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇
------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇