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STOCK PURCHASE AGREEMENT
dated
March 23, 2000
between
IMPAX LABORATORIES, INC.
and
PURCHASER
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TABLE OF CONTENTS
Page
SECTION 1. SALE AND PURCHASE OF PREFERRED STOCK..........................................................1
SECTION 2. CLOSING.......................................................................................2
SECTION 3. DEFINITIONS...................................................................................2
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY................................................15
4.1. Corporate Existence, Power and Authority.....................................................15
4.2. Capital Stock................................................................................16
4.3. Subsidiaries.................................................................................17
4.4. Business.....................................................................................17
4.5. No Defaults or Conflicts.....................................................................17
4.6. Disclosure Materials; Other Information......................................................18
4.7. Litigation...................................................................................19
4.8. Taxes........................................................................................19
4.9. ERISA........................................................................................19
4.10. Legal Compliance.............................................................................21
4.11. Outstanding Securities.......................................................................22
4.12. Permits, Licenses and Approvals; Intellectual Property and Other Rights......................22
4.13. Key Employees................................................................................22
4.14. Properties...................................................................................22
4.15. Suppliers and Customers......................................................................23
4.16. Environmental Compliance.....................................................................23
4.18. Offering of Shares...........................................................................24
4.19. SEC Reports..................................................................................24
4.20. Indebtedness.................................................................................25
4.21. Use of Proceeds..............................................................................25
4.22. Other Names..................................................................................25
4.23. Brokers......................................................................................25
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER..............................................26
5.1. Corporate Power and Authority................................................................26
5.2. Investment Intent............................................................................26
5.3. Brokers......................................................................................26
SECTION 6. RESTRICTIONS ON TRANSFER.....................................................................27
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SECTION 7. INFORMATION AS TO THE COMPANY................................................................27
7.1. Financial Information........................................................................27
7.2. Communication with Accountants...............................................................29
7.3. Inspection...................................................................................29
7.4. Notices......................................................................................30
SECTION 8. AFFIRMATIVE COVENANTS........................................................................31
8.1. Maintenance of Existence, Properties and Franchises; Compliance with Law;
Taxes; Insurance.............................................................................31
8.2. Office for Payment, Exchange and Registration; Location of Office; Notice of
Change of Name or Office.....................................................................32
8.3. Fiscal Year..................................................................................32
8.4. Environmental Matters........................................................................33
8.5. Reservation of Shares........................................................................34
8.6. Securities Exchange Act Registration.........................................................34
8.7. Delivery of Information for Rule 144A Transactions...........................................34
8.8. Senior Securities............................................................................35
8.9. Shelf Registration...........................................................................35
8.10. Further Assurances...........................................................................35
SECTION 9. NEGATIVE COVENANTS...........................................................................36
9.1. No Dilution or Impairment; No Changes in Capital Stock.......................................36
9.2. Indebtedness.................................................................................37
9.3. Dissolution..................................................................................37
9.4. No Change in Business........................................................................37
9.5. Restricted Payments; Investments.............................................................37
9.6. Affiliate Loans and Guaranties...............................................................37
9.7. Transactions with Affiliates.................................................................38
9.8. Liens........................................................................................38
9.9. Private Placement Status.....................................................................38
9.10. Maintenance of Public Market.................................................................39
9.11. Actions Prior to the Closing Date............................................................39
SECTION 10. CONDITIONS TO PURCHASER'S OBLIGATIONS........................................................39
10.1. Series 2 Certificate of Designations; Series 1 Waiver;
Stockholders' Agreement; Registration Rights Agreement.......................................40
10.2. Certificates for Shares......................................................................40
10.3. Senior Status................................................................................40
10.4. Accuracy of Representations and Warranties...................................................40
10.5. Compliance with Agreements...................................................................40
10.6. Officers' Certificates.......................................................................41
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10.7. Proceedings..................................................................................41
10.8. Legality; Governmental and Other Authorization...............................................41
10.9. No Material Adverse Change...................................................................41
10.10. Opinion of Counsel...........................................................................41
10.11. Acceptance of Agent for Service of Process...................................................42
10.12. Other Documents and Opinions.................................................................42
SECTION 11. BREACH OF REPRESENTATIONS, WARRANTIES
AND COVENANTS................................................................................42
SECTION 12. SPECIFIC PERFORMANCE.........................................................................42
SECTION 13. EXPENSES.....................................................................................43
SECTION 14. DIRECT PAYMENTS..............................................................................45
SECTION 15. AMENDMENTS AND WAIVERS.......................................................................45
SECTION 16. EXCHANGE OF SHARES; CANCELLATION OF SURRENDERED
SHARES; REPLACEMENT..........................................................................45
SECTION 17. NOTICES......................................................................................46
SECTION 18. MISCELLANEOUS................................................................................46
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Schedule 1 Purchasers; Number of Shares; Number of Warrants
Schedule 2 Indebtedness
Schedule 3 Investments
Schedule 4 Disclosure Material
Schedule 5 Liens
Schedule 6 Capital Stock
EXHIBIT A-1 Series 2 Certificate of Designations
EXHIBIT A-2 Series 1 Waiver
EXHIBIT B Disclosure Schedule
EXHIBIT C Stockholders' Agreement Amendment
EXHIBIT D-1 Registration Rights Agreement
EXHIBIT D-2 Registration Rights Amendment
EXHIBIT E Opinion of Counsel for the Company
EXHIBIT F Form of Confidentiality Agreement
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STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT is dated as of March 23, 2000 between
Impax Laboratories, Inc., a Delaware corporation (the "Company"), and the
Purchaser listed on the signature page of this Agreement (the "Purchaser").
W I T N E S S E T H :
-------------------
WHEREAS, the Company desires to issue and sell to the Purchaser, and
the Purchaser desires to purchase from the Company, shares of the Company's
Series 2 Convertible Preferred Stock, par value $.01 per share (the "Series 2
Convertible Preferred Stock"), upon the terms and provisions hereinafter set
forth;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
SECTION 1. SALE AND PURCHASE OF PREFERRED STOCK
(a) The Company agrees to sell to the Purchaser and, subject to the
terms and conditions hereof and in reliance upon the representations and
warranties of the Company contained herein or made pursuant hereto, the
Purchaser agrees to purchase from the Company at the Closing provided for in
Section 2 hereof, the number of shares of Series 2 Convertible Preferred Stock
set forth opposite the Purchaser's name on Schedule 1 hereto. The shares of
Series 2 Convertible Preferred Stock being acquired under this Agreement and by
the other Purchasers under the other Stock Purchase Agreements (as hereinafter
defined) are collectively referred to herein as the "Shares", containing rights
and privileges as more fully set forth in the Series 2 Certificate of
Designations of the Company in the form attached hereto as Exhibit A (the
"Series 2 Certificate of Designations").
(b) The aggregate purchase price to be paid to the Company by the
Purchaser for the Shares to be purchased by the Purchaser pursuant to this
Agreement shall be the amount set forth opposite the Purchaser's name on
Schedule 1 hereto. No further payment shall be required from the Purchaser for
the Shares. The parties further acknowledge and agree that the Shares do not
constitute "preferred stock" as that term is used in Section 305(b)(4) of the
Code and Treasury Regulation ss. 1.305-5(a) and agree not to take any position
inconsistent with the characterization of the Shares as common stock for
purposes of Section 305 of the Code on any Tax Return or before any Taxing
Authority.
(c) The Shares are being sold to the purchasers listed on Schedule 1
hereto (the "Purchasers") pursuant to this Agreement and the other Series 2
Convertible Preferred Stock Purchase Agreements (such agreements collectively,
as from time to time assigned, supplemented or amended or as the terms thereof
may be waived, the "Stock Purchase Agreements"). Each Stock Purchase Agreement
shall be dated the date hereof and shall be identical except as to the
identities of the respective Purchasers. The sale of Shares to each Purchaser
under each Stock Purchase Agreement is to be a separate sale, and no Purchaser
shall have any liability under any Stock Purchase Agreement other than the Stock
Purchase Agreement to which it is a party.
(d) The Company will use the proceeds from the sale of the Shares,
together with other funds it will receive on the Closing Date to fund future
development opportunities and for working capital and general corporate
purposes.
SECTION 2. CLOSINGS
(a) Subject to the terms and conditions hereof, the closing of the
purchase and sale of the Shares to be purchased by the Purchaser and the other
Purchasers will take place at the offices of Xxxxxx, Xxxxx & Xxxxxxx LLP, 000
Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx at 10:00 A.M., New York City time on March 23,
2000, or such other time and date as shall be mutually agreed to by the Company
and the Purchasers (the "Closing") (such time and date are herein referred to as
the "Closing Date").
(b) Subject to the terms and conditions hereof, at the Closing (i)
the Company will deliver to each Purchaser a certificate registered in the
Purchaser's name (or the name of its nominee, if any, as specified on Schedule 1
hereto) evidencing the number of Shares set forth opposite the Purchaser's name
on Schedule 1 and (ii) upon the Purchaser's receipt thereof, the Purchaser will
deliver to the Company a certified or official bank check (or wire transfer) in
an amount equal to the aggregate purchase price (as specified in Section 1(b)
hereof) for the Shares to be purchased by the Purchaser payable to the order of
the Company in federal or other immediately available funds.
SECTION 3. DEFINITIONS
(a) For purposes of this Agreement, the following definitions shall
apply (such definitions to be equally applicable to both the singular and plural
forms of the terms defined):
"Affiliate", when used with respect to any Person, means (i) if such
Person is a corporation, any officer or director thereof (other than a
director elected pursuant to Section 4(c) of the Series 1 Certificate of
Designations) and any Person which is, directly or indirectly, the
beneficial owner (by itself or as part of
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any group) of more than five percent (5%) of any class of any equity
security (within the meaning of the Securities Exchange Act) thereof, and,
if such beneficial owner is a partnership, any general partner thereof, or
if such beneficial owner is a corporation, any Person controlling,
controlled by or under common control with such beneficial owner, or any
officer or director of such beneficial owner or of any corporation
occupying any such control relationship, (ii) if such Person is a
partnership, any general or limited partner thereof, and (iii) any other
Person which, directly or indirectly, controls or is controlled by or is
under common control with such Person. For purposes of this definition,
"control" (including the correlative terms "controlling", "controlled by"
and "under common control with"), with respect to any Person, shall mean
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through
the ownership of voting securities or by contract or otherwise. The holding
of Shares (or of Conversion Shares obtained upon conversion of Shares) and
the rights under any Stock Purchase Agreement or under the Series 2
Certificate of Designations, the Stockholders' Agreement or the
Registration Rights Agreement (or the exercise of any such rights,
including, without limitation, nominating a director to the Board (or a
Board committee) of the Company and or sending an observer to a Board (or
Board committee) meetings of the Company), shall not cause a Purchaser to
be deemed to be an "Affiliate" of the Company.
"Agreement" means this Stock Purchase Agreement (together with
exhibits and schedules) as from time to time assigned, supplemented or
amended or as the terms hereof may be waived.
"Benefit Plan" means any Plan, existing at the Closing, established
or to which contributions have at any time been made by the Company, or any
predecessor of any of the foregoing, or under which any employee, former
employee or director of the Company or any beneficiary thereof is covered,
is eligible for coverage or has benefit rights.
"Board" or "Board of Directors" means with respect to any Person
which is a corporation, a business trust or other entity, the board of
directors or other group, however, designated, which is charged with legal
responsibility for the management of such Person, or any committee of such
board of directors or group, however designated, which is authorized to
exercise the power of such board or group in respect of the matter in
question.
"Business Day" means any day other than a Saturday, Sunday or any
day on which banks in the location of the office of the Company provided
for in Section 17 hereof are authorized or obligated to close.
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"Capitalized Leases" means any lease to which the Company is party
as lessee, or by which it is bound, under which it leases any property
(real, personal or mixed) from any lessor other than the Company, and which
either is required to be capitalized in accordance with generally accepted
accounting principles consistently applied, or, even if not so required to
be capitalized, shall have (or have had), at the time first entered into,
an initial term of greater than three (3) years (including leases of
shorter duration which are or were extendible to a total term greater than
three (3) years at the option of the lessor). The value of Capitalized
Leases, as of the time of any determination thereof, shall mean the sum of
the then present values, determined as hereinafter provided, of future
obligations of lessees under then existing Capitalized Leases. To compute
the value of any Capitalized Lease, the following methods shall be used, as
applicable:
(i) values of leases required to be capitalized in accordance with
generally accepted accounting principles shall be computed in
accordance with such principles; and
(ii) values of other leases (and values of contracts or other items
which this Agreement provides are to be valued as if they were
Capitalized Leases) shall be computed by discounting, to the
date of determination, at an assumed interest rate of eight
percent (8%) per annum, the minimum amount of future rental
payments that will be due under the related documentation,
including rental payments that may be due during extensions
which are at the other party's option, but excluding any
amounts in respect of insurance on, taxes on and/or
maintenance of the properties subject to such leases (provided
that such amounts are owed and paid only to the extent
actually incurred).
"Closing" has the meaning set forth in Section 2(a) hereof.
"Closing Date" has the meaning set forth in Section 2(a) hereof.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time, and the regulations and interpretations thereunder.
"Commission" means the Securities and Exchange Commission and any
other similar or successor agency of the federal government administering
the Securities Act or the Securities Exchange Act.
"Common Stock" means the Company's Common Stock, par value $.01 per
share, and shall also include any common stock of the Company hereafter
authorized and any capital stock of the Company of any other class
hereafter authorized which is not preferred as to dividends or assets over
any other class of capital stock of the Company or which has ordinary
voting power for the election
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of directors of the Company; provided that Common Stock shall not include
the Series 1 Preferred or the Series 2 Convertible Preferred Stock.
"Company" means Impax Laboratories, Inc., a Delaware corporation,
its successors and assigns.
"Consolidated" or "consolidated", when used with reference to any
financial term in this Agreement, means the aggregate for the Company of
the amounts signified by such term for all such Persons, with intercompany
items eliminated, and, with respect to net worth, after eliminating the
portion of net worth properly attributable to minority interests, if any,
in the capital of any such Person (other than in the capital of the
Company) and otherwise as determined in accordance with generally accepted
accounting principles consistently applied (except as otherwise expressly
provided herein).
"Conversion Share" or "Conversion Shares" means the shares of the
Company's Common Stock obtained or obtainable upon conversion of Shares and
shall also include any capital stock or other securities into which
Conversion Shares are changed and any capital stock or other securities
resulting from or comprising a reclassification, combination or subdivision
of, or a stock dividend on, any Conversion Shares. In the event that any
Conversion Shares are sold either in a public offering pursuant to a
registration statement under the Securities Act or pursuant to a Rule 144
Transaction, then the transferees of such Conversion Shares shall not be
entitled to any benefits under this Agreement with respect to such
Conversion Shares and such Conversion Shares shall no longer be considered
to be "Conversion Shares" for purposes of any consent or waiver provision
of this Agreement.
"Disclosure Material" has the meaning specified in Section 4.6(a)
hereof.
"Environmental Laws" means all federal, state, local, foreign, civil
and criminal laws, statutes, ordinances, orders, codes, Environmental
Permits, rules, policies, and regulations and common law relating to the
protection of the environment and human health or relating to the handling,
use, generation, treatment, storage, transportation or disposal of
Hazardous Materials, including but not limited to the Resource Conservation
and Recovery Act of 1976, 42 X.X.X.xx. 6901 et seq.; the Toxic Substances
Control Act, 15 X.X.X.xx. 2601 et seq.; the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, 42 X.X.X.xx. 9601 et
seq.; the Federal Water Pollution Control Act, 33 X.X.X.xx. 1251 et seq.;
the Clean Air Act, 42 X.X.X.xx. 7401 et seq.; the Hazardous Materials
Transportation Act, 49 X.X.X.xx. 1801 et seq.; The Occupational Safety and
Health Act, 29 X.X.X.xx. 651; the Federal Insecticide, Fungicide and
Rodenticide Act, 7 X.X.X.xx. 136y et seq.; and the Oil Pollution Act of
1990, 33 X.X.X.xx. 2701 et seq., all as may be amended or superseded from
time to time.
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"Environmental Lien" has the meaning set forth in Section 4.16
hereof.
"Environmental Permits" means all permits, licenses, approvals,
authorizations or consents required by any Governmental Authority under any
applicable Environmental Law and includes any and all orders, consent
orders or binding agreements issued or entered into by a Governmental
Authority under any applicable Environmental Law.
"ERISA" means Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" means each "person" (as defined in Section 3(9) of
ERISA) which is under "common control" with the Company (within the meaning
of Section 414(b), (c), (m) or (o) of the Code).
"Xxxxxxx Funds" means Xxxxxxx US Discovery Fund III, L.P. and
Xxxxxxx US Discovery Offshore Fund III, L.P.
"GAAP" means U.S. generally accepted accounting principles,
consistently applied.
"Governmental Authority" means any federal, state, or local
governmental agency or authority (including regulatory authority) having
jurisdiction over the Company or any of its respective assets or
businesses.
"Guaranty" means (i) any guaranty or endorsement of the payment or
performance of, or any contingent obligation in respect of, any
indebtedness or other obligation of any other Person, (ii) any other
arrangement whereby credit is extended to one obligor (directly or
indirectly) on the basis of any promise or undertaking of another Person
(a) to pay the indebtedness of such obligor, (b) to purchase an obligation
owed by such obligor, (c) to purchase or lease assets (or to provide funds,
goods or services) under circumstances that would enable such obligor to
discharge one or more of its obligations or (d) to maintain the capital,
working capital, solvency or general financial condition of such obligor,
in each case whether or not such arrangement is disclosed in the balance
sheet of such other Person or is referred to in a footnote thereto and
(iii) any liability as a general partner of a partnership in respect of
indebtedness or other obligations of such partnership; provided, however,
that the term "Guaranty" shall not include (1) endorsements for collection
or deposit in the ordinary course of business, (2) any guaranty of
indebtedness of the Company by a subsidiary of the Company or (3)
obligations of the Company which would constitute Guaranties solely by
virtue of the continuing liability of a Person which has sold assets
subject to liabilities for the liabilities which were assumed by the Person
acquiring the assets, unless such liability is required to be carried on
the consolidated balance
6
sheet of the Company. The amount of any Guaranty and the amount of
indebtedness resulting from such Guaranty shall be the maximum amount of
the guarantor's potential obligation in respect of such Guaranty.
"Hazardous Materials" means any petroleum, petroleum hydrocarbons,
petroleum waste or petroleum products, underground storage tanks, asbestos
or asbestos-containing materials, pesticides, lead and lead-containing
materials, urea formaldehyde insulation and polychlorinated biphenyls
(PCBs), ionizing and non-ionizing radiation including radon and
electromagnetic frequency radiation; and any chemicals, materials,
substances or wastes in any amount or concentration which are now or
hereafter "hazardous substances," "hazardous wastes," "hazardous
materials," "extremely hazardous wastes," "restricted hazardous wastes,"
"toxic substances," "toxic pollutants" or words of similar import, under
any applicable Environmental Law.
"Indebtedness" of any Person means, without duplication, as of any
date as of which the amount thereof is to be determined, (i) all
obligations of such Person to repay money borrowed (including, without
limitation, all notes payable and drafts accepted representing extensions
of credit, all obligations under letters of credit, all obligations
evidenced by bonds, debentures, notes or other similar instruments and all
obligations upon which interest charges are customarily paid), (ii) all
Capitalized Leases in respect of which such Person is liable as lessee or
as the guarantor of the lessee, (iii) all monetary obligations which are
secured by any Lien existing on property owned by such Person whether or
not the obligations secured thereby have been incurred or assumed by such
Person, (iv) all conditional sales contracts and similar title retention
debt instruments under which such Person is obligated to make payments, (v)
all Guaranties by such Person and (vi) all contractual obligations (whether
absolute or contingent) of such Person to repurchase goods sold and
distributed. "Indebtedness" shall not include, however, any unfunded
obligations in any employee pension benefit plan (as defined in ERISA) of
the Company.
"Initial Shelf Registration" has the meaning set forth in Section
8.10 hereof.
"Investment" means, with respect to any Person, (i) any loan,
advance or extension of credit by such Person to, and any contributions to
the capital of, any other Person, (ii) any Guaranty by such Person, (iii)
any interest in any capital stock, equity interest or other securities of
any other Person, (iv) any transfer or sale of property of such Person to
any other Person other than upon full payment, in cash or other
consideration, of not less than the agreed sale price bargained on an
arms-length basis and (v) any commitment or option to make an Investment
if, in the case of an option, the consideration therefor exceeds $10,000,
and any of the foregoing under clauses (i) through (v) shall be considered
an Investment whether such Investment is acquired by purchase, exchange,
merger or any other method; provided, that the term "Investment" (1)
7
shall not include an Investment in the Company, (2) shall not include
current trade and customer accounts receivable and allowances, provided
they relate to goods furnished in the ordinary course of business and are
given in accordance with the customary practices of the Company, (3) shall
not include temporary investments of excess cash of the Company in any of
the following: (A) investment grade obligations maturing within one year of
their issuance which as to principal and interest constitute direct
obligations of, or obligations guaranteed by, the United States of America,
(B) negotiable certificates of deposit of banks or trust companies which
are organized under the laws of the United States of America or any state
thereof and which have capital and surplus of at least $500,000,000, (C)
commercial paper which is rated not less than prime-one or A-1 or their
equivalents by Xxxxx'x Investor Service, Inc. or Standard & Poor's
Corporation or their successors, (D) any repurchase agreement secured by
any one or more of the foregoing and (E) money market funds primarily
investing in any of the foregoing securities and sponsored by or affiliated
with nationally recognized brokerage or investment advisory firms, and (4)
shall not include Investments of the Company existing on the date hereof
and disclosed on Schedule 3 hereto.
"Lien" means any mortgage, pledge, hypothecation, assignment,
deposit arrangement, encumbrance, or preference, priority or other security
interest of any kind or nature whatsoever (including, without limitation,
any conditional sale or other title retention agreement, any financing
lease having substantially the same effect as any of the foregoing, any
assignment or other conveyance of any right to receive income and any
assignment of receivables with recourse against the assignor), any filing
of a financing statement as debtor under the Uniform Commercial Code or any
similar statute and any agreement to give or make any of the foregoing;
provided that the term "Lien" shall not include Permitted Liens.
"Outside Directors" means those directors on the Company's Board of
Directors at any time who are not otherwise Affiliates of or employed by
the Company.
"Outstanding" or "outstanding" means (a) when used with reference to
the Shares or the Conversion Shares as of a particular time, all Shares or
Conversion Shares theretofore duly issued except (i) Shares and Conversion
Shares theretofore reported as lost, stolen, mutilated or destroyed or
surrendered for transfer, exchange or replacement, in respect of which new
or replacement Shares or Conversion Shares have been issued by the Company,
(ii) Shares and Conversion Shares theretofore canceled by the Company and
(iii) Shares and Conversion Shares registered in the name of, as well as
Shares owned beneficially by, the Company, or any of its Affiliates. For
purposes of the preceding sentence, in no event shall "Affiliates" include
(x) the persons which are identified as "Purchasers" on Schedule 1 hereto
or (y) any Affiliates of any such persons.
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"Pension Plan" means any "employee pension benefit plan" as defined
in Section 3(2) of ERISA.
"Permitted Lien" means (i) any Lien for Taxes, governmental charges
or levies not yet due or delinquent or being contested in good faith by
appropriate proceedings for which adequate reserves have been established
in accordance with GAAP, (ii) any imperfections of title, easements, rights
of way or similar Liens, zoning laws or land use restrictions as normally
exist with respect to property similar in character to the property
affected thereby and which individually or in the aggregate with other such
Liens, zoning laws or land use restrictions do not materially impair the
value or marketability of the property subject to such Liens, zoning laws
or land use restrictions or interfere with the use of such property in the
conduct of the business of the Company and which do not secure obligations
for money borrowed, (iii) Liens imposed by any law, such as mechanic's,
materialman's, landlord's, warehouseman's and carrier's Liens, securing
obligations incurred in the ordinary course of business which are not yet
overdue or which are being diligently contested in good faith by
appropriate proceedings and, with respect to such obligations which are
being contested, for which the Company has set aside adequate reserves, if
appropriate, and (iv) any Lien resulting from purchase by the Company of
goods in the ordinary course of business as to which Liens are not filed of
record.
"Person" or "person" means an individual, corporation, partnership,
firm, association, joint venture, trust, unincorporated organization,
government, governmental body, agency, political subdivision or other
entity.
"Plan" means any bonus, incentive compensation, deferred
compensation, pension, profit sharing, retirement, stock purchase, stock
option, stock ownership, stock appreciation rights, phantom stock, leave of
absence, layoff, vacation, day or dependent care, legal services,
cafeteria, life, health, accident, disability, workmen's compensation or
other insurance, severance, separation or other employee benefit plan,
practice, policy or arrangement of any kind, whether written or oral, or
whether for the benefit of a single individual or more than one individual
including, but not limited to, any "employee benefit plan" within the
meaning of Section 3(3) of ERISA.
"Preferred Stock" means any class of the capital stock of a
corporation (whether or not convertible into any other class of such
capital stock) which has any right, whether absolute or contingent, to
receive dividends or other distributions of the assets of such corporation
(including, without limitation, amounts payable in the event of the
voluntary or involuntary liquidation, dissolution or winding-up of such
corporation), which right is superior to the rights of another class of the
capital stock of such corporation. "Preferred Stock" includes, without
limitation, the Series 1 Preferred and the Series 2 Convertible Preferred
Stock.
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"Purchaser" means the person who accepts and agrees to the terms
hereof as indicated by such person's signature (as "the undersigned
Purchaser") on the execution page of this Agreement, together with its
successors and assigns.
"Purchaser Holders" means (i) each Purchaser, (ii) any Affiliate,
officer or employee of an Affiliate or investment fund managed by an
Affiliate of a Purchaser to which any Purchaser may transfer record and/or
beneficial ownership of any shares of the Shares or the Conversion Shares
and (iii) any transferee of Shares or Conversion Shares from a Purchaser
Holder other than a transferee of Shares or Conversion Shares sold in
either a public offering pursuant to a registration statement under the
Securities Act or pursuant to a Rule 144 Transaction, except that for
purposes of Section 9 hereof, such transferee shall be a Purchaser Holder
only if such transferee is reasonably acceptable to the Company. The
transferor and the transferee shall notify the Company in writing as to the
transferee's status as a Purchaser Holder in accordance with this
definition, and shall notify the Company if such transferee ceases to be a
Purchaser Holder.
"Purchasers" has the meaning set forth in Section 1(c) hereof,
together with their respective successors and assigns.
"Registrable Securities" means (i) any shares of Common Stock issued
or issuable upon (x) conversion of the Series 1 Preferred, (y) conversion
of the Series 2 Convertible Preferred Stock or (z) exercise of the Warrants
purchased by the Xxxxxxx Funds pursuant to the Series D Purchase Agreements
and (ii) any securities issued or issuable with respect to the Common Stock
referred to in clause (i) by way of stock dividend or stock split or in
connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization or otherwise. As to any particular
Registrable Securities, such securities will cease to be Registrable
Securities when they have (x) been effectively registered under the
Securities Act and disposed of in accordance with the registration
statement covering them or (y) been transferred pursuant to a Rule 144
Transaction (or any similar rule then in force) under the Securities Act.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the Closing Date, among the Company and each of the
Purchasers.
"Registration Rights Amendment" means Amendment No. 1 to the Amended
and Restated Registration Rights Agreement, dated as of the Closing Date,
among the Company, the Purchaser and the other stockholders of the Company
named therein.
"Restricted Payment" means (i) every payment in connection with the
redemption, purchase, retirement or other acquisition by or on behalf of
the Company of any shares of the Company's capital stock (as defined
below),
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whether or not owned by the Company, (ii) any prepayments or repayments
made on Indebtedness of the Company, (iii) every payment to or on behalf of
any Affiliate of the Company on account of or with respect to any lease
arrangements, and (iv) every payment by or on behalf of the Company
(whether as repayment or prepayment of principal or as interest or
otherwise) on or with respect to (A) any obligation to repay money borrowed
owing to any Affiliate of the Company or (B) any obligation, to any Person,
of any Affiliate of the Company or to any other holder of shares of the
Company's capital stock (as defined below), which obligation is assumed, or
is the subject of a Guaranty, by the Company; provided, however, (a) that
the restrictions of the foregoing clause (i) shall not apply to (A) any
payment in respect of capital stock of the Company to the extent payable in
shares of the capital stock of the Company, (B) any redemption of the
Series 1 Preferred or the Series 2 Convertible Preferred Stock or (C) any
redemption or repurchase pursuant to the 1995 Stock Incentive Plan as in
effect on the date hereof, (b) that the restrictions of the foregoing
clause (ii) shall not apply to any regularly scheduled prepayment or
repayment of Indebtedness, provided that such Indebtedness being prepaid or
repaid is not at the time of such prepayment or repayment or at any prior
time thereto owing to an Affiliate of the Company, and (c) that none of the
foregoing clauses shall apply to any payments, distributions or other
transfers or actions on or with respect to the Shares or the Conversion
Shares or to the Purchasers (or holders of Shares or the Conversion Shares)
under the Stock Purchase Agreements. For purposes of this definition,
"capital stock" shall also include warrants and other rights and options to
acquire shares of capital stock (whether upon exercise, conversion,
exchange or otherwise).
"Rule 144" means (i) Rule 144 under the Securities Act as such Rule
is in effect from time to time and (ii) any successor rule, regulation or
law, as in effect from time to time.
"Rule 144A" means (i) Rule 144A under the Securities Act as such
Rule is in effect from time to time and (ii) any successor rule, regulation
or law, as in effect from time to time.
"Rule 144 Transaction" means a transfer of Conversion Shares (A)
complying with Rule 144 as such Rule is in effect on the date of such
transfer (but not including a sale other than pursuant to "brokers'
transactions" as defined in clauses (1) and (2) of paragraph (g) of such
Rule as in effect on the date hereof) and (B) occurring at a time when
Conversion Shares are registered pursuant to Section 12 of the Securities
Exchange Act.
"SEC Reports" has the meaning set forth in Section 4.19 hereof.
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"Securities Act" means the Securities Act of 1933, as amended, and
the rules, regulations and interpretations thereunder.
"Securities Exchange Act" means the Securities Exchange Act of 1934,
as amended, and the rules, regulations and interpretations thereunder.
"Series 1 Certificate of Designations" means the Certificate of
Designations of the Series 1 Preferred.
"Series 1 Preferred" means, collectively, the Series 1-A Convertible
Preferred Stock and the Series 1-B Convertible Preferred Stock.
"Series 1 Waiver" means the Waiver of Certain Rights Under the
Series 1 Certificate of Designations.
"Series 1-A Convertible Preferred Stock" means the Company's Series
1-A Convertible Preferred Stock, par value $.01 per share.
"Series 1-B Convertible Preferred Stock" means the Company's Series
1-B Convertible Preferred Stock, par value $.01 per share.
"Series 2 Certificate of Designations" has the meaning set forth in
Section 1(a) hereof.
"Series 2 Convertible Preferred Stock" means the Company's Series 2
Convertible Preferred Stock, par value $.01 per share, which will have the
rights, powers and privileges on the Closing Date as more fully set forth
in the Series 2 Certificate of Designations.
"Series D Purchase Agreements" means, collectively, the separate
Stock and Warrant Purchase Agreements, dated as of March 2, 1999 (as
amended by Amendment No. 1, dated as of May 18, 1999), between the Company
and each of the Xxxxxxx Funds.
"Shares" has the meaning set forth in Section 1(a) hereof. In the
event that any Shares are sold either in a public offering pursuant to a
registration statement under Section 5 of the Securities Act or pursuant to
a Rule 144 Transaction, then the transferees of such Shares shall not be
entitled to any benefits under this Agreement with respect to such Shares
and such Shares shall no longer be considered to be "Shares" for purposes
of any consent or waiver provision of this Agreement.
"Shelf Registration" has the meaning set forth in Section 8.10
hereof.
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"Stock Purchase Agreements" has the meaning set forth in Section
1(c) hereof.
"Stockholders' Agreement" means the Stockholders' Agreement, dated
as of December 14, 1999, among the Company, the Purchasers and certain
other stockholders of the Company, as amended by the Stockholders'
Agreement Amendment.
"Stockholders' Agreement Amendment" means Amendment No. 1 to the
Stockholders' Agreement, dated as of the Closing Date, among the Company,
the Purchasers and the other stockholders of the Company named therein.
"Subsequent Shelf Registration" has the meaning set forth in Section
8.10 hereof.
"Subsidiary", with respect to any Person, means any corporation,
association or other entity of which more than 50% of the total voting
power of shares of stock or other equity interests (without regard to the
occurrence of any contingency) to vote in the election of directors,
managers or trustees thereof is, at the time as of which any determination
is being made, owned or controlled, directly or indirectly, by such Person
or one or more of its Subsidiaries, or both. The term "Subsidiary" or
"Subsidiaries" when used herein without reference to any particular Person,
means a Subsidiary or Subsidiaries of the Company.
"Tax" or "Taxes" means all federal, state, local or foreign net or
gross income, gross receipts, net proceeds, sales, use, ad valorem, value
added, franchise, bank shares, withholding, payroll, employment, excise,
property, alternative or add-on minimum, environmental or other taxes,
assessments, duties, fees, levies or other governmental charges of any
nature whatsoever, whether disputed or not, together with any interest,
penalties, additions to tax or additional amounts with respect thereto.
"Tax Returns" means any returns, reports or statements (including
any information returns) required to be filed for purposes of a particular
Tax.
"Taxing Authority" means any governmental agency, board, bureau,
body, department or authority of any United States federal, state or local
jurisdiction, or any foreign jurisdiction, having or purporting to exercise
jurisdiction with respect to any Tax.
"Transferees" shall mean any transferee (except for a Purchaser
Holder) of Shares or Conversion Shares from a Purchaser Holder. Transferees
shall not include a transferee of Shares or Conversion Shares sold in either a
public offering pursuant to a registration statement under the Securities Act of
1933, as amended (the "Securities Act"), or pursuant to Rule 144 under the
Securities Act.
13
(b) For all purposes of this Agreement, except as otherwise
expressly provided or unless the context otherwise requires:
(i) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Agreement as a whole and not to any particular
Section or other subdivision;
(ii) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with GAAP (except as otherwise
provided herein);
(iii) all computations provided for herein, if any, shall be made in
accordance with GAAP (except as otherwise provided herein);
(iv) any uses of the masculine, feminine or neuter gender shall also
be deemed to include any other gender, as appropriate;
(v) all references herein to actions by the Company, such as
"create", "sell", "transfer", "dispose of", etc., mean such action whether
voluntary or involuntary, by operation of law or otherwise;
(vi) the exhibits and schedules to this Agreement shall be deemed a
part of this Agreement;
(vii) each of the representations and warranties of the Company
contained in Section 4 hereof is separate and is not limited, qualified or
modified by the existence, wording or satisfaction of any other
representation or warranty of the Company in Section 4 or otherwise;
(viii) each of the covenants of the Company contained in Sections 7,
8 and 9 hereof or otherwise contained in any Stock Purchase Agreement, the
Series 2 Certificate of Designations, the Stockholders' Agreement or the
Registration Rights Agreement is separate and is not limited or satisfied
by the existence, wording or satisfaction of any other covenant of the
Company in Section 7, 8 or 9 or otherwise; and
(ix) all references herein (in covenants or otherwise) to any
action(s) which are to be taken (or which are prohibited from being taken)
by any Person or the Company shall apply to such Person or the Company, as
the case may be, whether such action is taken directly or indirectly.
14
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Purchaser as follows as
of the date hereof and as of the Closing Date, except as set forth in the
Disclosure Schedule attached hereto as Exhibit B:
4.1. Corporate Existence, Power and Authority.
(a) The Company is a corporation duly organized, validly existing
and in good standing under the laws of its jurisdiction of incorporation. The
Company is duly qualified, licensed and authorized to do business and is in good
standing in each jurisdiction in which it owns or leases any property or in
which the conduct of its business requires it to so qualify or be so licensed,
except for such jurisdictions where the failure to so qualify or be so licensed
would not have a material adverse effect on the Company's assets, properties,
liabilities, business, affairs, results of operations, condition (financial or
otherwise) or prospects.
(b) No proceeding has been commenced looking toward the dissolution
or merger of the Company or the amendment of its certificate of incorporation
(other than the Series 2 Certificate of Designations). The Company is not in
violation in any respect of its certificate of incorporation or by-laws.
(c) The Company has all requisite power, authority (corporate and
other) and legal right to own or to hold under lease and to operate the
properties it owns or holds and to conduct its business as now being conducted.
(d) The Company has all requisite power, authority (corporate and
other) and legal right to execute, deliver, enter into, consummate the
transactions contemplated by and perform its obligations under (i) the Stock
Purchase Agreements, including, without limitation, the issuance by the Company
of the Shares and the Conversion Shares as contemplated herein and in the Series
2 Certificate of Designations (subject to the proper filing with the Secretary
of State of the State of Delaware of the Series 2 Certificate of Designations),
(ii) the Series 1 Waiver, (iii) the Stockholders' Agreement, (iv) the
Stockholders' Agreement Amendment, (v) the Registration Rights Agreement and
(vi) the Registration Rights Amendment. The execution, delivery and performance
of the Stock Purchase Agreements, the Series 1 Waiver, the Stockholders'
Agreement, the Stockholders' Agreement Amendment, the Registration Rights
Agreement and the Registration Rights Amendment by the Company (including,
without limitation, the issuance by the Company of the Shares and the Conversion
Shares as contemplated herein and in the Series 2 Certificate of Designations)
have been duly authorized by all required corporate and other actions. The
Company has duly executed and delivered the Stock Purchase Agreements, the
Series 1 Waiver, the Stockholders' Agreement, the Stockholders' Agreement
Amendment, the Registration Rights Agreement and the Registration Rights
Amendment. The Stock Purchase Agreements, the Series 1 Waiver, the Stockholders'
Agreement, the Stockholders' Agreement Amendment, the Registration Rights
Agreement and
15
Registration Rights Amendment constitute the legal, valid and binding
obligations of the Company enforceable in accordance with their respective
terms, subject to bankruptcy, insolvency, reorganization, moratorium and other
similar laws relating to the rights of creditors generally.
4.2. Capital Stock.
(a) Schedule 6(a) hereto correctly and completely lists (i) the
authorized capital stock of the Company (Common Stock and Preferred Stock), (ii)
the number of designated shares of Preferred Stock in each series or class
thereof after giving effect to the Series 2 Certificate of Designations and
(iii) on February 29, 2000, after giving effect to the issuance of Shares
contemplated by the Stock Purchase Agreements, the number of shares outstanding
in each series or class thereof. All of such outstanding shares are, or on the
Closing Date will be, duly authorized, validly issued and outstanding, fully
paid and non-assessable. The shares of the Company's Common Stock issuable upon
conversion of the Series 1 Preferred and Series 2 Convertible Preferred Stock
will be, when issued in accordance with the respective terms of the Series 1
Certificate of Designations and Series 2 Certificate of Designations, duly
authorized, validly issued, fully paid and non-assessable. Except as provided in
the Series 2 Certificate of Designations and the Series 1 Certificate of
Designations, none of the shares of the Company's capital stock which will be
outstanding at the Closing (i) were or will be subject to preemptive rights when
issued or (ii) provide the holders thereof with any preemptive rights with
respect to any issuances of capital stock.
(b) Schedule 6(b) hereto correctly and completely lists the number
and purpose for which such shares of the Company's Common Stock are reserved for
issuance by the Company.
(c) Except as referred to in Section 4.2(b), there are no
outstanding options, warrants, subscriptions, rights, convertible securities or
other agreements or plans under which the Company may become obligated to issue,
sell or transfer shares of its capital stock or other securities.
(d) Except as set forth on Schedule 6(c) hereto and except for the
registration rights contained in the Registration Rights Agreement, there are
and will be no outstanding registration rights with respect to any capital stock
of the Company, which (in either case) will be outstanding on the Closing Date,
or any capital stock referred to in Section 4.2(b) or 4.2(c).
(e) There are no voting agreements, voting trusts, proxies or other
agreements or understandings with respect to the voting of any capital stock of
the Company of which the Company is a party, except as provided herein, in the
Series 2 Certificate of Designations and the Series 1 Certificate of
Designations and Schedule 6(d) hereto.
16
(f) Except as set forth in Schedule 6(e) hereto, there are no
anti-dilution protections or other adjustment provisions in existence with
respect to any capital stock of the Company or any capital stock referred to in
Section 4.2(b) or 4.2(c).
(g) The Series 2 Certificate of Designations has been duly adopted
by the Company and is fully effective as an amendment to the Company's
certificate of incorporation. The Shares have all of the rights, priorities and
terms set forth in the Series 2 Certificate of Designations. The Series 1
Preferred have all of the rights, priorities and terms set forth in the Series 1
Certificate of Designations.
(h) To the knowledge of the Company, those persons who own, directly
or indirectly, more than 5% (calculated in accordance with Rule 13d-3 of the
Securities Exchange Act) of the Company's outstanding Common Stock are as
follows: (i) Xxxxxxx Xxxxx, (ii) Chemical Company of Malaysia, (iii) Chiin Hsiao
Children Irrevocable Trust, (iv) Xxxxx Xxx, (v) Kingdom Capital Management
Corporation, (vi) Shushen (Xxxx) Hsiao, (vi) Bear Xxxxxxx Asset Management, Inc.
and (vii) Xxx Children Irrevocable Trust.
4.3. Subsidiaries.
The Company has no Subsidiaries. The Company has no Investments in
any other Person.
4.4. Business.
The Company is engaged primarily in the business of manufacturing
and distributing immediate release and controlled release solid oral
pharmaceutical products as well as providing product development services to
major pharmaceutical companies. The Company neither currently engages in, nor
has any intention of engaging in, any other business.
4.5. No Defaults or Conflicts.
(a) The Company is not in violation or default in any material
respect (and is not in default in any respect regarding any Indebtedness) under
any indenture, agreement or instrument to which it is a party or by which it or
its properties may be bound. The Company is not in default in any material
respect under any material order, writ, injunction, judgment or decree of any
court or other governmental authority or arbitrator(s).
(b) The execution, delivery and performance by the Company of the
Stock Purchase Agreements, the Series 1 Waiver, the Stockholders' Agreement, the
Stockholders' Agreement Amendment, the Registration Rights Agreement and the
Registration Rights Amendment and any of the transactions contemplated hereby or
thereby (including, without limitation, the issuance of the Shares and the
Conversion Shares as contemplated herein and
17
therein and in the Series 2 Certificate of Designations and the adoption of the
Series 2 Certificate of Designations as an amendment to the Company's
certificate of incorporation) do not and will not (i) violate or conflict with,
with or without the giving of notice or the passage of time or both, any
provision of (A) the certificate of incorporation or by-laws of the Company, (B)
any law, rule, regulation or order of any federal, state, county, municipal or
other governmental authority, (C) any judgment, writ, injunction, decree, award
or other action of any court or governmental authority or arbitrator(s), or (D)
any agreement, indenture or other instrument applicable to the Company or any of
its respective properties, (ii) result in the creation of any Lien upon any of
the Company's properties, assets or revenues, except as provided in the Series 2
Certificate of Designations, (iii) require the consent, waiver, approval, order
or authorization of, or declaration, registration, qualification or filing with,
any Person (whether or not a governmental authority and including, without
limitation, any shareholder approval), or (iv) cause antidilution clauses of any
outstanding securities to become operative or give rise to any preemptive
rights. No provision referred to in Sections (A) and (C) of the preceding clause
(i) materially adversely affects the assets, properties, liabilities, business,
affairs, results of operations, condition (financial or otherwise) or prospects
of the Company on a consolidated basis or the ability of the Company to perform
its obligations under the Stock Purchase Agreements, the Series 2 Certificate of
Designations, the Series 1 Certificate of Designations, the Series 1 Waiver, the
Stockholders' Agreement, the Stockholders' Agreement Amendment, the Registration
Rights Agreement, the Registration Rights Amendment or any of the transactions
contemplated hereby or thereby.
4.6. Disclosure Materials; Other Information.
(a) The Company has previously furnished to the Purchaser the
materials described on Schedule 4.6 hereto (the "Disclosure Material"). The
audited and unaudited financial statements referred to or contained in the
materials referred to on Schedule 4.6 fairly present the consolidated financial
condition of the Company as of the respective dates thereof and the consolidated
results of the operations of the Company for such periods and have been prepared
in accordance with GAAP, except that any such unaudited statements may omit
notes and may be subject to year-end adjustment.
(b) Since December 31, 1999, (i) the business of the Company has
been conducted in the ordinary course and (ii) there has been no material
adverse change in the assets, properties, liabilities, business, affairs,
results of operations, condition (financial or otherwise) or prospects of the
Company on a consolidated basis. As of the Closing Date and as of the date
hereof, there are no material liabilities of the Company which would be required
to be provided for in a consolidated balance sheet of the Company as of either
such date prepared in accordance with GAAP, other than liabilities provided for
in the financial statements referred to in Section 4.6(a). Since December 31,
1999, no amount or property has directly or indirectly been declared, ordered,
paid, made or set aside for any Restricted Payment nor has any such action been
agreed to.
18
(c) There are no material liabilities, contingent or otherwise, of
the Company that have not been disclosed in the financial statements referred to
in Section 4.6(a) or otherwise disclosed in the Disclosure Material.
(d) The financial projections included in the Disclosure Material
conform with the internal operating forecasts of the Company and were based on
reasonable assumptions when made and have been prepared in good faith.
(e) There is no fact known to the Company which is not in the
Disclosure Material and which materially and adversely affects, or in the future
would be reasonably likely (as far as the Company currently can reasonably
foresee) to materially and adversely affect, the assets, properties,
liabilities, business, affairs, results of operations, condition (financial or
otherwise) or prospects of the Company on a consolidated basis.
4.7. Litigation.
There is no action, suit, proceeding, investigation or claim pending
or, to the knowledge of the Company, threatened in law, equity or otherwise
before any court, administrative agency or arbitrator which (i) questions the
validity of the Stock Purchase Agreements, the Series 2 Certificate of
Designations, the Series 1 Certificate of Designations, the Series 1 Waiver, the
Stockholders' Agreement, the Stockholders' Agreement Amendment, the Registration
Rights Agreement, the Registration Rights Amendment, the Shares or the
Conversion Shares, or (iii) might result in a material adverse change in the
assets, properties, liabilities, business, affairs, results of operations,
condition (financial or otherwise) or prospects of the Company on a consolidated
basis.
4.8. Taxes.
The Company has duly and timely filed all Tax Returns required to be
filed by it, and each such Tax Return correctly and completely reflects the Tax
liability and all other information required to be reported thereon. The Company
has paid or caused to be paid all Taxes (whether or not reflected on such Tax
Returns) that are due and payable. The provision for Taxes due by the Company in
the most recent financial statement included in the Disclosure Material is
sufficient for all unpaid Taxes, being current Taxes not yet due and payable, of
the Company, as of the end of the period covered by such financial statement,
and as of the Closing Date, such provision, as adjusted for the passage of time
through such date, will be sufficient for the then-accrued and unpaid Taxes not
yet due and payable of the Company. No Tax Returns of the Company have ever been
audited by any Taxing Authority, there is no dispute concerning any Tax
liability of the Company either threatened, claimed or raised by any Taxing
Authority, and the Company does not expect any Taxing Authority to assess
additional Taxes against or in respect of it for any past period. The Company
has withheld and paid, or, if not yet due for payment, set aside in accounts for
such purposes, all Taxes required to have been withheld in connection with
amounts paid or owing to any employee, creditor, independent contractor or
19
other third party. Other than stamp taxes, the Company has no liability for
Taxes of any Person other than the Company (i) as a transferee or successor,
(ii) by contract, or (iii) otherwise. There are no applicable Taxes payable by
the Company in connection with the execution and delivery of the Stock Purchase
Agreements, the Series 1 Waiver, the Stockholders' Agreement, the Stockholders'
Agreement Amendment, the Registration Rights Agreement or the Registration
Rights Amendment or the issuance by the Company of the Shares or the Conversion
Shares.
4.9. ERISA.
(a) All Benefit Plans are listed in Exhibit B, and copies of all
documentation relating to such Benefit Plans have been delivered to or made
available for review by Purchasers (including copies of written Benefit Plans,
written descriptions of oral Benefit Plans, summary plan descriptions, trust
agreements, the three most recent annual returns, employee communications, and
IRS determination letters).
(b) Each Benefit Plan has at all times been maintained and
administered in all material respects in accordance with its terms and with the
requirements of all applicable law, including ERISA and the Code, and each
Benefit Plan intended to qualify under section 401(a) of the Code has at all
times since its adoption been so qualified, and each trust which forms a part of
any such plan has at all times since its adoption been tax-exempt under section
501(a) of the Code.
(c) No Benefit Plan has incurred any "accumulated funding
deficiency" within the meaning of section 302 of ERISA or section 412 of the
Code, and the "amount of unfunded benefit liabilities" within the meaning of
section 4001(a)(18) of ERISA does not exceed zero with respect to any Benefit
Plan subject to Title IV of ERISA.
(d) No "reportable event" (within the meaning of section 4043 of
ERISA) has occurred with respect to any Benefit Plan or any Plan maintained by
an ERISA Affiliate since the effective date of said section 4043 for which
notice is not waived under the regulations issued pursuant to said Section 4043.
(e) No Benefit Plan is a multiemployer plan within the meaning of
section 3(37) of ERISA.
(f) No direct, contingent or secondary liability has been incurred
or is expected to be incurred by the Company under Title IV of ERISA to any
party with respect to any Benefit Plan, or with respect to any other Plan
presently or heretofore maintained or contributed to by any ERISA Affiliate.
(g) Neither the Company nor any ERISA Affiliate has incurred any
liability for any tax imposed under section 4971 through 4980B of the Code or
civil liability under section 502(i) or (l) of ERISA.
20
(h) No benefit under any Benefit Plan, including, without
limitation, any severance or parachute payment plan or agreement, will be
established or become accelerated, vested or payable by reason of any
transaction contemplated under this Agreement.
(i) No Benefit Plan provides health or death benefit coverage beyond
the termination of an employee's employment, except as required by Part 6 of
Subtitle B of Title I of ERISA or section 4980B of the Code or any State laws
requiring continuation of benefits coverage following termination of employment.
(j) No suit, action or other litigation (excluding claims for
benefits incurred in the ordinary course of plan activities and any other claim
which could reasonably be expected to result in a material liability or expense
to the Company) has been brought or, to the knowledge of the Company, threatened
against or with respect to any Benefit Plan and there are no facts or
circumstances known to the Company that could reasonably be expected to give
rise to any such suit, action or other litigation.
(k) All contributions to Benefit Plans that were required to be made
under such Benefit Plans have been made, and all benefits accrued under any
unfunded Benefit Plan have been paid, accrued or otherwise adequately reserved
in accordance with generally accepted accounting principles, all of which
accruals under unfunded Benefit Plans are as disclosed in Exhibit B, and the
Company has performed all material obligations required to be performed under
all Benefit Plans.
(l) The execution, delivery and performance of the Stock Purchase
Agreements, the Series 1 Waiver, the Stockholders' Agreement, the Stockholders'
Agreement Amendment, the Registration Rights Agreement and the Registration
Rights Amendment and the consummation of the transactions contemplated hereby
and thereby (including, without limitation, the offer, issue and sale by the
Company, and the purchase by the Purchaser of the Shares and the Conversion
Shares) will not involve any "prohibited transaction" within the meaning of
ERISA or the Code with respect to any Benefit Plan.
4.10. Legal Compliance.
(a) The Company's manufacturing, distribution and marketing
practices are in compliance in all material respects with all applicable laws,
rules, regulations, orders, licenses, judgments, writs, injunctions, decrees or
demands, including, without limitation, laws and regulations administered by the
Food and Drug Administration ("FDA") and the Drug Enforcement Administration
("DEA").
(b) The Company possesses all material Food and Drug Administration
new drug applications, abbreviated new drug applications, and new animal drug
applications as are necessary for the conduct of its business as now being
conducted, a list of such which will be provided to the Purchaser upon the
Purchaser's request.
21
(c) Other than the May 25, 1993 "Richlyn Order," there are no
adverse orders, judgments, writs, injunctions, decrees, or demands of any court
or administrative body, domestic or foreign, or of any governmental agency or
instrumentality, domestic or foreign, outstanding against the Company.
(d) The Company has not and will not use the services of any person
debarred under the provisions of the Generic Drug Enforcement Act of 1992, 21
U.S.C. ss. 335(a)(b). None of the Company's officers or employees has been
convicted of a felony under federal law for conduct relating to the development,
approval or regulation of any product subject to the Federal Food, Drug, and
Cosmetic Act or the Controlled Substances Act.
4.11. Outstanding Securities.
All securities (as defined in the Securities Act) of the Company
have been offered, issued, sold and delivered in compliance with, or pursuant to
exemptions from, all applicable federal and state laws, and the rules and
regulations of federal and state regulatory bodies governing the offering,
issuance, sale and delivery of securities.
4.12. Permits, Licenses and Approvals; Intellectual Property and
Other Rights.
The Company owns or possesses and holds free from material conflicts
with the rights of others all franchises, licenses, permits, consents, approvals
and other authority (governmental or otherwise), patents, patent rights,
trademarks, trademark rights, trade names, trade name rights and copyrights
(each of which patent, trademark or copyright is listed on Exhibit B hereto),
and all rights and privileges with respect to any of the foregoing, as are
necessary for the conduct of its business as now being conducted and as
currently proposed to be conducted; provided that, no such representation is
made with respect to government franchises, licenses, permits, consents,
approvals or other authority which may be required with respect to the Company's
business as proposed to be conducted. The Company is not in default in any
material respect under any of such franchises, licenses, permits, consents,
approvals or other authority. The rights of (and use by) the Company with
respect to such or any other patents, patent rights, trademarks, trademark
rights, trade names, trade name rights or copyrights do not conflict with or
infringe any rights of others in a manner which might materially and adversely
affect the assets, properties, liabilities, business, affairs, results of
operations, condition (financial or otherwise) or prospects of the Company on a
consolidated basis, and no such claim of conflict or infringement has been
asserted by any Person.
4.13. Key Employees.
The Company has good relationships with its employees and has not
had and does not expect any substantial labor problems. The Company has no
knowledge as to any intentions of any key employee or any group of employees to
leave the employ of the Company. The employees of the Company are not and have
never been represented by any labor union, and no
22
collective bargaining agreement is binding and in force against the Company or
currently being negotiated by the Company.
4.14. Properties.
Other than the Permitted Liens, the Company has good and marketable
title to its real property, all of which is disclosed on Exhibit B hereto, and
good and marketable title to each of its other properties other than leased
properties. Certain real property used by the Company in the conduct of their
respective businesses is held under lease (as identified on Exhibit B hereto),
and the Company is not aware of any pending or threatened claim or action by any
lessor of any such property to terminate any such lease. All such leases are
valid and in full force and effect, and none of such leases is in default. None
of the properties owned or leased by the Company is subject to any Liens which
could materially and adversely affect the assets, properties, liabilities,
business, affairs, results of operations, condition (financial or otherwise) or
prospects of the Company on a consolidated basis.
4.15. Suppliers and Customers.
(a) The Company has adequate sources of supply for its business as
currently conducted and as proposed to be conducted. The Company has good
relationships with all of its material sources of supply of goods and services
and does not anticipate any material problem with any such material sources of
supply.
(b) The Company has no knowledge that the customer base of the
Company might materially decrease.
4.16. Environmental Compliance.
(a) There is no Hazardous Material on, about, under or in, any
property, real or personal, in which the Company has any interest in an amount
or concentration which could constitute a violation that would result in a
liability in excess of $5,000 or otherwise result in a liability in excess of
$5,000 to the Company under any applicable Environmental Law.
(b) There is no (and has not been any) off-site use, handling,
storage or disposal or on-site use, handling, storage or disposal of Hazardous
Material at or from any locations currently or formerly owned, leased, operated
or occupied by the Company as a result of which use, handling, storage or
disposal there would exist a risk that the Company could incur a material
liability or obligation under any applicable Environmental Law.
(c) The Company has not received any verbal or written notice,
citation, subpoena, summons, complaint or other correspondence or communication
from any person with respect to the presence of any non-indigenous Hazardous
Material upon, into, beneath, or emanating from or affecting any of the real
property (including improvements) currently or
23
formerly owned or occupied by the Company that could result in a liability to
the Company in excess of $5,000.
(d) There has been no intentional or unintentional, gradual or
sudden, release, disposal or discharge by the Company or, to the Company's
knowledge, by others, upon, into or beneath the real property (including
improvements) currently or formerly owned or occupied by the Company that has
caused or is causing soil or groundwater contamination which, under applicable
Environmental Laws could require investigation or remediation or could otherwise
create a material liability or obligation on the part of the Company.
(e) The Company is in material compliance with all applicable
Environmental Laws and the terms and conditions of all Environmental Permits.
(f) To the best knowledge of the Company after reasonable inquiry,
there are no Liens arising under or pursuant to any Environmental Law
("Environmental Liens") relating to any real property (including improvements
thereon) currently owned by the Company.
(g) There are no (i) underground storage tanks, (ii) polychlorinated
biphenyl containing equipment or (iii) asbestos-containing materials at any site
currently owned, operated or leased by the Company, except in compliance with
all applicable Environmental Laws.
4.17. No Burdensome Agreements.
To the best of the knowledge of the Company, other than this
Agreement and the related documents, the Company is not a party to any contract
or agreement with any Affiliate of the Company, the terms of which are less
favorable to the Company than those which might have been obtained, at the time
such contract or agreement was entered into, from a person who was not such an
Affiliate.
4.18. Offering of Shares.
None of the Company, any agent or any other person acting on its
behalf, directly or indirectly, (i) offered any of the Shares or any similar
security of the Company (A) by any form of general solicitation or general
advertising (within the meaning of Regulation D under the Securities Act) or (B)
for sale to or solicited offers to buy any thereof from, or otherwise approached
or negotiated with respect thereto with, any person other than the Purchasers
and not more than twenty-four (24) other institutional investors each of which
the Company reasonably believed was an "accredited investor" within the meaning
of Regulation D under the Securities Act or (ii) has done or caused to be done
(or has omitted to do or to cause to be done) any act which act (or which
omission) would result in bringing the issuance or sale of the Shares within the
provisions of Section 5 of the Securities Act or the filing, notification or
reporting provisions of any state securities laws.
24
4.19. SEC Reports.
The Company has filed all proxy statements, reports and other
documents required to be filed by it under the Securities Exchange Act. The
Company has furnished the Purchaser with copies of (i) its Annual Report on Form
10-KSB for the fiscal year ended December 31, 1998, (ii) its Quarterly Reports
on Form 10-QSB for the fiscal quarters ended March 31, 1999, June 30, 1999 and
September 30, 1999, (iii) its Proxy Statement dated April 12, 1999 and (iv) the
Joint Proxy Statement/Prospectus dated November 9, 1999 filed by the Company and
Impax Pharmaceuticals, Inc. (collectively, the "SEC Reports"). Each SEC Report
was in substantial compliance with the requirements of its respective form and
none of the SEC Reports, nor the financial statements (and the notes thereto)
included in the SEC Reports, as of their respective dates, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
4.20. Indebtedness.
Schedule 2 hereto sets forth (i) the amount of all Indebtedness of
the Company outstanding as of February 29, 2000 (and there is no additional
material amount of Indebtedness of the Company outstanding other than that
listed as of February 29, 2000 or as set forth in Exhibit B), (ii) any Lien with
respect to such Indebtedness and (iii) a description of each instrument or
agreement governing such Indebtedness. The Company has made available to the
Purchaser a complete and correct copy of each such instrument or agreement
(including all amendments, supplements or modifications thereto). No material
default exists with respect to or under any such Indebtedness or any instrument
or agreement relating thereto and no event or circumstance exists with respect
thereto that (with notice or the lapse of time or both) could give rise to such
a default.
4.21. Use of Proceeds.
The Company will use the proceeds realized from the sale of the
Shares to fund future development opportunities and for working capital and
general corporate purposes. No portion of such proceeds will be used for the
purpose, whether immediate, incidental or ultimate, of purchasing or carrying,
within the meaning of Regulation U of the Board of Governors of the Federal
Reserve System, as amended from time to time, any "margin stock" as defined in
said Regulation U, or any "margin stock" as defined in Regulation G of the Board
of Governors of the Federal Reserve System, as amended from time to time, or for
the purpose of purchasing, carrying or trading in securities within the meaning
of Regulation T of the Board of Governors of the Federal Reserve System, as
amended from time to time, or for the purpose of reducing or retiring any
indebtedness which both (i) was originally incurred to purchase any such margin
stock or other securities and (ii) was directly or indirectly secured by such
margin stock or other securities. None of the assets of the Company includes any
such "margin stock." The Company has no present intention of acquiring any such
"margin stock."
25
4.22. Other Names.
Except for "Global Pharmaceutical Corporation" and "Impax
Pharmaceuticals, Inc.", the businesses previously or presently conducted by the
Company has not been conducted under any corporate, trade or fictitious name.
4.23. Brokers.
No broker, finder or investment banker or other party is entitled to
any brokerage, finder's or other similar fee or commission in connection with
any Stock Purchase Agreement, the Series 1 Waiver, the Stockholders' Agreement,
the Stockholders' Agreement Amendment, the Registration Rights Agreement, the
Registration Rights Amendment or the Series 2 Certificate of Designations or any
of the transactions contemplated hereby or thereby, based upon arrangements made
by or on behalf of the Company or any of its Affiliates.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Company as follows:
5.1. Corporate Power and Authority.
The Purchaser has all requisite power, authority and legal right to
execute, deliver, enter into, consummate the transactions contemplated by and
perform its obligations under this Agreement, the Series 1 Waiver, the
Stockholders' Agreement, the Stockholders' Agreement Amendment, the Registration
Rights Agreement and the Registration Rights Amendment. The execution, delivery
and performance of this Agreement, the Series 1 Waiver, the Stockholders'
Agreement, the Stockholders' Agreement Amendment, the Registration Rights
Agreement and the Registration Rights Amendment by the Purchaser have been duly
authorized by all required corporate and other actions. The Purchaser has duly
executed and delivered this Agreement, the Series 1 Waiver, the Stockholders'
Agreement, the Stockholders' Agreement Amendment, the Registration Rights
Agreement and the Registration Rights Amendment, and this Agreement, the Series
1 Waiver, the Stockholders' Agreement, the Stockholders' Agreement Amendment,
the Registration Rights Agreement and the Registration Rights Amendment
constitute the legal, valid and binding obligations of the Purchaser enforceable
against the Purchaser in accordance with their respective terms, subject to
bankruptcy, insolvency, reorganization, moratorium and other similar laws
relating to the rights of creditors generally.
5.2. Investment Intent.
The Purchaser is capable of evaluating the risk of its investment in
the Shares being purchased by it and is able to bear the economic risk of such
investment. The Purchaser has had the opportunity to request and receive all
information deemed necessary by it to evaluate
26
an investment in the Company. The Purchaser is purchasing the Shares for its own
account for investment and not with a present view to any distribution thereof
in violation of applicable securities laws; provided, however, that the
Purchaser may transfer record and/or beneficial ownership of the Shares or the
Conversion Shares to one or more Affiliates, officers or employees of Affiliates
or investment funds managed by Affiliates of the Purchaser, in all cases in
compliance with federal securities laws. It is understood that the disposition
of the Purchaser's property shall at all times be within the Purchaser's
control. If the Purchaser should in the future decide to dispose of any of its
Shares or Conversion Shares, it is understood that it may do so only in
compliance with the Securities Act, applicable securities laws and this
Agreement. The Purchaser is an "accredited investor" as defined in Rule 501(a)
under the Securities Act. If domiciled in the United States, Purchaser's
domicile is in the state indicated on Schedule 1 hereto.
5.3. Brokers.
Except as disclosed on Exhibit B hereto, no broker, finder or
investment banker or other party is entitled to any brokerage, finder's or other
similar fee or commission in connection with any Stock Purchase Agreement, the
Series 1 Waiver, the Stockholders' Agreement, the Stockholders' Agreement
Amendment, the Registration Rights Agreement, the Registration Rights Amendment
or the Series 2 Certificate of Designations or any of the transactions
contemplated hereby or thereby, based upon arrangements made by or on behalf of
the Purchaser or any of its Affiliates.
SECTION 6. RESTRICTIONS ON TRANSFER
The Purchaser agrees that it will not sell or otherwise dispose of
any Shares or Conversion Shares unless such Shares or Conversion Shares have
been registered under the Securities Act and, to the extent required, under any
applicable state securities laws, or pursuant to an applicable exemption from
such registration requirements. The Company may endorse on all Share
certificates a legend stating or referring to such transfer restrictions;
provided, that no such legend shall be endorsed on any Share certificates which,
when issued, are no longer subject to the restrictions of this Section 6.
27
SECTION 7. INFORMATION AS TO THE COMPANY
The Company covenants and agrees as follows:
7.1. Financial Information.
(a) The Company will maintain a system of accounting established and
administered in accordance with sound business practices to permit preparation
of financial statements in accordance with generally accepted accounting
principles consistently applied.
(b) So long as any holder of Series 2 Convertible Preferred Stock
owns at least 20,000 Shares, the Company will deliver to such holder the
following:
(i) as soon as practicable but not later than five (5) Business
Days after their issuance, and in any event within ninety (90) days after the
close of each fiscal year of the Company, (A) a consolidated balance sheet of
the Company as of the end of such fiscal year and (B) consolidated statements of
operations, stockholders' equity and cash flows of the Company for such fiscal
year, in each case setting forth in comparative form the corresponding figures
for the preceding fiscal year, all such balance sheets and statements to be in
reasonable detail and certified without qualification by Price Waterhouse
Coopers LLC or any "Big Five" independent public accounting firm selected by the
Company, and such statements shall be accompanied by a management analysis of
any material differences between the results for such fiscal year and the
corresponding figures for the preceding year; the Company's Annual Report on
Form 10-KSB shall satisfy such requirement provided that it is in compliance
with all applicable requirements of the SEC and is certified by a "Big Five"
accounting firm;
(ii) as soon as practicable, copies (A) of all financial
statements, proxy material or reports sent to the Company's stockholders, (B) of
any public press releases and (C) of all reports or registration statements
filed with the Commission pursuant to the Securities Act or the Securities
Exchange Act;
(iii) as soon as practicable and in any event within forty-five
(45) days after the close of each of the first three (3) fiscal quarters of the
Company, (A) a consolidated balance sheet of the Company as of the end of such
fiscal quarter, (B) consolidated statements of operations, stockholders' equity
and cash flows of the Company for the portion of the fiscal year ended with the
end of such quarter, in each case in reasonable detail, certified by the Chief
Financial Officer, Chief Executive Officer or the President of the Company and
setting forth in comparative form the corresponding figures for the comparable
period one year prior thereto (subject to normal year-end adjustments), together
with a management analysis of any material differences between such results and
the corresponding figures for such prior period and (C) a certificate of the
Chief Financial Officer, Chief Executive Officer or the President certifying the
Company's compliance with the covenants contained in Section 9 of this
Agreement; the
28
Company's Quarterly Report on Form 10-QSB shall satisfy such requirement
provided that it is in compliance with all applicable requirements of the SEC;
(iv) as soon as practicable and without duplication of any of
the above items, any other materials furnished to the Company's Board of
Directors or to holders of the Company's capital stock or Indebtedness,
including, without limitation, any compliance certificates furnished in respect
of such Indebtedness; and
(v) as soon as practicable, such other information as may
reasonably be requested by such holder.
(c) The Company will deliver to each member of the Company's Board
of Directors as soon as practicable (and in the case of (iii), prior to the end
of each fiscal year) and without duplication of any of the items listed below,
the following:
(i) copies of any annual, special or interim audit reports or
management or comment letters with respect to the Company or their operations
submitted to the Company by independent public accountants;
(ii) copies of summary financial information prepared on a
quarterly basis regarding the Company on a consolidated basis as presented to
the Board and any other summary financial information otherwise prepared;
(iii) copies of the annual budget and business plan for the next
fiscal year;
(iv) copies of all formal communications, from time to time, to
directors of the Company (including without limitation all information furnished
to such directors in connection with such communications), and copies of minutes
of meetings of the Board of Directors (and of any executive committees thereof)
of the Company;
(v) notice of default under any material agreement, contract or
other instrument to which the Company is a party or by which it is bound;
(vi) notice of any action or proceeding which has been commenced
or threatened against the Company and which, if adversely determined, would
have, individually or in the aggregate, a material adverse effect on the assets,
properties, liabilities, business, affairs, results of operations, condition
(financial or otherwise) or prospects of the Company on a consolidated basis;
and
(vii) copies of all filings made with the Commission.
29
(d) All such financial statements referred to in this Section 7.1
shall be prepared in accordance with generally accepted accounting principles
consistently applied (except for any change in accounting principles specified
in the accompanying certificate, in the financial statements themselves or
required by GAAP, and except that any interim financial statements may omit
notes and may be subject to normal year-end adjustments).
(e) Without limiting the foregoing provisions of this Section 7.1,
the Company agrees that, if requested in writing by any holder of Shares, it
will not deliver to such holder (until otherwise instructed by such holder) (x)
any non-public information or non-public materials regarding the Company
(whether described in this Section 7.1 or otherwise) and (y) any information
(whether or not included in clause (x)) which such holder specifies that it does
not want to receive. The Company shall comply with any such request with respect
to each such Purchaser and any subsequent holders of Shares acquired directly or
indirectly (through one or more transfers) from such Purchaser, until instructed
otherwise by the then holder of such Shares.
7.2. Communication with Accountants.
The Company hereby authorizes any Purchaser to communicate directly
with the independent certified public accountants for the Company and authorizes
such accountants to disclose to such Purchaser any and all financial statements
and any other information of any kind that they may have with respect to the
assets, properties, liabilities, business, affairs, results of operations,
condition (financial or otherwise) or prospects of the Company. The Company
shall deliver a letter addressed to such accountants instructing them to comply
with the provisions of this Section 7.2.
7.3. Inspection.
So long as a holder of Series 2 Convertible Preferred Stock owns at
least 20,000 Shares, the Company will permit such holder and any authorized
representative of such holder, to visit and inspect any of the properties of the
Company, to examine their respective books and records and to discuss with their
officers their books and records and the assets, properties, liabilities,
business, affairs, results of operations, condition (financial or otherwise) or
prospects of the Company, all at such reasonable times, all on reasonable notice
and as often as may be reasonably requested.
7.4. Notices.
The Company will give notice to all holders of Shares promptly after
it learns (other than by notice from all of such holders) of the existence of
any of the following:
(a) any default under any Indebtedness (or under any indenture,
mortgage or other agreement relating to any Indebtedness) which Indebtedness is
in an aggregate principal
30
amount exceeding $250,000 (or the equivalent thereof in other currencies) in
respect of which the Company is liable;
(b) any action or proceeding which has been commenced or threatened
against the Company and which, if adversely determined, would have, individually
or in the aggregate, a material adverse effect on the assets, properties,
liabilities, business, affairs, results of operations, condition (financial or
otherwise) or prospects of the Company on a consolidated basis or the ability of
the Company to perform its obligations under the Stock Purchase Agreements, the
Series 1 Waiver, the Stockholders' Agreement, the Stockholders' Agreement
Amendment, the Registration Rights Agreement, the Registration Rights Amendment
or the Series 2 Certificate of Designations;
(c) any dispute which may exist between the Company and any
governmental regulatory body which, in the reasonable opinion of the Company is
reasonably likely to, individually or in the aggregate, materially adversely
affect the normal business operations of the Company or the assets, properties,
liabilities, business, affairs, results of operations, condition (financial or
otherwise) or prospects of the Company on a consolidated basis or the ability of
the Company to perform its obligations under the Stock Purchase Agreements, the
Series 1 Waiver, the Stockholders' Agreement, the Stockholders' Agreement
Amendment, the Registration Rights Agreement, the Registration Rights Amendment
or the Series 2 Certificate of Designations; and
(d) if any (i) "reportable event" (as such term is described in
Section 4043(c) of ERISA) has occurred; or (ii) "accumulated funding deficiency"
(within the meaning of Section 412(a) of the Code) has been incurred with
respect to a Pension Plan maintained or contributed to (or required to be
maintained or contributed to) by the Company or any ERISA Affiliate that is
subject to the funding requirements of ERISA and the Code or that an application
may be or has been made to the Secretary of the Treasury for a waiver or
modification of the minimum funding standard (including any required installment
payments) or an extension of any amortization period under Section 412 of the
Code, in each case with respect to such a Pension Plan; or (iii) Pension Plan
maintained or contributed to (or required to be maintained or contributed to) by
the Company or any ERISA Affiliate has been terminated, reorganized, petitioned
or declared insolvent under Title IV of ERISA; or (iv) Pension Plan maintained
or contributed to (or required to be maintained or contributed to) by the
Company or any ERISA Affiliate has an unfunded current liability giving rise to
a lien under ERISA or the Code; or (v) proceeding has been instituted pursuant
to Section 515 of ERISA to collect a delinquent contribution to a Pension Plan
maintained or contributed to (or required to be maintained or contributed to) by
the Company or any ERISA Affiliate; or (vi) of the Company or its ERISA
Affiliates will or may incur any liability (including any contingent or
secondary liability) to or on account of the termination or withdrawal from a
Pension Plan maintained or contributed to (or required to be maintained or
contributed to) by the Company or any ERISA Affiliate; or (vii) "prohibited
transaction" (as such term is defined in Section 406 of ERISA or Section 4975 of
the Code) in connection with an "employee benefit plan" (as defined in Section
3(3) of ERISA),
31
maintained or contributed to (or required to be maintained or contributed to) by
the Company or any ERISA Affiliate.
Such notice (i) with respect to (a), shall specify the nature and period of
existence of any such default and what the Company proposes to do with respect
thereto and (ii) with respect to (b), (c) or (d), shall specify the nature of
any such matter referred to in such clause, what action the Company proposes to
take with respect thereto and what action any other relevant Person is taking or
proposes to take with respect thereto.
7.5. Confidentiality Agreement.
The Company's obligation to provide any non-public information under
this Section 7 or otherwise to any person other than members of its Board of
Directors shall be subject to prior execution of a confidentiality agreement
between the Company and the recipient of such information as more fully set
forth in the form attached hereto as Exhibit F (the "Confidentiality
Agreement").
SECTION 8. AFFIRMATIVE COVENANTS
The Company covenants and agrees as follows:
8.1. Maintenance of Existence, Properties and Franchises;
Compliance with Law; Taxes; Insurance.
The Company will:
(a) maintain its corporate existence, rights and other franchises in
full force and effect;
(b) maintain its tangible assets in good repair, working order and
condition so far as necessary or advantageous to the proper carrying on of its
businesses;
(c) comply with all applicable laws and with all applicable orders,
rules, rulings, certificates, licenses, regulations, demands, judgments, writs,
injunctions and decrees, provided, that such compliance shall not be necessary
so long as (i) the applicability or validity of any such law, order, rule,
ruling, certificate, license, regulation, demand, judgment, writ, injunction or
decree shall be contested in good faith by appropriate proceedings and (ii)
failure to so comply will not have a material adverse effect on the assets,
properties, liabilities, business, affairs, results of operations, condition
(financial or otherwise) or prospects of the Company on a consolidated basis;
32
(d) pay promptly when due all Taxes imposed upon its properties,
assets or income and all claims or indebtedness (including, without limitation,
vendor's, workmen's and like claims) which might become a lien upon such
properties or assets; provided, that payment of any such Tax shall not be
necessary so long as (i) the applicability or validity thereof shall be
contested in good faith by appropriate proceedings and a reserve, if
appropriate, shall have been established with respect thereto and (ii) failure
to make such payment will not have a material adverse effect on the assets,
properties, liabilities, business, affairs, results of operations, condition
(financial or otherwise) or prospects of the Company on a consolidated basis;
and
(e) keep adequately insured, by financially sound and reputable
insurers of nationally recognized stature, all its properties of a character
customarily insured by entities similarly situated, against loss or damage of
the kinds and in amounts customarily insured against by such entities and with
such deductibles or coinsurance as is customary.
8.2. Office for Payment, Exchange and Registration; Location of
Office; Notice of Change of Name or Office.
(a) So long as any of the Shares is outstanding, the Company will
maintain an office or agency where Shares may be presented for redemption,
exchange, conversion, exercise or registration of transfer as provided in this
Agreement. Such office or agency initially shall be the office of the Company
specified in Section 17 hereof, subject to Section 8.2(b).
(b) The Company shall give each holder of Shares at least twenty
(20) days' prior written notice of any change in (i) the name of the Company as
then in effect or (ii) the location of the office of the Company required to be
maintained under this Section 8.2.
8.3. Fiscal Year.
The fiscal year of the Company for tax, accounting and any other
purposes shall end on December 31 of each calendar year.
8.4. Environmental Matters.
(a) The Company and shall keep and maintain any property either
owned leased, operated or occupied by the Company free and clear of any
Environmental Liens, and the Company shall keep all such property free of
Hazardous Material contamination and in compliance with all applicable
Environmental Laws and the terms and conditions of any Environmental Permits;
provided, however, that the Company shall have the right at its cost and
expense, and acting in good faith, to contest, object or appeal by appropriate
legal proceeding the validity of any Environmental Lien. The contest, objection
or appeal with respect to the validity of an Environmental Lien shall suspend
the Company's obligation to eliminate such Environmental Lien under this
paragraph pending a final determination by appropriate administrative or
judicial authority of the legality, enforceability or status of such
Environmental
33
Lien, provided that the following conditions are satisfied: (i)
contemporaneously with the commencement of such proceedings, the Company shall
give written notice thereof to each holder of Shares or Conversion Shares; and
(ii) if under applicable law any real property or improvements thereon are
subject to sale or forfeiture for failure to satisfy the Environmental Lien
prior to a final determination of the legal proceedings, the Company must
successfully move to stay such sale, forfeiture or foreclosure pending final
determination of the Company's action; and (iii) the Company must, if requested,
furnish to the holders of Shares or Conversion Shares a good and sufficient
bond, surety, letter of credit or other security satisfactory to such holders
equal to the amount (including any interest and penalty) secured by the
Environmental Lien.
(b) The Company will, by administrative or judicial process, enforce
the obligations of any other Person who is potentially liable for damages,
contribution or other relief in connection with any violation of Environmental
Laws, including, but not limited to, asbestos abatement, Hazardous Material
remediation or off-site or on-site disposal.
(c) The Company will defend, indemnify and hold harmless each
current, former and future holder of Shares or Conversion Shares, its employees,
officers, directors, stockholders, partners, financial and legal representatives
and assigns, from and against any liabilities, obligations, losses, damages,
penalties, actions, judgments, suits and claims, joint or several, and any
costs, disbursements and expenses (including attorneys' fees and expenses and
costs of investigation) of whatever kind or nature, known or unknown, contingent
or otherwise asserted against, imposed on, or sustained by, them, arising out of
or in any way related to (i) the presence, disposal, release, removal,
discharge, storage or transportation by the Company on behalf of any
predecessors thereof of any Hazardous Material upon, into, from or affecting any
real property (including improvements) currently or formerly owned, leased,
operated or occupied by the Company; (ii) any judicial or administrative action,
suit or proceeding, actual or threatened, relating to Hazardous Material upon,
in, from or affecting any real property (including improvements) currently or
formerly owned, leased, operated or occupied by the Company for which the
Company could be liable; (iii) any violation of any Environmental Law, by the
Company or any of their agents, tenants, subtenants or invitees; (iv) the
imposition of any Environmental Lien for the recovery of costs expended in the
investigation, study or remediation of any environmental liability of (or
asserted against) the Company; and (v) any liability arising out of or related
to the off-site shipment, disposal, treatment, handling or disposal of Hazardous
Materials. This Section 8.4(c) and Section 8.4(d) shall survive any payment,
conversion or transfer of Shares and any termination of this Agreement.
(d) To the extent that the Company is strictly liable without regard
to fault under any environmental law, regulation or ordinance, the Company's
obligations to the holders of Shares or Conversion Shares under any of the
indemnification provisions of the Stock Purchase Agreements shall likewise be
strict without regard to fault with respect to the violation of any
environmental law, regulation or ordinance which results in any liability to any
of the indemnified persons referred to in Section 8.4(c).
34
8.5. Reservation of Shares.
There have been reserved, and the Company shall at all times keep
reserved, free from preemptive rights, out of its authorized Common Stock a
number of shares of Common Stock sufficient to provide for the exercise of the
conversion rights provided in Section 5 of the Series 2 Certificate of
Designations.
8.6. Securities Exchange Act Registration.
(a) The Company will maintain effective a registration statement
(containing such information and documents as the Commission shall specify and
otherwise complying with the Securities Exchange Act), under Section 12(b) or
Section 12(g), whichever is applicable, of the Securities Exchange Act, with
respect to the Common Stock of the Company, and the Company will file on time
such information, documents and reports as the Commission may require or
prescribe for companies whose stock has been registered pursuant to such Section
12(b) or Section 12(g), whichever is applicable.
(b) The Company will, upon the request of any holder of Shares, make
whatever other filings with the Commission, or otherwise make generally
available to the public such financial and other information, as any such holder
may deem reasonably necessary or desirable in order to enable such holder to be
permitted to sell Shares pursuant to the provisions of Rule 144.
8.7. Delivery of Information for Rule 144A Transactions.
If a holder of Shares proposes to transfer any such Shares pursuant
to Rule 144A under the Securities Act (as in effect from time to time), the
Company agrees to provide (upon the request of such holder or the prospective
transferee) to such holder and (if requested) to the prospective transferee any
financial or other information concerning the Company which is required to be
delivered by such holder to any transferee of such Shares pursuant to such Rule
144A, subject to confidentiality provisions, if applicable.
8.8. Senior Securities.
The Company shall maintain the senior status of the Series 2
Convertible Preferred Stock such that it shall rank senior in all respects,
including the payment on limitation and redemption, to all other equity
securities of the Company, except that the Series 1 Preferred shall rank pari
passu with the Series 2 Convertible Preferred Stock.
8.9. Shelf Registration.
On or before June 30, 2000, the Company shall prepare and file with
the SEC a registration statement for an offering to be made on a delayed or
continuous basis pursuant to
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Rule 415 of the Securities Act (a "Shelf Registration") registering the resale
from time to time by the Purchaser Holders of all the Registrable Securities
(the "Initial Shelf Registration"). The registration statement shall be on Form
S-3 or another appropriate form permitting registration of such Registrable
Securities for resale by the Purchaser Holders. If the Initial Shelf
Registration or any Subsequent Shelf Registration ceases to be effective for any
reason at any time, the Company shall use its best efforts to obtain the prompt
withdrawal of any order suspending the effectiveness thereof, and in any event
shall within thirty (30) days of such cessation of effectiveness amend the Shelf
Registration in a manner reasonably expected to obtain the withdrawal of the
order suspending the effectiveness thereof, or to promptly file an additional
Shelf Registration covering all the Registrable Securities (a "Subsequent Shelf
Registration"). All fees and expenses incident to the Company's or any Purchaser
Holder's performance of or compliance with a Shelf Registration pursuant to this
Agreement shall be borne by the Company whether or not any of the Registration
Statements become effective. At such time that all Purchaser Holders are able to
sell their common stock under Rule 144 without any restrictions, then the
obligation of the Company to maintain the Shelf Registration pursuant to this
Section 8.9 shall terminate.
8.10. Further Assurances.
The Company will from time to time, upon the request of any
Purchaser Holder, promptly and duly execute and deliver any and all such further
instruments and documents as such holder may reasonably deem necessary or
desirable to obtain the full benefits of (i) the obligations of the Company
under this Agreement and (ii) the other rights and powers herein granted. Upon
the instructions from time to time of (I) any Purchaser Holder or (II) any
Transferee, provided that such Transferee holds not less than an aggregate of
20,000 Shares, the Company shall execute and cause to be filed any document or
filing presented to the Company in proper form for signing or filing, in each
case as the Purchaser Holder or such Transferee may reasonably deem necessary or
desirable in light of the Company's obligations under this Agreement, and the
Company shall pay or cause to be paid any filing or other fees in connection
therewith.
SECTION 9. NEGATIVE COVENANTS
So long as the Purchaser Holders hold any Shares (except as
otherwise provided in Section 9.2 herein), the Company covenants and agrees that
without the prior written consent of the holders of (A) at least 70% of
outstanding Shares with respect to Sections 9.1, 9.3 and 9.5 to 9.10 herein and
(B) at least 50% of the outstanding Shares with respect to Sections 9.2 and 9.4
herein:
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9.1. No Dilution or Impairment; No Changes in Capital Stock.
The Company will not, by amendment of its certificate of
incorporation or through any consolidation, merger, reorganization, transfer of
assets, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms of the
Stock Purchase Agreements, the Series 1 Waiver, the Series 2 Certificate of
Designations, the Registration Rights Agreement, the Registration Rights
Amendment, the Stockholders' Agreement or the Stockholders' Agreement Amendment.
The Company will at all times in good faith assist in the carrying out of all
such terms, and in the taking of all such action, as may be necessary or
appropriate in order to protect the rights of the holders of Shares (as such
rights are set forth in the Stock Purchase Agreements, Series 1 Waiver, the
Series 2 Certificate of Designations, the Registration Rights Agreement, the
Registration Rights Agreement Amendment, the Stockholders' Agreement and the
Stockholders' Agreement Amendment) against dilution or other impairment. Without
limiting the generality of the foregoing, the Company (a) will not issue any
shares or class or series of equity or equity-linked security, which is senior
to, or pari passu with, the Series 2 Convertible Preferred Stock as to dividend
payments or amounts payable in the event of liquidation or winding up of the
Company, (b) will not enter into any agreement or instrument which would
restrict or otherwise materially adversely affect the ability of the Company to
perform its obligations under the Stock Purchase Agreements, the Series 1
Waiver, the Stockholders' Agreement, the Stockholders' Agreement Amendment, the
Registration Rights Agreement, the Registration Rights Amendment or the Series 2
Certificate of Designations, (c) will not amend its certificate of incorporation
or by-laws in any manner which would impair or reduce the rights of the
Preferred Stock, including, without limitation, an amendment which would alter
or change the powers, privileges or preferences of the holders of the Series 2
Convertible Preferred Stock (including, without limitation, changing the Series
2 Certificate of Designations after any Shares have been called for redemption),
(d) except as otherwise provided in the Series 2 Certificate of Designations or
in accordance with Section 6(a) of the Series 1 Certificate of Designations, as
in effect on the date hereof, will not redeem, repurchase or otherwise acquire
any shares of capital stock of the Company or any other rights or options to
subscribe for or purchase any capital stock of the Company or any other
securities convertible into or exchangeable for capital stock of the Company,
(e) will not permit the par value or the determined or stated value of any
shares of Common Stock receivable upon the conversion of the Shares to exceed
the amount payable therefor upon such conversion, (f) will take all such action
as may be necessary or appropriate in order that the Company may at all times
validly and legally issue duly authorized, fully paid and nonassessable shares
of the Common Stock free from all taxes, Liens and charges with respect to the
issue thereof, upon the conversion of the Shares from time to time outstanding,
(g) will not take any action which results in any adjustment of the current
conversion price under the Series 2 Certificate of Designations if the total
number of shares of the Common Stock (or other securities) issuable after the
action upon the conversion of all of the then outstanding Shares would exceed
the total number of shares of Common Stock (or other securities) then authorized
by the Company's certificate of incorporation and available for the purpose of
issuance upon such conversion or exercise, (h) will not have any authorized
Common Stock (and will not issue any Common Stock) other than its
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existing authorized Common Stock, $.01 par value per share, and (i) will not
amend its certificate of incorporation to change any terms of its Common Stock.
9.2. Indebtedness.
So long as the Purchaser Holders hold at least 20% of the aggregate
number of shares of the Series 2 Convertible Preferred Stock purchased pursuant
to the Stock Purchase Agreements, the Company will not (i) incur Indebtedness,
excluding any Indebtedness set forth on Schedule 2 hereto, in excess of $20
million in aggregate principal amount; or (ii) enter into any agreement,
amendment or modification with respect to any Indebtedness, which agreement,
amendment or modification under clause (ii) restricts or prohibits (or was
intended primarily to restrict or prohibit) the Company from making any payments
under, or otherwise performing under the Stock Purchase Agreements.
9.3. Dissolution.
The Company will not (or will not agree to) wind up, liquidate or
dissolve its affairs.
9.4. No Change in Business.
The Company will not change substantially the character of its
business as conducted on the Closing Date as represented in Section 4.4 hereof
and described in the Disclosure Material.
9.5. Restricted Payments; Investments.
The Company will not declare or make or permit to be declared or
made:
(a) any Restricted Payment; or
(b) any Investment.
9.6. Affiliate Loans and Guaranties.
The Company may not incur or permit to exist any of the following:
(a) any obligation of the Company to repay money borrowed owing to
(i) any Affiliate of the Company or (ii) any other holder of shares of the
capital stock of the Company; or
(b) any obligation, to any Person, which obligation is assumed or
guaranteed by the Company and which is an obligation of (i) any Affiliate of the
Company or (ii) any other holder of shares of the capital stock of the Company
(excluding, in the case of this clause (b), any obligation of the Company which
is not owed to an Affiliate of the Company or to any other holder of shares of
the capital stock of the Company).
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This Section 9.6 shall not apply to (1) any obligations under the Stock Purchase
Agreements or with respect to the Shares, (2) any loans, advances or Guarantees
referred to in clause (1) of the proviso to the definition of "Investment"
contained in Section 3 hereof or (3) Indebtedness identified on Schedule 2
hereto.
9.7. Transactions with Affiliates.
The Company will not directly or indirectly, enter into any
transaction or agreement (including, without limitation, the purchase, sale,
distribution, lease or exchange of any property or the rendering of any service)
with any Affiliate of the Company, unless such transaction or agreement (a) is
approved by a majority of the Outside Directors on the Board of Directors, and
(b) is on terms that are no less favorable to the Company, as the case may be,
than those which might be obtained at the time of such transaction from a Person
who is not such an Affiliate; provided, however, that this Section 9.7 shall not
limit, or be applicable to, (i) employment arrangements with (and general salary
and benefits compensation for) any individual who is a full-time employee of the
Company if such arrangements are approved by a majority of the Outside Directors
on the Board of Directors; (ii) the payment of reasonable and customary regular
fees to directors of the Company who are not employees of the Company; (iii)
existing arrangements as disclosed on the Disclosure Schedule; and (iv) the
transactions expressly contemplated by this Agreement.
9.8. Liens.
The Company will not create or permit to exist, to create or suffer
to exist, any Lien upon or with respect to any of its assets or income, other
than Permitted Liens and existing liens set forth on Schedule 5 hereto.
9.9. Private Placement Status.
Neither the Company nor any agent nor other Person acting on the
Company's behalf will do or cause to be done (or will omit to do or to cause to
be done) any act which act (or which omission) would result in bringing the
issuance or sale of the Shares or the Conversion Shares within the provisions of
Section 5 of the Securities Act or the filing, notification or reporting
requirements of any state securities law (other than in accordance with a
registration and qualification of Conversion Shares pursuant to the Registration
Rights Agreement).
9.10. Maintenance of Public Market.
The Company will not proceed with a program of acquisition of its
Common Stock, initiate a corporate reorganization or recapitalization or
undertake a consolidation or merger or authorize, consent to or take any action
which would have the effect of:
39
(a) removing the Company from registration with the Commission under
the Securities Exchange Act with respect to the Company's Common Stock;
(b) requiring the Company to make a filing under Section 13(e) of
the Securities Exchange Act;
(c) reducing substantially or eliminating the public market for
shares of Common Stock of the Company;
(d) causing a delisting of the Company's Common Stock as a Small Cap
Market Security on the NASDAQ Stock Market (unless such stock is delisted as a
result of being listed on the NASDAQ National Market or a national securities
exchange); or
(e) if any shares of the Company's Common Stock are at any time
listed on a national exchange, causing a delisting of such stock from such
exchange.
9.11. Actions Prior to the Closing Date.
From the date hereof through the Closing Date, the Company will not,
(a) issue or agree to issue any capital stock or any securities exercisable for,
or convertible or exchangeable into, capital stock or (b) purchase, redeem or
otherwise acquire any of its capital stock; provided, however, that this Section
9.11 shall not limit, or be applicable to, (i) the transactions contemplated by
the Stock Purchase Agreements, including any issuance of capital stock in
connection with the transactions contemplated by Sections 9.1 and 9.10 hereof,
(ii) grants of options or issuances of Common Stock to officers, directors or
employees of the Company pursuant to the current terms of the Company's 1995
Stock Incentive Plan and (iii) the conversion of the Series 1 Preferred or the
exercise of existing warrants.
SECTION 10. CONDITIONS TO PURCHASER'S OBLIGATIONS
Purchaser's obligation to purchase Shares hereunder is subject to
satisfaction of the following conditions at the Closing (any of which may be
waived by Purchaser):
10.1. Series 2 Certificate of Designations; Series 1 Waiver;
Stockholders' Agreement; Registration Rights Agreement.
(a) The certificate of incorporation of the Company shall have been
duly amended by the filing of the Series 2 Certificate of Designations in the
form of Exhibit A-1 hereto.
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(b) The Company, the Purchasers and the other stockholders of the
Company named therein shall have entered into the Stockholders' Agreement
Amendment substantially in the form of Exhibit C hereto.
(c) The Company shall have entered into a Registration Rights
Agreement with the Purchasers substantially in the form of Exhibit D-1 hereto,
and the Company, the Purchasers and certain other stockholders of the Company
shall have entered into the Registration Rights Amendment substantially in the
form of Exhibit D-2 hereto.
(d) The Company, the Purchasers and certain other stockholders of
the Company shall have entered into the Series 1 Waiver substantially in the
form of Exhibit A-2 hereto.
10.2. Certificates for Shares.
The Purchaser shall concurrently receive the certificates for Shares
contemplated by Section 2(b) hereof.
10.3. Senior Status.
The Company shall have taken all of the necessary actions, including
the amendment of the appropriate existing agreements, so that, except as
provided in this Section 10.3, the Series 2 Convertible Preferred Stock shall
rank senior in all respects, including the payment on limitation and redemption,
to all other equity securities of the Company, except that the Series 1
Preferred shall rank pari passu with the Series 2 Convertible Preferred Stock.
10.4. Accuracy of Representations and Warranties.
The representations and warranties of the Company contained in the
Stock Purchase Agreement herein or in any certificate or document delivered
pursuant hereto shall be correct and complete on and as of the Closing Date with
the same effect as though made on and as of such date.
10.5. Compliance with Agreements.
The Company shall have performed and complied in all material
respects with all agreements, covenants and conditions contained in the Stock
Purchase Agreements and any other document contemplated hereby or thereby which
are required to be performed or complied with by the Company on or before the
Closing Date.
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10.6. Officers' Certificates.
The Purchaser shall have received a certificate dated the Closing
Date and signed by the President or Chief Executive Officer and by the Secretary
or the Treasurer of the Company, to the effect that the conditions of Sections
10.4, 10.5, 10.8 (second sentence only) and 10.10 have been satisfied.
10.7. Proceedings.
All corporate and other proceedings in connection with the
transactions contemplated by the Stock Purchase Agreements, and all documents
incident thereto, shall be in form and substance satisfactory to the Purchaser
and its counsel, and the Purchaser shall have received all such originals or
certified or other copies of such documents as the Purchaser or its counsel may
reasonably request.
10.8. Legality; Governmental and Other Authorization.
The purchase of and payment for the Shares shall not be prohibited
by any law or governmental order, rule, ruling, regulation, release,
interpretation or opinion applicable to the Purchaser and shall not subject the
Purchaser to any penalty, tax, liability or other onerous condition. Any
necessary consents, approvals, licenses, permits, orders and authorizations of,
and any filings, registrations or qualifications with, any governmental or
administrative agency or other Person, with respect to the transactions
contemplated by the Stock Purchase Agreements shall have been obtained or made
and shall be in full force and effect. The Company shall have delivered to the
Purchaser, upon its reasonable request setting forth what is required, factual
certificates or other evidence, in form and substance satisfactory to the
Purchaser and its counsel, to enable the Purchaser to establish compliance with
this condition.
10.9. No Material Adverse Change.
There shall have been no material adverse change in the assets,
properties, liabilities, business, affairs, results of operations, condition
(financial or otherwise) or prospects of the Company on a consolidated basis
since December 31, 1999.
10.10. Opinion of Counsel.
The Purchaser shall have received an opinion, dated the Closing Date
and addressed to the Purchasers, of Blank Rome Xxxxxxx & XxXxxxxx LLP, counsel
for the Company, which opinion shall be in form and substance satisfactory to
the Purchaser and its counsel and shall be to the effect set forth in Exhibit E
hereto.
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10.11. Acceptance of Agent for Service of Process.
CSC, The United States Corporation Company shall have accepted its
appointment as the Company's agent in New York to receive service of process
pursuant to Section 18(i) hereof.
10.12. Other Documents and Opinions.
The Purchaser shall have received such other documents and opinions,
in form and substance reasonably satisfactory to the Purchaser and its counsel,
relating to matters incident to the transactions contemplated hereby as the
Purchaser may reasonably request.
SECTION 11. BREACH OF REPRESENTATIONS, WARRANTIES AND COVENANTS
(a) The representations, warranties, covenants and agreements of the
Company and the Purchaser contained in this Agreement, the Series 1 Waiver, the
Stockholders' Agreement, the Stockholders' Agreement Amendment, the Registration
Rights Agreement, the Registration Rights Amendment or in any document or
certificate delivered pursuant hereto or thereto or in connection herewith shall
survive for a period of two (2) years from the Closing Date, and shall continue
in effect following, the execution and delivery of the Stock Purchase
Agreements, the Series 1 Waiver, the Stockholders' Agreement, the Registration
Rights Agreement, the Registration Rights Amendment, the closings hereunder and
thereunder, any investigation at any time made by the Purchaser or on its behalf
or by any other Person, the issuance, sale and delivery of the Shares, any
disposition thereof and any payment, conversion or cancellation of the Shares;
provided that Section 9 shall terminate upon conversion of all of the Shares (or
as earlier provided therein). All statements contained in any certificate or
other document delivered by or on behalf of the Company pursuant hereto shall
constitute representations and warranties by the Company hereunder.
(b) The Company agrees to indemnify and hold the Purchaser harmless
from and against and will pay to the Purchaser the full amount of any loss,
damage, liability or expense (including amounts paid in settlement and
reasonable attorneys' fees and expenses) to the Purchaser resulting either
directly or indirectly from any breach of the representations, warranties,
covenants or agreements of the Company contained in any Stock Purchase
Agreement, or in the Stockholders' Agreement, the Stockholders' Agreement
Amendment, the Registration Rights Agreement, the Registration Rights Amendment
or any other document or certificate delivered pursuant hereto or thereto or in
connection herewith or therewith.
SECTION 12. SPECIFIC PERFORMANCE
The parties agree that irreparable damage will result in the event
that this Agreement is not specifically enforced, and the parties agree that any
damages available at law for a breach of this Agreement would not be an adequate
43
remedy. Therefore, the provisions hereof and the obligations of the parties
hereunder shall be enforceable in a court of equity, or other tribunal with
jurisdiction, by a decree of specific performance, and appropriate injunctive
relief may be applied for and granted in connection therewith. Such remedies and
all other remedies provided for in this Agreement shall, however, be cumulative
and not exclusive and shall be in addition to any other remedies which a party
may have under this Agreement or otherwise.
SECTION 13. EXPENSES
(a) Whether or not the transactions herein contemplated are
consummated, the Company shall pay (i) the costs, fees and expenses of the
Company and its counsel in connection with the Stock Purchase Agreements, the
Series 2 Certificate of Designations, the Series 1 Waiver, the Stockholders'
Agreement, the Stockholders' Agreement Amendment, the Registration Rights
Agreement, and the Registration Rights Amendment, other related documentation
and the issuance of the Shares and the Conversion Shares and the furnishing of
all opinions by counsel for the Company, (ii) the costs, fees and expenses of
Xxxxxx, Xxxxx & Bockius LLP in connection with the Stock Purchase Agreements,
the Series 2 Certificate of Designations, the Series 1 Waiver, the Stockholders'
Agreement, the Stockholders' Agreement Amendment, the Registration Rights
Agreement and the Registration Rights Amendment, other related documentation and
the transactions contemplated hereby and thereby (whether or not a Closing
occurs hereunder); provided, however, that such fees and expenses shall not
exceed $45,000 without the approval of the Company, (iii) the fees and expenses
of counsel to the Purchasers in connection with any amendments to or
modifications or waivers of any provisions of the Stock Purchase Agreements, the
Series 1 Waiver, the Series 2 Certificate of Designations, the Stockholders'
Agreement, the Stockholders' Agreement Amendment, the Registration Rights
Agreement or the Registration Rights Amendment, other related documentation or
in connection with any other agreements between the Purchasers and the Company
and (iv) the fees and expenses (including attorneys' fees and expenses) of any
holder of Shares or Conversion Shares in enforcing its rights against the
Company if the Company defaults in its obligations hereunder, under the Series 1
Waiver, Series 2 Certificate of Designations, the Stockholders' Agreement, the
Stockholders' Agreement Amendment, the Registration Rights Agreement or the
Registration Rights Amendment.
44
(b) In addition to all other sums due hereunder or provided for in
this Agreement, the Company shall pay to the Purchaser or its agents,
respectively, an amount sufficient to indemnify such persons (net of any Taxes
on any indemnity payments) against all reasonable costs and expenses (including
reasonable attorneys' fees and expenses and reasonable costs of investigation)
and damages and liabilities incurred by the Purchaser or its agents pursuant to
any investigation or proceeding against any or all of the Company, the
Purchasers, or their agents, arising out of or in connection with the Stock
Purchase Agreements, the Series 1 Waiver, the Stockholders' Agreement, the
Stockholders' Agreement Amendment, the Registration Rights Agreement, the
Registration Rights Amendment or purchase of the Shares (or any transaction
contemplated hereby or thereby or any other document or instrument executed
herewith or therewith or pursuant hereto or thereto), whether or not the
transactions contemplated by this Agreement are consummated, which investigation
or proceeding requires the participation of the Purchaser or its agents or is
commenced or filed against the Purchaser or its agents because of the Stock
Purchase Agreements, the Series 1 Waiver, the Stockholders' Agreement, the
Stockholders' Agreement Amendment, the Registration Rights Agreement, the
Registration Rights Amendment, the purchase of the Shares or any of the
transactions contemplated hereby or thereby (or any other document or instrument
executed herewith or therewith or pursuant hereto or thereto), other than any
investigation or proceeding in which it is finally determined that there was (i)
gross negligence or willful misconduct on the part of the Purchaser or its
agents, (ii) a material breach by Purchaser of any of its representations or
warranties contained herein, (iii) a material breach by Purchaser of any
provision of any confidentiality agreement between the Company and the
Purchaser, in any case, which was not taken by them in reliance upon any of the
Company's representations, warranties, covenants or agreements in the Stock
Purchase Agreements, the Series 1 Waiver, the Stockholders' Agreement, the
Stockholders' Agreement Amendment, the Registration Rights Agreement, the
Registration Rights Amendment, or in any other documents or instruments
contemplated hereby or thereby or executed herewith or therewith or pursuant
hereto or thereto. The Company shall assume the defense, and shall have its
counsel represent the Purchaser and such agents, in connection with
investigating, defending or preparing to defend any such action, suit, claim or
proceeding (including any inquiry or investigation); provided, however, that the
Purchaser, or any such agent, shall have the right (without releasing the
Company from any of its obligations hereunder) to employ its own counsel and
either to direct its own defense or to participate in the Company's defense, but
the fees and expenses of such counsel shall be at the expense of such person
unless (i) the employment of such counsel shall have been authorized in writing
by the Company in connection with such defense, (ii) the Company shall not have
provided its counsel to take charge of such defense or (iii) there may be
defenses available to the Purchaser, or such agent of the Purchaser which are
different from or additional to those available to the Company, then in any of
such events referred to in clauses (i), (ii) or (iii) such counsel fees and
expenses (but only for one counsel for the Purchaser and its agents) shall be
borne by the Company. Any settlement of any such action, suit, claim or
proceeding shall require the consent of both the Company and such indemnified
person (neither of which shall unreasonably withhold its consent).
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(c) The Company agrees to pay, or to cause to be paid, all
documentary, stamp and other similar Taxes, other than transfer taxes payable
upon the transfer by the Purchaser of Shares to a Transferee, levied under the
laws of the United States of America, any state or local Taxing Authority
thereof or therein or any other applicable jurisdiction in connection with the
issuance and sale of the Shares and the execution and delivery of the Stock
Purchase Agreements, the Series 1 Waiver, the Stockholders' Agreement, the
Stockholders' Agreement Amendment, the Registration Rights Agreement, the
Registration Rights Amendment and any other documents or instruments
contemplated hereby or thereby and any modification of the Series 2 Certificate
of Designations, the Series 1 Waiver, the Stockholders' Agreement, the
Stockholders' Agreement Amendment, the Registration Rights Agreement, the
Registration Rights Amendment or the Stock Purchase Agreements or any such other
documents or instruments and will hold the Purchaser harmless without limitation
as to time against any and all liabilities with respect to all such Taxes.
(d) The obligations of the Company under this Section 13 shall
survive any Closing hereunder and any termination of the Stock Purchase
Agreements.
SECTION 14. DIRECT PAYMENTS
As long as the Purchaser or any institutional holder which is a
direct or indirect transferee (as a result of one or more transfers) from the
Purchaser shall be the holder of any Shares, the Company will make all
redemption payments, liquidation payments and other distributions by wire
transfer to the Purchaser's or such other holder's (or its nominee's) account at
any bank or trust company, notwithstanding any contrary provision herein or in
the Company's certificate of incorporation with respect to the place of payment.
The Purchaser has provided an address on Schedule 1 hereto for payments by wire
transfer, and such address may be changed for the Purchaser or any subsequent
holder by notice to the Company. All such payments shall be made in U.S. dollars
and in federal or other immediately available funds.
SECTION 15. AMENDMENTS AND WAIVERS
(a) The terms and provisions of this Agreement may be amended,
waived, modified or terminated only with the written consent of the holders of
more than 70% of outstanding Shares; provided, however, that no such amendment,
waiver, modification or termination shall change this Section 15(a) without the
written consent of the holders of all the Shares and Conversion Shares then
outstanding.
(b) Promptly after obtaining the written consent of the holders as
herein provided, the Company shall transmit a copy of any amendment, waiver,
modification or termination which has been adopted to all holders of Shares and
Conversions Shares then
46
outstanding, but failure to transmit copies shall not in any way affect the
validity of any such amendment, waiver, modification or termination.
SECTION 16. EXCHANGE OF SHARES; CANCELLATION OF SURRENDERED SHARES; REPLACEMENT
(a) Subject to Section 6 hereof, at any time at the request of any
holder of Shares to the Company at its address provided under Section 17 hereof,
the Company at its expense (except for any transfer tax arising out of the
exchange) will issue and deliver to or upon the order of the holder in exchange
therefor a new certificate or certificates in such amount or amounts as such
holder may request in the aggregate representing the number of Shares
represented by such surrendered certificates, and registered in the name of such
holder or as such holder may direct.
(b) Any Share certificate which is converted into Conversion Shares
in whole or in part shall be canceled by the Company, and no new Share
certificates shall be issued in lieu of any Shares which have been converted
into Conversion Shares. The Company shall issue a new certificate with respect
to any Shares which were not converted into Conversion Shares and were
represented by a certificate which was converted in part.
(c) Upon receipt of evidence satisfactory to the Company of the
loss, theft, destruction or mutilation of any Share certificate and, in the case
of any such loss, theft or destruction, upon delivery of an indemnity agreement
reasonably satisfactory to the Company (if requested by the Company and
unsecured in the case of the Purchaser or another similar institutional holder),
or in the case of any such mutilation, upon surrender of such Share certificate
(which surrendered Share certificate shall be cancelled by the Company), the
Company will issue a new Share certificate of like tenor in lieu of such lost,
stolen, destroyed or mutilated Share certificate as if the lost, stolen,
destroyed or mutilated Share certificate were then surrendered for exchange.
SECTION 17. NOTICES
All notices, requests, demands, consents and other communications
hereunder shall be in writing and shall be delivered by hand or shall be sent by
telex or telecopy (confirmed by registered, certified or overnight mail or
courier, postage and delivery charges prepaid), (i) if to the Company, to Impax
Laboratories, Inc., 00000 Xxxxxxxx Xxxxxx, Xxxxxxx, Xxxxxxxxxx 00000, Attention:
Xxxxx X. Xxxxxxx, Co-Chief Executive, with a copy to Blank Rome Xxxxxxx &
XxXxxxxx LLP, Xxx Xxxxx Xxxxxx, Xxxxxxxxxxxx, XX 00000-0000, Attention: Xxx X.
Xxxxxxx or (ii) if to the Purchaser, at the address indicated on Schedule 1
hereto, with a copy to Xxxxxx, Xxxxx & Bockius LLP, 000 Xxxx Xxxxxx, Xxx Xxxx,
XX 00000-0000, Attention: Xxxxx X. Xxxxxx, Esq., or at such other address as a
party may from time to time designate as its address in
47
writing to the other party to this Agreement. Whenever any notice is required to
be given hereunder, such notice shall be deemed given and such requirement
satisfied only when such notice is delivered or, if sent by telex or telecopier,
when received.
SECTION 18. MISCELLANEOUS
(a) The Stock Purchase Agreements, Series 1 Waiver, the
Stockholders' Agreement, the Stockholders' Agreement Amendment, the Registration
Rights Agreement, the Registration Rights Amendment and, upon any closing
hereunder and the Series 2 Certificate of Designations together with any further
agreements entered into by the Purchaser and the Company at any closing
hereunder, contain the entire agreement between the Purchaser and the Company,
and supersede any prior oral or written agreements, commitments, terms or
understandings, regarding the subject matter hereof.
(b) Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. To the extent permitted by applicable law, the parties
hereby waive any provision of law which may render any provision hereof
prohibited or unenforceable in any respect.
(c) This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns, whether so
expressed or not; provided, that (a) the Company may not assign any of its
rights, duties or obligations under this Agreement, except with the Purchaser's
written consent, and (b) the Purchaser may assign any of its rights, duties or
obligations under this Agreement to a purchaser of its Shares, provided that
such purchaser is reasonably acceptable to the Company.
(d) In addition to any assignment by operation of law, the Purchaser
may assign, in whole or in part, any or all of its rights (and/or obligations)
under this Agreement to any permitted transferee of any or all of its Shares or
Conversion Shares and (unless such assignment expressly provides otherwise) any
such assignment shall not diminish the rights the Purchaser would otherwise have
under this Agreement or with respect to any remaining Shares or Conversion
Shares held by the Purchaser.
(e) No course of dealing and no delay on the part of any party
hereto in exercising any right, power, or remedy conferred by this Agreement
shall operate as a waiver thereof or otherwise prejudice such party's rights,
powers and remedies. No single or partial exercise of any right, power or remedy
conferred by this Agreement shall preclude any other or further exercise thereof
or the exercise of any other right, power or remedy.
48
(f) The headings and captions in this Agreement are for convenience
of reference only and shall not define, limit or otherwise affect any of the
terms or provisions hereof.
(g) This Agreement shall be governed by, and construed in accordance
with, the laws of the State of New York (other than any conflict of laws rule
which might result in the application of the laws of any other jurisdiction).
(h) This Agreement may be executed by the parties hereto in separate
counterparts, each of which when so executed and delivered shall be an original,
but all such counterparts shall together constitute one and the same instrument,
and all signatures need not appear on any one counterpart.
(i) THE COMPANY HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE OR
FEDERAL COURT LOCATED WITHIN THE COUNTY OF NEW YORK, STATE OF NEW YORK AND
IRREVOCABLY AGREES THAT, SUBJECT TO THE PURCHASER'S ELECTION, ALL ACTIONS OR
PROCEEDINGS RELATING TO THIS AGREEMENT, THE SERIES 1 WAIVER, THE SERIES 2
CERTIFICATE OF DESIGNATIONS, THE STOCKHOLDERS' AGREEMENT, THE STOCKHOLDERS'
AGREEMENT AMENDMENT, THE REGISTRATION RIGHTS AGREEMENT, THE REGISTRATION RIGHTS
AMENDMENT, THE SHARES OR THE CONVERSION SHARES MAY BE LITIGATED IN SUCH COURTS.
THE COMPANY ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY
AND UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND
WAIVES ANY DEFENSE OF FORUM NON CONVENIENS, AND IRREVOCABLY AGREES TO BE BOUND
BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT, THE SERIES 1
WAIVER, THE SERIES 2 CERTIFICATE OF DESIGNATIONS, THE STOCKHOLDERS' AGREEMENT,
THE STOCKHOLDERS' AGREEMENT AMENDMENT, THE REGISTRATION RIGHTS AGREEMENT, THE
REGISTRATION RIGHTS AMENDMENT, THE SHARES OR THE CONVERSION SHARES. THE COMPANY
DESIGNATES AND APPOINTS CSC, THE UNITED STATES CORPORATION COMPANY, AND SUCH
OTHER PERSONS AS MAY HEREAFTER BE SELECTED BY THE COMPANY AND WHICH IRREVOCABLY
AGREE IN WRITING TO SO SERVE AS ITS AGENT, TO RECEIVE ON ITS BEHALF SERVICE OF
ALL PROCESS IN ANY SUCH PROCEEDING IN ANY SUCH COURT, SUCH SERVICE BEING HEREBY
ACKNOWLEDGED BY THE COMPANY TO BE EFFECTIVE AND BINDING SERVICE IN EVERY
RESPECT. A COPY OF ANY SUCH PROCESS SO SERVED SHALL BE MAILED BY REGISTERED MAIL
TO THE COMPANY AT THE ADDRESS OF THE COMPANY PROVIDED HEREUNDER EXCEPT THAT
UNLESS OTHERWISE PROVIDED BY APPLICABLE LAW, ANY FAILURE TO MAIL SUCH COPY SHALL
NOT AFFECT THE VALIDITY OF SERVICE OF PROCESS. AS AN ALTERNATIVE TO SERVICE OF
PROCESS ON SUCH AGENT (WHETHER OR NOT ANY SUCH AGENT HAS BEEN APPOINTED), THE
COMPANY HEREBY AGREES THAT SERVICE UPON IT BY MAIL
49
SHALL CONSTITUTE SUFFICIENT NOTICE AND SERVICE OF PROCESS. NOTHING HEREIN SHALL
AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL
LIMIT THE RIGHT OF THE PURCHASER TO BRING PROCEEDINGS OR OBTAIN OR ENFORCE
JUDGMENTS AGAINST THE COMPANY IN THE COURTS OF ANY OTHER JURISDICTION.
(j) THE COMPANY AND THE PURCHASER HEREBY WAIVE THEIR RESPECTIVE
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT
OF THIS AGREEMENT, THE SERIES 1 WAIVER, THE SERIES 2 CERTIFICATE OF
DESIGNATIONS, THE STOCKHOLDERS' AGREEMENT, THE STOCKHOLDERS' AGREEMENT
AMENDMENT, THE REGISTRATION RIGHTS AGREEMENT, THE REGISTRATION RIGHTS AGREEMENT
AMENDMENT, THE SHARES OR THE CONVERSION SHARES, OR ANY DEALINGS BETWEEN THEM
RELATING TO THE SUBJECT MATTER OF THIS TRANSACTION. THE COMPANY AND THE
PURCHASER ALSO WAIVE ANY BOND OR SURETY OR SECURITY UPON SUCH BOND WHICH MIGHT,
BUT FOR THIS WAIVER, BE REQUIRED OF THE PURCHASER. THE SCOPE OF THIS WAIVER IS
INTENDED TO BE ALL- ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN
ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION, INCLUDING,
WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL
OTHER COMMON LAW AND STATUTORY CLAIMS. THE COMPANY AND THE PURCHASER FURTHER
WARRANT AND REPRESENT THAT EACH HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL,
AND THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING
CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY
NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO (OR ASSIGNMENTS
OF) THIS AGREEMENT, THE SERIES 1 WAIVER, THE SERIES 2 CERTIFICATE OF
DESIGNATIONS, THE STOCKHOLDERS' AGREEMENT, THE STOCKHOLDERS' AGREEMENT
AMENDMENT, THE REGISTRATION RIGHTS AGREEMENT, THE REGISTRATION RIGHTS AMENDMENT,
THE SHARES OR THE CONVERSION SHARES. IN THE EVENT OF LITIGATION, THIS AGREEMENT
MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL (WITHOUT A JURY) BY THE COURT.
[remainder of page intentionally left blank]
50
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the date first above written.
IMPAX LABORATORIES, INC.
By /s/ Xxxxx X. Xxxxxxx
---------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Co-Chief Executive Officer
Accepted and Agreed to as of the
date first above written by the
undersigned Purchaser:
CHEMICAL COMPANY OF MALAYSIA BERHAD
By /s/ Oh Xxx Xxx
---------------------------------------
Name: Oh Xxx Xxx
Title: Director