EXHIBIT 2
STOCK PURCHASE AGREEMENT
BETWEEN
PHARMACEUTICAL RESOURCES, INC.
AND
LIPHA AMERICAS, INC.
DATED MARCH 25, 1998
TABLE OF CONTENTS
Page
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SECTION 1. Closing Transactions............................................................................2
1.1 Purchase and Sale of Shares.....................................................................2
1.2 The Closing.....................................................................................2
1.3 Closing Deliveries..............................................................................2
SECTION 2. Representations and Warranties of the Company...................................................3
2.1 Organization....................................................................................3
2.2 Authorization...................................................................................3
2.3 Non-contravention...............................................................................4
2.4 Authorization of the Shares.....................................................................4
2.5 Capitalization..................................................................................4
2.6 Reports Under the Exchange Act..................................................................5
2.7 No Brokers or Finders...........................................................................5
2.8 Governmental Authorizations; Third-Party Consents...............................................5
2.9 Financial Statements............................................................................5
2.10 Absence of Material Adverse Effect..............................................................5
2.11 Subsidiaries; Other Equity Interests............................................................6
2.12 No Third-Party Options..........................................................................6
2.13 Employee Matters................................................................................6
2.14 Permits.........................................................................................8
2.15 Intellectual Property...........................................................................8
2.16 No Pending Litigation or Proceedings............................................................8
2.17 Insurance Coverage..............................................................................9
2.18 Compliance with Laws............................................................................9
2.19 Environmental Matters...........................................................................9
2.20 Tax Returns and Taxes..........................................................................10
2.21 Outstanding Registration Rights................................................................11
2.22 Certain Beneficial Owners......................................................................12
2.23 FDA Compliance.................................................................................12
2.24 Reliance.......................................................................................12
SECTION 3. Representations and Warranties of the Purchaser................................................13
3.1 Organization...................................................................................13
3.2 Authorization..................................................................................13
3.3 Non-contravention..............................................................................13
3.4 No Brokers or Finders..........................................................................13
3.5 Governmental Authorizations; Third-Party Consents..............................................13
3.6 Investment Representations.....................................................................14
SECTION 4. Conditions to the Company's Obligation........................................................14
4.1 Representations and Warranties.................................................................14
4.2 Performance of Obligations.....................................................................15
4.3 Opinion of Counsel.............................................................................15
4.4 No Litigation or Legislation...................................................................15
4.5 Clal Sale of Shares............................................................................15
4.6 HSR Act........................................................................................15
4.7 Distribution Agreement in Effect...............................................................15
4.8 Shareholders' Approval.........................................................................15
4.9 Fairness Opinion...............................................................................15
4.10 Purchase Price and Other Closing Deliveries....................................................15
4.11 Consents and Waivers...........................................................................16
4.12 Services Agreements............................................................................16
4.13 Purchaser Board Approval.......................................................................16
SECTION 5. Conditions to the Purchaser's Obligation.......................................................16
5.1 Representations and Warranties................................................................16
5.2 Performance of Obligations.....................................................................16
5.3 Opinion of Counsel.............................................................................16
5.4 No Litigation or Legislation...................................................................16
5.5 HSR Act........................................................................................16
5.6 Board Resignations.............................................................................17
5.7 No Material Adverse Effect.....................................................................17
5.8 ISRA...........................................................................................17
5.9 Shareholders' Approval.........................................................................17
5.10 Closing Deliveries.............................................................................17
5.11 Distribution Agreement.........................................................................17
5.12 Services Agreements; Options...................................................................17
5.13 Board Approval.................................................................................17
5.14 Option Standstill Agreements...................................................................17
5.15 Section 7.10 Agreement.........................................................................17
5.16 Clal Share Purchase............................................................................18
SECTION 6. Covenants of the Parties.......................................................................18
6.1 Xxxx-Xxxxx-Xxxxxx Notification.................................................................18
6.2 Publicity......................................................................................18
6.3 Confidentiality................................................................................18
6.4 Further Assurances.............................................................................19
SECTION 7. Covenants of the Company.......................................................................19
7.1 Exchange Act Filings...........................................................................19
7.2 Proxy Statement; Meeting; Listing Applications.................................................19
7.3 Board Representation...........................................................................19
7.4 Environmental Matters..........................................................................21
7.5 Conduct of Business Prior to Closing...........................................................21
7.6 Options, Warrants or Other Stock Rights........................................................22
7.7 Other Agreements...............................................................................22
7.8 Right of First Refusal.........................................................................22
7.9 Appointment of COO.............................................................................22
7.10 Agreement of the Chairman of the Company.......................................................22
7.11 Rights Agreement...............................................................................23
7.12 U.S. Real Property Holding Corporation.........................................................23
SECTION 8. Covenants of the Purchaser.....................................................................23
8.1 Company Designees..............................................................................23
8.2 No Modification................................................................................23
8.3 Other Agreements...............................................................................24
8.4 Related Party Transactions.....................................................................24
8.5 Business Combinations..........................................................................24
8.6 Executive Committee............................................................................24
SECTION 9. Transfer of Securities.........................................................................24
9.1 Transfer Restrictions..........................................................................24
9.2 Legends........................................................................................25
SECTION 10. Exchanges; Lost, Stolen or Mutilated Certificates..............................................25
SECTION 11. Survival of Representations, Warranties and Agreements.........................................25
SECTION 12. Indemnification................................................................................25
12.1 Indemnitors; Indemnified Persons...............................................................25
12.2 Company Indemnity..............................................................................26
12.3 Purchaser Indemnity............................................................................26
12.4 Defense........................................................................................27
12.5 Purchaser Claims...............................................................................27
12.6 Exclusive Remedy...............................................................................27
SECTION 13. Miscellaneous..................................................................................28
13.1 Expenses.......................................................................................28
13.2 Assignment; Binding Effect.....................................................................28
13.3 Entire Agreement...............................................................................28
13.4 Notices........................................................................................29
13.5 Amendments; Waiver.............................................................................29
13.6 Counterparts...................................................................................29
13.7 Headings.......................................................................................29
13.8 Governing Law..................................................................................29
13.9 Severability...................................................................................29
13.10 Consent to Jurisdiction........................................................................30
13.11 Termination....................................................................................30
13.12 Injunctive Relief..............................................................................31
STOCK PURCHASE AGREEMENT, dated March 25, 1998, between Pharmaceutical
Resources, Inc., a New Jersey corporation (the "Company"), whose principal
offices are located at Xxx Xxx Xxxxx Xxxx, Xxxxxx Xxxxxx, Xxx Xxxx 00000, and
Lipha Americas, Inc., a Delaware corporation (the "Purchaser"), whose principal
offices are located at 0000 Xxxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxxx 00000.
WHEREAS, the Company desires to issue and sell to the Purchaser, and
the Purchaser desires to purchase from the Company, 10,400,000 restricted shares
(the "Shares") of the Company's common stock, par value $.01 per share ("Common
Stock");
WHEREAS, concurrently with the execution and delivery of this
Agreement, Merck KGaA, an affiliate of the Purchaser ("Merck"), and Clal
Pharmaceutical Industries, Ltd. ("Clal") are entering into a stock purchase
agreement pursuant to which Merck (or its designees) will, subject to the terms
and conditions thereof, purchase from Clal certain shares of Common Stock
beneficially owned by Clal (the "Clal Stock Purchase Agreement"), the
consummation of which transaction shall occur at the time of the consummation of
the transactions contemplated by this Agreement;
WHEREAS, concurrently with the execution and delivery of this Agreement
and as an inducement to the Company to enter into this Agreement, the Company
and Genpharm, Inc. ("Genpharm"), an affiliate of the Purchaser, are entering
into a distribution agreement pursuant to which, and subject to the conditions
contained therein, the Company shall distribute certain products of Genpharm,
substantially in the form of Exhibit A hereto (the "Distribution Agreement");
WHEREAS, at the Closing (as defined in Section 1.2 hereof), the Company
and Genpharm and Merck shall enter into services agreements substantially in the
form of Exhibit B hereto (collectively, the "Services Agreements"; each
individually referred to herein as a "Services Agreement") pursuant to which
Merck and Genpharm shall render certain significant services to the Company, in
consideration of, among other things, the issuance by the Company to Merck and
Genpharm of certain five-year stock options exercisable commencing in the year
2001 to acquire up to an aggregate of 1,171,040 additional shares of Common
Stock (the "Option Shares"), substantially in the form of Exhibit C hereto
(collectively, the "Options"; each individually referred to herein as an
"Option");
WHEREAS, the Company has received a fairness opinion from Gruntal &
Co., L.L.C. ("Gruntal") to the effect that the Purchase Price (as defined in
Section 1.1 hereof) and the transactions contemplated by this Agreement, the
Distribution Agreement, the Services Agreements and the Options are, taken as a
whole, from a financial point of view, fair to the holders of Common Stock;
WHEREAS, the Company's Board of Directors has approved the execution
and performance of this Agreement, the Distribution Agreement, the Services
Agreements and the Options, and has determined that the transactions
contemplated hereby and thereby are in the best interests of the Company and its
shareholders; and
WHEREAS, the Company and the Purchaser desire to set forth their mutual
agreements with respect to the sale and purchase of the Shares and as to the
other matters set forth herein.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements set forth herein, the parties hereto agree as follows:
SECTION 1. Closing Transactions.
1.1 Purchase and Sale of Shares. At the Closing, the Company shall sell
to the Purchaser, and the Purchaser shall, or shall cause its designee to,
purchase from the Company, upon the terms and subject to the conditions
hereinafter set forth, the Shares for an aggregate cash purchase price of
$20,800,000 (the "Purchase Price"), or $2.00 per Share.
1.2 The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Xxxxxxx, Calamari &
Xxxxxxx, 000 Xxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx, at 10:00 A.M., on the
second business day following the date on which all of the conditions set forth
in Sections 4 and 5 hereof shall have been satisfied or, to the extent
permitted, waived, or at such other place, time and/or date as the parties may
agree (the "Closing Date"); provided, that the Closing Date shall not occur
before June 1, 1998.
1.3 Closing Deliveries. (a) At the Closing, the Company shall deliver
to the Purchaser, Merck and Genpharm, as applicable:
(i) a stock certificate or certificates representing the Shares,
registered in the name of the Purchaser or, subject to Section 13.2
hereof, its designee on the Company's books and containing no legends
other than as set forth in Section 9.2 hereof and as required under
the Rights Agreement (as defined in Section 7.11 hereof);
(ii) a registration rights agreement, duly executed by the
Company, substantially in the form of Exhibit D hereto (the
"Registration Rights Agreement");
(iii) the certificates of officers of the Company referred to in
Sections 5.1 and 5.2 hereof;
(iv) the agreements covering the Options, duly executed by the
Company;
(v) the opinion of counsel referred to in Section 5.3 hereof;
(vi) the Services Agreements, duly executed by the Company;
ii
(vii) the agreement of the Chairman of the Company referred to in
Section 7.10 hereof; and
(viii) the agreement of Xxxxxxx Xxxxxx referred to in Section
7.3(e) hereof.
(b) At the Closing, the Purchaser, Merck and Genpharm, as applicable,
shall deliver to the Company:
(i) the Purchase Price, in the form of a wire transfer of
immediately available funds to an account designated by the Company;
(ii) the Registration Rights Agreement, duly executed by the
Purchaser, Merck and Genpharm;
(iii) the certificates of officers of the Purchaser referred to
in Sections 4.1 and 4.2 hereof;
(iv) the opinion of counsel referred to in Section 4.3 hereof;
(v) the Services Agreements, duly executed by Merck or Genpharm,
as applicable;
(vi) the agreements covering the Options, duly executed by Merck
or Genpharm, as applicable; and
(vii) the agreement of the Purchaser (and its Affiliates)
referred to in Section 7.3(e) hereof.
SECTION 2. Representations and Warranties of the Company. The Company
hereby represents and warrants to the Purchaser as follows:
2.1 Organization. Each of the Company, and any corporation with respect
to which the Company owns a majority of the common stock, or has the power to
vote or direct the voting of sufficient securities to elect a majority of the
directors, or has the power to control or direct the actions of such
corporation, all of which are set forth on Schedule 2.11 hereto (collectively,
the "Subsidiaries", each individually referred to herein as a "Subsidiary"), is
a corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation, as set forth on Schedule 2.11.
Each of the Company and its Subsidiaries has all necessary corporate power and
authority to own or lease its properties and to conduct its business as now
being conducted. Each of the Company and its Subsidiaries is
iii
duly qualified to do business and is in good standing as a foreign corporation
in each jurisdiction in which the property owned, leased or operated by it, or
the nature of the business conducted by it, requires such qualification under
applicable law, except where the failure to be so qualified would not result in
a Material Adverse Effect (as defined in Section 2.10 hereof).
2.2 Authorization. The execution, delivery and, subject to obtaining
the approval (the "Shareholders' Approval") of the holders of (i) a majority of
the outstanding shares of Common Stock for the issuance of the Shares, the
delivery of the Options and the issuance of the Option Shares, (ii) a majority
of the outstanding shares of Common Stock for the amendment of the Company's
certificate of incorporation in order to increase the number of authorized
shares of Common Stock and (iii) a plurality of the shares of Common Stock voted
at a meeting for the election of the Nominees (as defined in Section 7.3 hereof)
(the preceding clauses (i), (ii) and (iii) to be individually referred to herein
as a "Proposal" and collectively as the "Proposals"), the performance by the
Company of this Agreement, the other agreements referred to herein and the
transactions contemplated hereby and thereby have been duly authorized by all
requisite corporate action by the Company. This Agreement constitutes, and each
other agreement referred to herein, upon due execution and delivery, will
constitute, the valid and binding obligation of the Company, enforceable against
the Company in accordance with its terms, except as such enforceability may be
limited by (i) bankruptcy laws and other similar laws affecting creditors'
rights generally and (ii) general principles of equity, regardless of whether
asserted in a proceeding in equity or at law.
2.3 Non-contravention. Neither the execution, delivery or performance
of this Agreement and the other agreements referred to herein nor the
consummation of the transactions contemplated hereby or thereby will, subject to
obtaining the Shareholders' Approval, violate or be in conflict with any
provision of the certificate of incorporation or by-laws of any of the Company
and its Subsidiaries; subject to obtaining the Shareholders' Approval, and
except as set forth on Schedule 2.3 hereto, violate or be in conflict with any
material note, bond, lease, mortgage, indenture, license, contract, commitment,
franchise, permit, instrument or other material agreement or obligation to which
any of the Company and its Subsidiaries is a party or by which it is bound;
violate or be in conflict with any law, judgment, decree, order, regulation or
ordinance by which any of the Company and its Subsidiaries is bound or affected;
or result in the creation or imposition of any liens, charges, pledges or other
encumbrances ("Liens") in favor of any third party upon any property or assets
of the Company and its Subsidiaries.
2.4 Authorization of the Shares. Subject to obtaining the Shareholders'
Approval, all corporate action necessary for the issuance, sale and delivery of
the Shares has been taken by the Company and, when issued and delivered upon
payment in full of the Purchase Price, the Shares will be validly issued, fully
paid and nonassessable, free and clear of any and all Liens. Subject to
obtaining the Shareholders' Approval, the Option Shares will be validly
authorized
iv
for issuance and, when and if issued upon payment in full of the exercise price
for the Option Shares in accordance with the terms of the Options, the Option
Shares will be validly issued, fully-paid and nonassessable, free and clear of
any and all Liens.
2.5 Capitalization. The authorized capital stock of the Company
consists of 60,000,000 shares of Common Stock, of which no more than 18,923,000
shares are issued and outstanding as of the date hereof, and 6,000,000 shares of
preferred stock, par value $.0001 per share, of which no shares are issued and
outstanding as of the date hereof. The Company holds no treasury shares. All
outstanding shares of Common Stock have been duly and validly issued and are
fully-paid and nonassessable. There are no outstanding securities exchangeable
or convertible into, or options, warrants, or rights to subscribe for, or to
purchase, or commitments to issue, any unissued shares of capital stock of any
of the Company and its Subsidiaries, except as set forth on Schedule 2.5 hereto.
2.6 Reports Under the Exchange Act. Since October 1, 1994, except as
set forth on Schedule 2.6 hereto, the Company has filed with the Securities and
Exchange Commission (the "SEC") in timely fashion all reports required to be
filed by the Company pursuant to the Securities Exchange Act of 1934, as amended
(the "Exchange Act") (as such reports may have been amended or supplemented, the
"SEC Reports"). The Common Stock is registered under Section 12(b) of the
Exchange Act. As of their respective filing dates with the SEC, the SEC Reports
did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements made therein, in light of the circumstances in which they were made,
not misleading.
2.7 No Brokers or Finders. No person, firm or corporation has or will
have, as a result of any act or omission by any of the Company and its
Subsidiaries, any right, interest or valid claim against the Purchaser or any of
the Company and its Subsidiaries for any commission, fee or other compensation
as a finder or broker, or in any similar capacity, other than with respect to
the opinion referred to in Section 4.9 hereof (the costs of which will be borne
by the Company), in connection with the transactions contemplated by this
Agreement.
2.8 Governmental Authorizations; Third-Party Consents. No approval,
consent, authorization or other action by, or notice to or filing with, any
governmental authority or any other person or entity, and no lapse of a waiting
period, is necessary or required in connection with the execution, delivery or
performance by the Company of this Agreement, the other agreements referred to
herein or the transactions contemplated hereby or thereby, except for (i) such
filings or approvals required pursuant to the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended, and the regulations promulgated thereunder
(the "HSR Act"), (ii) such filings or approvals as may be required to be
obtained in connection with the manufacture and sale of products pursuant to the
Distribution Agreement, (iii) the Shareholders' Approval of the
v
Proposals by the requisite votes, (iv) such filings or approvals required to
list the Shares and the Option Shares on the New York Stock Exchange and the
Pacific Stock Exchange and (v) the matters set forth on Schedule 2.8 hereto.
2.9 Financial Statements. The audited financial statements of the
Company included in the Company's Annual Report on Form 10-K for the fiscal year
ended September 30, 1997 (the "Audited Statements") and the unaudited financial
statements of the Company included in the Company's Quarterly Report on Form
10-Q for the fiscal quarter ended December 31, 1997 (the "Unaudited Statements")
complied as to form with the requirements of the Exchange Act and except as
disclosed therein or in the footnotes thereto and, except for the absence of
notes and subject to year-end adjustments in the case of the Unaudited
Statements, were prepared in accordance with United States generally accepted
accounting principles. The Audited Statements and the Unaudited Statements
fairly present, in all material respects, the consolidated financial condition
and the consolidated results of operations of the Company as of the dates and
for the periods indicated therein.
2.10 Absence of Material Adverse Effect. Except as disclosed in the SEC
Reports, since January 1, 1998, the business of the Company and its Subsidiaries
has been operated in the ordinary course and substantially consistent with past
practice. Since January 1, 1998, there has been no event or circumstance
resulting in a material adverse effect on the properties, business and assets,
liabilities, condition (financial or otherwise) or operations of the Company and
its Subsidiaries, considered as a whole (a "Material Adverse Effect"). There has
been no event or circumstance, since January 1, 1998, which would materially
adversely affect the ability of the Company to perform its obligations under
this Agreement, or any of the other agreements to be entered into in connection
with this Agreement, or to consummate the transactions contemplated hereby and
thereby.
2.11 Subsidiaries; Other Equity Interests. Each Subsidiary of the
Company and each other person in which the Company or any of its Subsidiaries
has an equity interest is set forth on Schedule 2.11 hereto. Each Subsidiary is
wholly (100%) owned by the Company. The authorized, issued and outstanding
shares of the capital stock of each Subsidiary, and the record and beneficial
ownership of the outstanding shares thereof, is as set forth on Schedule 2.11.
There are no agreements or arrangements to which any Subsidiary is a party or by
which it is bound for the redemption, repurchase or issuance of, and there are
no options, warrants, puts, calls or other rights to subscribe for or purchase,
shares of such Subsidiary's capital stock.
2.12 No Third-Party Options. Except as contemplated hereby, as set
forth on Schedule 2.12 hereto, or as disclosed in the SEC Reports, there are no
existing agreements, contracts, commitments, options, warrants or rights with,
of or to any person which are binding on the Company or its Subsidiaries to
acquire any of the Company's and its Subsidiaries' assets,
vi
properties, or rights or any interest therein (whether real, personal or mixed,
tangible or intangible, wherever located and whether in the possession of the
Company and its Subsidiaries or any other person), except for those entered into
in the ordinary course of business consistent with past practice for the sale of
inventory and/or which could not reasonably be expected to result in a Material
Adverse Effect.
2.13 Employee Matters.
(a) The Company has delivered to the Purchaser a list of its
and its Subsidiaries' current employees (the "Employees"). This list, attached
hereto as Schedule 2.13(a), sets forth the current compensation, commissions or
hourly rate of pay, date of birth, date and location of employment and job title
for each Employee. Schedule 2.13(a) lists all agreements between the Company and
its Subsidiaries and any Employee(s) with respect to the employment of any
Employee(s). Except as set forth on Schedule 2.13(a), there are no outstanding
loans with outstanding principal amounts in excess of $50,000 from the Company
or any of its Subsidiaries to any Employees. Except as set forth on Schedule
2.13(a), no Employee is on disability or other leave of absence and the Company
is not aware of the intent of any officer, executive employee or head of a
department of any of the Company and its Subsidiaries to terminate his/her
employment.
(b) Schedule 2.13(b) hereto lists each "employee benefit
plan", as defined in Section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), whether or not covered by ERISA, that any of the
Company and its Subsidiaries sponsors or has sponsored to which the Company or
any of its Subsidiaries is or has been in the past three years required to make
contributions, including without limitation any pension, profit-sharing,
retirement or deferred compensation plan, each other benefit plan, policy,
arrangement or practice, whether covering one or more employees, which provides
deferred compensation, bonus, stock purchase, stock option, vacation, severance,
disability, hospitalization, medical insurance or life insurance payments or
benefits and any other material employee benefit plans, agreements, arrangements
or understandings maintained for the benefit of the Employees or former
employees of any of the Company and its Subsidiaries ("Former Employees")
(collectively, together with any related trusts, the "Employee Benefit Plans").
Except as set forth on Schedule 2.13(b), no Employee Benefit Plan constitutes a
multi-employer plan (as defined under Section 400(a)(3) of ERISA). Except as set
forth on Schedule 2.13(b), all participants in the Employee Benefit Plans are
Employees or Former Employees (or their dependents or beneficiaries). The
Company has previously delivered or made available to the Purchaser true and
complete copies of all documents or instruments establishing or constituting
each such Employee Benefit Plan and all summary plan descriptions or other
descriptive materials relating thereto distributed by the Company and its
Subsidiaries to Employees. Except as set forth on Schedule 2.13(b), all Employee
Benefit Plans are currently in compliance with
vii
all applicable funding requirements under law. Schedule 2.13(b) also sets forth
a list of those Former Employees (or their dependents or beneficiaries) who are
receiving continuation coverage under the Company's or any of its Subsidiaries'
medical plans pursuant to the Consolidated Omnibus Budget Reconciliation Act of
1985 ("COBRA") and the dates upon which those individuals commenced receiving
such continuation coverage. Except as set forth on Schedule 2.13(b), none of the
Company, its Subsidiaries or the Purchaser will incur any liability under any
Employee Benefit Plan or agreement with an Employee solely as a result of the
transactions contemplated by this Agreement.
(c) Except as set forth on Schedule 2.13 (c) hereto, (i) each
Employee Benefit Plan which is an "employee pension benefit plan", as defined in
Section 3(2) of ERISA, meets the requirements of Section 401(a) of the Code and
any related trust is exempt from U.S. federal income tax under Section 501(a) of
the Code and (ii) the Company and its Subsidiaries are in compliance in all
material respects with the terms of such Employee Benefit Plans and with the
requirements of the Internal Revenue Code of 1986, as amended (the "Code"), and
ERISA in respect thereto. None of the Company or its Subsidiaries has any
obligation under any Employee Benefit Plan or otherwise to provide
post-retirement health benefits (exclusive of obligations under COBRA) with
respect to any of the Employees or Former Employees.
(d) The Employees are not and have not in the past three years
been covered by any labor or collective bargaining agreement. No strike, work
stoppage, picketing, slowdown, lockout or material labor dispute involving the
Company's or its Subsidiaries' operations has occurred during the past three
years or, to the Company's knowledge, is threatened. To the Company's knowledge,
no attempt at the organization of a union involving the Company or its
Subsidiaries has occurred during the past three years or is threatened.
(e) None of the Company or its Subsidiaries has incurred any
material liability under, and has complied in all material respects with, the
Worker Adjustment Retraining and Notification Act and the regulations
promulgated thereunder and any similar state laws and does not reasonably expect
to incur any such liability as a result of actions taken or not taken prior to
the date hereof.
(f) Except as set forth on Schedule 2.13(f) hereto or as
disclosed in the SEC Reports, the Company and its Subsidiaries have complied in
all material respects with all applicable laws, rules, regulations and executive
orders governing the terms and conditions of employment, discriminatory
practices with respect to employment, hiring and discharge, the employment of
aliens, the payment of minimum wages and overtime, workplace health and safety
or otherwise relating to the conduct of employers with respect to employees and
potential employees, and except as set forth on Schedule 2.13, there have been
no claims made or, to the
viii
Company's knowledge, threatened against the Company or its Subsidiaries arising
out of, relating to or alleging any material violation of the foregoing.
2.14 Permits. The Company and its Subsidiaries have all licenses,
permits, orders, certificates, authorizations, consents and approvals of all
governmental and regulatory authorities and bodies, whether federal, state or
local, domestic or foreign, which are necessary for the operation of its
business as currently conducted ("Permits"), except for the failure to have such
Permits that could not, individually or in the aggregate, reasonably be expected
to result in a Material Adverse Effect. Except as could not, individually or in
the aggregate, reasonably be expected to result in a Material Adverse Effect,
the Permits are in full force and effect and no suspension or cancellation of
any of them is pending or, to the Company's knowledge, threatened.
2.15 Intellectual Property. Schedule 2.15 hereto sets forth all of the
patents, registered copyrights and registered trademarks of the Company and its
Subsidiaries , all of which are owned by the Company or its Subsidiaries free
and clear of any Liens. None of the Company or its Subsidiaries has infringed
upon or unlawfully used, in any material respect, any patent, trademark, service
xxxx, tradename, copyright, or trade secret ("Intellectual Property") owned by
another person. None of the Company or its Subsidiaries has received any written
notice of any claim of infringement or other material claim relating to any of
its Intellectual Property. No shareholder of the Company or its Subsidiaries or
member of any such shareholder's family or any entity controlled by them, or any
Employee or Former Employee owns or has any proprietary, financial or other
material interest, directly or indirectly, in any Intellectual Property which
the Company or its Subsidiaries owns, possesses or materially uses in its
operations. Schedule 2.15 sets forth all confidentiality or non-disclosure
agreements to which either the Company or its Subsidiaries or any of its
Employees or Former Employees is a party and which relate to the Company's or
its Subsidiaries' business and were executed in the past seven years.
2.16 No Pending Litigation or Proceedings. Except as set forth on
Schedule 2.16 hereto or as disclosed in the SEC Reports, there are no material
actions, suits, proceedings (including arbitral proceedings) or investigations
pending or, to the Company's knowledge, threatened against the Company or its
Subsidiaries or directly relating to or otherwise directly affecting the
business, assets or properties of the Company and its Subsidiaries. Except as
set forth on Schedule 2.16 or as disclosed in the SEC Reports, there is no
outstanding judgment, writ, injunction, decree, award or order of any court or
any governmental or regulatory authority or body against or directly affecting
the business, assets or properties of the Company and its Subsidiaries.
2.17 Insurance Coverage. Each of the Company and its Subsidiaries has
during the past three years maintained liability, casualty, property loss and
other insurance policies with
ix
respect to the conduct of its business in such amounts, of such kinds and with
such insurance carriers as the Company and it Subsidiaries, as applicable, has
deemed appropriate and sufficient for companies of a similar size engaged in
similar types of businesses and operations. Schedule 2.17 hereto sets forth a
summary description of each such insurance policy, listing for each policy the
risks insured against, coverage limits, any deductible amounts, any pending
claims thereunder and the term of each such policy. Each such policy is in full
force and effect, and no written notice of cancellation has been received with
respect to any such policy, nor will the consummation of the transactions
contemplated by this Agreement cause the cancellation of, or the right to
cancel, any such policy pursuant to the terms of such policy. The Company and
its Subsidiaries have filed all notices or reports required under such policies,
except such filings the failure of which to make could not reasonably be
expected to result in a Material Adverse Effect.
2.18 Compliance with Laws. Except as set forth on Schedule 2.18 hereto
or as disclosed in the SEC Reports, each of the Company's and its Subsidiaries'
business and operations are being conducted in compliance with all applicable
laws, statutes, rules, regulations, ordinances, codes, orders, franchises and
Permits of all governmental entities, including without limitation, those
relating to occupational safety and health and equal employment practices,
except for such instances of noncompliance that could not, individually or in
the aggregate, reasonably be expected to result in a Material Adverse Effect. No
notice, citation, summons or order has been assessed and no investigation or
review is pending or, to the Company's knowledge, threatened by any governmental
or other entity with respect to any alleged material violation by any of the
Company and its Subsidiaries of any of the foregoing.
2.19 Environmental Matters. Except as set forth on Schedule 2.19 hereto
or as disclosed in the SEC Reports, and except for such matters that could not,
individually or in the aggregate, reasonably be expected to result in a Material
Adverse Effect, (a) there are no investigations, inquiries or other proceedings
pending or, to the Company's knowledge, threatened with regard to the current or
prior conduct of the business and operations of the Company and its
Subsidiaries, or relating to (x) any properties owned or previously owned by the
Company and its Subsidiaries, (y) any properties at which any of the Company and
its Subsidiaries has conducted operations or (z) any sites at which any of the
Company and its Subsidiaries has disposed of, or arranged for the disposal of,
waste materials, and arising out of or relating to any actual or alleged failure
to comply with any requirement of any law, statute, rule, regulation, code or
ordinance relating to air or water quality, waste management, hazardous or toxic
substances, or the protection of health or the environment ("Environmental
Laws"); (b) the Company and its Subsidiaries are in compliance with the
requirements of all Environmental Laws in connection with its business,
operations and otherwise; and (c) none of the properties or sites referred to in
clauses (x), (y) or (z) above is contaminated with any hazardous waste or
substance as a result of any act or omission of the Company and any of its
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Subsidiaries, or, to the Company's knowledge, any agent, servant or bailee of
the Company and any of its Subsidiaries, to a degree that poses a risk to health
or the environment or could impose a liability on the Company. With regard to
compliance with Environmental Laws, the representations and warranties set forth
in this Section 2.19 shall supersede the provisions of Section 2.18 hereof.
2.20 Tax Returns and Taxes.
(a) The Company and its Subsidiaries have filed all Tax
Returns (as hereinafter defined) required to be filed by it. Except with respect
to any contested liability for Taxes (as hereinafter defined), as set forth on
Schedule 2.20 hereto, all such Tax Returns were correct and complete in all
material respects. All Taxes owed by the Company and any of its Subsidiaries
(whether or not shown on any Tax Return) have been paid except for (i) Taxes
accrued but not yet payable, (ii) Taxes which are being contested in good faith,
and (iii) Taxes, the non-payment of which could not reasonably be expected to
result in a Material Adverse Effect. Except as set forth on Schedule 2.20, none
of the Company and its Subsidiaries has received any notice of assessment of
additional Taxes that is currently pending. Except as set forth on Schedule
2.20, none of the Company and its Subsidiaries has waived any statute of
limitations in respect of Taxes or executed or filed with any Tax authority any
agreement or document extending the period of assessment of any Taxes, and the
Company and its Subsidiaries are not currently the beneficiary of any extension
of time within which to file any Tax Return. Except as set forth on Schedule
2.20, there are no claims, examinations, audits, proceedings or proposed
deficiencies for or in respect of Taxes pending or, to the Company's knowledge,
threatened against the Company or its Subsidiaries. No claim has been made in
writing to the Company or its Subsidiaries in the past three years by an
authority in a jurisdiction where the Company and its Subsidiaries do not file
Tax Returns that it is or may be subject to taxation by that jurisdiction. There
are no recorded Tax Liens on any of the assets of the Company and its
Subsidiaries, nor are there any security interests on any of the assets of the
Company and its Subsidiaries that arose in connection with any failure (or
alleged failure) of the Company or any of its Subsidiaries to pay any Tax (other
than Liens and security interests for Taxes not yet due and payable or for Taxes
that the Company (or any of its Subsidiaries, as applicable) is contesting in
good faith).
(b) The Company (and each of its Subsidiaries, as applicable)
has withheld and paid all Taxes required by applicable law to have been withheld
and paid in connection with amounts paid or owing to any Employee or Former
Employee, independent contractor, creditor, stockholder or other third party,
except where the failure to do so could not reasonably be expected to result in
a Material Adverse Effect.
xi
(c) Except as set forth on Schedule 2.20, there is no dispute
or claim concerning any Tax liability of the Company (or any of its
Subsidiaries, as applicable) either (i) claimed or raised by any governmental
authority in writing or (ii) as to which the Company or any of its executive
officers (or employees principally responsible for Tax matters) has knowledge
based upon personal contact with any agent of such authority. Schedule 2.20
lists those federal, state, local, and foreign income Tax Returns filed with
respect to the Company (or any of its Subsidiaries, as applicable) that have
been audited in the past three years, and indicates those Tax Returns that
currently are the subject of audit.
(d) The Company (or any of its Subsidiaries, as applicable)
has not filed a consent under Section 341(f) of the Code concerning collapsible
corporations. Except as set forth on Schedule 2.20(f) hereto, the Company (or
any of its Subsidiaries, as applicable) has not made any payments, nor is it
obligated to make any payments, nor is it a party to any agreement that under
certain circumstances could obligate it to make any payments that will not be
deductible under Section 280G of the Code. The Company has disclosed on its
federal income Tax Returns all positions taken therein that could give rise to a
substantial understatement of federal income Tax within the meaning of Section
6662 of the Code. The Company (or any of its Subsidiaries, as applicable) is not
a party to any Tax allocation or sharing agreement. The Company has not been a
member of an Affiliated Group filing a consolidated federal income tax return
(other than a group the common parent of which is the Company).
(e) The Company (or any of its Subsidiaries, as applicable)
does not have (i) income reportable for a period ending after the Closing Date
but attributable to a transaction (e.g., an installment sale) occurring in or a
change in accounting method made for a period ending on or prior to the Closing
Date which resulted in a deferred reporting of income from such transaction or
from such change in accounting method (other than a deferred intercompany
transaction); or (ii) deferred gain or loss arising out of any deferred
intercompany transaction. No "ownership change" (within the meaning of Section
382(g) of the Code) has, to the Company's knowledge, occurred prior to the date
hereof which currently limits the Company's ability to utilize any net operating
loss carryovers under Section 382 of the Code.
For purposes of this Agreement, "Tax" or "Taxes" means any
federal, state, local, or foreign income, gross receipts, license, payroll,
employment, excise, severance, stamp, occupation, premium, windfall profits,
environmental (including taxes under Code Section 59A), customs duties, capital
stock, franchise, profits, withholding, social security (or similar),
unemployment, disability, real property, personal property, sales, use,
transfer, registration, value added, alternative or add-on minimum, estimated,
or other tax of any kind whatsoever, including any interest, penalty, deficiency
or addition thereto, whether disputed or not, and "Tax Return" means any return,
declaration, report, claim for refund, or information return or
xii
statement relating to Taxes, including any schedule or attachment thereto, and
including any amendment thereof.
2.21 Outstanding Registration Rights. Except as set forth on Schedule
2.21 hereto or as disclosed in the SEC Reports, the Company has not in the past
three years granted (or incurred any obligations or commitments to grant) to any
holder or holders of any capital stock (or rights to acquire any capital stock)
of the Company (i) any rights to request or demand registration of, or the
filing of an offering circular with respect to, outstanding shares of capital
stock of the Company under any securities laws or rules, (ii) any rights to
include any outstanding shares of capital stock of the Company in any
registration or filing effected by the Company pursuant to any securities laws
or rules, or (iii) any rights to require the Company to take action under any
securities laws or rules in order to permit or otherwise facilitate disposition
of any outstanding shares of the Company's capital stock.
2.22 Certain Beneficial Owners.
(a) Schedule 2.22(a) hereto sets forth an analysis prepared
by the Company's auditors stating the stock ownership of 5-percent shareholders
(as such term is defined in Section 382 of the Code) in the Company as of the
dates indicated therein. To the Company's knowledge, such Schedule correctly
sets forth in all material respects the stock ownership of such shareholders and
the changes in such stock ownership as of each fiscal year-end indicated
therein.
(b) Schedule 2.22(b) lists all options, warrants, or other
stock rights issued by the Company and outstanding as of the date hereof to any
person, whether or not a 5-Percent Shareholder, that have not yet been exercised
as of the date hereof, together with the exercise dates, exercise prices, any
consideration paid therefor and expiration dates.
2.23 FDA Compliance. The products manufactured, sold, distributed or
supplied by each of the Company and its Subsidiaries, as applicable, are not
adulterated or misbranded within the meaning of the United States Federal Food,
Drug and Cosmetic Act, as amended ("USFFDCA"), and comply with any monograph or
other requirements of the United States Food and Drug Administration ("FDA")
applicable to the products or their manufacture, except for instances of
noncompliance that could not, individually or in the aggregate, reasonably be
expected to result in a Material Adverse Effect. Such products have been and
continue to be manufactured in compliance with all applicable statutes,
ordinances and regulations, including but not limited to, the USFFDCA and the
regulations thereunder, including the current Good Manufacturing Practices which
have been adopted by the FDA, except for instances of noncompliance that could
not, individually or in the aggregate, reasonably be expected to result in a
Material Adverse Effect. Current Good Manufacturing Practice means current good
xiii
manufacturing practice regulations established in 21 C.F.R. Parts 210 and 211,
as amended and in effect from time to time, and other applicable FDA policies
relating thereto. Except as set forth on Schedule 2.23 hereto or as disclosed in
the SEC Reports, none of the Company and its Subsidiaries has in the past three
years received any notice or summons in respect of a material violation or
alleged material violation of any statute or regulation from the FDA or other
similar authorities.
2.24 Reliance. The representations, warranties, covenants and
agreements of the Company contained herein and in the certificates and schedules
required to be delivered in accordance with the terms of this Agreement shall,
subject to Section 11 hereof, survive any investigation made by the Purchaser
and are made by the Company with the expectation that the Purchaser is relying
thereon in entering this Agreement and the same shall not be deemed waived by
any investigation conducted by the Purchaser or its employees, advisors,
consultants or representatives, whether before or after the consummation of the
transactions contemplated hereby.
SECTION 3. Representations and Warranties of the Purchaser. The
Purchaser hereby represents and warrants to the Company as follows:
3.1 Organization. The Purchaser is a corporation duly organized and
validly existing and in good standing under the laws of Delaware and is a
wholly-owned subsidiary of Merck. The Purchaser has all necessary corporate
power and authority to own or lease its properties and to conduct its business
as now being conducted.
3.2 Authorization. The execution, delivery and performance by the
Purchaser of this Agreement, the other agreements referred to herein and the
transactions contemplated hereby and thereby have been duly authorized by all
requisite corporate action by the Purchaser and, in the case of the Distribution
Agreement and the Services Agreement to which it is a party, by Merck and
Genpharm, as the case may be. This Agreement constitutes, and each of the other
agreements referred to herein, upon execution and delivery, will constitute, a
valid and binding obligation of the Purchaser and, in the case of the
Distribution Agreement and the Services Agreement to which it is a party, of
Merck and Genpharm, enforceable against the Purchaser, Merck or Genpharm, as the
case may be, in accordance with its terms, except as such enforceability may be
limited by (i) bankruptcy laws and other similar laws affecting creditors'
rights generally and (ii) general principles of equity, regardless of whether
asserted in a proceeding in equity or at law.
3.3 Non-contravention. Neither the execution, delivery and performance
of this Agreement and the other agreements referred to herein nor the
consummation of the transactions
xiv
contemplated hereby or thereby will violate or be in conflict with any provision
of the articles of organization of the Purchaser or, in the case of the
Distribution Agreement and the Services Agreement to which it is a party, of
Merck or Genpharm, as the case may be; violate or be in conflict with any
material note, bond, lease, mortgage, indenture, license, contract, commitment,
franchise, permit, instrument or other material agreement or obligation to which
the Purchaser, Merck or Genpharm is a party or by which either of them is bound;
violate or be in conflict with any law, judgment, decree, order, regulation or
ordinance by which the Purchaser, Merck or Genpharm is bound or affected; or
result in the creation or imposition of any Liens in favor of any third party
upon any property or assets of the Purchaser, Merck or Genpharm.
3.4 No Brokers or Finders. No person, firm or corporation has or will
have, as a result of any act or omission by the Purchaser, Merck or Genpharm,
any right, interest or valid claim against the Company for any commission, fee
or other compensation as a finder or broker, or in any similar capacity, in
connection with the transactions contemplated by this Agreement.
3.5 Governmental Authorizations; Third-Party Consents. No approval,
consent, authorization or other action by, or notice to or filing with, any
governmental authority or any other person or entity, and no lapse of a waiting
period, is necessary or required in connection with the execution, delivery or
performance by the Purchaser or, in the case of the Distribution Agreement and
the Services Agreement to which it is a party, by Merck or Genpharm, as the case
may be, of this Agreement, the other agreements referred to herein or the
transactions contemplated hereby or thereby, except for such filings or
approvals (a) required pursuant to the HSR Act and (b) as may be required (by
the FDA or other governmental authorities) to be obtained in connection with the
Distribution Agreement.
3.6 Investment Representations. (a) The Purchaser and its Affiliates
(as defined in Rule 405 of the Securities Act of 1933, as amended (the
"Securities Act")) are acquiring the Shares and the Options and, upon exercise
of the Options, will be acquiring the Option Shares solely for their own
accounts and not with a view to, or for resale in connection with, any
distribution thereof within the meaning of the Securities Act. Each of the
Purchaser, Merck and Genpharm is an "accredited investor" (as defined in Rule
501(a) of Regulation D promulgated under the Securities Act).
(b) The Purchaser, on behalf of itself and its Affiliates, understands
that (i) the Shares and the Option have not been registered, and the Option
Shares, when issued, will not be registered under the Securities Act or any
applicable state securities laws, by reason of their issuance by the Company in
a transaction exempt from the registration requirements of the Securities Act
and applicable state securities laws and (ii) the Shares, the Options and the
Option Shares must be held by the Purchaser (or Merck or Genpharm, as
applicable) indefinitely unless
xv
a subsequent disposition thereof is registered under the Securities Act and
applicable state securities laws or is exempt from such registrations.
(c) The Purchaser, on behalf of itself and its Affiliates, acknowledges
that no representations or warranties have been made or furnished to, or relied
on by, the Purchaser or any of its representatives in connection with its
purchase of the Shares except as expressly provided herein. The Purchaser has
such knowledge and experience in financial and business matters that it is
capable of evaluating the risks and merits of this investment.
(d) The Purchaser, on behalf of itself and its Affiliates, acknowledges
that, following its acquisition of the Shares, the Purchaser will be an
Affiliate of the Company and will be subject to all requirements and
restrictions applicable to Affiliates under the Securities Act and the Exchange
Act (including the rules and regulations promulgated thereunder).
SECTION 4. Conditions to the Company's Obligation.
The obligation of the Company to consummate the transactions
contemplated hereby shall be subject to the satisfaction or waiver (other than
in respect of Sections 4.4, 4.6 and 4.8 hereof) by the Company, at or prior to
the Closing, of all the following conditions:
4.1 Representations and Warranties. The representations and warranties
of the Purchaser set forth in this Agreement shall be true and correct in all
material respects on and as of the date hereof and on and as of the Closing Date
(with the same effect as though such representations and warranties had been
made on and as of such Closing Date), and officers of the Purchaser shall have
certified to such effect to the Company in writing.
4.2 Performance of Obligations. The Purchaser shall have performed,
satisfied and complied with all covenants, agreements and conditions required by
this Agreement to be performed, satisfied or complied with by it on or before
the Closing Date, and officers of the Purchaser shall have certified to such
effect to the Company in writing.
4.3 Opinion of Counsel. The Company shall have received from Coudert
Brothers, counsel for the Purchaser, an opinion addressed to the Company, dated
the Closing Date, in form and substance reasonably satisfactory to the Company,
it being understood that Coudert Brothers may rely upon the opinion of
Xxxxx-Xxxxx Xxxxxxx, Head of the Legal Department of Merck, for all matters of
German law, if applicable.
4.4 No Litigation or Legislation. No federal, state, local or foreign
statute, rule or regulation shall have been enacted after the date hereof, and
no litigation, proceeding, governmental inquiry or investigation shall be
pending, which prohibits or seeks to prohibit or
xvi
materially restricts the consummation of the transactions contemplated by this
Agreement or the other agreements provided for herein.
4.5 Clal Sale of Shares. Merck (or its designee) shall have purchased
those certain shares of Common Stock beneficially owned by Clal in accordance
with the terms of the Clal Stock Purchase Agreement, and all agreements between
Clal and the Company relating to or arising out of Clal's acquisitions of Common
Stock shall be terminated by the parties thereto and be of no further force and
effect.
4.6 HSR Act. All applicable waiting periods under the HSR Act shall
have expired or been terminated with respect to the transactions contemplated by
this Agreement.
4.7 Distribution Agreement in Effect. The Distribution Agreement shall
be in full force and effect and there shall exist no facts or circumstances
which, with the giving of notice or the passage of time or both, would
constitute a material default thereunder by Genpharm.
4.8 Shareholders' Approval. The Shareholders' Approval of each of the
Proposals shall have been obtained and all of the Nominees (as defined in
Section 7.3 hereof) shall have been elected.
4.9 Fairness Opinion. The fairness opinion of Gruntal, the Company's
financial advisor, rendered with regard to this Agreement and the other
agreements to be entered into in connection herewith and the transactions
contemplated hereby and thereby shall have been reconfirmed by Gruntal as of the
date of mailing to the Company's shareholders of the definitive proxy statement
(the "Proxy Statement") in respect of the Company's meeting of its shareholders
to be held in connection with the Proposals (the "Meeting").
4.10 Purchase Price and Other Closing Deliveries. The Purchaser shall
have paid the Purchase Price and delivered, or cause to be delivered, the
agreements, instruments and certificates specified in Section 1.3(b) hereof.
4.11 Consents and Waivers. The Company shall have obtained all material
consents and waivers necessary or appropriate for its consummation of the
transactions contemplated by this Agreement, as specified in Section 2.8 hereof
and Schedule 2.8 hereto, and the other agreements referred to herein after using
its reasonable best efforts to obtain them.
4.12 Services Agreements. Merck and Genpharm shall have duly executed
and delivered to the Company the Services Agreements.
xvii
4.13 Purchaser Board Approval. The Board of Directors of Merck shall
have approved this Agreement and the transactions contemplated hereby prior to
April 3, 1998.
SECTION 5. Conditions to the Purchaser's Obligation.
The obligation of the Purchaser to consummate the transactions
contemplated hereby shall be subject to the satisfaction or waiver (other than
in respect of Sections 5.4, 5.5 and 5.9 hereof) by the Purchaser, at or prior to
the Closing, of all the following conditions:
5.1 Representations and Warranties. The representations and warranties
of the Company set forth in this Agreement shall be true and correct in all
material respects on and as of the date hereof and on and as of the Closing Date
(with the same effect as though such representations and warranties had been
made on and as of such Closing Date), and officers of the Company shall have
certified to such effect to the Purchaser in writing.
5.2 Performance of Obligations. The Company shall have performed,
satisfied and complied with all covenants, agreements and conditions required by
this Agreement to be performed, satisfied or complied with by it on or before
the Closing Date, and officers of the Company shall have certified to such
effect to the Purchaser in writing.
5.3 Opinion of Counsel. The Purchaser shall have received from Xxxxxxx,
Calamari & Xxxxxxx, counsel for the Company, an opinion addressed to the
Purchaser, dated the Closing Date, in form and substance reasonably satisfactory
to the Purchaser.
5.4 No Litigation or Legislation. No federal, state, local or foreign
statute, rule or regulation shall have been enacted after the date hereof, and
no litigation, proceeding, governmental inquiry or investigation shall be
pending, which prohibits or seeks to prohibit or materially restricts the
consummation of the transactions contemplated by this Agreement or the other
agreements provided for herein, or materially restricts or impairs the ability
of the Purchaser to own an equity interest in the Company.
5.5 HSR Act. All applicable waiting periods under the HSR Act shall
have expired or been terminated with respect to the transactions contemplated by
this Agreement.
5.6 Board Resignations. The Purchaser shall have received the
resignations of the current members of the Board of Directors of the Company,
subject to their re-election in accordance with Section 7.3 hereof.
xviii
5.7 No Material Adverse Effect. Since the date hereof, there shall not
have occurred a condition or event constituting a Material Adverse Effect (other
than in respect of the matter set forth on Schedule 2.10 hereto).
5.8 ISRA. The Company shall have delivered to the Purchaser evidence of
the Company's having obtained an ISRA Clearance (as defined in Section 7.4
hereof).
5.9 Shareholders' Approval. The Shareholders' Approval of each of the
Proposals shall have been obtained and all of the Nominees shall have been
elected.
5.10 Closing Deliveries. The Company shall have delivered the Shares,
the Options and the agreements, instruments and certificates specified in
Section 1.3(a) hereof.
5.11 Distribution Agreement. There shall exist no facts or
circumstances which, with the giving of notice or the passage of time or both,
would constitute a material default by the Company under the Distribution
Agreement.
5.12 Services Agreements; Options. The Company shall have duly executed
and delivered to Merck and Genpharm the Services Agreements and the Options.
5.13 Board Approval. The Board of Directors of Merck shall have
approved this Agreement and the transactions contemplated hereby prior to April
3, 1998.
5.14 Option Standstill Agreements. At least fifteen (15) days prior to
Closing, the Company shall have duly executed and delivered to the Purchaser
agreements in writing, in form reasonably satisfactory to the Purchaser, from
(i) the four persons listed on Schedule 5.14(a) hereto that, notwithstanding the
terms of any stock option plan or any option heretofore granted, not to exercise
or seek to exercise such options until three (3) years and ten (10) U.S.
business days from the Closing Date and (ii) substantially all other persons who
then hold unexercised options, warrants or other stock rights to purchase Common
Stock, other than those persons set forth on Schedule 5.14(b) hereto, not,
notwithstanding the terms of any stock option plan or any option theretofore
granted, to exercise or seek to exercise such options, warrants or other stock
rights, except to the extent indicated on Schedule 5.14(b).
5.15 Section 7.10 Agreement. The Company shall have delivered the
agreement of the Chairman of the Company referred to in Section 7.10 hereof.
5.16 Clal Share Purchase. The Purchaser shall have purchased, after
using its reasonable best efforts to do so, those certain shares of Common Stock
beneficially owned by Clal in accordance with the terms of the Clal Stock
Purchase Agreement.
xix
5.17 Consent. The Company shall have obtained the approvals set forth
on Schedule 2.3, Item 1, hereto.
SECTION 6. Covenants of the Parties.
The Company and the Purchaser hereby covenant as follows:
6.1 Xxxx-Xxxxx-Xxxxxx Notification. As soon as practicable after the
execution of this Agreement, the Company and the Purchaser shall each file, or
cause to be filed, with the Federal Trade Commission and the Antitrust Division
of the United States Department of Justice, pursuant to the HSR Act, the
notifications and documentary materials required in connection with the
transactions contemplated by this Agreement. Thereafter, the Company and the
Purchaser will file any additional information requested as soon as practicable
after any receipt of a request for additional information and shall use
reasonable best efforts to obtain early termination of the applicable waiting
period under the HSR Act. The Company and the Purchaser shall coordinate and
cooperate with each other in exchanging such information and providing such
reasonable assistance as may be requested in connection with such filings. All
filing fees in connection with the HSR Act shall be paid by the Purchaser.
6.2 Publicity. The Company and the Purchaser shall consult with each
other, to the extent reasonably practicable, as to the form and substance of any
press releases and other third-party communications or disclosures relating to
the negotiation, execution, delivery and consummation of this Agreement, the
other agreements referred to herein, and the transactions contemplated hereby or
thereby. No party shall be prohibited from issuing or filing any press release
or other third-party communication or disclosure which, upon advice of its legal
counsel, shall be deemed necessary or appropriate under applicable law or the
applicable rules of any stock exchange; provided, however, that such party shall
have first consulted with the other party as to the form and content of such
disclosure. This covenant shall survive the Closing or any termination of this
Agreement.
6.3 Confidentiality. All information to which access is given or
furnished by one party to the other in connection with the negotiation,
execution, delivery and consummation of this Agreement, the other agreements
referred to herein, and the transactions contemplated hereby or thereby shall be
kept confidential by each party and shall be used only in connection with this
Agreement, such other agreements and the transactions contemplated hereby and
thereby; provided, however, that the foregoing shall not apply to any
information that (a) shall be publicly available as of the date hereof, (b)
shall become publicly available other than as a result of prohibited disclosure
by such party, (c) shall be disclosed to such party by any person
xx
or entity that is not known to such party to be subject to any confidentiality
restrictions imposed by the other party or (d) shall be required to be disclosed
by law, the applicable rules of any stock exchange or by order of any court of
competent jurisdiction. Without limiting the foregoing, the Purchaser shall not
disclose, and shall use its reasonable best efforts to cause its Affiliates not
to disclose, any such confidential information to any person or entity that is
not an Affiliate or a director or officer of such Affiliate or any advisor
thereto. This covenant shall survive the Closing or any termination of this
Agreement.
6.4 Further Assurances. Upon reasonable request of a party and without
further consideration, the other party, whether prior to or after the Closing,
shall execute, acknowledge and deliver all such other instruments and documents,
and shall take all such other actions for the purpose of effecting and
evidencing the consummation of the transactions contemplated by this Agreement
and the other agreements referred to herein. Without limiting the generality of
the foregoing, the Company shall, and shall cause its Subsidiaries to, from the
date hereof until the earlier of the Closing Date or the termination of this
Agreement pursuant to Section 13.11 hereof, provide all information and
documents reasonably requested by the Purchaser relating to a determination of
the Company's status as a United States real property holding corporation, as
defined under the Code.
SECTION 7. Covenants of the Company.
The Company (and the Purchaser, to the extent expressly provided in
this Section 7) hereby covenants as follows:
7.1 Exchange Act Filings. From and after the date hereof to the Closing
Date or the earlier termination of this Agreement pursuant to Section 13.11
hereof, the Company shall use its best efforts to file in a timely manner all
reports required to be filed by it with the SEC under the Exchange Act and
shall, promptly upon filing, deliver copies of such reports to the Purchaser.
7.2 Proxy Statement; Meeting; Listing Applications. (a) The Company
shall prepare, review with the Purchaser and its counsel, and file with the SEC
the Proxy Statement as soon as reasonably practicable after the date hereof.
Each party shall furnish all information concerning itself and related persons
which is required or customary for inclusion in the Proxy Statement. The Company
shall, as soon as reasonably practicable after the date hereof, (i) take all
steps necessary to duly call, give notice of, convene and hold a meeting of its
shareholders for the purpose of securing the Shareholders' Approval to the
Proposals (such meeting is presently contemplated by the parties to be held in
June 1998); (ii) distribute to its shareholders the Proxy Statement in
accordance with applicable Federal and state laws and with its Certificate of
Incorporation and By-Laws; and (iii) recommend (in the Proxy Statement and, if
deemed
xxi
appropriate by the Company, otherwise) to its shareholders approval of the
Proposals. Notwithstanding anything to the contrary contained herein, if the
Agreement shall be terminated (or is subject to termination) pursuant to Section
13.11 hereof, the Company may postpone, adjourn or cancel the Meeting, withdraw
or change its recommendation to its shareholders and/or withdraw or delay
distribution of the Proxy Statement.
(b) The Company shall use its commercial best efforts to have the
Shares and the Option Shares listed on The New York Stock Exchange and The
Pacific Stock Exchange.
7.3 Board Representation. (a) Subject to the conditions set forth
herein, the Company shall nominate, and the Company and the Purchaser shall use
their best efforts to cause the election at the Meeting of, certain persons to
be designated by each of the Purchaser and the Company (collectively, the
"Nominees"), as provided herein, to serve as directors on the Board of Directors
of the Company such that:
(i) a majority of the members of such Board shall be comprised of
the Purchaser's designated representatives; and
(ii) three of the members of such Board shall be comprised of the
Company's designated representatives consisting of Xxxxxxx X. Xxxxxx
("Xxxxxx") and two additional representatives designated by the
current Board of Directors of the Company (collectively, the "Company
Designees").
Notwithstanding anything to the contrary contained herein, each representative
designated by the Purchaser in accordance with Section 7.3(f) hereof shall be
nominated for election to serve on the Board of Directors unless such
representative shall not be satisfactory to the Company's current Board of
Directors for good faith reasons and each Company Designee shall be nominated to
serve on the Board of Directors unless such Designee (other than Xxxxxx) shall
not be satisfactory to the Purchaser for good faith reasons. All current members
of the Company's Board of Directors not nominated as set forth above shall
resign effective upon the Closing. Any current members of such Board nominated
as set forth above shall resign effective upon the Closing, subject to their
re-nomination and re-election as set forth herein. All Nominees shall take
office if, and only if, the Closing shall occur.
(b) Any director designated hereunder shall serve subject to the terms
of the Company's Certificate of Incorporation and By-laws, each as in effect on
the Closing Date, and the provisions of applicable law.
(c) The Company Designees and the Purchaser shall jointly designate two
of the Company's directors to comprise the audit committee of the Company. Each
of such directors
xxii
must qualify as independent, outside directors in accordance with the rules and
regulations of The New York Stock Exchange.
(d) The directors designated by the Purchaser shall serve as Class I
and Class III directors of the Company (as allocated by the Purchaser) whose
terms shall expire in the years 2000 and 1999, respectively. The Company
Designees shall serve as Class II directors of the Company whose terms shall
expire in the year 2001. There shall be no Class II directors other than the
Company Designees (and their respective successors selected in accordance with
Section 8.1 hereof) through May 31, 2001.
(e) The Company shall include in the Proxy Statement distributed in
respect of the Meeting the Proposals and shall recommend its approval of each
Proposal (including approval of all Nominees) by the shareholders of the
Company. Xxxxxx and the Purchaser (and its Affiliates) agree to vote any shares
of Common Stock which they own or otherwise have the power to vote in favor of
each of the Proposals (including approval of all Nominees).
(f) The Company shall give the Purchaser written notice not less than
10 days prior to the filing with the SEC of the preliminary Proxy Statement in
respect of the Meeting to allow the Purchaser to designate its nominees for
director for inclusion in such Proxy Statement. The Company shall have no
obligation to include such nominees in the Proxy Statement unless the Company
receives written notice from the Purchaser setting forth its designated nominees
(along with all biographical and other information necessary for inclusion in
the Proxy Statement) not later than five days after the Company's notice to the
Purchaser.
7.4 Environmental Matters. For each parcel of real property which is
owned, operated, leased or used by the Company and any of its Subsidiaries in
the State of New Jersey, the Company shall, and shall cause each of its
Subsidiaries to, as applicable, comply with the obligations imposed by the New
Jersey Industrial Site Recovery Act and any regulations promulgated thereunder,
at or prior to the Closing, by either (a) securing any of the following: (i) a
letter of nonapplicability from the New Jersey Department of Environmental
Protection ("NJDEP"); (ii) approval by NJDEP of a negative declaration submitted
by the Company; (iii) a no further action letter from NJDEP; (iv) a letter of
authorization for the transfer of ownership from NJDEP without any material
conditions thereto; or (v) approval from NJDEP of a remediation agreement
reasonably acceptable to the Purchaser; or (b) filing a De Minimis Quantity
Exemption Affidavit with NJDEP (any of the items listed in clauses (a) and (b)
above being an "ISRA Clearance").
7.5 Conduct of Business Prior to Closing. From and after the date
hereof to the Closing Date or the earlier termination of this Agreement pursuant
to Section 13.11 hereof, except as set forth on Schedule 7.5 hereto, neither the
Company nor its Subsidiaries shall (a)
xxiii
conduct their respective businesses other than in the ordinary course, except as
contemplated by this Agreement; (b) amend its charter or by-laws; (c) sell,
lease or otherwise dispose of any material assets or properties owned or used in
the operation of their respective businesses, except for the sale of inventory
and disposition of obsolete equipment in the ordinary course of business; (d)
dissolve, or agree to dissolve, or merge or consolidate with, or agree to merge
or consolidate with, or purchase or agree to purchase all or substantially all
of the assets of, or otherwise acquire, any other business entity; (e) authorize
for issuance, issue or sell any additional shares of its capital stock or any
securities or obligations convertible into shares of its capital stock or issue
or grant any option, warrant or other right to purchase any shares of its
capital stock, except for (i) the granting of options, warrants or rights under
the Company's existing stock or other plans (as such are set forth on Schedule
2.13 hereto) and (ii) the issuance or sale of capital stock pursuant to the
exercise of any options, warrants, or rights granted prior to the date hereof to
any of the Company's employees, directors, independent contractors or other
agents and listed on Schedule 2.12 hereto; (f) redeem, buy back, or cancel any
shares, securities, options, warrants or other stock rights in the Company; or
(g) other than in the ordinary course of business, enter into any material
contract or agreement, or incur any material capital expenditure, which has not
been approved by the Purchaser.
7.6 Options, Warrants or Other Stock Rights. From and after the date
hereof to the Closing Date or the earlier termination of this Agreement pursuant
to Section 13.11 hereof, the Company shall issue options and warrants, or other
stock rights under the Company's existing stock option or stock purchase plans
only if the exercise date is no earlier than three years from the Closing Date
and the options, warrants or other stock rights are issued in connection with
the performance of services for the Company and qualify as "compensatory
options" within the meaning of Treas. Reg. Sec. 1.382-4(d)(8)(iii).
7.7 Other Agreements. At the Closing, upon satisfaction or permitted
waiver of the conditions set forth in Section 4 hereof, the Company shall
execute and deliver the agreements, instruments and certificates specified in
Section 1.3(a) hereof.
7.8 Right of First Refusal. (a) Subject to the conditions and other
provisions set forth in this Section 7.8 and in Section 8.4 hereof, the Company,
for a period of six years following the Closing, shall give the Purchaser
written notice (the "Transaction Notice") of the Company's intention to sell
equity securities of the Company in any offering not subject to registration
under the Securities Act (or, if subject to registration under the Securities
Act, in any offering for cash only) specifying the terms and conditions of such
offering, including the type and amount of consideration to be received by the
Company. Subject to the conditions and other provisions set forth in this
Section 7.8 and in Section 8.4 hereof, the Purchaser shall have the right,
exercisable by giving written notice to the Company within 30 days after receipt
of the Transaction Notice, to purchase all, but not less than all, of the equity
securities described
xxiv
in the Transaction Notice on substantially the same terms and conditions as
specified in such Transaction Notice. In the event that the Purchaser shall not
provide notice of its election to consummate such transaction within such 30-day
period, the Company may sell the equity securities to any third party or parties
(a "Third-Party Transaction") on substantially the same terms and conditions as
specified in the Transaction Notice at any time within 90 days after the
expiration of such 30-day period. If the Company shall not consummate a
Third-Party Transaction within such 90-day period, the consummation of such
Transaction or any other Third- Party Transaction shall again be subject to the
Purchaser's rights under this Section 7.8(a).
(b) The closing of any transaction to be consummated with the Purchaser
pursuant to this Section 7.8 shall take place at the offices of the Company or
its counsel on a date designated by the Company and reasonably acceptable to the
Purchaser not later than 60 days after the Purchaser's receipt of the
Transaction Notice.
7.9 Appointment of COO. As soon as practicable following the Closing,
the Board of Directors of the Company shall duly elect a designee of the
Purchaser as the President and Chief Operating Officer (COO) of the Company and
each of its Subsidiaries.
7.10 Agreement of the Chairman of the Company. At the Closing, the
Company shall deliver a fully executed agreement to the Purchaser reasonably
satisfactory to the Purchaser whereby the Chairman of the Company, Xxxxxxx X.
Xxxxxx, shall expressly (i) agree to the appointment referred to in Section 7.9
above; (ii) agree that he shall serve as the Chairman and Chief Executive
Officer of the Company and each of its Subsidiaries; and (iii) acknowledge that
Section 7.9 hereof and this Section 7.10 hereof do not constitute a breach or a
violation by the Employer (as such term is used in the below mentioned
Employment Agreement) of the terms of his employment pursuant to the Employment
Agreement between the Company and Xxxxxx, dated as of October 4, 1992, as
amended.
7.11 Rights Agreement. Each of the Company and First City Transfer
Company (as successor rights agent) shall, prior to the Closing, execute and
deliver an amendment to the Rights Agreement, dated August 6, 1991, as amended
(the "Rights Agreement"), exempting from operation under the Rights Agreement
the acquisitions of shares of Common Stock pursuant to this Agreement and the
Options. Such amendment shall be in full force and effect and constitute a valid
and binding agreement of the Company enforceable against the Company in
accordance with its terms.
7.12 U.S. Real Property Holding Corporation. From and after the date
hereof to the Closing Date or the earlier termination of this Agreement pursuant
to Section 13.11 hereof, the Company shall (a) use reasonable efforts to avoid
making any changes in the composition of its assets which would cause the
Company to be classified as a United States real property holding
xxv
corporation within the meaning of Section 897(c)(2) of the Code and (b) obtain
the consent of the Purchaser prior to the acquisition of any United States Real
Property Interest (as defined in Section 897 of the Code).
SECTION 8. Covenants of the Purchaser.
The Purchaser (and the Company following the Closing, to the extent
expressly provided in this Section 8) hereby covenants as follows:
8.1 Company Designees. For a period of three years following the
Closing, the Purchaser shall not cause, and shall use its best efforts not to
permit, (i) the removal, except for cause (as such term is defined and used
under New Jersey corporate law), of any of the Company Designees serving as
directors of the Company prior to the scheduled expiration of their terms or
(ii) the shortening of any of such Designees' terms as directors. In the event
that any Company Designee shall resign or cannot otherwise continue to serve as
a director, the remaining Company Designee(s) shall designate a replacement
therefor and, upon such designation, unless such designee shall not be
reasonably satisfactory to the Purchaser, the Company and the Purchaser shall
use their reasonable best efforts to cause the appointment and/or election of
such designated replacement to the Company's Board of Directors. Such
replacement directors shall be deemed to be Company Designees for the purpose of
this Agreement.
8.2 No Modification. For a period of three years following the Closing,
the Purchaser shall not cause, and shall use its reasonable best efforts not to
permit, the Company to agree to any amendment, modification or waiver of or take
any action in respect of this Agreement, the Distribution Agreement or the other
agreements referred to herein, including, without limitation, in respect of any
agreement or settlement relating to a dispute or claim for indemnification
hereunder or thereunder, without the prior written consent of at least a
majority of the Company Designees (including any replacements therefor as
provided in Section 8.1 hereof).
8.3 Other Agreements. At the Closing, upon satisfaction or permitted
waiver of the conditions set forth in Section 5 hereof, the Purchaser shall pay
the Purchase Price and execute and deliver the agreements, instruments and
certificates specified in Section 1.3(b) hereof.
8.4 Related Party Transactions. For a period of three years following
the Closing, except as expressly permitted by this Agreement or any other
agreements referred to herein, the Purchaser shall not cause or permit the
Company or its Subsidiaries existing on the date of the Agreement, directly or
indirectly, to engage in or enter into any, or to amend or terminate any then
validly existing, transaction, arrangement or agreement with, or to make any
distribution
xxvi
or dividend of property or monies to, the Purchaser or any Affiliate or
associate (as defined in Rule 405 of the Securities Act ("Associate") of the
Purchaser, without the prior written consent of a majority of the Company
Designees (including any replacements therefor as provided in Section 8.1
hereof).
8.5 Business Combinations. For a period of three years following the
Closing, neither the Purchaser nor any of its Affiliates or Associates shall,
without the prior written consent of a majority of the Company Designees
(including any replacements therefor as provided in Section 8.1 hereof) and the
prior receipt from an independent nationally recognized investment bank of a
written fairness opinion to the effect that the proposed transaction is fair
(from a financial point of view) to all shareholders of the Company, (i) propose
that the Company, or cause or permit the Company to, merge, consolidate or enter
into any other business combination with or into another entity (including,
without limitation, any "short-form" merger), (ii) propose that the Company, or
cause or permit the Company to, sell, lease, pledge or otherwise dispose of all
or any material portion of the assets of the Company, (iii) propose or make, or
cause or permit the Company to propose or make, any exchange offer or tender
offer for, or repurchase of, any securities of the Company or (iv) propose that
the Company, or cause or permit the Company to, recapitalize, liquidate,
dissolve or, to the extent it would cause the Company not to be publicly-held,
reorganize.
8.6 Executive Committee. For a period of three years following the
Closing, the Purchaser shall cause the Company to, and the Company shall,
constitute and maintain an executive committee of the Company's Board of
Directors to manage the fundamental matters concerning the Company in the
intervals between Board meetings, and each shall use its reasonable best efforts
to cause Xxxxxx (or his designee who shall be a member of the Company's Board of
Directors) to be, and remain for such period, a duly appointed, full member of
such committee.
SECTION 9. Transfer of Securities. The Purchaser, for itself and each
of its Affiliates, agrees as follows:
9.1 Transfer Restrictions. The Purchaser and its Affiliates shall not
transfer any of the Shares or the Option Shares unless such transfer shall be in
full compliance with all applicable provisions of the Securities Act and all
applicable provisions of state securities laws.
9.2 Legends. Each certificate for the Shares and the Option Shares
shall be endorsed with the following legend:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 OR UNDER ANY STATE SECURITIES
xxvii
LAWS, AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED
OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER
APPLICABLE FEDERAL AND STATE SECURITIES LAWS OR AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE COMPANY THAT THE TRANSFER IS EXEMPT FROM
REGISTRATION UNDER APPLICABLE FEDERAL AND STATE SECURITIES LAWS."
SECTION 10. Exchanges; Lost, Stolen or Mutilated Certificates. Upon
surrender by the Purchaser (or Merck or Genpharm, as applicable) to the Company
of any certificates representing the Shares or the Option Shares, the Company,
at its expense, shall issue in exchange therefor, and deliver to the Purchaser
(or Merck or Genpharm, as applicable), a new certificate or certificates
representing such Shares or Option Shares, in such denominations as may be
requested in writing by the Purchaser (or Merck or Genpharm, as applicable).
Every surrendered certificate representing the Shares or the Option Shares shall
be duly endorsed or be accompanied by a written instrument of the Purchaser's
(or Merck's or Genpharm's, as applicable) attorney duly authorized in writing.
Upon receipt of evidence satisfactory to the Company of the loss, theft,
destruction or mutilation of any certificate representing any Shares or Option
Shares, and in case of any such loss, theft or destruction, upon delivery of an
indemnity agreement satisfactory to the Company, or in case of any such
mutilation, upon surrender and cancellation of such certificate, the Company
shall issue and deliver to the Purchaser (or Merck or Genpharm, as applicable) a
new certificate for such Shares or Option Shares of like tenor and in the same
amount and name in lieu of such lost, stolen or mutilated certificate.
SECTION 11. Survival of Representations, Warranties and Agreements. The
representations and warranties (including the Schedules hereto) of the parties
contained herein and the agreements and covenants contained in Section 7 hereof
(excluding Sections 7.3, 7.8 and 7.9 hereof) shall survive the date hereof for a
period of 12 months following the Closing Date (the "Survival Period");
provided, that (i) a party shall not be liable to the other party hereto for any
claim for indemnification under Section 12 hereof in respect of a breach of a
representation or warranty unless written notice thereof describing such claim
with reasonable specificity shall be delivered to the Indemnitor (as defined in
Section 12.1 hereof) prior to the expiration of the Survival Period and (ii) the
representations and warranties relating to Taxes contained in Section 2.20
hereof shall survive until the expiration of the appropriate statute of
limitation.
SECTION 12. Indemnification.
12.1 Indemnitors; Indemnified Persons. For purposes of this Section 12,
each party which, pursuant to this Section 12, agrees to indemnify any other
person or entity shall be referred to as the "Indemnitor" with respect to such
person or entity, and each such person or
xxviii
entity who is indemnified shall be referred to as the "Indemnified Person" with
respect to such Indemnitor.
12.2 Company Indemnity. The Company hereby agrees to indemnify and hold
harmless each of the Purchaser and it Affiliates, and its directors, officers,
employees, agents and controlling persons (within the meaning of Section 15 of
the Securities Act or Section 20(a) of the Exchange Act), from and against any
and all claims, liabilities, losses, damages and expenses (including, without
limitation, reasonable attorneys' fees and disbursements) asserted against or
incurred by any such Indemnified Person which are caused by or are related to or
arise out of (a) subject to Section 11 hereof, the Company's material breach of
any of its representations, warranties, covenants or agreements contained in
this Agreement, (b) any untrue statement or alleged untrue statement of a
material fact contained in the Proxy Statement or the omission or alleged
omission to state a material fact required to be stated therein or necessary to
make the statements therein not misleading (a "Violation") or (c) (i) any
material violation by the Company or any Subsidiary thereof of any Environmental
Laws, or the disposal, discharge or release of solid wastes, pollutants or
hazardous substances, whether in compliance with Environmental Laws or not,
other than in respect of those matters set forth on Schedule 12.2 hereto (ii)
the ownership, operation or use of any landfill, wastewater treatment plant, air
pollution control equipment, storage lagoon or other waste management or
pollution control facility, whether in compliance with Environmental Laws or
not, other than in respect of those matters set forth on Schedule 12.2 hereto,
or (iii) exposure of any person to any chemical substances, noises or vibrations
generated by the Company, any of its Subsidiaries, or any of their respective
predecessors, whether in compliance with Environmental Laws or not, other than
in respect of those matters set forth on Schedule 12.2 hereto; provided,
however, that no indemnification shall be provided hereunder for any decrease in
the market price of the shares of Common Stock purchased or owned by the
Purchaser or any of its Affiliates; and provided, further, that no
indemnification shall be provided hereunder with respect to the preceding clause
12.2(b) to the extent an untrue or alleged untrue statement or omission or
alleged omission was made by the Company in reliance upon and in conformity with
information furnished by or on behalf of the Purchaser for use in the Proxy
Statement. The Company shall reimburse any such Indemnified Person for all costs
and expenses (including, without limitation, reasonable attorneys' fees and
disbursements and costs of investigation) incurred in connection with preparing
for, bringing or defending any action, claim, investigation, suit or other
proceeding, whether or not in connection with pending or threatened litigation,
which shall be caused by or related to or arise out of the foregoing, whether or
not such Indemnified Person shall be named as a party thereto.
12.3 Purchaser Indemnity. The Purchaser hereby agrees to indemnify and
hold harmless each of the Company, and its directors, officers, employees and
agents, from and against any and all claims, liabilities, losses, damages and
expenses (including, without
xxix
limitation, reasonable attorneys' fees and disbursements and costs of
investigation) asserted against or incurred by any such Indemnified Person which
are caused by or are related to or arise out of (a) subject to Section 11
hereof, the Purchaser's material breach of any representation, warranty,
covenant or agreement of the Purchaser contained in this Agreement or (b) a
Violation to the extent that such Violation shall occur in respect of
information furnished to the Company by or on behalf of the Purchaser for use in
the Proxy Statement. The Purchaser shall reimburse any such Indemnified Person
for all costs and expenses (including, without limitation, reasonable attorneys'
fees and disbursements and costs of investigation) incurred in connection with
preparing for, bringing or defending any action, claim, investigation, suit or
other proceeding, whether or not in connection with pending or threatened
litigation, which shall be caused by or related to or arise out of the
foregoing, whether or not such Indemnified Person shall be named as a party
thereto.
12.4 Defense. Promptly after receipt by an Indemnified Person of notice
of any claim or demand or the commencement of any suit, action or proceeding by
any third party with respect to which indemnification may be sought hereunder,
such Indemnified Person shall notify in writing the Indemnitor of such claim or
demand or the commencement of such suit, action or proceeding, but failure so to
notify the Indemnitor shall not relieve the Indemnitor from any liability which
the Indemnitor may have hereunder or otherwise, unless the Indemnitor shall be
actually prejudiced by such failure. If the Indemnitor shall so elect, the
Indemnitor shall assume the defense of such claim, demand, action, suit or
proceeding, including the employment of counsel reasonably satisfactory to such
Indemnified Person, and shall pay the fees and disbursements of such counsel. In
the event, however, that such Indemnified Person shall reasonably determine that
having common counsel would present such counsel with a conflict of interest or
alternative defenses shall be available to an Indemnified Person or if the
Indemnitor shall fail to assume the defense of the claim, demand, action, suit
or proceeding in a timely manner, then such Indemnified Person may employ
separate counsel to represent or defend such Person against any such claim,
demand, action, suit or proceeding and the Indemnitor shall pay the reasonable
fees and disbursements of such counsel; provided, however, that the Indemnitor
shall not be required to pay the fees and disbursements of more than one
separate counsel for all Indemnified Persons in any jurisdiction in any single
action, suit or proceeding. For any claim, demand, action, suit or proceeding
the defense of which the Indemnitor shall assume, the Indemnified Person shall
have the right to participate therein and to retain its own counsel at such
Indemnified Person's own expense (except as otherwise specifically provided in
this Section 12.4), so long as such participation does not interfere with the
Indemnitor's control of such claim, demand, action, suit or proceeding. The
Indemnitor shall not, without the prior written consent of the Indemnified
Person, settle or compromise or consent to the entry of any judgment in any
pending or threatened claim, action, suit or proceeding in respect of which
indemnification may be sought hereunder unless such settlement, compromise or
consent shall include an unconditional release of such Indemnified Person from
all liability arising out of such
xxx
claim, demand, action, suit or proceeding and would not prohibit, restrict or
impair the Indemnified Person from engaging in any business.
12.5 Purchaser Claims. If there shall be any claim for indemnification
by the Purchaser under this Section 12 or under the Distribution Agreement, all
determinations by the Company relating thereto, including, without limitation,
the choice and engagement of counsel, the defense and/or prosecution of any
action and the terms and conditions of any settlement or compromise thereof,
shall be made solely by the Company Designees (by majority vote thereof).
12.6 Exclusive Remedy. The parties hereto agree that the sole and
exclusive remedy and recourse with respect to any and all claims, suits,
actions, demands, liabilities, losses, expenses and damages relating to or
arising out of the subject matter of this Agreement (excluding the Distribution
Agreement and the Services Agreements) shall be pursuant, and subject, to the
indemnification provisions set forth in this Section 12, subject to the
provisions of Section 13.11 hereof and except for the remedy of injunctive
relief set forth in Section 13.12 hereof.
SECTION 13. Miscellaneous.
13.1 Expenses. The parties shall bear their own respective expenses
(including, but not limited to, all fees and expenses of counsel, financial
advisers and independent accountants) incurred in connection with the
preparation, negotiation and execution of this Agreement and the other
agreements referred to herein and the consummation of the transactions
contemplated hereby and thereby. To the extent that a Company Designee shall be
required to make any determination or take any action hereunder (including,
without limitation, with respect to indemnification under Section 12 hereof or
reviewing the compliance of the Purchaser with its covenants and agreements
contained herein) in his/her capacity as a Company Designee, the Purchaser shall
cause the Company to, and the Company shall, promptly reimburse and/or pay any
reasonable out-of-pocket expenses incurred by the Company Designee in acting in
such capacity. The Company Designees are intended third-party beneficiaries of
this provision.
13.2 Assignment; Binding Effect. All terms and provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and permitted assigns, but neither this
Agreement nor any of the rights, interests or obligations hereunder may be
assigned or delegated by any party hereto without the prior written consent of
the other party; provided, that the Purchaser shall have the right to designate
an Affiliate of the Purchaser to purchase and take delivery of the Shares at the
Closing pursuant to Section 1.1 hereof. The obligations and agreements of the
Purchaser hereunder shall succeed to and bind any purchaser or transferee,
whether or not such purchaser or transferee shall be an Affiliate of the
Purchaser, of the Shares and/or the Option Shares, but shall also remain binding
on the
xxxi
Purchaser if the transferee is an Affiliate thereof. Notwithstanding the
foregoing, the Options shall be at all times nontransferable and nonassignable
by the Purchaser or Genpharm.
13.3 Entire Agreement. This Agreement (including the Exhibits and
Schedules hereto) and the other agreements referred to herein or delivered
pursuant hereto contain the entire agreement between the parties with respect to
the subject matter hereof and thereof and supersede all prior arrangements or
understandings, written or oral, with respect thereto, including, without
limitation, the Confidentiality Agreement, dated December 16, 1997, by and
between the parties. The parties hereto agree that the only representations and
warranties made in connection with the transactions contemplated hereby and
thereby are those expressly made in writing in this Agreement. The Purchaser
expressly disclaims reliance upon any representations or warranties other than
those expressly made in writing by the Company in this Agreement. The Purchaser
acknowledges and agrees that it is sophisticated in matters concerning the
subject matter of this Agreement and the business of the Company, that the
Purchaser and the Company have an ordinary business relationship of
seller-purchaser and that no special relationship of trust exists between the
Purchaser and the Company which could give rise to a special duty of care.
13.4 Notices. All notices hereunder shall be in writing and shall be
given: (a) if to the Company, at Xxx Xxx Xxxxx Xxxx, Xxxxxx Xxxxxx, Xxx Xxxx
00000 (attention: Xxxxxxx X. Xxxxxx, President), fax number: (000) 000-0000, or
such other address or fax number as the Company shall have designated in writing
to the Purchaser in accordance with this Section 13.4, with a copy to Xxxxxxx,
Calamari & Xxxxxxx, 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 (attention:
Xxxxxxx Xxxxxxxxxx, Esq. and Xxxxxxx X. Xxxxxxx, Esq.), fax number: (212) 213-
1199, or (b) if to the Purchaser, at x/x Xxxxx XXxX, Xxxxxxxxxxx Xxxxxxx 000,
00000 Xxxxxxxxx Xxxxxxx (attention: Xx. Xxxx Xxxxxxxxx), fax number 000 00 0000
72 3435, or such other address or fax number as the Purchaser shall have
designated in writing to the Company in accordance with this Section 13.4, with
a copy to Coudert Brothers, 0000 Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx, Xxx Xxxx
00000-0000 (attention: Xxxxx X. Xxxxxxxx, Xx., Esq.), fax number: (212)
000-0000. Any notice shall be deemed to have been given if personally delivered
or sent by express commercial courier or delivery service or by telegram,
telefax, telex or facsimile transmission. Any notice given in any other manner
shall be deemed given when actually received.
13.5 Amendments; Waiver. Prior to the Closing, this Agreement may not
be amended or, subject to Section 13.11 hereof, terminated, and no provision
hereof may be waived, except pursuant to a written instrument executed by the
Company and the Purchaser. For a period of three years following the Closing,
neither this Agreement nor the Distribution Agreement may be amended, and no
provision hereof or thereof may be waived, without the prior written
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consent of at least a majority of the Company Designees (on behalf of the
Company) and except pursuant to a written instrument executed by both parties.
13.6 Counterparts. This Agreement may be executed in counterparts, and
each such counterpart shall be deemed to be an original instrument, but all such
counterparts together shall constitute but one agreement.
13.7 Headings. The headings of the sections of this Agreement have been
inserted for convenience of reference only and shall not be deemed to be a part
of this Agreement. As used herein, the phrase "to the Company's knowledge" shall
mean the actual knowledge of any of the executive officers of the Company only.
13.8 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York applicable to contracts
made and to be performed wholly therein.
13.9 Severability. If any term or provision hereof shall be invalid or
unenforceable, (i) the remaining terms and provisions hereof shall be
unimpaired, (ii) any such invalidity or unenforceability in any jurisdiction
shall not invalidate or render unenforceable such term or provision in any other
jurisdiction and (iii) the invalid or unenforceable term or provision shall be
deemed replaced by a term or provision as determined by a court to be valid and
enforceable and to express, to the fullest extent legally permissible, the
intention of the parties with respect to the invalid or unenforceable term or
provision.
13.10 Consent to Jurisdiction. In connection with any dispute which may
arise under this Agreement or under any other agreement referred to herein
(except for the Distribution Agreement), each of the parties hereby irrevocably
submits to, consents to, and waives any objection to the exclusive jurisdiction
of the courts of the State of New York located in the County of New York and of
the United States District Court for the Southern District of New York, and
waives any objection to the laying of venue in such courts. Each such party
admits that any such dispute may be resolved at least as conveniently in such a
court as in any other court, and shall not seek dismissal or a change of venue
on the ground that resolution of such a dispute in any such court shall not be
convenient or in the interests of justice. The Purchaser hereby appoints Coudert
Brothers as its agent upon whom service of process may be made with the same
force and effect as if such service shall have been made personally upon the
Purchaser. The Company hereby appoints Xxxxxxx, Calamari & Xxxxxxx as its agent
upon whom service of process may be made with the same force and effect as if
such service shall have been made personally upon the Company.
xxxiii
13.11 Termination.
(a) This Agreement may be terminated and the transactions
contemplated hereby may be abandoned at any time prior to the Closing: (i) by
the mutual written consent of the Purchaser and the Company, (ii) by either
party to this Agreement, if the Shareholders' Approval shall not have been
obtained with respect to each of the Proposals at the Meeting, including any
adjournments thereof, (iii) by either party to this Agreement, if there shall
have been a material breach of a representation or warranty contained in this
Agreement by the other party, or a material breach by the other party of any
covenant or agreement set forth herein and such breach shall not have been cured
within ten (10) days following the occurrence thereof, and such shall not have
been waived by the other party hereto, (iv) by either party to this Agreement,
if the Closing shall not have occurred by July 15, 1998 or (v) by the Company,
if the Board of Directors of the Company determines in good faith, after
consultation with outside counsel, that failure to terminate this Agreement
would create a substantial risk of liability for breach of its fiduciary duties
to the Company's shareholders under applicable law.
Upon any such termination, all further obligations of the
parties shall become null and void and no party shall have any liability to the
other party, except that the obligations of the parties hereto pursuant to
Sections 6.2, 6.3 and 13, including Section 13.11(b), hereof shall survive such
termination indefinitely.
(b) Notwithstanding anything to the contrary contained herein,
if this Agreement (i) is terminated by either party pursuant to Section 13.11(a)
(iii) hereof, then the breaching party shall promptly pay to the non-breaching
party in cash an amount equal to $750,000, or (ii) is terminated by the Company
pursuant to Section 13.11(a) (v) hereof, then the Company shall promptly pay to
the Purchaser in cash an amount equal to $1,000,000. The parties acknowledge and
agree that the provisions of this Section 13.11(b) provide for liquidated
damages (and not a penalty) and shall be the sole and exclusive remedy and
recourse of the parties hereto in respect of a termination of this Agreement
pursuant to Sections 13.11(a)(iii) or (v) hereof.
13.12 Injunctive Relief.
(a) The Purchaser hereby acknowledges and agrees that a breach by it of
its covenants or agreements hereunder will cause irreparable harm to the
Company. Accordingly, the Purchaser acknowledges and agrees that a remedy at law
for a breach of its obligations hereunder (including, but not limited to, its
obligations under Sections 6.3, 7.3 and 8 hereof) will be inadequate and agrees,
in the event of a breach or threatened breach by the Purchaser of the provisions
of this Agreement (including, but not limited to, its obligations pursuant to
Sections 6.3, 7.3 and 8 hereof), that the Company and, in the case of Sections
7.3, 8.1, 8.5 and
xxxiv
8.6 hereof, the shareholders of the Company (other than the Purchaser) and the
Company Designees, shall be entitled, in addition to all other available
remedies, to an injunction restraining any actual or threatened breach and/or
the remedy of specific performance.
(b) The Company hereby acknowledges and agrees that a breach by it of
its covenants or agreements hereunder will cause irreparable harm to the
Purchaser. Accordingly, the Company acknowledges and agrees that a remedy at law
for a breach of its obligations hereunder (including, but not limited to, its
obligations under Sections 6.3 and 7 hereof) will be inadequate and agrees, in
the event of a breach or threatened breach by the Company of the provisions of
this Agreement (including, but not limited to, its obligations pursuant to
Sections 6.3, 7.3 and 7.8 hereof), that the Purchaser shall be entitled, in
addition to all other available remedies, to an injunction restraining any
actual or threatened breach and/or the remedy of specific performance.
IN WITNESS WHEREOF, each of the undersigned has caused this Agreement
to be executed as of the date first written above.
PHARMACEUTICAL RESOURCES, INC.
By: /s/ Xxxxxxx X. Xxxxxx
--------------------------
Name: Xxxxxxx X. Xxxxxx
Title: President
LIPHA AMERICAS, INC.
By: /s/ Xxxxxxxxx Xxxx
------------------------------
Name: Xxxxxxxxx Xxxx
Title: Head New Business, Merck
KGaA
xxxv
Exhibit A
Distribution Agreement
Exhibit B
Services Agreements
Exhibit C
Options
Exhibit D
Registration Rights Agreement
Schedules
Schedule 2.3
Schedule 2.5
Schedule 2.6
Schedule 2.8
Schedule 2.10
Schedule 2.11
Schedule 2.12
Schedule 2.13
Schedule 2.15
Schedule 2.16
Schedule 2.17
Schedule 2.18
Schedule 2.19
Schedule 2.20
Schedule 2.21
Schedule 2.22
Schedule 2.23
Schedule 5.14(a)
Schedule 5.14(b)
Schedule 7.5
Schedule 12.2
Exhibit A....................................Distribution Agreement
Exhibit B.......................................Services Agreements
Exhibit C..................................................Options
Exhibit D.............................Registration Rights Agreement
v