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PLAN OF REORGANIZATION AND AGREEMENT
This Plan of Reorganization and Agreement is made and entered into as of
October 24, 1996, by and among Xxxxx Medical Industries, Inc. ("JMED"), a
Delaware corporation, and Abana Pharmaceuticals, Inc. ("Abana"), a Delaware
corporation, and Xxxx Xxxx ("Xxxx") and Xxxxx Xxxx ("Xxxx"), individual
shareholders of Abana resident in the State of Alabama.
Witnesseth That:
Whereas, Abana is primarily engaged in the distribution and sale
of pharmaceutical products; and
Whereas, JMED has for a number of years owned 362,519 shares of
the common stock of Abana representing approximately 16% of the
currently outstanding capital stock of Abana; and
Whereas, subject to the terms and conditions of this Agreement,
JMED wishes to acquire and succeed to the operations of Abana in
exchange for shares of voting capital stock of JMED in a
reorganization qualifying under Section 368(a) of the Internal
Revenue Code of 1986, as amended, and will establish Abana
Acquisition Corporation ("AAC") as a wholly-owned subsidiary of
JMED to enter into transactions to accomplish such acquisition and
reorganization; and
Whereas, subject to the terms and conditions of this Agreement,
the Board of Directors of Abana favors and recommends to its
shareholders the adoption of the plan of reorganization set forth
in this Agreement and the approval of the transactions
contemplated hereby; and,
Whereas, each of Xxxx and Xxxx (individually a "Principal Holder"
and collectively the "Principal Holders") holds shares of the
voting capital stock of Abana representing in excess of
twenty-nine percent (29%) of the voting capital stock of Abana and
each Principal Holder joins in the execution and delivery of this
Agreement with Abana and JMED to adopt and approve the
reorganization transactions contemplated hereby by written consent
of holders of a majority of the outstanding stock of Abana
pursuant to Section 228 of Delaware General Corporation Law
("DGCL") and to fulfill certain conditions to the reorganization;
Now Therefore, in consideration of the premises and the covenants,
representations and undertakings hereinafter contained, the parties hereto
agree as follows:
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I. THE REORGANIZATION TRANSACTIONS
1.1 Merger. On the Closing Date, as hereinafter defined, Abana shall
merge with and into AAC (the "Merger") which shall be the surviving
corporation (the "Surviving Corporation") and pursuant to which: (a) each
outstanding share of the capital stock of AAC shall be exchanged for and
converted into a share of the common capital stock of the Surviving
Corporation; (b) each outstanding share of the capital stock of Abana shall be
exchanged for and converted into the Merger Consideration as hereinafter
defined, provided, however, that (i) no fractional shares of the voting capital
stock of JMED constituting the Merger Consideration shall be issued, (ii)
shares of the capital stock of Abana held by JMED or AAC shall be canceled and
retired, and (iii) each share of the common stock of Abana held by any holder
of Abana exercising rights as a dissenting shareholder in accordance with the
DGCL shall, in lieu of being converted into the Merger Consideration represent
solely the right of the holder thereof to receive from the Surviving
Corporation cash in an amount equal to the fair value of such share. Each of
JMED, AAC and Abana agrees to execute and deliver an agreement or certificate
of merger in an appropriate form to evidence such reorganization and Merger and
for purpose of filings with the Secretary of State of Delaware to give effect
to the Merger as of the Closing Date. Upon the effectiveness of the Merger,
the Surviving Corporation shall succeed by operation of law to the assets,
operations and liabilities of each of Abana and AAC.
1.2 The Merger Consideration. Except as provided in paragraph 1.1 above,
each share of the capital stock of Abana outstanding on the Closing Date shall
be exchanged for and converted into twenty-two one-hundredths (0.22) of a share
of the Common Stock, par value $.04 per share, of JMED. References in this
Agreement to "JMED Common Stock" shall mean the class of such Common Stock;
references in this Agreement to the "Xxxxx Stock" shall mean the shares of JMED
Common Stock being issued and delivered in connection with the transactions
contemplated hereby.
1.3 Cash to be Paid in Lieu of Fractional Share Interests. Any fractional
share interest in the Xxxxx Stock resulting from the conversion of shares of
the capital stock of Abana in the Merger shall, in lieu of issuance of such
fractional share interest, be converted into and exchanged for the right to
receive in cash an amount equal to the value of such fractional share interest
as of the Closing Date based upon the last reported bid price per share of JMED
Common Stock as reported by Nasdaq on the Closing Date.
1.4 Conversion of Certain Option Rights to Acquire Shares of Abana Common
Stock. Each option or right outstanding on the Closing Date to acquire shares
of the common stock of Abana (an "Abana Option"), whether or not exercisable as
of such date, shall be converted into and exchanged for an option to acquire
shares of JMED Common Stock in accordance with the following terms and
conditions:
(i) the number of shares to which the option to acquire shares of
JMED Common Stock shall relate shall be determined by multiplying
the number of shares of common stock of Abana to which the Abana
Option applied by 0.22, and then rounding such result to the
nearest whole number; and
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(ii) the price per share of the option to acquire shares of
JMED Common Stock shall be the per share option price applicable to
the Abana common stock multiplied by 4.55, with the result of such
calculations rounded to the nearest whole cent.
The expiration date and vesting schedule of each such option shall remain
unchanged. Notwithstanding the foregoing, any holder of an exercisable Abana
Option may by written notice to Abana and JMED delivered not less than five
business days prior to the Closing Date elect to have such Abana Option settled
in cash on the business day next following the Closing Date based upon the last
reported bid price per share of JMED Common Stock on the Closing Date reduced
by the applicable exercise price per share.
1.5 JMED Contribution of Shares & Cash. JMED agrees to provide either
directly or to AAC as a contribution to the capital of AAC the number of shares
of the Xxxxx Stock required to permit the Surviving Corporation to deliver the
Xxxxx Stock to the shareholders of Abana together with cash necessary for the
settlement of any payments due in respect of fractional share interests or to
dissenting shareholders. JMED further agrees to issue and deliver as of the
Closing Date option agreements under its existing stock and option plans in the
form required by paragraph 1.4 above.
1.6 Indemnification and Escrow by Principal Holders. In connection with
the transactions contemplated hereby, each Principal Holder joins in the
representations and warranties of Abana in Article VII below and agrees to use
his respective best efforts to cause Abana to fulfill the conditions precedent
to the obligations of JMED and AAC under this Agreement. The Principal Holders
further agree to execute and deliver on the Closing Date an agreement in the
form of Exhibit I hereto providing for (i) indemnification to JMED in respect
of certain matters and (ii) the deposit on the Closing Date of an aggregate of
60,000 shares of JMED Common Stock in escrow to secure such indemnification.
1.7 Adoption of Merger by Written Consent and Agreements by Principal
Holders. Each Principal Holder agrees with JMED and Abana that the execution
and delivery of this Agreement by such Principal Holder constitutes his
irrevocable consent and adoption of the Merger. Each Principal Holder further
agrees with JMED and Abana (i) to execute and deliver at or prior to the
Closing Date such other agreements and instruments as are provided herein to
fulfill all conditions precedent to the obligations of JMED hereunder,
including the Escrow Agreement in the form of Exhibit I hereto and their
respective Non-Competition Agreements in the form of Exhibit II hereto; (ii)
not to effect any sale or transfer of the shares of the capital stock of Abana
held by such Principal Holder without the prior written consent of each of
Abana and JMED; and (iii) not to exercise, at or prior to the Closing Date,
any Abana Option presently held by such Principal Holder. Each Principal
Holder further represents to JMED that the shares of the Xxxxx Stock being
acquired by such Principal Holder pursuant to the Merger are being acquired
solely for the account of such Principal Holder for investment and without a
current view to the resale or distribution thereof.
1.8 Distribution of Merger Consideration and Proceeds. As promptly as
practicable following the Closing Date and the effectiveness of the Merger
under the DGCL, JMED
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and the Surviving Corporation shall distribute to each former shareholder of
Abana the number of shares of the Xxxxx Stock and/or the cash to which such
former shareholder is entitled as a result of the transactions contemplated
hereby or arising therefrom; provided, however, that no former shareholder of
Abana shall be entitled to receive such distribution until such shareholder
shall have delivered and surrendered to the Surviving Corporation the
certificate(s) evidencing such former shareholder's ownership of shares of
Abana Stock. No former shareholder of Abana shall be entitled to receive any
dividend payable on shares of the Xxxxx Stock to which such former shareholder
is entitled until distribution of the certificates representing the Xxxxx Stock
due such former shareholder shall have been made in accordance with the
foregoing and any check in payment of any such dividend shall be held by JMED
or its agent until such distribution of certificates representing the Xxxxx
Stock shall have been effected. Neither any such dividend nor any cash
consideration or proceeds due any former shareholder of Abana arising from the
transactions contemplated hereby shall bear interest pending actual
distribution or delivery thereof to such former shareholder of Abana.
1.9 Closing Date and Closing. Unless terminated in accordance with
paragraph 8.2 below, the Closing Date for the transactions contemplated hereby
shall occur on December 31, 1996, or as promptly thereafter as the conditions
to the parties' obligations to consummate the transactions contemplated hereby
shall be satisfied. The Closing of the transactions contemplated hereby shall
occur at the offices of Xxxxxxxxxxxx, Xxxxxx & Xxxx, P.C., Suite 2000, 00 Xxxxx
Xxxxxxxx, Xx. Xxxxx, Xxxxxxxx.
1.10 Effective Date of the Merger and Transactions Contemplated Hereby.
The Merger contemplated hereby shall become effective on the Closing Date or as
promptly thereafter as the appropriate certificate of merger is filed in
accordance with the DGCL. Notwithstanding the foregoing, JMED and Abana agree
that for tax and accounting purposes the Merger and reorganization transactions
contemplated hereby shall be effective as of the close of business on the later
of (i) December 31, 1996, or (ii) the last calendar day of the month preceding
the month in which the Closing occurs.
II. CERTAIN MATTERS IN RESPECT OF THE XXXXX STOCK
2.1 Absence of Registration in Respect of Certain Shares. The offer and
sale of shares of the Xxxxx Stock to the Principal Holders in connection with
the reorganization contemplated by this Agreement has not been registered under
the Securities Act of 1933, as amended (the "Securities Act"), in reliance by
JMED upon the availability of one or more exemptions from the requirements of
Section 5 of the Securities Act as applicable to the offer to the Principal
Holders and their irrevocable acceptance evidenced by adopting and consenting
to the Merger. The certificates evidencing shares of the Xxxxx Stock issuable
to the Principal Holders as a result of the Merger shall be subject to "stop
transfer" restrictions and bear a legend in substantially the following form:
The shares represented by this certificate have been issued or
transferred to the registered holder in a transaction occurring
without registration under the Securities Act of 1933, as amended
(the "Act"), and may not be sold, transferred, assigned, pledged
or hypothecated by the registered holder in the absence of current
registration under the Act except to the extent that there shall
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be available to the registered holder an exemption from
registration. The issuer shall not be required to give effect to
any sale, transfer, assignment, pledge or hypothecation unless the
issuer shall have been provided by the transferor with an opinion
of counsel, satisfactory in form and substance to the issuer, to
the effect that such transaction either (i) is in accordance with
the terms of a current registration of such shares or (ii)
qualifies for an exemption from current registration and, in the
latter case, specifies such exemption and the basis therefor,
including whether such shares constitute "restricted securities"
in the hands of the transferee or pledgee.
JMED agrees that the foregoing legend will be (i) removed from certificates at
such time as the holding period under Rule 144 under the Securities Act
establishes that, in accordance with paragraph (k) of Rule 144, volume
limitations and notice of sale requirements are no longer applicable or (ii)
modified appropriately in the event of registration of the shares under the
Securities Act to permit sales by the Principal Holders in accordance with the
terms of this Agreement. JMED further covenants to use its best efforts to
remain current in its reporting obligations under the Securities Exchange Act
of 1934, as amended (the "Exchange Act").
2.2 Information Concerning JMED. JMED has provided to Abana and to each
Principal Holder copies of all filings made by JMED to the date of this
Agreement pursuant to the Exchange Act commencing with its Annual Report on
Form 10-K for the year ended December 31, 1995.
2.3 Registration of Certain Shares of the Xxxxx Stock. Although in
accordance with the DGCL neither the vote nor the consent of holders of the
capital stock of Abana (other than the consent of the Principal Holders which
is contained in this Agreement) is required in connection with the Merger, JMED
and Abana acknowledge that the issuance of shares of the Xxxxx Stock to holders
of the capital stock of Abana other than the Principal Holders may be deemed to
involve an "offer" and "sale" under the Securities Act. Accordingly, as
promptly as practicable following the execution and delivery of this Agreement
JMED and Abana agree jointly to prepare a Registration Statement on Form S-4
(the "Registration Statement"), including the form of formal notice of the
adoption of the Merger by consent of the Principal Holders in accordance with
the DGCL, and JMED agrees to cause such Registration Statement to be filed
under the Securities Act and to use its best efforts to cause such Registration
Statement to become effective as promptly thereafter as practicable.
2.4 Registration Rights of Principal Holders. Subject to the terms and
conditions set forth in this paragraph 2.4, JMED agrees that upon request of
the Principal Holders after the Closing Date it will file one registration
statement under the Securities Act to permit such Principal Holders to make
offers and sales of the shares of the Xxxxx Stock received by them in the
Merger.
(a) A written request for a registration may be submitted to JMED by
either of the Principal Holders at any time after the Closing Date and unless
otherwise agreed by the Principal Holders shall relate to all shares of the
Xxxxx Stock held by the Principal Holders as of the date of such request. JMED
agrees to file such registration as promptly as practicable after such request
is received but in no event shall JMED be required to effect such filing until
five business days following the date upon which JMED's Annual Report on Form
10-K for the year ended December 31, 1996, is filed under
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the Exchange Act. Anything to the contrary herein notwithstanding, no
registration statement shall be required hereunder if, as of the date upon
which such request for registration is received, the shares of the Xxxxx Stock
held by the Principal Holders shall be eligible for sale under Rule 144 under
the Securities Act.
(b) Any registration pursuant to this paragraph 2.4 shall be effected on
Form S-3 or its equivalent and shall incorporate by reference information
concerning JMED to the maximum extent permitted by Form S-3 and the
Instructions applicable thereto and such registration shall relate to offerings
from time to time by the selling participants in open market or negotiated
transactions, but not to an underwritten offering.
(c) JMED agrees to use its best efforts to prepare and file such
registration statement as promptly as practicable following receipt of the
written request but shall not be required to file such registration statement
sooner than five days following the filing of its quarterly report on Form 10-Q
for its most recently ended quarter (or, in the case of a request received
during the first calendar quarter, sooner than five days following the filing
of its annual report on Form 10-K for the preceding year), and following filing
shall use its best efforts to cause the registration statement to be declared
effective as promptly as practicable.
(d) Subject to the participating holders' agreement to refrain from sales
of the shares during certain periods as provided in clause (e) below, JMED
agrees to utilize its best efforts to keep such registration current and
effective until the earliest to occur of the following events (i) the second
anniversary of the Closing Date or such earlier date upon which Rule 144
becomes available to the Principal Holders, (ii) notification to JMED that all
shares included in such registration have been sold for the accounts of the
participating holders, or (iii) a request by all participating holders having
unsold shares that the registration statement be terminated.
(e) The holders participating in any such registration statement will
agree with JMED and with any underwriters acting on behalf of JMED to refrain
from any offering or sale of shares (i) during the forty-five (45) days
following the effective date of any registration statement filed by JMED
relating to an offering for its own account of its Common Stock (or of
securities convertible into its Common Stock) filed on Form S-3 or S-4 provided
that JMED gives notice to such holders of the filing and effectiveness of such
registration statement, and (ii) during any period in which information
provided by any participating holder to JMED for inclusion in the registration
is inaccurate or incomplete.
(f) In connection with the registration statement filed pursuant hereto,
each participating holder, and each broker acting on behalf of any such holder,
shall provide to JMED such information as may be reasonably requested by JMED
or required for inclusion in the registration, and each holder shall agree to
indemnify JMED in respect of any misstatement of fact, or the failure to state
a fact necessary to make the statements of fact not misleading, relating to
such holder's participation and proposed manner of sale.
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(g) In connection with registration provided pursuant hereto, JMED agrees
to bear the expense of the filing fee due the Securities and Exchange
Commission together with (i) the fees and expenses of JMED's counsel and
accountants in connection with the preparation, review and filing of the
registration statement and (ii) the costs of electronic filing of the
registration statement and printing costs with respect to the prospectus
included in such registration statement; including costs in respect of any
pre-effective amendment thereto. Each participating holder will bear the
expense of any counsel fees incurred by or on behalf of such holder and
brokerage commissions or other expenses in connection with the sale, including
the cost of any review of offering or brokerage arrangements by the National
Association of Securities Dealers, Inc. ("NASD"). JMED agrees to provide to
each participating holder copies of the prospectus included in the registration
together with copies of reports filed under the Exchange Act and incorporated
therein by reference.
(h) Notwithstanding the provisions of clause (g), the participating
holders shall be responsible for costs incurred in connection with any
amendment to the registration statement arising from any change in the proposed
manner of offering or distribution or any withdrawal of shares from
registration and in the event that any such amendment is required, and the
participating holders shall reimburse JMED for its reasonable out of pocket
expenses (including fees of counsel and accountants and printing expenses) in
connection with amending the registration statement and prospectus.
In connection with any such registration statement and offering, each
participating holder shall understand and acknowledge that JMED is not a
participant in the offering and is under no obligation to provide information
or assistance other than the materials constituting the registration statement
and the materials incorporated therein by reference. Each Principal Holder or
other holder participating in such registration shall, upon request by JMED,
provide such holder's written agreement to indemnify and hold JMED (and each
officer or director of JMED) harmless from any loss, damage, claim or expense
arising in connection with such registration and based upon information
supplied to JMED for inclusion in such registration by such holder or by any
broker acting on behalf of such holder in connection with the sale or
distribution of shares pursuant to such registration.
2.5 Certain Reports by Principal Holders and Participants. In
consideration of the registration rights hereunder, each Principal Holder and
each other participant in any registration statement filed pursuant to
paragraph 2.4 above shall promptly advise JMED of sales of shares included for
the account of such participant in any registration statement filed under the
Securities Act.
2.6 Registration Rights Non-Transferable. The registration rights granted
by JMED pursuant to paragraph 2.4 above are granted solely for the benefit of
the Principal Holders and may not be transferred or assigned, except by
operation of law, without the consent of JMED acting in its sole discretion.
2.7 Registration in respect of Options to Acquire JMED Stock. JMED agrees
that any options issued by it in conversion of outstanding Abana Options will
be issued under existing
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employee stock option plans maintained by JMED and that the Common Stock of
JMED issuable upon exercise thereof will have been subject to registration on
Form S-8 under the Securities Act at or prior to the exercise of such options.
2.8 Indemnification by JMED in respect of Registrations. In connection
with the Registration Statement and any registration pursuant to paragraph 2.4
above, JMED shall indemnify and hold each Principal Holder harmless from and
against any and all losses, claims, damages, expenses or liabilities to which
any of them may become subject under applicable laws (including, but not
limited to, the Securities Act and the Exchange Act) and rules and regulations
thereunder and will reimburse them for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any actions
whether or not resulting in liability, insofar as such losses, claims, damages,
expenses, liabilities or actions arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact contained in any such
application, statement or filing or arise out of or are based upon the omission
of alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, provided,
however, that such indemnification shall not apply insofar as any such
statement or omission was made in reliance upon and in conformity with
information furnished in writing by a Principal Holder or by Abana expressly
for use therein.
III. COVENANTS PENDING CLOSING
3.1 Access to Information and Properties. From and after the date of this
Agreement, Abana and the Principal Holders will afford to the officers and
authorized representatives of JMED full access to the properties, books and
records of Abana in order that JMED may have full opportunity to make such
reasonable investigation as it shall desire to make of the affairs, business,
operations and prospects of Abana, and the officers of Abana shall furnish JMED
with such additional financial and operating data and other information as to
the business and properties of Abana as JMED shall from time to time reasonably
request. To the extent reasonably possible JMED agrees to conduct such access
and investigation in coordination with Xxxx in order to minimize any potential
disruption of Abana's business operations. As soon as practicable after they
become available, Abana will deliver to JMED all audited or unaudited financial
statements prepared by or for Abana prior to the Closing Date, which financial
statements will be prepared in accordance with generally accepted accounting
principles applied on a basis consistent with prior periods. In the event that
the transactions contemplated by this Agreement are not consummated, JMED will
return to Abana all information and data relating to Abana delivered in writing
to JMED by Abana and any and all copies thereof, and in such event, JMED agrees
to exert its best efforts to ensure that none of its officers, employees or
agents divulge any confidential information relating to the business of Abana
to a third party or use the same in any manner for the profit or to the benefit
of JMED or any such officer, employee, agent or a third party, unless and until
(i) it shall have become public knowledge otherwise than by disclosure by JMED
or its officers, employees or agents, (ii) JMED shall have received such
confidential information from a third party who, by revealing the same, is not
in violation of any obligation to Abana to keep such information confidential
or (iii) JMED is required by law to disclose any such confidential information.
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3.2 Information for Applications and Filings. Abana will furnish JMED with
all information concerning Abana required for inclusion in the Registration
Statement or any other application, statement or filing to be made by JMED to
or with any governmental body in connection with the transactions contemplated
by this Agreement or in connection with any unrelated transactions during the
term of this Agreement, and Abana represents and warrants that all information
so furnished for such statements, applications and filings shall be true and
correct in all material respects and shall not omit any material fact required
to be stated therein or necessary to make the statements made not misleading.
Abana and the Principal Holders shall jointly and severally indemnify and hold
harmless JMED, each of its officers and directors, each underwriter and each
person, if any, who controls JMED within the meaning of the Securities Act,
from and against any and all losses, claims, damages, expenses or liabilities
to which any of them may become subject under applicable laws (including, but
not limited to, the Securities Act and the Exchange Act) and rules and
regulations thereunder and will reimburse them for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
actions whether or not resulting in liability, insofar as such losses, claims,
damages, expenses, liabilities or actions arise out of or are based upon any
untrue statement or alleged untrue statement of a material fact contained in
any such application, statement or filing or arise out of or are based upon the
omission of alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, but
only insofar as any such statement or omission was made in reliance upon and in
conformity with information furnished in writing by Abana expressly for use
therein. Abana further agrees at any time upon the request of JMED to furnish
to JMED a written letter or statement confirming the accuracy of information
relating to Abana contained in any application, statement or filing and further
confirming that the information with respect to Abana contained in such
document was furnished by Abana expressly for use therein or, if such is not
the case, indicating the inaccuracies contained in such document or that the
information was not furnished by Abana for use therein. The indemnity
agreement contained in this paragraph 3.2 shall remain operative and in full
force and effect regardless of any investigation made by or on behalf of JMED.
3.3 Best Efforts. Abana will use its best efforts to take or cause to be
taken all actions necessary, proper or advisable to consummate this Agreement
and the transactions contemplated hereby and in connection with filing
applications or statements with, or obtaining approvals of, governmental
bodies for the transactions contemplated by this Agreement.
3.4 Operations of Abana pending Closing. From and after the date of this
Agreement until the earlier of the Closing Date or the expiration of the term
of this Agreement:
(a) Abana will use its best efforts to (i) carry on its business in a
reasonably prudent manner, (ii) maintain and keep its properties in good repair
and condition as at present, except for deterioration due to ordinary wear and
tear and damage due to casualty, (iii) maintain in full force and effect
insurance comparable in amount and in scope of coverage to that now maintained
by it, (iv) perform all of its obligations under contracts, leases and
documents relating to or affecting its assets and business except such
obligations as Abana may in good faith reasonably dispute, (v) use its best
efforts to maintain and preserve its business organization intact, to retain
its present employees and
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customers and (vi) comply with and perform all obligations and duties imposed
upon it by all federal, state and local laws, and all rules, regulations and
orders imposed by federal, state or local governmental authorities.
(b) Abana will not, without the prior written consent of the President or
an Executive Vice President of JMED, (i) permit any change to be made in its
articles or certificate of incorporation or by-laws, (ii) take any action which
would render any representation of Abana in Article VII below inaccurate or
incomplete if made as of the Closing Date, (iii) enter into or amend any
contract, agreement or other instrument other than contracts for the purchase
or sale of inventory in the ordinary course of business or other contracts in
the ordinary course of business which if existing on the date hereof would not
be required to be disclosed on any Schedule to this Agreement, (iv) make, or
enter into any contract or agreement for, any capital expenditure except in
accordance with contracts or agreements listed on any Schedule to this
Agreement, (v) declare or pay any dividend on the outstanding shares of the
capital stock of Abana; (vi) pay or agree to pay any bonus or compensation to
any Principal Holder or officer of Abana except as set forth on Schedule 3.4
hereto or increase in any manner the compensation or benefits due any employee
of Abana; or (vii) make any extension of credit or advance to or any investment
in any other entity.
3.5 Notification to JMED. Abana will promptly inform JMED of:
(a) all actions, suits, proceedings or governmental investigations or
inquiries brought or to its knowledge threatened against Abana after the date
hereof;
(b) all events or occurrences which might adversely affect the business,
operations, properties, prospects, assets or condition, financial or otherwise,
of Abana;
(c) all issues raised by the Internal Revenue Service or any other
governmental authority subsequent to the date hereof except for issues raised
by governmental taxing authorities other than the Internal Revenue Service or
any state taxing authority which involve amounts less than $10,000 in the
aggregate;
(d) all correspondence or other contact between Abana and the U.S. Food
and Drug Administration ("FDA"), the Environmental Protection Agency ("EPA"),
the U.S. Drug Enforcement Agency ("DEA"), the U.S. Occupational Safety and
Health Administration ("OSHA") or any comparable state agency with jurisdiction
over the business, properties and activities of Abana; and
(e) all other matters relating to the conduct of, or affecting the
business, operations, properties, prospects, assets or conditions, financial or
otherwise, of Abana which in the judgment of Abana are material.
3.6 Inconsistent Activities. Abana shall not, prior to the expiration of
the term of this Agreement, (i) solicit, directly or indirectly, or cause any
other person to solicit, any offer to acquire the assets of Abana, whether by
merger, purchase of assets, tender offer or similar
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transaction; or (ii) enter into any agreement which provides for the merger of
Abana or the sale of the capital stock of Abana or the assets of Abana to a
person other than JMED or a subsidiary of JMED.
3.7 Activities by JMED. JMED shall not be restricted in any way, and no
consent need be obtained by JMED from Abana or any Principal Holder, with
respect to (i) the issuance by JMED of (or the agreement by JMED to issue)
additional shares of its capital stock in connection with other acquisitions or
the grant or exercise of outstanding employee or director options, or (ii) the
issuance of any other additional shares of capital stock of JMED authorized in
good faith and for valid business purposes by JMED's Board of Directors prior
to the Closing Date; provided, however, that JMED (a) will not issue or commit
or agree to issue additional shares of its Common Stock in a quantity which
would render JMED unable to fulfill its obligations hereunder to contribute or
deliver the Xxxxx Stock as of the Closing Date in accordance with this
Agreement and (b) will not establish between the date of this Agreement and the
Closing Date any record date for holders of JMED Common Stock with respect to
any dividend (other than regular quarterly cash dividends in an amount not
exceeding 0.025 per share), split, recapitalization or reorganization involving
shares of JMED Common Stock unless the Merger Consideration provided in this
Agreement shall be appropriately adjusted give effect to such event.
3.9 Transfers of Abana Stock. Abana and each Principal Holder shall use
their respective best efforts to discourage any sales, transfers or assignments
of outstanding shares of Abana Stock between the date of this Agreement and the
Closing Date.
3.10 Notice to Abana Shareholders in Respect of Merger and Reorganization.
As promptly as practicable following the execution and delivery of this
Agreement, Abana shall provide notice (the "Notice") to its shareholders of the
adoption and approval of the Merger by the written consent of holders of a
majority of the outstanding capital stock of Abana; provided, that without the
written consent of JMED such Notice shall not be provided prior to the date
upon which the Registration Statement becomes effective under the Securities
Act. Any such Notice shall (i) comply with the requirements of DGCL, (ii)
include notice of the availability to shareholders of Abana of rights under
Section 262 of the DGCL, and (iii) include a form of Transmittal Letter by
which shareholders of Abana may forward the certificates representing shares of
the capital stock of Abana surrendered for conversion and exchange as of the
Closing Date. The Notice shall be in a form reasonably acceptable to JMED and
its counsel.
IV CONDITIONS TO JMED'S OBLIGATIONS TO CLOSE
The obligations of JMED under this Agreement to consummate the
transactions contemplated hereby, and the obligations of AAC to consummate the
Merger, are subject, at the discretion of JMED, to the satisfaction at or prior
to the Closing Date of each of the following conditions:
4.1 Representations. The representations and warranties made by Abana and
the Principal Holders in this Agreement shall have been true when made on the
date of this Agreement
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and shall be true in all material respects as of the Closing Date with the same
force and effect as if such representations and warranties were made at and as
of the Closing Date (except for changes therein required or permitted by this
Agreement).
4.2 Compliance. Each of Abana and the Principal Holders shall have
performed or complied with all covenants and conditions required by this
Agreement to be performed and complied with prior to or at the Closing.
4.3 Absence of Adverse Change. There shall not have been a material
adverse change in the financial condition, assets, liabilities, business or
prospects of Abana nor shall any event have occurred which involves a risk that
such a material adverse change will occur.
4.4 Certification. JMED shall have been furnished with a certificate,
executed by each of the Principal Holders, individually and as officers of
Abana, dated as of the Closing Date and certifying that the conditions in
paragraphs 4.1, 4.2 and 4.3 have been fulfilled.
4.5 Registration Statement Effective. The Registration Statement in
respect of the shares of the Xxxxx Stock issuable under the Merger to
shareholders of Abana other than the Principal Holders shall have been declared
effective under the Securities Act and the Prospectus contained therein shall
have been forwarded to each holder of record of shares of the capital stock of
Abana not less than twenty (20) business days prior to the Closing Date.
4.6 Absence of Dissenters. Holders of more than 56,000 shares of the
capital stock of Abana shall not have exercised appraisal or dissenters' rights
in respect of the Merger under Section 262 of the DGCL or objected in writing
to the adoption of the Merger and this Agreement by the consent of the
Principal Holders.
4.7 Legal Opinion. JMED shall have received the opinion of Sirote &
Permutt, P.C., counsel to Abana and special counsel to the Principal Holders,
in the form of Exhibit III hereto.
4.8 Litigation. JMED shall be furnished with a certificate dated the
Closing Date and executed by the Principal Holders, individually and as
officers of Abana, to the effect that (i) no litigation, proceeding,
investigation or inquiry is pending or threatened which might result in action
to enjoin or prevent the consummation of the transactions contemplated by this
Agreement or which involves a risk of a material adverse change in the
financial condition, assets, liabilities, business or prospects of Abana and
(ii) no issues have been raised by the Internal Revenue Service or any other
taxing authority which involve a risk of a material adverse change in the
financial condition, assets, liabilities, business or prospects of Abana.
4.9 Governmental Approvals; Consents and Other Matters. Each of JMED and
Abana shall have received all consents, approvals and waivers from third
parties and governmental agencies and authorities, if any, necessary to permit
the transactions contemplated by this Agreement, no such consent or
authorization shall contain unduly burdensome conditions, all waiting periods
relating to
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any required filings with governmental authorities shall have expired, and
there shall not be any threatened action or proceeding by or before any court
or any other governmental body which shall seek to restrain, prohibit or
invalidate the transactions contemplated by this Agreement and which, in the
judgment of the Board of Directors of JMED, made in good faith after consulting
with counsel, makes it inadvisable to proceed with the transactions
contemplated hereby.
4.10 Agreements of Principal Holders and Affiliates. Each Principal Holder
of Abana shall have executed and delivered to JMED (i) the Escrow and
Indemnification Agreement in the form of Exhibit I (the "Escrow Agreement"),
(ii) a Non-Competition Agreement in the form of Exhibit II hereto, and (iii) a
voluntary termination without penalty of such Principal Holder's employment
agreement with Abana, including a waiver of bonus rights or accruals, in a form
acceptable to JMED; and there shall be instruments delivered to JMED with
respect to the deposit of an aggregate of 60,000 shares of the Xxxxx Stock
pursuant to the Escrow Agreement.
4.11 Stockholder's Agreement Inapplicable. Abana shall have provided to
JMED evidence that the rights of first refusal under Section 3 of Abana's
Stockholders' Agreement dated March 7, 1988 shall have lapsed or been waived as
to all holders of Abana stock or JMED shall have received an opinion of counsel
satisfactory in form and substance to it to the effect that such Stockholders'
Agreement does not apply to the Merger and the transactions contemplated by
this Agreement.
V CONDITIONS TO ABANA'S OBLIGATIONS TO CLOSE
The obligations of Abana under this Agreement and under the Merger
Agreement, to consummate the transactions contemplated hereby are subject, at
the discretion of Abana, to the satisfaction at or prior to the Closing Date of
each of the following conditions:
5.1 Representations. The representations and warranties made by JMED in
this Agreement were true when made and shall be true in all material respects
as of the Closing Date with the same force and effect as if such
representations and warranties were made at and as of the Closing Date (except
for changes therein required or permitted by this Agreement).
5.2 Compliance. JMED shall have performed or complied with all covenants
and conditions required by this Agreement to be performed and complied with
prior to or at the Closing.
5.3 Absence of Adverse Change. There shall not have been a material
adverse change in the financial condition, assets, liabilities, business or
prospects of JMED nor shall any event have occurred which involves a risk that
such a material adverse change will occur.
5.4 Certification. Abana shall have been furnished with a certificate,
executed by the President or an Executive Vice President of JMED dated as of
the Closing Date and certifying that the conditions in paragraphs 5.1, 5.2 and
5.3 have been fulfilled.
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5.6 Legal Opinion. Abana shall have received the opinion of Xxxxxxxxxxxx,
Xxxxxx & Xxxx, P.C., counsel to Xxxxx and AAC, in the form of Exhibit IV
hereto.
5.7 Litigation. Abana shall be furnished with a certificate dated the
Closing Date and executed by the President or an Executive Vice President of
JMED to the effect that no litigation, proceeding, investigation or inquiry is
pending or threatened which might result in action to enjoin or prevent the
consummation of the transactions contemplated by this Agreement or which
involves a material risk of a material adverse change in the financial
condition, assets, liabilities, business or prospects of JMED.
5.8 Notice. The Notice shall have been provided to the record holders of
the capital stock of Abana not less than twenty days prior to the Closing Date
either directly Abana or by JMED pursuant to the Prospectus included in the
Registration Statement.
5.9 Tax Opinion. At or prior to the filing of the Registration Statement,
Abana shall have received the favorable opinion of Sirote & Permutt, P.C., in
substantially the form of Exhibit VII hereto, to the effect that the Merger
contemplated by this Agreement qualifies as a reorganization under Section
368(a) of the Internal Revenue Code.
VI REPRESENTATIONS AND WARRANTIES OF JMED.
JMED represents and warrants to Abana as follows:
6.1 Organization of JMED. JMED is a corporation duly organized and validly
existing under the laws of the State of Delaware and has all material power and
authority (including all material governmental licenses, franchises, permits
and other authorizations which are legally required) to own its properties and
to engage in the business and activities presently conducted by it. JMED is
duly qualified as a foreign corporation, and is in good standing, in each
jurisdiction where the nature of its properties or the conduct of irs business
makes such qualification necessary, except for such jurisdictions where the
failure to so qualify will not have a material adverse effect on the financial
condition, assets, liabilities, business or prospects of JMED and its
subsidiaries taken as a whole.
6.2 Organization of AAC. AAC will be, as of Closing, a corporation duly
organized and validly existing under the laws of the State of Delaware and will
be a wholly owned subsidiary of JMED organized for the purpose of the
transactions contemplated by this Agreement.
6.3 Capitalization of JMED. The authorized capital stock of JMED consists
of 1,000,000 shares of Preferred Stock, $1.00 par value, issuable in series of
which no shares are outstanding, and 30,000,000 shares of JMED Common Stock, of
which 27,998,332 shares were outstanding at September 30, 1996.
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6.4 The Xxxxx Stock. The Xxxxx Stock to be issued and delivered in
connection with the transactions contemplated by this Agreement pursuant to the
agreement of merger will, upon issuance and delivery, be duly authorized,
validly issued, fully paid and non-assessable. The JMED Common Stock is
admitted to trading in the Nasdaq National Market of the NASD and is registered
as a class of equity securities under Section 13(g) of the Exchange Act.
6.5 Authority and Approvals. The Board of Directors of JMED has authorized
the negotiation of this Agreement and at or prior to the filing of the
Registration Statement will ratify the execution and delivery of this
Agreement, the filing of the Registration Statement and its approved the
transactions contemplated hereby. JMED has the corporate power and authority
to execute and deliver this Agreement and such other agreements and instruments
as are necessary and appropriate to consummate the transactions contemplated
hereby and this Agreement, and each of such other instruments and agreements
when executed and delivered pursuant hereto, constitutes a valid and binding
obligation of JMED. JMED, as the holder of all the issued and outstanding
capital stock of AAC has authorized and approved the execution and delivery of
this Agreement and such other instruments and agreements as are necessary and
appropriate to AAC's participation in the consummation of the transactions
contemplated hereby.
6.6 Financial Statements. The financial statements of JMED contained in
its filings under the Securities Act and the Exchange Act and furnished to
Abana and the Principal Holders pursuant to paragraph 2.2 above fairly present
the consolidated financial position of JMED and its subsidiaries as of the
respective dates thereof and the consolidated results of their operations for
the periods indicated in accordance with generally accepted accounting
principles applied on a consistent basis, subject, in the case of unaudited
consolidated financial statements, to year-end audit adjustments consisting
only of normal recurring accruals and routine adjustments (which in the
aggregate are not material) as discussed in the notes to the financial
statements. Except as arising from the acquisition of Xxxxxxx Pharmaceuticals,
Inc. on August 30, 1996 as reflected in JMED's filing on Form 8-K under the
Exchange Act in respect thereof or as and to the extent reflected or reserved
against in such consolidated balance sheet as of June 30, 1996, JMED did not
have, as of that date, any material liabilities or obligations (absolute or
contingent) of a nature required to be reflected in a balance sheet or the
notes thereto prepared in accordance with generally accepted accounting
principles. Since June 30, 1996, there has not been any material adverse
change in the consolidated financial condition, assets, business or prospects
of JMED and its subsidiaries taken as a whole, nor has any event or condition
occurred which with the lapse of time would cause or create any material
adverse change in the consolidated financial condition, assets, business or
prospects of JMED and its subsidiaries taken as a whole.
6.7 No Conflict with Other Instruments or Agreements. The execution,
delivery and performance of this Agreement and the transactions contemplated
hereby will not violate any provision of, or constitute a default under, any
law, or any order, writ, injunction or decree of any court or governmental
agency, or any contract, agreement or instrument to which JMED or AAC is a
party or by which either JMED or AAC is bound or constitute an event which with
the lapse of time
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or action by a third party could result in any default under any of the
foregoing or result in the creation of any lien, charge or encumbrance upon any
of JMED's assets or properties.
6.8 Accuracy of Information. The information relating to JMED and its
subsidiaries and disclosed or provided in writing by JMED to Abana in
connection with this Agreement and the transactions contemplated hereby, when
such information is considered in the aggregate, did not contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements made therein, in light of the circumstances under
which they were made, not misleading. There are no material facts or
circumstances not disclosed to Abana in writing which should be disclosed to
Abana in order to make any of the representations and warranties made by JMED
herein not misleading or, to the knowledge of JMED, in order for decisions by
Abana and the holders of the capital stock of Abana in connection with this
Agreement to be made on the basis of adequate information.
6.9 Continuation of the Business of Abana. JMED intends to cause the
Surviving Corporation to continue the business of Abana subsequent to the
transactions contemplated hereby, and JMED has no plan or intention to
liquidate the Surviving Corporation, to cause the Surviving Corporation to
distribute its assets to JMED, to merge the Surviving Corporation into another
corporation following the merger between AAC and Abana as contemplated hereby,
or to cause the Surviving Corporation to sell or otherwise dispose of its
assets except in the ordinary course of business; provided, however, that the
foregoing shall not prevent an election by JMED subsequent to the Closing Date
to cause the merger of Abana directly into JMED.
6.10 No Impediment to Demand Registration Rights. As of the date of this
Agreement and as of the Closing Date, JMED is eligible to utilize form S-3 to
effect registration of the Xxxxx Stock under the Securities Act on behalf of
the Principal Holders as contemplated in paragraph 2.4 hereof and, to the best
of JMED's knowledge, neither this Agreement and the transactions contemplated
hereby nor any other transaction pending as of the Closing Date will constitute
or give rise to an impediment to JMED's ability so to utilize form S-3.
VII REPRESENTATIONS AND WARRANTIES IN RESPECT OF ABANA
Abana and the Principal Holders jointly and severally represent and
warrant to JMED as follows:
7.1 Organization of Abana. Abana is a corporation duly organized and
validly existing under the laws of the State of Delaware and has all material
power and authority (including all material governmental licenses, franchises,
permits and other authorizations which are legally required) to own its
properties and to engage in the business and activities presently conducted by
it. Abana is duly qualified as a foreign corporation, and is in good standing,
in Alabama and each other jurisdiction where the nature of its properties or
the conduct of its business makes such qualification necessary, except for such
jurisdictions in which the failure to so qualify will not have a material
adverse effect on the financial condition, assets, liabilities, business or
prospects of Abana
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taken as a whole, and the states in which Abana is so qualified are listed on
Schedule 7.1 hereto. Abana does not have any subsidiary nor does it have,
directly or indirectly, any investment or interest in any other corporation,
partnership, joint venture or other business entity.
7.2 Capitalization. The authorized capital stock of Abana consists of
5,000,000 shares of common capital stock, $.01 par value (the "Abana Stock"),
of which 2,274,213 shares are issued and outstanding as of the date of this
Agreement and 50,882 shares are held by Abana as treasury stock. All such
outstanding shares of Abana Stock are validly issued, fully paid and
non-assessable and have not been issued in violation of the preemptive rights
of any person. There are no existing options, warrants, rights, calls or
commitments of any kind obligating Abana to issue or deliver shares of Abana
Stock other than options held by employees to purchase an aggregate of 182,136
shares of Abana Stock as set forth on Schedule 7.2 hereto. No shares of Abana
Stock have been issued or acquired as treasury stock in contemplation of the
transactions contemplated by this Agreement and, except as set forth on
Schedule 7.2 to this Agreement, Abana does not have any outstanding commitment,
obligation or right to purchase, reacquire or redeem any of Abana Stock.
7.3 Shareholders and Related Parties. Schedule 7.3 hereto identifies each
holder of capital stock of Abana and the number of shares held by each such
holder. Except as disclosed on Schedule 7.3 hereto, Abana has not engaged in
any transaction during the two years preceding the date of this Agreement with
any corporation or other entity in which any one or more Principal Holder(s)
is/are the owner(s) of either (i) an equity interest exceeding 10% of the
capital or income of such corporation or other entity or (ii) a voting interest
exceeding 10% of the voting power in such corporation or other entity. Except
as disclosed on Schedule 7.3 hereto, Abana is not a party to any agreement with
a holder of capital stock of Abana or aware of any agreement between or among
any such holders relating to a right of first refusal with respect to the
purchase or sale by any such holder of shares of the capital stock of Abana or
any voting agreement or voting trust with respect to shares of such capital
stock.
7.4 Financial Statements. Abana has delivered to JMED copies of financial
statements of Abana (the "Abana Financial Statements") as of December 31, 1994
and 1995 and for each of the fiscal years in the three year period ended
December 31, 1995, in the form attached as Exhibit V hereto, which financial
statements consist of comparative balance sheets as of December 31, 1994 and
1995, statements of operations, cash flow and changes in shareholders' equity
for each of the years ending December 31, 1993, 1994 and 1995 with footnotes
and supplementary schedules. The Abana Financial Statements have been audited
by Xxxxxx Xxxxxxxxx & Associates, P.C. Abana's balance sheet as of December
31, 1995 is sometimes hereinafter referred to as the "Abana Balance Sheet."
The Abana Financial Statements are true and correct and fairly present the
financial position of Abana and the results of its operations at the dates and
for the periods indicated in conformity with generally accepted accounting
principles applied on a consistent basis. Abana has also delivered to JMED
copies of unaudited internal financial statements as of September 30, 1996 and
for the nine months then ended (the "Abana Interim Statements") which are
attached as Exhibit VI hereto. The Abana Interim Statements are true, correct
and accurate and fairly present the financial position of Abana as of September
30, 1996, and the sales and net income of Abana for the nine months then
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ended. Abana did not, as of the date of the Abana Balance Sheet or as of the
date of the unaudited balance sheet included in the Abana Interim Statements,
have any liabilities (absolute or contingent) of a nature required (in
accordance with generally accepted accounting principles consistently applied)
to be reflected in a balance sheet or the notes thereto prepared which are not
so reflected or provided for and which are material to Abana.
7.5 Taxes. Except as disclosed in Schedule 7.5 hereto,
(a) Abana has duly and timely filed with the appropriate governmental
taxing authorities (i) all state, local, foreign and other tax returns required
to be filed and (ii) all federal tax returns and reports required to be filed,
in each case by or with respect to Abana and its operations and employees.
Abana has included in such returns and reports all items of income, gain, loss,
deduction and credit or other items required to be included therein. Abana has
paid all taxes and assessments (including interest and penalties) which have
come due with respect to the periods covered by such returns and reports. Abana
has not executed or filed with the Internal Revenue Service or any other
governmental taxing authority any agreement extending the period for assessment
and collection of any tax (except for agreements which have expired), nor is
there any pending claim for assessment or collection of taxes asserted against
Abana. No audit of any federal income tax return of Abana by the Internal
Revenue Service has occurred. There exists no outstanding controversy or
dispute with respect to federal or state income taxes due from Abana for
periods ending on or prior to December 31, 1995.
(b) The amounts set up as provisions for taxes on the financial
statements referred to in paragraph 7.4 above are sufficient for the payment of
all unpaid federal, state, local, foreign or other taxes (including any
interest or penalties) of Abana applicable to the periods covered by such
financial statements and all years and periods prior thereto, and for which
Abana may on the dates of such financial statements have been liable in its own
right, as a transferee of the assets of or as a successor to any other
corporation or other entity or otherwise.
7.6 Certain Contracts and Commitments. Abana is not obligated with respect
to any compensation or payment due any employee or affiliate of, or consultant
to, Abana or any Principal Holder which compensation or payment will become due
or measured by the transactions contemplated by this Agreement, including any
broker's or finder's fee, any "change of control" compensation arrangement or
other provision or arrangement.
7.7 Authority and Approval. The Board of Directors of Abana has authorized
and approved the execution and delivery of this Agreement and recommended the
approval of this Agreement and the transactions contemplated hereby to the
Principal Holders for adoption by the consent of such Principal Holders as
holders of a majority of the Abana Stock. Abana has the corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. This Agreement constitutes a valid and
binding obligation of Abana and the Principal Holders.
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7.8 Certain Conduct. Except as set forth in Schedule 7.8 hereto, since the
date of the Abana Balance Sheet, Abana has not (i) declared or set aside or
paid any dividends, (ii) incurred any obligations or liabilities (fixed or
contingent), except obligations or liabilities incurred in the ordinary course
of business or which are not, in the aggregate, material to Abana, (iii)
mortgaged, pledged or subjected to lien or encumbrance (other than statutory
liens not yet delinquent) any assets which are material to Abana, (iv)
discharged or satisfied any lien or encumbrance or paid any obligation or
liability (fixed or contingent), other than accruals and accounts payable
included in the Abana Balance Sheet and accruals and accounts payable incurred
since the date of the Abana Balance Sheet in the ordinary course of business,
(v) sold, exchanged or otherwise disposed of any of its capital assets other
than in the ordinary course of business, (vi) materially increased the rate of
compensation payable or to become payable by Abana to its directors, officers,
employees or agents; or (vii) materially changed any of its business policies
or practices including, without limitation, advertising, distributing,
marketing, pricing, purchasing, personnel or sales polices, (viii) entered into
any transaction or agreement with either Principal Holder, (ix) terminated or
failed to renew any contract or Agreement that is material to the condition of
Abana or received any notice or threat of termination from a party to any
contract which is material to the condition of Abana, or (x) entered into any
transaction outside the ordinary course of its business, other than this
Agreement, which is material to Abana. Schedule 7.8 also reflects all
payments, advances or loans made by Abana to any Principal Holder during the
period between January 1, 1996 and the date of this Agreement.
7.9 Litigation. Except as set forth in Schedule 7.9 hereto, there are, as
of the date of this Agreement, no legal, quasi-judicial or administrative
proceedings of any kind or nature now pending or, to the knowledge of
management of Abana or either Principal Holder, threatened before any court or
administrative body in any manner in which any claim is being asserted or is
proposed to be asserted against Abana. Abana is not in default with respect to
any judgment, order, writ, injunction, decree, award, rule or regulation of any
court, arbitrator or governmental agency or instrumentality, and no event has
occurred which with notice or lapse of time or both would constitute such a
default.
7.10 General Contracts. Except for matters disclosed on Schedule 7.10
Abana is not a party to or bound by any (i) employment contract (including
without limitation any collective bargaining contract or union agreement), (ii)
bonus, stock option, deferred compensation or profit-sharing, pension or
retirement plan or arrangement, (iii) lease or license with respect to any
property, real or personal, whether as landlord, tenant, licensor or licensee,
(iv) contracts or commitments for capital expenditures in excess of $10,000 in
the aggregate or in excess of $5,000 for any one project, (v) contract or
commitment made in the ordinary course of business for the purchase of
inventory or raw materials or other materials or supplies for a period of more
than nine months from the date of this Agreement, (vi) contract or commitment
made in the ordinary course of business for the sale of inventory at fixed unit
prices over a period of more than sixty (60) days from the date of this
Agreement; (vii) contract or agreement with any buying group or distributor,
whether or not entered into in the ordinary course of business, providing for
rebates or retroactive price adjustments of any nature, (viii) contract or
option to purchase or sell, other than in the ordinary course of business, any
real or personal property which is material to Abana; (ix) indenture,.
mortgage, note, debenture,
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guaranty, security agreement or other debt instrument; or (x) contract other
than the foregoing involving more than $5,000 or providing for the payment of
royalties on sales or which is otherwise material to Abana. There are no
contracts other than those set forth on Schedule 7.10 which are necessary for
the operation of Abana's business. Abana is not in default in any material
respect under any such contract, nor is any other party to any such contract in
default thereunder in any material respect, nor does any condition exist that
with notice or lapse of time or both would constitute a material default
thereunder. Schedule 7.10 also sets forth any co-marketing, co-development or
other co-venture agreement or arrangement to which Abana is or has been a party
at any time during the three (3) years prior to the date of this Agreement.
7.11 Applicable Laws and Governmental Authorizations. Abana is in
compliance with all applicable federal, state, local and foreign laws,
statutes, rules, regulations, orders, ordinances, codes, licenses, franchises,
permits, authorizations and concessions, including but not limited to necessary
FDA and DEA authorizations, licenses and approvals and those imposing taxes,
regulating prices and relating to pension and profit sharing matters,
environmental matters, labor matters, civil rights matters and occupational
safety and health matters. Abana possesses all licenses, franchises, permits,
authorizations and concessions (collectively "Licenses") which are known by
Abana to be legally required to enable it to carry on its business as presently
conducted. No revocation proceeding is pending and no violations exist with
respect to any of such Licenses, and there is no basis or grounds for any
revocation or limitation of any of such Licenses. No term or condition of any
of such Licenses adversely affects, or in the future can reasonably be expected
to adversely affect, the financial condition, assets, liabilities, business or
prospects of the Surviving Corporation. Except as set forth in Schedule 7.11,
there are no letters of adverse finding, Form 483's, regulatory actions,
memoranda of understanding or other regulatory correspondence or communications
with the FDA, the DEA, the EPA, OSHA or any other state or federal government
agencies or boards, pertaining to Abana or any product manufactured, sold or
distributed by it. No authorization, approval, consent or order of, or
registration, declaration or filing with, any court or other governmental body
is required in connection with the execution and delivery by Abana of this
Agreement or the consummation of the transactions contemplated hereby.
7.12 NDAs, ANDAs and Product Information. Schedule 7.12 hereto lists each
product manufactured by or produced for Abana. No New Drug Application
("NDA") or Abbreviated New Drug Application ("ANDA") has heretofore been filed
with the FDA by or on behalf of Abana. The transactions contemplated by this
Agreement do not require the consent or approval of the FDA. No product and
product line of Abana is, to the knowledge and reasonable belief of Abana and
the Principal Holders, required to be the subject of an NDA or ANDA. Schedule
7.12 also sets forth research and development projects and activities in
progress by or for the benefit of Abana which may lead to future filings of any
NDA or ANDA. Neither Abana nor either Principal Holder has received any, and
to the best of each Principal Holder's knowledge there are no, statements,
citations or decisions by any governmental or regulatory body stating that any
product of Abana is defective or unsafe or fails to meet any standards
promulgated by any such governmental or regulatory body. Except as set forth
on Schedule 7.12, there have been no recalls ordered by any such governmental
or regulatory body with respect to any product of Abana. To the best of each
Principal Holder's
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knowledge, there is no (i) fact relating to any Abana product that may impose
upon Abana a duty to recall any products or a duty to warn customers of a
defect in any product, or (ii) significant liability for warranty claims,
returns or servicing with respect to any product which is not fully reflected
on the Abana Interim Statements.
7.13 Title to Properties. Except as set forth in Schedule 7.13, Abana has
good and indefeasible title to all of the assets and properties which are
material to Abana, and Abana owns all personal and intangible properties
reflected in the Abana Balance Sheet or acquired subsequent to the date
thereof, subject to no liens, mortgages, security interests, encumbrances or
charges of any kind except (i) statutory liens not yet delinquent, (ii) defects
and irregularities in title and encumbrances which are not substantial in
character or amounts and do not impair the uses thereof for the purpose for
which they are held in a manner which is material to Abana, and (iii) for those
assets and properties disposed of for fair value in to ordinary course of
business since the dates of the Abana Balance Sheet.
7.14 Real Property. Abana does not own any real property. Schedule
7.14 attached hereto sets forth a listing of any and all real estate leased,
occupied or otherwise used by Abana (the "Leased Real Estate"), and the terms
and conditions of each such lease. The use and condition of the Leased Real
Estate does not, and will not, violate any zoning, subdivision, building,
health, fire or similar statute, ordinance, regulation or code and Abana has
not received any notice, written or otherwise, from any governmental agency
alleging any such violations. The Leased Real Estate is in full compliance
with all applicable zoning requirements and is not a nonconforming, conditional
or special use. Abana has delivered to JMED a true, correct and complete copy
of each lease identified on Schedule 7.14.
7.15 Employee Benefit Plans and ERISA.
(a) Schedule 7.15 sets forth a list and description of all "employee
benefit plans" as such term is defined in Section 3 of the Employment
Retirement Income Security Act of 1974, as amended, ("ERISA") of Abana or any
ERISA Affiliate (collectively the "Plans") including all bonus, incentive
compensation, profit-sharing, pension, retirement, stock purchase, stock
option, deferred compensation, hospitalization, group insurance, death benefit,
disability, union, collective bargaining, works council, severance and other
compensation and fringe benefit plans, trust agreements, arrangements and
commitments of Abana or any ERISA Affiliate. True, correct and complete copies
of all documents creating or evidencing any such plan, agreement, arrangement
or commitment have been delivered to JMED. There are no negotiations, demands
or proposals which are pending or which have been made since December 31, 1995
which concern matters now covered, or that would be covered, by such types of
plans, agreements, arrangements or commitments. Abana and each ERISA Affiliate
is not and has never been a party to any multiemployer plan as that term is
defined by ERISA. The transactions contemplated hereby will not result in a
deemed severance or termination of employment under any plan, agreement,
arrangement or commitment, nor will any subsequent termination of employment
result in any obligations under any severance pay plan, agreement, arrangement
or commitment.
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(b) For purposes of this Section 7.15, "ERISA Affiliate" means each trade
or business (whether or not incorporated) which together with Abana is treated
as a single employer under Section 414(b), (c), (m) or (o) of the Internal
Revenue Code of 1986, as amended ("Code").
(c) All Plans are in compliance with the applicable provisions of ERISA,
including all reporting and disclosure requirements, and no "reportable event"
or "prohibited transaction" as defined by ERISA has occurred. Each of the
Plans which is intended to meet the requirements of Section 401(a) of the Code
to be "qualified" within the meaning of the Code, is so qualified and there
exists no fact which would adversely affect the qualified status of such Plans.
The statements of assets and liabilities of each Plan as of the end of the
most recent fiscal year for each such Plan and the statement of changes in fund
balances, financial position and net assets available for benefits under such
Plan for such fiscal year, true and complete copies of which have been made
available to Buyer, fairly present the financial condition of such Plan as of
such date and the results of operations thereof for the year ended on such
date, all in accordance with GAAP applied on a consistent basis, and there has
been no material adverse change in the assets, fund balances, or net value of
such Plan subsequent to such date.
(d) Abana and each ERISA Affiliate has complied with all of its
obligations under Section 4980B of the Code, including the provision of
adequate notice to employees and "qualified beneficiaries" concerning rights to
continuation of health care coverage. Abana and each ERISA Affiliate has not
agreed or committed to provide retiree medical or life insurance benefits to
any current or former employee.
(e) Other than claims for benefits submitted by participants or
beneficiaries in the ordinary course, there is no request for documents,
litigation, legal action, suit, investigation, claim, counterclaim or
proceeding pending or threatened against or affecting any Plan. Neither Abana
nor any ERISA Affiliate nor any administrator or fiduciary of any Plan (or any
agent of any of the foregoing) has engaged in any transaction or acted or
failed to act in a manner which could subject Abana or any ERISA Affiliate to
any material liability for a breach of fiduciary duty under ERISA or any other
applicable law. If Section 302 of ERISA and Section 412 of the Code apply to
any Plan, no "accumulated funding deficiency", as such term is defined in
Section 302 of ERISA and Section 412 of the Code, whether or not waived, exists
with respect to such Plan. Abana and each ERISA Affiliate has no liability and
there are no claims against Abana or any ERISA Affiliate pursuant to any
provision of the Code or ERISA by reason of the relationship of Abana to any
ERISA Affiliate.
7.16 Continuity of Interest. Abana knows of no present plan or intention
on the part of its shareholders to sell or otherwise dispose of a number of
shares of the Xxxxx Stock to be received by them pursuant to the reorganization
contemplated hereby which would reduce their holdings of such Xxxxx Stock to an
amount having in the aggregate a value at the time of the merger of less than
fifty percent (50%) of all Abana Stock outstanding as of the same date. In
addition, no Principal Holder has any present plan or intention to sell or
otherwise dispose of more than fifty percent (50%) of the shares of the Xxxxx
Stock to be received by such Principal Holder.
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7.17 Intellectual Property. Schedule 7.17 hereto lists all patents and
applications therefor, trademarks, trademark registrations and applications
therefor, trade names, copyrights and copyright registrations and applications
therefor, technology, processes, formulae and manufacturing know-how
(collectively, "Intellectual Properties") which cover any of the products or
processes of Abana or are used in connection with the business thereof or are
held for use in connection therewith or otherwise related thereto. Except as
set forth in Schedule 7.17 hereto, Abana owns and has good and marketable title
to such Intellectual Properties, subject to no liens, mortgages, pledges,
encumbrances, claims, restrictions or charges of any kind, and all taxes or
other payments due and payable and necessary to keep such Intellectual
Properties in effect have been made. Abana has not been charged or threatened
to be charged with the infringement of, nor has Abana infringed on, any
unexpired patent, trademark, trademark registration, trade name, copyright,
copyright registration or other proprietary right of any party in the United
States or in any foreign country in connection with the business of Abana.
Abana has no knowledge of any unexpired patent adverse to the interest of
Abana, except patents under which Abana is licensed.
7.18 Insurance. Abana has in effect insurance coverage with reputable
insurers, which in respect of amounts, types and risks insured is that which
management of Abana reasonably believe to be adequate for the business
conducted by Abana. A list and description of the coverage of each such
insurance and the provider thereof is set forth on Schedule 7.18 hereto.
7.19 No Conflict with Other Agreements or Instruments. Except as disclosed
on Schedule 7.19 hereto, the execution, delivery and performance of this
Agreement and the transactions contemplated hereby will not violate any
provision of, or constitute a default under, any law, or any order writ,
injunction or decree of any court or other governmental agency, or any
contract, agreement or instrument to which Abana is a party or by which it is
bound or constitute an event which, with the lapse of time or action by a third
party or both, could result in the creation of any lien, charge or encumbrance
upon any of the assets or properties of Abana or upon the capital stock of the
Surviving Corporation.
7.20 Certain Conduct. Except as disclosed on Schedule 7.20 hereto, since
the date of the Abana Balance Sheet, Abana has not (i) made any general wage or
salary increase or instituted or amended any employee welfare, retirement or
similar plan or arrangement, (ii) made any significant change in any method of
management, operation or accounting in respect of Abana, or (iii) suffered any
damage, destruction or loss, whether or not covered by insurance, materially
and adversely affecting the business, assets, liabilities, financial condition
or prospects of Abana.
7.21 Customers; Supplemental Financial Schedules and Information. Abana
has delivered to JMED as Schedule 7.21 hereto information reflecting for each
of the fiscal periods covered by the Abana Financial Statements (i) a listing
of each customer representing more than five percent (5%) of sales during such
period together with a summary of the principal products or product lines sold
to such customer, and (ii) a listing of each product or product line
representing more than five percent (5%) of sales during such period together
with identification of the five
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principal customers for such product or product line. To the best knowledge of
Abana, no customer listed on Schedule 7.21 intends to cease doing business with
Abana.
7.22 Employee Relations. To the best information and belief of Abana, the
services of substantially all present employees of Abana will continue to be
available to the Surviving Corporation for the continuation of the business of
Abana after the Closing Date. Except as set forth in Schedule 7.22, there are
no controversies pending or, to the best information and belief of Abana,
threatened between Abana and any employees, former employees or job applicants
thereof, and Abana believes that its relationships with employees is good. No
union is known to Abana to have organized any employees of Abana, there are no
representation petitions pending with the National Labor Relations Board with
respect to such employees, there have been no demands for recognition by any
labor organization purporting to recognize such employees and Abana is unaware
of any efforts by any labor organization to represent any of such employees.
7.23 Investment Company Status. Abana is not an investment company within
the meaning of the Internal Revenue Code or the Investment Company Act of 1940.
7.24 Accuracy of Information. The information relating to Abana disclosed
or provided in writing by Abana to JMED in connection with this Agreement and
the transactions contemplated hereby, when such information is considered in
the aggregate, did not contain any untrue statement of a material fact or omit
to state any material fact necessary in order to make the statements made
therein, in light of the circumstances under which they were made, not
misleading. There are no material facts or circumstances not disclosed to JMED
in writing which should be disclosed to JMED in order to make any of the
representations and warranties made by Abana herein not misleading or, to the
knowledge of Abana, in order for decisions by JMED in connection with this
Agreement to be made on the basis of adequate information.
7.25 Environmental Matters. Except as set forth on Schedule 7.25 hereto,
Abana does not generate, hold or dispose of hazardous environmental waste
products.
7.26 Sales Personnel. Attached hereto as Schedule 7.26 is a listing of all
sales personnel of Abana, the current salaries and other benefits paid or
accruing to said personnel and the geographic territories currently serviced by
each of them.
VIII TERM AND TERMINATION; REMEDIES
8.1 Term of Agreement. Unless terminated in accordance with the provisions
of paragraph 8.2 below, this Agreement shall expire on the later of (i) the
Closing or (ii) March 31, 1997, provided, however, that in the event of a
Closing of the transactions contemplated hereby, the expiration of this
Agreement shall not affect the rights or responsibilities of any party hereto
which arise as of the Closing and are covenants to be performed following
Closing.
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8.2 Termination. This Agreement and the transactions contemplated hereby
may be terminated by the mutual Agreement of the parties at any time prior to
the Closing Date, whether before or after the giving of Notice to the record
holders of the Abana Stock in accordance with the DGCL. In addition this
Agreement shall be subject to termination as follows:
(a) At the election of Abana in the event that JMED shall fail or refuse
to file the Registration Statement on or before November 30, 1996, provided,
however, that such election shall not be available to Abana in the event that
JMED shall reasonably claim that the inability to effect such filing is the
result of a failure of Abana to provide on a timely basis information or data
required to complete such filing; or
(b) At the election of JMED in the event that Abana shall fail or refuse
to satisfy all conditions precedent to the obligations of JMED and AAC on or
before December 31, 1996, provided, however, that such election shall not be
available to JMED if the only conditions precedent not fulfilled as of such
date relates (i) to the failure of the Registration Statement to have been
declared effective not less than twenty (20) business days prior to December
31, 1996 or (ii) that as a result of the failure in clause (i) the time for
assertion of dissenters' appraisal rights under the DGCL has not expired by
such date; or
(c) At the election of JMED in the event that (i) Abana shall have failed
to provide on a timely basis information or data concerning Abana for inclusion
in the Registration Statement to enable the filing thereof on or before
November 30, 1996 or (ii) the transactions contemplated by this Agreement shall
be contested by any pending or threatened action by or before any court or
other governmental body which shall seek to restrain, prohibit or invalidate
the transactions contemplated by this Agreement and which, in the judgment of
the Board of Directors of JMED, made in good faith after consulting with
counsel, makes it inadvisable to proceed with the transactions contemplated
hereby.
8.3 Remedies upon Termination. In the event of a termination of this
Agreement pursuant to clause (a) or clause (b) or clause (c)(i) of paragraph
8.2, the party electing such termination (unless such party is also in default
of its obligations hereunder) shall be entitled to recover from the defaulting
party or parties its out of pocket expenses incurred in connection with
negotiation of this Agreement and otherwise in connection with the transactions
contemplated hereby; provided, however, that the amount of such out of pocket
expense shall not, either as to JMED or as to Abana, exceed $150,000.
8.4 Remedies in lieu of Termination. This Agreement constitutes a valid,
binding and enforceable obligation of the parties hereto. In the event of a
failure or refusal of a party to perform its covenants hereunder and to satisfy
and fulfill the conditions to be performed by such party as a condition to
another party's obligations hereunder, the non-defaulting party shall be
entitled to enforcement of this Agreement or to recover damages in lieu of such
enforcement, together with attorneys fees and expenses reasonably incurred in
connection with such enforcement or recovery. Each Principal Holder
acknowledges and agrees with Abana and JMED that in the event of his failure
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to perform and observe his covenants under this Agreement monetary damages may
be insufficient as a remedy and that accordingly JMED and/or Abana shall be
entitled to seek injunctive and other equitable relief against the Principal
Holders in the enforcement of this Agreement.
IX MISCELLANEOUS
9.1 Entire Agreement. This Agreement, together with the Exhibits and
Schedules hereto, constitutes the entire agreement between the parties with
respect to the subject matter hereof and supersedes all prior agreements or
understandings of the parties relating thereto.
9.2 Amendments. This Agreement may be amended by the parties hereto at any
time prior to the Closing Date by action taken by, or pursuant to authority
delegated by, their respective Boards of Directors, provided, however, that
from and after the effective date of the Registration Statement (or such later
date as the Notice is given) no amendment which shall reduce the number of
shares of the Xxxxx Stock issuable in consummation of the transactions
contemplated hereby shall be effective without the ratifying consent of holders
of a majority of the Abana Stock. The execution and acceptance, at or prior to
the Closing Date, of any Exhibit in a form other than the form attached hereto
shall evidence such party's consent to any amendment inherent in such executed
Exhibit.
9.3 Captions and Headings. All Article headings or paragraph captions
contained in this Agreement, in any Schedule referred to herein or in any
Exhibit annexed hereto, and the table of contents, if any, to this Agreement
are for convenience of reference only, shall not be deemed a part of this
Agreement and shall not affect the meaning or interpretation of this Agreement.
9.4 No Third-Party Rights. No provision of this Agreement shall be deemed
or construed in any way to result in the creation of any rights or obligations
in any person or entity not a party to this Agreement.
9.5 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original but all of which
together shall constitute a single instrument.
9.6 Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Missouri excluding any choice of law
rules which may direct the application of the law of another state; provided,
however, that matters of law concerning the internal corporate affairs of JMED,
AAC and Abana, respectively, shall be governed by the general corporation laws
of their respective states of incorporation.
9.7 Successors and Assigns. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors and
assigns; provided, however, that no party may assign any of its rights, duties
or obligations hereunder prior to the Closing Date without the prior written
consent of each other party, which consent may be withheld in the other's sole
discretion. No assignment of this Agreement or of any rights hereunder shall
relieve the assigning party of any of its obligations or liability hereunder.
No assignment, other than an
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assignment or transfer by operation of law, shall be effective with respect to
rights arising on or as of the Closing Date of the transactions contemplated by
this Agreement without the consent of the party granting or obligated to
perform such rights.
9.8 Survival of Representations, Warranties and Covenants. The
representations and warranties made in this Agreement by Abana shall not
survive the Closing Date, provided, however, that the non-survival of such
representations and warranties shall not void or otherwise invalidate the
indemnification of JMED by the Principal Holders as and to the extent provided
in Exhibit I hereto. The representations and warranties of JMED in this
Agreement and the covenants of JMED in Article II of this Agreement shall
survive the Closing Date for a period of three (3) years.
9.9 Notices. All notices or other communications to parties to this
Agreement which are required or permitted to be given hereunder shall be deemed
validly given if in writing and sent (i) by certified United States Mail,
postage prepaid, return receipt requested, (ii) by prepaid independent
overnight courier or delivery service, or (iii) by confirmed tele-facsimile
communication with receipt acknowledged from the receiving machine, and
addressed as follows:
If to Abana or the Principal Holders, as follows:
Abana Pharmaceuticals, Inc.
X.X. Xxx 000000
Xxxxxxxxxx, Xxxxxxx 00000
Attn: President
facsimile: 000-000-0000
With a copy to:
Sirote & Permutt, P.C.
0000 Xxxxxxxxx Xxxxxx, Xxxxx
P.O. Box 55727
Birmingham, Alabama 35255-5727
Attn: Xxxx X. Xxxxxx, Esq
facsimile: 000-000-0000
If to JMED or AAC, as follows:
Xxxxx Medical Industries, Inc.
0000 Xxxxx Xxxx
Xx. Xxxxx, Xxxxxxxx 00000
Attn: President
facsimile: 000-000-0000
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With a copy to:
Xxxxxxxxxxxx, Xxxxxx & Xxxx, P.C.
2000 Equitable Building
00 Xxxxx Xxxxxxxx
Xx. Xxxxx, Xxxxxxxx 00000
Attn: Xxxxxx X. Chod, Esq.
facsimile: 000-000-0000
or in any case to such other address or addresses as hereafter shall be
furnished by any party hereto to the other party.
9.10 Severability. If any provision of this Agreement is found or declared
to be invalid or unenforceable by any court or other competent authority having
jurisdiction, such finding or declaration shall not invalidate any other
provision hereof, and this Agreement shall thereafter continue in full force
and effect except that such invalid or unenforceable provision, and (if
necessary) other provision(s) thereof, shall be reformed by a court of
competent jurisdiction so as to effect insofar as is practicable, the intention
of the parties as set forth in this Agreement, provided that if such court is
unable or unwilling to effect such reformation, the invalid or unenforceable
provision shall be deemed deleted to the same extent as if it had never
existed.
9.11 Expenses. Except as otherwise specifically provided in this
Agreement, each party to this Agreement will pay its respective expenses
incurred in connection with the preparation and performance of this Agreement
and the transactions contemplated hereby.
9.12 Extension; Waiver. At any time prior to the Closing Date, a party
hereto may (i) extend the time for performance of any of the obligations or
other acts which obligations or acts are conditions to the party granting such
extension, (ii) waive any inaccuracies in the representations and warranties
made to such party in this Agreement or in any document delivered pursuant
hereto, or (iii) waive compliance by another party with respect to any
agreements or covenants in favor of the party granting such waiver. Any
agreement on the part of a party hereto to grant any such extension or waiver
shall be valid if set forth in an instrument in writing signed by such party.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK; SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
as of the day and year first above written.
ABANA PHARMACEUTICALS, INC XXXXX MEDICAL INDUSTRIES, INC.
By Xxxx X. Xxxx By Xxxxxx X. Xxxxx
-------------------------- -------------------------------------
Name: Xxxx X. Xxxx Name: Xxxxxx X. Xxxxx
Title: President Title: Chairman & President
Xxxx X. Xxxx
____________________________
Xxxx X. Xxxx
Xxxxx X. Xxxx
____________________________
Xxxxx X. Xxxx
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