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AGREEMENT AND PLAN OF MERGER
BY AND AMONG
GILEAD SCIENCES, INC.,
GAZELLE ACQUISITION SUB, INC.
AND
NEXSTAR PHARMACEUTICALS, INC.
DATED AS OF FEBRUARY 28, 1999
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TABLE OF CONTENTS
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ARTICLE I. THE MERGER
SECTION 1.1. The Merger.....................................................2
SECTION 1.2. Effective Time of the Merger...................................2
SECTION 1.3. Effects of the Merger..........................................2
SECTION 1.4. Certificate of Incorporation of the Surviving Corporation......2
SECTION 1.5. By-Laws of the Surviving Corporation...........................2
SECTION 1.6. Directors and Officers of the Surviving Corporation............2
ARTICLE II. CONVERSION OF SHARES
SECTION 2.1. Conversion of Shares...........................................3
(a) Capital Stock of Sub.............................................3
(b) Cancellation of Treasury Stock...................................3
(c) Exchange Ratio for Company Common Stock..........................3
(d) Cancellation of Company Common Stock.............................3
SECTION 2.2. Surrender of Certificates......................................4
SECTION 2.3. Fractional Shares..............................................6
SECTION 2.4. Closing........................................................7
SECTION 2.5. Stock Option Plans.............................................7
SECTION 2.6. Employee Stock Purchase Plan...................................8
ARTICLE III. REPRESENTATIONS AND WARRANTIES
SECTION 3.1. Representations and Warranties of the Company..................8
(a) Due Organization, Good Standing and Power.........................8
(b) Authorization and Validity of Agreement...........................8
(c) Capitalization....................................................9
(d) Consents and Approvals; No Violations............................12
(e) Company Reports and Financial Statements; Accounting Records.....13
(f) Absence of Certain Changes.......................................14
(g) Regulatory Compliance............................................14
(h) Compliance with Laws.............................................17
(i) Litigation.......................................................19
(j) Employee Benefit Plans...........................................19
(k) Employment Agreements............................................22
(l) Taxes............................................................22
(m) Absence of Undisclosed Liabilities...............................24
(n) Patents, Trademarks, Etc.........................................25
(o) Transactions with Directors, Officers and Affiliates.............25
(p) Broker's or Finder's Fee.........................................26
(q) Opinion of Financial Advisor.....................................26
(r) Vote Required....................................................26
(s) Material Contracts...............................................26
(t) Accounting Matters...............................................28
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(u) Tax Treatment....................................................28
(v) Certain Business Practices.......................................28
(w) Governmental Authorizations......................................28
(x) Insurance........................................................29
(y) Y2K Compliance...................................................29
(z) Supply...........................................................30
(aa) Receivables.....................................................30
SECTION 3.2. Representations and Warranties of Parent and Sub..............31
(a) Due Organization, Good Standing and Power........................31
(b) Authorization and Validity of Agreement..........................31
(c) Capitalization...................................................32
(d) Consents and Approvals; No Violations............................33
(e) Parent Reports and Financial Statements; Accounting Records......34
(f) Absence of Certain Changes.......................................35
(g) Compliance with Laws.............................................35
(h) Litigation.......................................................37
(i) Taxes............................................................37
(j) Parent Employee Benefit Plans....................................39
(k) Patents, Trademarks, Etc.........................................40
(l) Broker's or Finder's Fee.........................................41
(m) Accounting Matters...............................................41
(n) Tax Treatment....................................................41
(o) Operations of Sub................................................41
(p) Absence of Undisclosed Liabilities...............................41
(q) Regulatory Compliance............................................42
(r) Certain Business Practices.......................................43
(s) Governmental Authorizations......................................43
(t) Y2K Compliance...................................................44
ARTICLE IV. CONDUCT OF BUSINESS; TRANSACTIONS PRIOR
TO CLOSING DATE; ADDITIONAL AGREEMENTS
SECTION 4.1. Conduct of Business of the Company............................45
SECTION 4.2. Conduct of Business of Parent.................................47
SECTION 4.3. Access to Information Concerning Business and Records.........47
SECTION 4.4. Confidentiality...............................................48
SECTION 4.5. Registration Statement/Joint Proxy Statement; Quotation
on Nasdaq National Market..............................48
SECTION 4.6. Employee Benefits.............................................50
SECTION 4.7. Stockholder Approvals; Recommendations........................50
SECTION 4.8. Stock Options.................................................51
SECTION 4.9. Letters of the Company's Accountants..........................52
SECTION 4.10. Letters of Parent's Accountants..............................52
SECTION 4.11. Notices of Certain Events....................................52
SECTION 4.12. HSR Act......................................................53
SECTION 4.13. Indemnification; Officers' and Directors' Insurance..........53
SECTION 4.14. Efforts......................................................54
SECTION 4.15. Rule 145.....................................................54
SECTION 4.16. No Solicitation..............................................55
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SECTION 4.17. Tax Reorganization...........................................57
SECTION 4.18. Convertible Debentures.......................................58
SECTION 4.19. Warrants.....................................................58
ARTICLE V. CONDITIONS PRECEDENT TO MERGER
SECTION 5.1. Conditions Precedent to Obligations of Parent, Sub and
the Company............................................58
(a) Approval of Stockholders.........................................58
(b) HSR Act..........................................................58
(c) No Restraints....................................................58
(d) Statutes.........................................................59
(e) Nasdaq National Market Quotation.................................59
(f) Effectiveness of Registration Statement..........................59
(g) Market Events....................................................59
(h) Accounting Treatment.............................................59
SECTION 5.2. Conditions Precedent to Obligations of Parent and Sub.........59
(a) Accuracy of Representations and Warranties.......................59
(b) Performance by Company...........................................59
(c) Affiliate Agreements.............................................60
(d) Tax Opinion......................................................60
(e) Accountants' Letters.............................................60
(f) Consents.........................................................60
(g) No Governmental Litigation.......................................60
SECTION 5.3. Conditions Precedent to Obligation of the Company.............61
(a) Accuracy of Representations and Warranties.......................61
(b) Performance by Parent and Sub....................................61
(c) Tax Opinion......................................................61
(d) Registration Rights Agreement....................................61
(e) Undertakings.....................................................61
ARTICLE VI. TERMINATION AND ABANDONMENT
SECTION 6.1. Termination...................................................62
SECTION 6.2. Effect of Termination.........................................64
ARTICLE VII. MISCELLANEOUS
SECTION 7.1. Fees and Expenses.............................................64
SECTION 7.2. Representations, Warranties and Agreements....................65
SECTION 7.3. Extension; Waiver.............................................65
SECTION 7.4. Public Announcements..........................................66
SECTION 7.5. Notices.......................................................66
SECTION 7.6. Entire Agreement..............................................67
SECTION 7.7. Binding Effect; Benefit; Assignment...........................67
SECTION 7.8. Amendment and Modification....................................67
SECTION 7.9. Further Actions...............................................68
SECTION 7.10. Headings.....................................................68
SECTION 7.11. Counterparts.................................................68
SECTION 7.12. Applicable Law...............................................68
SECTION 7.13. Severability.................................................68
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SECTION 7.14. Enforcement of Agreement.....................................68
SECTION 7.15. "Person" Defined.............................................68
SECTION 7.16. Submission to Jurisdiction...................................68
SECTION 7.17. Subsidiaries.................................................69
EXHIBITS
Exhibit A Form of Affiliate Agreement
Exhibit B Form of Registration Rights Agreement
Exhibit C Form of Undertaking
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of February 28, 1999 (the
"Agreement"), by and among GILEAD SCIENCES, INC., a Delaware corporation
("Parent"), GAZELLE ACQUISITION SUB, INC., a Delaware corporation and a wholly
owned subsidiary of Parent ("Sub"), and NEXSTAR PHARMACEUTICALS, INC., a
Delaware corporation (the "Company").
WHEREAS, the respective Boards of Directors of the Company and
Parent have each determined that it is in the best interests of their respective
companies and stockholders that Parent acquire the business of the Company
pursuant to the terms and conditions set forth in this Agreement;
WHEREAS, the respective Boards of Directors of Parent, Sub and the
Company, and Parent acting as the sole stockholder of Sub, have approved the
merger of Sub into the Company (the "Merger"), pursuant and subject to the terms
and conditions of this Agreement, whereby each issued and outstanding share of
common stock, par value $.01 per share, of the Company ("Company Common Stock")
will be converted into the right to receive shares of common stock, par value
$.001 per share, of Parent ("Parent Shares") in accordance with Section 2.1 of
this Agreement;
WHEREAS, the respective Boards of Directors of the Company and
Parent have each determined that the Merger is fair to, and in the best
interests of, their respective companies and stockholders and have approved the
Merger, and the Board of Directors of the Company has recommended the approval
and adoption of this Agreement by the Company's stockholders;
WHEREAS, in order to induce Parent to enter into this Agreement and
to consummate the Merger, the Company and Parent are entering into a Stock
Option Agreement of even date herewith (the "Share Option Agreement") pursuant
to which the Company is granting to Parent an option to purchase certain shares
of Company Common Stock from the Company under the circumstances specified in
the Share Option Agreement;
WHEREAS, for United States federal income tax purposes, it is
intended that the Merger shall qualify as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as amended, and the rules
and regulations promulgated thereunder (the "Code"); and
WHEREAS, it is intended that the Merger shall be recorded for
accounting purposes as a pooling of interests under United States generally
accepted accounting principles ("US GAAP");
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NOW, THEREFORE, in consideration of the promises and of the mutual
representations, warranties, covenants and agreements herein contained, the
parties hereto agree as follows:
ARTICLE I.
THE MERGER
SECTION 1.1. THE MERGER. Subject to the terms and conditions of this
Agreement, at the time of the Closing (as defined in Section 2.4 hereof), a
certificate of merger (the "Certificate of Merger") effecting the merger of Sub
with and into the Company, shall be duly executed by the Company in accordance
with the Delaware General Corporation Law (the "DGCL") and shall be filed on the
Closing Date (as defined in Section 2.4 hereof). The Merger shall become
effective upon the filing of the Certificate of Merger with the Secretary of
State of the State of Delaware or at such time thereafter as is provided in the
Certificate of Merger in accordance with the provisions and requirements of the
DGCL. The date and time when the Merger shall become effective is hereinafter
referred to as the "Effective Time."
SECTION 1.2. EFFECTIVE TIME OF MERGER. At the Effective Time, Sub
shall be merged with and into the Company and the separate corporate existence
of Sub shall cease, and the Company shall continue as the surviving corporation
under the laws of the State of Delaware (the "Surviving Corporation").
SECTION 1.3. EFFECTS OF THE MERGER. From and after the Effective
Time, the Merger shall have the effects set forth in Section 259(a) of the DGCL.
SECTION 1.4. CERTIFICATE OF INCORPORATION OF THE SURVIVING
CORPORATION. The Certificate of Incorporation of the Company shall be the
Certificate of Incorporation of the Surviving Corporation after the Effective
Time, and thereafter may be amended in accordance with its terms and as provided
by law and this Agreement.
SECTION 1.5. BY-LAWS OF THE SURVIVING CORPORATION. The By-Laws of
Sub, as in effect immediately prior to the Effective Time, shall be the By-Laws
of the Surviving Corporation.
SECTION 1.6. DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION.
The directors of Sub immediately prior to the Effective Time shall be the
directors of the Surviving Corporation, and the officers of the Company
immediately prior to the Effective Time shall be the officers of the Surviving
Corporation, in each case until their respective successors are duly elected and
qualified.
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ARTICLE II.
CONVERSION OF SHARES
SECTION 2.1. CONVERSION OF SHARES. At the Effective Time, by virtue
of the Merger and without any action on the part of the holder of any shares of
Company Common Stock or any holder of capital stock of Sub:
(a) CAPITAL STOCK OF SUB. Each share of capital stock of Sub then
issued and outstanding shall become one fully paid and nonassessable share
of common stock, $0.01 par value per share, of the Surviving Corporation.
(b) CANCELLATION OF TREASURY STOCK. All shares of Company Common
Stock that are owned by the Company as treasury stock shall be canceled
and retired and shall cease to exist and no Parent Shares or other
consideration shall be delivered in exchange therefor.
(c) EXCHANGE RATIO FOR COMPANY COMMON STOCK. Each issued and
outstanding share of Company Common Stock (other than shares to be
canceled in accordance with Section 2.1(b)) shall be converted into the
right to receive that number of Parent Shares equal to the Exchange
Ratio (the Parent Shares issuable upon exchange of shares of Company
Common Stock are referred to as the "Merger Consideration"). For
purposes of this Agreement: (i) "Exchange Ratio" means a fraction equal
to 0.4250, PROVIDED, HOWEVER, that (A) if the Parent Share Value is less
than $36.47, then the Exchange Ratio shall be equal to the lesser of
0.5000 or a fraction having a numerator equal to $15.50 and having a
denominator equal to the Parent Share Value, and (B) if the Parent Share
Value is greater than $45.88, then the Exchange Ratio shall be equal to
the greater of 0.3786 or a fraction having a numerator equal to $19.50
and having a denominator equal to the Parent Share Value; and (ii)
"Parent Share Value" means the average of the closing prices of the
Parent Shares as reported on the Nasdaq National Market for the 20
consecutive trading days ending on the third trading day preceding the
date on which the stockholders of the Company vote on the Merger at the
Special Meeting (as defined in Section 4.7 hereof). If between the date
of this Agreement and the Effective Time the outstanding Parent Shares
or the outstanding Company Common Stock shall be changed into a
different number of shares by reason of any stock dividend, subdivision,
reclassification, split-up, combination or the like, the Exchange Ratio
shall be appropriately adjusted.
(d) RIGHTS OF FORMER HOLDERS OF COMPANY COMMON STOCK. All shares of
Company Common Stock converted into the right to receive Merger
Consideration pursuant to this Section 2.1 shall no longer be outstanding,
and each holder of a
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certificate representing any such shares shall cease to have any rights
with respect thereto, except the right to receive Merger Consideration to
be issued in consideration therefor upon the surrender of such certificate
in accordance with Section 2.2, without interest.
SECTION 2.2. SURRENDER OF CERTIFICATES. (a) Concurrently with or
prior to the Effective Time, the parties hereto shall designate ChaseMellon
Shareholder Services to act as agent (the "Exchange Agent") for purposes of
exchanging certificates representing shares of Company Common Stock as provided
in Section 2.1. As soon as practicable after the Effective Time, Parent shall
cause the Exchange Agent to mail or make available to each holder of record of a
certificate or certificates which immediately prior to the Effective Time
represented outstanding shares of Company Common Stock whose shares were
converted into the right to receive Merger Consideration pursuant to Section 2.1
a notice and letter of transmittal advising such holder of the effectiveness of
the Merger and the procedure for surrendering to the Exchange Agent such
certificate or certificates which immediately prior to the Effective Time
represented outstanding shares of Company Common Stock in exchange for Merger
Consideration deliverable in respect thereof pursuant to this Article II.
(b) Each holder of shares of Company Common Stock that has been
converted into a right to receive Merger Consideration, upon surrender to the
Exchange Agent of a certificate or certificates representing such Company Common
Stock, together with a properly completed letter of transmittal covering such
shares of Company Common Stock and such other documents as may reasonably be
required by the Exchange Agent or Parent, will be entitled to receive Merger
Consideration in respect of each share of Company Common Stock surrendered.
Until so surrendered, each share of Company Common Stock shall, after the
Effective Time, represent for all purposes, only the right to receive Merger
Consideration. Such letter of transmittal shall be in customary form and contain
such provisions as Parent may reasonably specify (including a provision
confirming that delivery of the certificates which immediately prior to the
Effective Time represented shares of Company Common Stock shall be effected, and
risk of loss and title to such certificates shall pass, only upon delivery of
such certificates to the Exchange Agent).
(c) If any Merger Consideration is to be issued to a Person (as
defined in Section 7.15 hereof) other than the registered holder of the Company
Common Stock represented by the certificate or certificates surrendered with
respect thereto, it shall be a condition to such issuance that the certificate
or certificates so surrendered shall be properly endorsed or otherwise be in
proper form for transfer and that the Person requesting such delivery shall pay
to the Exchange Agent any transfer or other taxes required as a result of such
issuance to
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a Person other than the registered holder of such Company Common Stock or
establish to the satisfaction of the Exchange Agent that such tax has been paid
or is not payable. If any certificate which immediately prior to the Effective
Time represented shares of Company Common Stock shall have been lost, stolen or
destroyed, Parent may, in its discretion and as a condition precedent to the
issuance of any certificate representing Parent Shares, require the owner of
such lost, stolen or destroyed certificate to provide an appropriate affidavit
and to deliver a bond (in such sum as Parent may reasonably direct) as indemnity
against any claim that may be made against the Exchange Agent, Parent or the
Surviving Corporation with respect to such certificate.
(d) As of the Effective Time, there shall be no further registration
of transfers of shares of Company Common Stock that were outstanding prior to
the Merger. After the Effective Time, certificates representing shares of
Company Common Stock presented to the Surviving Corporation for transfer shall
be canceled and exchanged for the consideration provided for, and in accordance
with the procedures set forth, in this Article II.
(e) At the close of business on the Effective Time, the stock ledger
of the Company with respect to the issuance of Company Common Stock shall be
closed. Six months after the Effective Time, any Merger Consideration made
available to the Exchange Agent and any portion of the Common Stock Trust (as
defined in Section 2.3) that remains unclaimed by the holders of shares of
Company Common Stock shall be returned to Parent upon demand. Any such holder
who has not delivered his certificates which immediately prior to the Effective
Time represented shares of Company Common Stock to the Exchange Agent in
accordance with Section 2.2 prior to that time shall thereafter look only to
Parent and the Surviving Corporation for issuance of Parent Shares in respect of
shares of Company Common Stock. Notwithstanding the foregoing, neither Parent
nor the Surviving Corporation shall be liable to any holder or former holder of
shares of Company Common Stock for any securities delivered or any amount paid
to a public official pursuant to applicable abandoned property laws. Any Parent
Shares remaining unclaimed by holders of shares of Company Common Stock three
years after the Effective Time (or such earlier date immediately prior to such
time as such securities would otherwise escheat to or become property of any
governmental entity or as is otherwise provided by applicable law) shall, to the
extent permitted by applicable law, be free and clear of any claims or interest
of any Person previously entitled thereto.
(f) No dividends, interest or other distributions with respect to
securities of Parent or the Surviving Corporation issuable with respect to
Merger Consideration shall be paid to the holder of any unsurrendered
certificates which formerly
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represented Company Common Stock until such certificates are surrendered as
provided in this Section. Upon such surrender, there shall be paid, without
interest, to the Person in whose name the Parent Shares representing such
securities are registered, all dividends and other distributions payable in
respect of such securities on a date subsequent to, and in respect of a record
date after, the Effective Time, subject to the effect of applicable abandoned
property laws.
SECTION 2.3. FRACTIONAL SHARES. No fraction of a Parent Share will
be issued, and such fractional interest shall not entitle the owner thereof to
vote or to any rights as a security holder of Parent. In lieu of any such
fractional interest, each holder of certificates which immediately prior to the
Effective Time represented shares of Company Common Stock otherwise entitled to
a fraction of a Parent Share (after aggregating all fractional Parent Shares
issuable to such holder) will be entitled to receive at the time such holder
receives Parent Shares pursuant to Section 2.2(b) hereof and in accordance with
the provisions of this Section 2.3 from the Exchange Agent a cash payment
representing such holder's proportionate interest in the net proceeds
(determined after deducting all commissions, transfer taxes and other
transaction costs) from the sale by the Exchange Agent on behalf of all such
holders of the aggregate of the fractions of Parent Shares which would otherwise
be issued (the "Excess Parent Shares"). The sale of the Excess Parent Shares by
the Exchange Agent shall be executed on the Nasdaq National Market through one
or more market makers in the Parent Shares and shall be executed in round lots
to the extent practicable. Until the net proceeds of such sale or sales have
been distributed to the former holders of shares of the Company Common Stock,
the Exchange Agent will, subject to Section 2.2(e), hold such proceeds in trust
for the former holders of shares of Company Common Stock (the "Common Stock
Trust"). Parent shall pay all commissions, transfer taxes and other
out-of-pocket transaction costs, including the expenses and compensation, of the
Exchange Agent incurred in connection with such sale of the Excess Parent
Shares. The Exchange Agent shall determine the portion of the Common Stock Trust
to which each former holder of shares of Company Common Stock shall be entitled,
if any, by multiplying the amount of the aggregate net proceeds comprising the
Common Stock Trust by a fraction the numerator of which is the amount of the
fractional Parent Share interest to which such former holder of shares of
Company Common Stock is entitled and the denominator of which is the aggregate
amount of fractional Parent Shares to which all former holders of shares of
Company Common Stock are entitled. As soon as practicable after the
determination of the amount of cash, if any, to be paid to former holders of
shares of Company Common Stock in lieu of any fractional Parent Shares, the
Exchange Agent shall make available such amounts to such former holders of
shares of the Company Common Stock without interest.
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SECTION 2.4. CLOSING. The closing of the Merger (the "Closing")
shall take place at the offices of Willkie Farr & Gallagher, 787 Seventh Avenue,
New York, New York 10019, as soon as practicable after the last of the
conditions set forth in Article V hereof is fulfilled or waived (subject to
applicable law) but in no event later than the fifth business day thereafter, or
at such other time and place and on such other date as Parent and the Company
shall mutually agree (the "Closing Date").
SECTION 2.5. STOCK OPTION PLANS. (a) Prior to the Effective Time,
but subject to the consummation of the Merger, the Board of Directors of the
Company and the committee appointed by the Board to administer the Company's
stock option plans shall use its best efforts to take all action reasonably
necessary or appropriate to provide that each option outstanding under the
Company's 1988 Stock Option Plan, 1993 Incentive Stock Plan, as amended, and
1995 Director Option Plan, as amended (collectively, the "Stock Option Plans"),
shall be converted into and become rights with respect to Parent Shares, and
Parent shall assume each such option in accordance with the terms (as in effect
as of the date of this Agreement) of the Stock Option Plan under which it was
issued and the stock option agreement by which it is evidenced. From and after
the Effective Time, (i) each option assumed by Parent in accordance with this
Section 2.5(a) may be exercised solely for Parent Shares, (ii) the number of
Parent Shares subject to each such option shall be equal to the number of shares
of Company Common Stock subject to such option immediately prior to the
Effective Time multiplied by the Exchange Ratio, rounding down to the nearest
whole share (with cash, less the applicable exercise price, being payable for
any fraction of a share), (iii) the per share exercise price under each such
option shall be adjusted by dividing the per share exercise price under such
option by the Exchange Ratio and rounding up to the nearest cent and (iv) any
restriction on the exercise of any such option shall continue in full force and
effect and the term, exercisability, vesting schedule and other provisions of
such option shall otherwise remain unchanged; PROVIDED, HOWEVER, that each
option assumed by Parent in accordance with this Section 2.5(a) shall, in
accordance with its terms, be subject to further adjustment as appropriate to
reflect any stock dividend, subdivision, reclassification, split-up, combination
or the like subsequent to the Effective Time. Parent shall file with the
Commission, no later than 5 business days after the Effective Time, a
registration statement on Form S-8 relating to Parent Shares issuable with
respect to the options assumed by Parent in accordance with this Section 2.5(a).
(b) The Company shall take all action reasonably necessary (under
the Stock Option Plans and otherwise) to effectuate the provisions of this
Section 2.5 and to ensure that, from and after the Effective Time, holders of
options have no
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rights with respect thereto other than those specifically provided in this
Section 2.5.
SECTION 2.6. EMPLOYEE STOCK PURCHASE PLAN. Prior to the Effective
Time, but subject to the consummation of the Merger, the Board of Directors of
the Company shall take all action reasonably necessary or appropriate to use the
accumulated payroll deductions in accounts of participants in the Company's
Employee Stock Purchase Plan (the "Stock Purchase Plan") to purchase shares of
Company Common Stock and immediately thereafter terminate the Stock Purchase
Plan.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The
Company hereby represents and warrants to Parent and Sub as follows:
(a) DUE ORGANIZATION, GOOD STANDING AND POWER. Each of the Company
and its Subsidiaries (as that term is defined in Section 7.17 hereof) is a
corporation duly organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation and each such
corporation has all requisite power and authority to own, lease and
operate its properties and to carry on its business as now being
conducted. Each of the Company and its Subsidiaries is duly qualified or
licensed to do business and is in good standing in each jurisdiction in
which the property owned, leased or operated by it or the nature of the
business conducted by it makes such qualification necessary, except in
such jurisdictions where the failure to be so qualified or licensed and in
good standing would not have a material adverse effect on the business,
properties, assets, liabilities, condition (financial or otherwise),
operations or results of operations (the "Condition") of the Company and
its Subsidiaries taken as a whole.
(b) AUTHORIZATION AND VALIDITY OF AGREEMENT. The Company has full
corporate power and authority to execute and deliver this Agreement and
the Share Option Agreement, to perform its obligations hereunder and
thereunder and, subject, in the case of this Agreement, to obtaining any
necessary stockholder approval of the Merger, to consummate the
transactions contemplated hereby and thereby. The execution, delivery and
performance of this Agreement and the Share Option Agreement by the
Company, and the consummation by it of the transactions contemplated
hereby and thereby, have been duly authorized by all necessary corporate
action on the part of the Company (including the authorization and
approval of the Board of Directors of the
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Company), subject (in the case of this Agreement) to the approval of the
Merger by the Company's stockholders in accordance with the DGCL. The
Board of Directors of the Company (at a meeting duly called and held) has
(a) determined that the Merger is advisable and fair and in the best
interests of the Company and its stockholders, and (b) recommended the
approval and adoption of this Agreement and approval of the Merger by the
holders of Company Common Stock and directed that this Agreement and the
Merger be submitted for consideration by the Company's stockholders at the
Special Meeting. The Board of Directors of the Company has taken all
action necessary to render inapplicable, as it relates to Parent, the
provisions of Section 203 of the DGCL. No other corporate action on the
part of the Company is necessary to authorize the execution, delivery and
performance of this Agreement and the Share Option Agreement by the
Company and the consummation of the transactions contemplated hereby and
thereby (other than, in the case of this Agreement, the approval of the
Merger by the holders of at least a majority of the outstanding Company
Common Stock). To the Company's knowledge, no other state takeover statute
or similar statute or regulation applies or purports to apply to the
Merger, this Agreement, the Share Option Agreement or the transactions
contemplated hereby and thereby. This Agreement and the Share Option
Agreement have been duly executed and delivered by the Company and each is
a valid and binding obligation of the Company enforceable against the
Company in accordance with its terms, except to the extent that its
enforceability may be subject to applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles.
(c) CAPITALIZATION. (i) The authorized capital stock of the Company
consists of 50,000,000 shares of Company Common Stock, $0.01 par value,
and 5,000,000 shares of preferred stock, $1.00 par value (the "Preferred
Stock"). As of January 31, 1999, (1) 28,670,645 shares of Company Common
Stock were issued and outstanding, (2) 3,169,785 shares of Company Common
Stock were reserved for issuance upon the exercise of outstanding options
granted under the Stock Option Plans, (3) 256,286 shares of Company Common
Stock were reserved for issuance upon exercise of outstanding warrants,
(4) 4,740,740 shares of Company Common Stock were reserved for issuance
upon the conversion of the Company's 6 1/4% Convertible Subordinated
Debentures Due 2004 (the "Convertible Debentures"), (5) no shares of
Preferred Stock were issued and outstanding, and (6) no shares of Company
Common Stock were held in the Company's treasury. All issued and
outstanding shares of Company Common Stock have been duly authorized and
validly issued in compliance with all applicable securities laws and are
fully paid and
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nonassessable, and none of such shares are subject to, nor were they
issued in violation of, any preemptive rights. None of the outstanding
shares of Company Common Stock is subject to any right of first refusal or
similar right of the Company or any of its Subsidiaries, and, except as
set forth in Schedule 3.1(c)(i) delivered to Parent by the Company prior
to the execution of this Agreement, there is no contract or arrangement
relating to the voting or registration of, or restricting any Person from
purchasing, selling, pledging or otherwise disposing of (or granting any
option or similar right with respect to), any shares of Company Common
Stock. Except as set forth in this Section 3.1(c) or on Schedule 3.1(c)(i)
delivered to Parent by the Company prior to the execution of this
Agreement and except for purchases pursuant to the Company's Stock
Purchase Plan, and except for changes since January 31, 1999 resulting
from the exercise of employee or director stock options or warrants, or
conversion of Convertible Debentures outstanding on such date, (i) there
are no shares of capital stock of the Company authorized, issued or
outstanding and (ii) there are not as of the date hereof, and at the
Effective Time there will not be, any outstanding options, warrants,
rights, subscriptions, claims of any character, agreements, obligations,
convertible or exchangeable securities or other commitments, contingent or
otherwise, relating to Company Common Stock or any other shares of capital
stock of the Company, pursuant to which the Company is or may become
obligated to issue, sell, grant or purchase, redeem or otherwise acquire
shares of Company Common Stock, any other shares of its capital stock or
any securities convertible into, exchangeable for, or evidencing the right
to subscribe for, any shares of the capital stock of the Company. Neither
the Company nor any of its predecessors has ever adopted any stockholder
rights plan (or similar plan commonly referred to as a "poison pill").
(ii) Schedule 3.1(c)(ii) delivered to Parent by the Company
prior to the execution of this Agreement sets forth the following
information with respect to each employee stock option and director stock
option of the Company outstanding as of February 26, 1999: (a) the
particular Stock Option Plan (if any) pursuant to which such option was
granted; (b) the name of the optionee; (c) the number of shares of Company
Common Stock subject to such option; (d) the exercise price of such
option; (e) the date on which such option was granted; (f) the extent to
which such option is vested and exercisable as of February 26, 1999; and
(g) the date on which such option expires. The Company has made available
to Parent accurate and complete copies of all stock option plans pursuant
to which the Company or any of its predecessor entities has ever granted
stock options, and the forms of all stock option agreements evidencing
such options.
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(iii) Schedule 3.1(c)(iii) delivered to Parent by the Company
prior to the execution of this Agreement sets forth the following
information with respect to each warrant to purchase shares of Company
Common Stock of the Company outstanding as of the date of this Agreement:
(a) the name of the holder of such warrant; (b) the number of shares of
Company Common Stock subject to such warrant; (c) the exercise price of
such warrant; (d) the date on which such warrant was granted; and (e) the
date on which such warrant expires. The Company has made available to
Parent accurate and complete copies of all warrants outstanding as of the
date of this Agreement, and all agreements relating thereto.
(iv) Schedule 3.1(c)(iv) delivered to Parent by the Company
prior to the execution of this Agreement lists all of the Company's
Subsidiaries (except for corporate Subsidiaries with no material assets or
liabilities, contingent or otherwise). Except as set forth on Schedule
3.1(c)(iv), all issued and outstanding shares of capital stock of the
Company's Subsidiaries (other than director's qualifying shares) have been
validly issued, are fully paid and nonassessable, are not subject to, nor
were they issued in violation of, any preemptive rights, and are owned, of
record and beneficially, directly or indirectly, by the Company, free and
clear of all liens, encumbrances, options or claims whatsoever. No shares
of capital stock of any of the Company's Subsidiaries are reserved for
issuance and there are no outstanding or authorized options, warrants,
rights, subscriptions, claims of any character, agreements, obligations,
convertible or exchangeable securities, or other commitments, contingent
or otherwise, relating to the capital stock of any of the Company's
Subsidiaries, pursuant to which such Subsidiary, the Company or any other
affiliate of such Subsidiary is or may become obligated to issue, sell,
grant or purchase or otherwise acquire any shares of capital stock of such
Subsidiary or any securities convertible into, exchangeable for, or
evidencing the right to subscribe for, any shares of capital stock of such
Subsidiary. Except as set forth in Schedule 3.1(c)(iv) or as provided by
applicable law, there are no restrictions of any kind which prevent the
payment of dividends by any of the Company's Subsidiaries. Except (A) for
the Company's Subsidiaries listed on Schedule 3(c)(iv), (B) as otherwise
listed on Schedule 3.1(c)(iv), (C) for ordinary course portfolio
investments in marketable securities and cash equivalents and (D) for
corporate Subsidiaries of the Company with no material assets or
liabilities, contingent or otherwise, the Company does not own, directly
or indirectly, any capital stock or other equity interest in any Person or
have any direct or indirect equity or ownership interest in any Person and
neither the Company nor any of its Subsidiaries is subject to any
obligation or requirement to make any material loan, capital contribution,
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investment or similar expenditure to or in any Person, except for loans,
capital contributions, investments or similar expenditures by the Company
or any of its Subsidiaries to any existing wholly owned Subsidiary of the
Company or to the Company.
(d) CONSENTS AND APPROVALS; NO VIOLATIONS. Assuming, in the case of
this Agreement, that (i) the filings required under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), are made
and the waiting period thereunder has been terminated or has expired; (ii)
the filing with the Securities and Exchange Commission (the "Commission")
of a definitive joint proxy statement (the "Joint Proxy Statement")
relating to the meetings of the Company's stockholders and Parent's
stockholders to be held in connection with the Merger is made; (iii) the
Registration Statement of Parent to be filed with the Commission on Form
S-4 in connection with the issuance of Parent Shares (the "Registration
Statement") is declared effective; (iv) the filing of the Certificate of
Merger and other appropriate merger documents, if any, as required by the
laws of the State of Delaware, is made; and (v) approval of the Merger by
a majority of the outstanding Company Common Stock is obtained, the
execution and delivery of this Agreement and the Share Option Agreement by
the Company and the consummation by the Company of the transactions
contemplated hereby and thereby will not: (1) violate any provision of the
Certificate of Incorporation, as amended, or By-Laws or other charter or
organizational documents of the Company or any of its Subsidiaries, or any
resolution adopted by the stockholders of the Company or the Board of
Directors of the Company or any of its Subsidiaries or any committee
thereof; (2) to the knowledge of the Company, violate any statute,
ordinance, rule, regulation, order or decree of any court or of any
governmental or regulatory body, agency or authority applicable to the
Company or any of its Subsidiaries or by which any of their respective
properties or assets may be bound, including without limitation, any
consent decrees, court orders or judgments; (3) require any filing with,
or permit, consent or approval of, or the giving of any notice to, any
governmental or regulatory body, agency or authority, domestic or foreign
(a "Governmental Entity"), including without limitation, any Governmental
Entity regulating the pharmaceutical business of the Company; or (4)
except as set forth on Schedule 3.1(d)(4) delivered to Parent by the
Company prior to the execution of this Agreement, result in a violation or
breach of, conflict with, constitute (with or without due notice or lapse
of time or both) a default (or give rise to any right of termination,
cancellation, payment or acceleration) under, or result in the creation of
any lien, security interest, charge or encumbrance upon any of the
properties or assets of the Company or any of its Subsidiaries under,
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any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, license, franchise, permit, agreement, lease or other
instrument or obligation to which the Company or any of its Subsidiaries
is a party, or by which it or any of their respective properties or assets
may be bound or under which the Company or any Subsidiary of the Company
has or may acquire any rights, excluding from the foregoing clauses (2),
(3) and (4) filings, permits, consents, approvals and notices the absence
of which, and violations, breaches, conflicts, defaults and liens which,
in the aggregate, would not have a material adverse effect on the
Condition of the Company and its Subsidiaries taken as a whole.
(e) COMPANY REPORTS AND FINANCIAL STATEMENTS; ACCOUNTING Records.
(i) Since January 1, 1996, the Company has filed all forms, reports and
documents with the Commission required to be filed by it pursuant to the
U.S. federal securities laws and the rules and regulations promulgated
thereunder, and, except for preliminary filings, all such forms, reports
and documents filed with the Commission have complied in all material
respects with all applicable requirements of the U.S. federal securities
laws and the Commission rules and regulations promulgated thereunder. The
Company has heretofore made available to Parent true and complete copies
of all forms, reports, registration statements and other filings filed by
the Company with the Commission since January 1, 1996 (such forms,
reports, registration statements and other filings, together with any
amendments thereto, but excluding any preliminary filings, are sometimes
collectively referred to as the "Company Commission Filings"). As of their
respective dates, the Company Commission Filings did not contain any
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.
(ii) The audited consolidated financial statements and the
unaudited interim financial statements of the Company included in the
Company Commission Filings comply as to form in all material respects with
applicable accounting requirements and with the rules and regulations of
the Commission with respect thereto, were prepared in accordance with US
GAAP (as in effect from time to time) applied on a consistent basis
(except as may be indicated therein or in the notes or schedules thereto)
and fairly present in all material respects the consolidated financial
position of the Company and its consolidated Subsidiaries as of the dates
thereof and the results of their operations and cash flows and changes in
stockholders' equity, as the case may be, for the periods then ended
subject, in the case of the unaudited interim financial statements, to
normal and
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recurring year-end audit adjustments, any other adjustments described
therein and the fact that certain information and notes have been
condensed or omitted in accordance with the Securities Exchange Act of
1934 (the "Exchange Act"), and the rules promulgated thereunder.
(iii) The unaudited consolidated financial statements of the
Company as of and for the year ended December 31, 1998 delivered to Parent
by the Company prior to the execution of this Agreement comply as to form
in all material respects with applicable accounting requirements, were
prepared in accordance with US GAAP (applied on a basis consistent with
the basis on which the financial statements referred to in Section
3.1(e)(ii) were prepared) and fairly present in all material respects the
consolidated financial position of the Company and its consolidated
Subsidiaries as of December 31, 1998, and the results of their operations
for the year ended December 31, 1998, except that such financial
statements do not include a consolidated statement of cash flows or
stockholders' equity or notes.
(iv) The Company and its Subsidiaries keep proper accounting
records in which all material assets and liabilities, and all material
transactions, of the Company and its Subsidiaries are recorded in
conformity with applicable accounting principles. Except as described on
Schedule 3.1(e)(iv) delivered by the Company to Parent prior to the
execution of this Agreement, no part of the Company's or any Subsidiary's
accounting system or records, or access thereto, is under the control of a
Person who is not an employee of the Company or such Subsidiary.
(f) ABSENCE OF CERTAIN CHANGES. Except as disclosed on Schedule
3.1(f) delivered to Parent by the Company prior to the execution of this
Agreement, since September 30, 1998 (i) there has not been any material
adverse change in the Condition of the Company and its Subsidiaries taken
as a whole; (ii) the businesses of the Company and its Subsidiaries have
been conducted in all material respects only in the ordinary course; (iii)
the Company and its Subsidiaries have not, other than in the ordinary
course of business, increased the compensation of any officer or granted
any general salary or benefits increase to their employees; and (iv)
neither the Company nor any of its Subsidiaries has taken, approved,
authorized or agreed or committed to take any action referred to in
Section 4.1 hereof except as expressly permitted or required thereby.
(g) REGULATORY COMPLIANCE. (i) As to each product subject to the
jurisdiction of the U.S. Food and Drug Administration ("FDA") under the
Federal Food, Drug and Cosmetic Act and the regulations thereunder
("FDCA") (each such product, a "Pharmaceutical Product") that is
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manufactured, tested, distributed and/or marketed by the Company or any of
its Subsidiaries, such Pharmaceutical Product is being manufactured,
tested, distributed and/or marketed in substantial compliance with all
applicable requirements under FDCA and similar state and foreign laws and
regulations, including but not limited to those relating to
investigational use, premarket clearance, good manufacturing practices,
labeling, advertising, record keeping, filing of reports and security.
(ii) Schedule 3.1(g)(ii) delivered by the Company to Parent
prior to the execution of this Agreement sets forth a list of each
Pharmaceutical Product manufactured, marketed, sold or licensed by the
Company or any Subsidiary as of the date hereof.
(iii) No Pharmaceutical Products have been recalled,
withdrawn, suspended or discontinued by the Company or any of its
Subsidiaries in the United States and outside the United States (whether
voluntarily or otherwise) during the period commencing January 1, 1996 and
ending on the date hereof. No proceedings in the United States and outside
of the United States of which the Company has knowledge (whether completed
or pending) seeking the recall, withdrawal, suspension or seizure of any
Pharmaceutical Product are pending against the Company or any of its
Subsidiaries, nor have any such proceedings been pending at any time
during the period commencing January 1, 1996 and ending on the date
hereof.
(iv) Schedule 3.1(g)(iv) delivered by the Company to Parent
prior to the execution of this Agreement sets forth a list of each of the
Company's and its Subsidiaries' pending and approved New Drug Applications
("NDAs"), Investigational New Drug applications ("INDs") and similar state
or foreign regulatory filings, as of the date hereof. True and complete
copies of such NDAs and INDs, including all supplements, amendments, and
annual reports, have heretofore been made available to Parent. Copies of
correspondence from the FDA, and similar state or foreign regulatory
authorities, and the Company's and its Subsidiaries' responses have
heretofore been made available to Parent. As to each drug for which such
an application has been approved, the Company and its Subsidiaries are in
substantial compliance with 21 U.S.C. ss.ss. 355 or 21 C.F.R. Parts 312,
314 or 430 ET SEQ., respectively, and similar state and foreign laws and
regulations and all terms and conditions of such applications. As to each
such drug, the Company and any relevant Subsidiary, and the officers,
employees or agents of the Company or such Subsidiary have included in the
application for such drug, where required, the certification described in
21 U.S.C. ss. 335a(k)(1) or any similar state or foreign laW or regulation
and the list
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<PAGE>
described in 21 U.S.C. ss. 335a(k)(2) or any similar state or foreign law
or regulation, and such certification and such list was in each case true
and accurate when made and remained true and accurate thereafter. In
addition, the Company and its Subsidiaries are in substantial compliance
with all applicable registration and listing requirements set forth in 21
U.S.C. ss. 360 and 21. C.F.R. Part 207 and all similar state and foreign
laws and regulations.
(v) Each article of drug manufactured and/or distributed by
the Company or any of its Subsidiaries is not adulterated within the
meaning of 21 U.S.C. ss. 351 (or similar state or foreign laws or
regulations) or misbranded within the meaning of 21 U.S.C. ss. 352 (or
similar state or foreign laws or regulations), and is not a product that
is in violation of 21 U.S.C. ss. 355 (or similar state or foreign laws or
regulations).
(vi) Schedule 3.1(g)(vi) delivered by the Company to Parent
prior to the execution of this Agreement sets forth a list of (A) Form
483s, (B) Notices of Adverse Findings and (C) warning letters or other
correspondence from the FDA or state or foreign regulatory authorities in
which the FDA or any such authority asserted that the operations of the
Company or any Subsidiary may not be in compliance with applicable laws,
regulations, orders, judgments or decrees, in each case received by the
Company or such Subsidiary from the FDA or any such authority since
January 1, 1996 to the date hereof and the response of the Company or such
Subsidiary to the FDA or any such authority to such notices from the FDA
or any such authority. True and complete copies of such Form 483s, Notices
of Adverse Findings, letters and other correspondence and the Company's or
Subsidiary's responses have heretofore been made available to Parent.
Except as set forth in Schedule 3.1(g)(vi), all manufacturing operations
of the Company and its Subsidiaries have been and are being conducted in
substantial compliance with the good manufacturing practice regulations
set forth in 21 C.F.R. Parts 210 and 211 and similar state or foreign
regulations.
(vii) Schedule 3.1(g)(vii) delivered by the Company to Parent
prior to the execution of this Agreement sets forth Adverse Reaction
Reports filed by the Company and its Subsidiaries with the FDA or state or
foreign regulatory authorities during the period commencing January 1,
1996 and ending on the date hereof.
(viii) Neither the Company, nor any Subsidiary, nor any
officer, employee or agent of either the Company or any Subsidiary has
made an untrue statement of a material fact or fraudulent statement to the
FDA or any state or foreign regulatory authority, failed to disclose a
material
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fact required to be disclosed to the FDA or any state or foreign
regulatory authority, or committed an act, made a statement, or failed to
make a statement that, at the time such disclosure was made, could
reasonably be expected to provide a basis for the FDA or any state or
foreign regulatory authority to invoke its policy respecting "Fraud,
Untrue Statements of Material Facts, Bribery, and Illegal Gratuities", set
forth in 56 Fed. Reg. 46191 (September 10, 1991) or any similar policy.
Neither the Company nor any Subsidiary, nor any officer, employee or agent
of either the Company or any Subsidiary, has been convicted of any crime
or engaged in any conduct for which debarment is mandated by 21 U.S.C. ss.
335a(a) or any similar state or foreign law or regulation or authorized by
21 U.S.C. ss. 335a(b) or any similar state or foreign law or regulation.
Schedule 3.1(g)(viii) delivered by the Company to Parent prior to the
execution of this Agreement is an accurate representation of certain
efficacy and safety data from the AmBisome and Abelcet comparative
clinical trial conducted by Fujisawa Healthcare, Inc. (Study No. 034)
(ix) Except as disclosed in the Company Commission Filings
filed with the Commission prior to the date hereof, neither the Company
nor any Subsidiary has received any written notice that the FDA or any
state or foreign regulatory authority has commenced, or threatened to
initiate, any action to withdraw its approval or request the recall of any
product of the Company or any Subsidiary, or commenced, or overtly
threatened to initiate, any action to enjoin production at any facility of
the Company or any Subsidiary.
(x) The Company and its Subsidiaries are, and have at all
times since January 1, 1996 been, in substantial compliance with the
Medicare Anti-kickback Statute, 42 U.S.C. ss. 1320a-7b(b), and
implementing regulations codified at 42 C.F.R. ss. 1001 and with all
similar state or foreign laws and regulations.
(h) COMPLIANCE WITH LAWS. (i) GENERAL. Except with respect to
FDA-related regulatory matters (which are covered by Section 3.1(g)
hereof) and environmental matters (which are covered by Section 3.1(h)(ii)
below), the Company and its Subsidiaries are and at all times since
January 1, 1996 have been in compliance with all applicable laws,
regulations, orders, judgments and decrees, except where the failure to so
comply would not have a material adverse effect on the Condition of the
Company and its Subsidiaries taken as a whole. Since January 1, 1996,
neither the Company nor any of its Subsidiaries has received any written
notice from any Governmental Entity regarding any actual or possible
material violation of, or material failure to comply with, any law,
regulation, order, judgment or decree.
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(ii) ENVIRONMENTAL MATTERS. Except to the extent that the
inaccuracy of any of the following (or the circumstances giving rise to
such inaccuracy), individually and in the aggregate, would not reasonably
be expected to have a material adverse effect on the Condition of the
Company and its Subsidiaries taken as a whole (after taking into account
any reserves therefor reflected in the consolidated balance sheet of the
Company as of September 30, 1998 contained in its most recently filed
Report on Form 10-Q (the "Company Balance Sheet")) or as set forth on
Schedule 3.1(h)(ii) delivered to Parent by the Company prior to the
execution of this Agreement (none of which scheduled items is expected to
have a material adverse effect on the Condition of the Company and its
Subsidiaries taken as a whole):
(A) the Company, its predecessor entities and its
Subsidiaries are and have been at all relevant times in
compliance with all applicable Environmental Laws and any
permits, authorizations, licenses and certificates issued by
any governmental regulatory authority or entity pursuant to
Environmental Laws;
(B) the Company and its Subsidiaries have
obtained, or made timely application for, all permits required
for their operations under Environmental Laws;
(C) there have been no Releases of any Hazardous
Materials for which the Company or any of its Subsidiaries is
liable or, to the Company's or any of its Subsidiaries'
knowledge, may be held liable, at any location, and there are
no uncontrolled Hazardous Materials present in the environment
or, to the Company's or any of its Subsidiaries' knowledge,
imminent threatened Releases of Hazardous Materials into the
environment at any of the Company's or its Subsidiaries'
facilities; and
(D) neither the Company nor its Subsidiaries have
received any written notice that it is or may be liable for
cleanup or other costs relating to environmental matters as a
result of (1) any Hazardous Materials in the environment at
any facility owned or operated by the Company or its
Subsidiaries or (2) the off-site disposal of Hazardous
Materials generated by the Company or its Subsidiaries at any
of its facilities.
For purposes of this Agreement, the following terms shall have the
following meanings:
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"Environmental Laws" means all applicable federal, state, local and
foreign statutes, rules, regulations, ordinances, orders, decrees and the
common law relating in any manner to the contamination, pollution or
protection of human health and safety or the environment including without
limitation the Comprehensive Environmental Response, Compensation and
Liability Act ("CERCLA"), the Solid Waste Disposal Act, the Resource
Conservation and Recovery Act, the Clean Air Act, the Clean Water Act, the
Toxic Substance Control Act, the Occupational Safety and Health Act and
similar state laws.
"Hazardous Materials" means all hazardous or toxic substances,
wastes, materials or chemicals, petroleum (including crude oil or any
fraction thereof) and petroleum products, asbestos and asbestos-containing
materials, pollutants, contaminants, which are regulated pursuant to any
applicable Environmental Law and such other materials and substances as
are regulated pursuant to any applicable Environmental Laws.
"Release" shall have the meaning set forth in CERCLA, Section
9601(22).
(i) LITIGATION. Except as disclosed in the Company Commission
Filings filed with the Commission prior to the date hereof or as set forth
on Schedule 3.1(i) delivered to Parent by the Company prior to the
execution of this Agreement, there is no action, suit, proceeding at law
or in equity, or any arbitration or any administrative or other proceeding
by or before (or to the knowledge of the Company any investigation by) any
governmental or other instrumentality or agency, pending, or, to the
knowledge of the Company, threatened, against or affecting the Company or
any of its Subsidiaries, or any of their properties or rights which if
adversely determined would be reasonably likely to have a material adverse
effect on the Condition of the Company and its Subsidiaries taken as a
whole. Except as disclosed in the Company Commission Filings filed with
the Commission prior to the date hereof, neither the Company nor any of
its Subsidiaries is subject to any judgment, order or decree entered in
any lawsuit, proceeding or arbitration which is reasonably likely to have
a material adverse effect on the Condition of the Company and its
Subsidiaries taken as a whole or on the ability of the Company or any
Subsidiary of the Company to conduct its business as presently conducted.
(j) EMPLOYEE BENEFIT PLANS. (i) Schedule 3.1(j) delivered by the
Company to Parent prior to the execution of this Agreement sets forth: (x)
all "employee benefit plans," as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended
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("ERISA"), and all other employee benefit programs and arrangements,
including, without limitation, severance pay, salary continuation for
disability, retirement, deferred or other executive compensation, bonus,
stock purchase, hospitalization, medical insurance, and life insurance,
maintained by the Company or any of its Subsidiaries or to which the
Company or any such Subsidiary is obligated to contribute for current or
former employees of the Company or any such Subsidiary in each case (the
"Employee Benefit Plans "). The Company has made available to Parent true
and complete copies of all Employee Benefit Plans, as in effect, together
with all amendments thereto which will become effective at a later date,
as well as the latest Internal Revenue Service ("IRS") determination
letters obtained with respect to any Employee Benefit Plan intended to be
qualified under Section 401(a) of the Code. True and complete copies of
the (i) most recent annual actuarial valuation report, if any, (ii) last
filed Form 5500 together with all applicable schedules, (iii) summary plan
description (as defined in ERISA), if any, and all modifications thereto
communicated to employees, (iv) most recent annual and periodic accounting
of related plan assets, if any, and (v) such other materials with respect
to the Employee Benefit Plans reasonably requested by Parent in each case,
relating to the Employee Benefit Plans, have been made available to Parent
and are correct in all material respects.
(ii) Except to the extent that any of the following, alone
and in the aggregate, would not reasonably be expected to have a material
adverse effect on the Condition of the Company and its Subsidiaries taken
as a whole: (i) neither the Company nor any of its Subsidiaries nor, to
the Company's knowledge, any of its or its Subsidiaries' directors,
officers, employees or agents has, with respect to any Employee Benefit
Plan, engaged in or been a party to any "prohibited transaction", as such
term is defined in Section 4975 of the Code or Section 406 of ERISA, which
could result in the imposition of either a penalty assessed pursuant to
Section 502(i) of ERISA or a tax imposed by Section 4975 of the Code, in
each case applicable to the Company or any of its Subsidiaries, or any
Employee Benefit Plan; (ii) all Employee Benefit Plans are and have been
at all times in compliance in all respects with the applicable
requirements prescribed by all statutes, orders, or governmental rules or
regulations with respect to such Employee Benefit Plans, including, but
not limited to, ERISA and the Code (except for such requirements that are
not required to be adopted as of the effective date of the applicable
requirement) and, to the knowledge of the Company, there are no pending or
threatened claims, lawsuits or arbitrations (other than routine claims for
benefits), relating to any of the Employee Benefit Plans, which have
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been asserted or instituted against the Company or any of its
Subsidiaries, any Employee Benefit Plan or the assets of any trust or
group annuity contract for any Employee Benefit Plan; (iii) each Employee
Benefit Plan intended to be qualified under Section 401(a) of the Code has
heretofore been determined by the IRS to be so qualified whether by
determination letter or otherwise; (iv) neither the Company nor any of its
Subsidiaries nor any trade or business which, together with the Company
and its Subsidiaries, is treated as a single employer under Section 414(t)
of the Code (an "ERISA Affiliate") has, or at any time in the last six
years has had, an obligation to contribute to a "defined benefit plan" as
defined in Section 3(35) of ERISA, a pension plan subject to the funding
standards of Section 302 of ERISA or Section 412 of the Code, a
"multiemployer plan" within the meaning of Section 3(37) or 4001(a)(13) of
ERISA or Section 414(f) of the Code or a "multiple employer plan" within
the meaning of Section 210(a) of ERISA or Section 413(c) of the Code; (v)
all (A) insurance premiums required to be paid with respect to, (B)
benefits, expenses, and other amounts due and payable under and (C)
contributions, transfers, or payments required to be made to, any Employee
Benefit Plan prior to the Effective Time will have been paid, made or
accrued on or before the Effective Time;(vi) no Employee Benefit Plan
provides benefits, including, without limitation, death or medical
benefits, beyond termination of service or retirement other than (A)
coverage mandated by law, (B) death or retirement benefits under any
qualified Employee Benefit Plan, (C) deferred compensation benefits
reflected on the books of the Company or (D) arrangements listed on
Schedule 3.1(j); (vii) except as disclosed in Schedule 3.1(j), the
execution and performance of this Agreement will not (A) constitute a
stated triggering event under any Employee Benefit Plan that will result
in any payment (whether of severance pay or otherwise) becoming due from
the Company or any of the Company's Subsidiaries to any officer, employee,
or former employee (or dependents of such employee or former employee), or
(B) accelerate the time of payment to or vesting of, or increase the
amount of, compensation due to any employee, officer or director of the
Company or any Subsidiary of the Company; and (viii) except as disclosed
in Schedule 3.1(j), any amount that could be received (whether in cash or
property or the vesting of property) as a result of any of the
transactions contemplated by this Agreement by any employee, officer or
director of the Company or any Subsidiary of the Company or any of their
affiliates who is a "disqualified individual" (as such term is defined in
proposed Treasury Regulation Section 1.280G-1) under any employment,
severance or termination agreement, other compensation arrangement or
Employee Benefit Plan currently in effect would not be
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characterized as an "excess parachute payment" (as such term is defined in
Section 280G(b)(1) of the Code).
(k) EMPLOYMENT AGREEMENTS. Except as set forth on Schedule 3.1(k)
delivered to Parent by the Company prior to the execution of this
Agreement, there exists (i) no union, guild or collective bargaining
agreement to which the Company or any Subsidiary is a party, (ii) no
employment, consulting or severance agreement between the Company or any
Subsidiary of the Company and any Person (except for consulting agreements
that individually, and in the aggregate, are not material to the Company),
and (iii) no employment, consulting, severance or indemnification
agreement or other agreement or plan to which the Company or any
Subsidiary is a party that would be altered or result in any bonus, golden
parachute, severance or other payment or obligation to any Person, or
result in any acceleration of the time of payment or in the provision or
vesting of any benefits, as a result of the execution or performance of
this Agreement or as a result of the Merger or the other transactions
contemplated hereby.
(l) TAXES.
(i) Each material Tax Return required to be filed by or on
behalf of the Company and each material Tax Return required to be filed by
or on behalf of the Company's Subsidiaries or any predecessor entities
with any Governmental Entity with respect to any taxable period ending on
or before the Closing Date (the "Company Returns") (i) has been or will be
filed on or before the applicable due date, and (ii) has been, or will be
when filed, prepared in all material respects in compliance with all
applicable laws, regulations, orders, judgments and decrees. All amounts
shown on the Company Returns to be due on or before the Closing Date have
been or will be paid on or before the Closing Date.
(ii) The Company Balance Sheet fully accrues all actual and
contingent liabilities for Taxes with respect to all periods through the
date of the Company Balance Sheet in accordance with US GAAP. The Company
and its Subsidiaries will establish, in the ordinary course of business
and consistent with their past practices, reserves adequate for the
payment of all Taxes that accrue during the period from September 30, 1998
through the Closing Date. Since the date of the Company Balance Sheet,
neither the Company nor any of its Subsidiaries has incurred any material
liability (accrued, unaccrued, matured, unmatured, contingent or
otherwise) for any Tax other than in the ordinary course of its business.
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(iii) Except as set forth on Schedule 3.1(l)(iii) delivered to
Parent by the Company prior to the execution of this Agreement, no Company
Return has ever been examined or audited by any Governmental Entity. No
extension or waiver of the limitation period applicable to any Company
Returns has been granted (by the Company, any Subsidiary of the Company or
any other Person), and no such extension or waiver has been requested from
the Company or any Subsidiary of the Company.
(iv) No claim or action, suit, proceeding or arbitration is
pending or, to the knowledge of the Company, has been threatened against
or with respect to the Company or any Subsidiary of the Company in respect
of any material Tax. No claim has ever been made by an authority in a
jurisdiction where the Company or any of its Subsidiaries does not file
Tax Returns that it is or may be subject to taxation by that jurisdiction.
There are no unsatisfied liabilities for material Taxes (including
liabilities for interest, additions to tax and penalties thereon and
related expenses) with respect to any notice of deficiency or similar
document received by the Company or any Subsidiary of the Company with
respect to any material Tax (other than liabilities for Taxes asserted
under any such notice of deficiency or similar document which are being
contested in good faith by the Company or any Subsidiary of the Company
and with respect to which adequate reserves for payment have been
established on the Company Balance Sheet). There are no liens or other
security interests for material Taxes upon any of the assets of the
Company or any Subsidiary of the Company except liens for current Taxes
not yet due and payable. Neither the Company nor any Subsidiary of the
Company has entered into or become bound by any agreement or consent
pursuant to Section 341(f) of the Code (or any comparable provision of
state or foreign Tax laws). Neither the Company nor any Subsidiary of the
Company has been, and neither the Company nor any Subsidiary of the
Company will be, required to include any adjustment in taxable income for
any tax period (or portion thereof) pursuant to Section 481 or 263A of the
Code (or any comparable provision under state or foreign Tax laws) as a
result of transactions or events occurring, or accounting methods
employed, prior to the Closing.
(v) There is no contract or arrangement covering any employee
or independent contractor or former employee or independent contractor of
the Company or any Subsidiary of the Company that, considered individually
or considered collectively with any other such contracts and arrangements,
could reasonably be expected to give rise directly or indirectly to the
payment of any amount that would not be deductible pursuant to Section 162
of the Code (or any comparable provision under state or foreign Tax laws).
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Neither the Company nor any Subsidiary of the Company is, or has ever
been, a party to or bound by any tax indemnity agreement, tax sharing
agreement, tax allocation agreement or similar contract or arrangement.
(vi) For purposes of this Agreement, the following terms shall
have the following meanings:
"Tax" means any tax (including any income tax, franchise
tax, capital gains tax, gross receipts tax, value-added tax, surtax,
estimated tax, unemployment tax, national health insurance tax,
excise tax, AD VALOREM tax, transfer tax, stamp tax, sales tax, use
tax, property tax, business tax, withholding tax or payroll tax),
levy, assessment, tariff, duty (including any customs duty) or
deficiency, and any related charge or amount (including any fine,
penalty or interest), imposed, assessed or collected by or under the
authority of any Governmental Entity.
"Tax Return" means any return (including any information
return), report, statement, declaration, estimate, schedule, notice,
notification, form, election, certificate or other document or
information filed with or submitted to, or required to be filed with
or submitted to, any Governmental Entity in connection with the
determination, assessment, collection or payment of any Tax or in
connection with the administration, implementation or enforcement of
or compliance with any applicable laws, regulations, orders,
judgments and decrees relating to any Tax.
(m) ABSENCE OF UNDISCLOSED LIABILITIES. Except with respect to
environmental matters (which are covered in Section 3.1(h)(ii) hereof) and
FDA-related regulatory matters (which are covered in Section 3.1(g)
hereof), neither the Company nor any of its Subsidiaries has any
indebtedness or liability, absolute or contingent, accrued, unaccrued,
matured or unmatured, direct or indirect, except for: (a) liabilities
identified as such in the "liabilities" column on the Company Balance
Sheet or in the notes thereto; (b) liabilities described on Schedule
3.1(m) delivered to Parent by the Company prior to the execution of this
Agreement; (c) liabilities incurred or accrued in the ordinary course of
business (including liens of current taxes and assessments not in default)
since September 30, 1998; and (d) liabilities that, individually and in
the aggregate, are immaterial in amount. Except as reserved on the Company
Balance Sheet or shown in Schedule 3.1(m), neither the Company nor any of
its Subsidiaries is directly or indirectly liable upon or with respect to
(by discount, repurchase agreements or otherwise), or obligated in any
other way to provide funds in respect of, or to guarantee or
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assume, any material debt, obligation or dividend of any Person, except
endorsements in the ordinary course of business in connection with the
deposit of items for collection.
(n) PATENTS, TRADEMARKS, ETC. Except as referenced in Schedule
3.1(n) delivered to Parent by the Company prior to the execution of this
Agreement, the Company and its Subsidiaries have obtained or applied for
all material patents, trademarks, trade names, service marks and
copyrights, maintained all material trade secrets and obtained all
licenses and other proprietary intellectual property rights and licenses
as are necessary in connection with the businesses of the Company and its
Subsidiaries. Except as referenced in Schedule 3.1(n), the Company does
not have any knowledge of any conflict with the intellectual property
rights of the Company or any of its Subsidiaries by others which, insofar
as reasonably can be foreseen, could have a material adverse effect on the
Condition of the Company and its Subsidiaries taken as a whole. Except as
referenced in Schedule 3.1(n), the Company does not have any knowledge of
any conflict by the Company or any of its Subsidiaries with the
intellectual property rights of others which, insofar as reasonably can be
foreseen, could have a material adverse effect on the Condition of the
Company and its Subsidiaries taken as a whole.
(o) TRANSACTIONS WITH DIRECTORS, OFFICERS AND AFFILIATES. Except as
disclosed in Schedule 3.1(o) delivered by the Company to Parent prior to
the execution of this Agreement or in the Company Commission Filings filed
with the Commission prior to the date hereof, since January 1, 1996, there
have been no transactions between the Company or any of its Subsidiaries
and any director, officer, employee, stockholder or "Affiliate" (as
defined in Rule 405 under the Securities Act of 1933, as amended (the
"Securities Act")) of the Company or any of its Subsidiaries, including,
without limitation, loans, guarantees or pledges to, by or for the Company
or any of the Company's Subsidiaries from, to, by or for any of such
Persons. Except as disclosed in such Schedule 3.1(o) or in the Company
Commission Filings filed with the Commission prior to the date hereof,
since January 1, 1996, none of the officers or directors of the Company or
any of its Subsidiaries, and no spouse or relative of any of such Persons,
has been a director or officer of, or has had any material direct or
indirect interest in, any Person which during such period has been a
supplier, customer or sales agent of the Company or any of its
Subsidiaries or has competed with or been engaged in any business of the
kind being conducted by the Company or any of its Subsidiaries. Schedule
3.1(o) identifies each Person who is or may be (in
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the reasonable judgment of the Company) an Affiliate of the Company as of
the date of this Agreement.
(p) BROKER'S OR FINDER'S FEE. Except for Morgan Stanley & Co.
Incorporated (whose fees and expenses as financial advisors to the Company
will be paid by the Company in accordance with the Company's agreement
with such firm, a true and correct copy of which has been previously
delivered to Parent by the Company), no agent, broker, Person or firm
acting on behalf of the Company or any of its Subsidiaries is, or will be,
entitled to any fee, commission or broker's or finder's fees from any of
the parties hereto, or from any Person controlling, controlled by, or
under common control with any of the parties hereto, in connection with
this Agreement or any of the transactions contemplated hereby.
(q) OPINION OF FINANCIAL ADVISOR. The Company has received the
opinion of Morgan Stanley & Co. Incorporated, dated the date hereof, to
the effect that, as of such date, the Merger Consideration is fair from a
financial point of view to the holders of Company Common Stock.
(r) VOTE REQUIRED. The approval of the Merger by the affirmative
vote of a majority of the votes that holders of the outstanding shares of
Company Common Stock are entitled to cast is the only vote of the holders
of any class or series of the Company's capital stock necessary to approve
the transactions contemplated hereby. Holders of Company Common Stock will
not have any appraisal rights or similar rights in connection with the
Merger or any of the other transactions contemplated hereby.
(s) MATERIAL CONTRACTS. Schedule 3.1(s) delivered to Parent by the
Company prior to the execution of this Agreement lists all material
contracts and agreements to which, as of the date hereof, the Company or
any Subsidiary is a party or by which the Company or any Subsidiary is
bound or under which the Company or any Subsidiary has or may acquire any
rights, which were not filed prior to the date hereof as exhibits to the
Company Commission Filings, which involve or relate to (i) obligations of
the Company or any Subsidiary for borrowed money or other indebtedness
where the amount of such obligations exceeds $100,000 individually, (ii)
the lease by the Company or any Subsidiary, as lessee or lessor, of real
property for rent of more than $100,000 per annum, (iii) the purchase or
sale of goods (other than raw material to be purchased by the Company on
terms that are customary and consistent with the past practice of the
Company and in amounts and at prices substantially consistent with past
practices of the Company) or services with an aggregate minimum purchase
price of more than $100,000 per annum, (iv) rights to manufacture and/or
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distribute any Pharmaceutical Product which accounted for more than
$100,000 of the consolidated revenues of the Company and its Subsidiaries
during the fiscal year ended December 31, 1998 or under which the Company
or any Subsidiary received or paid license or other fees in excess of
$100,000 during any year, (v) the purchase or sale of assets or properties
not in the ordinary course of business having a purchase price in excess
of $100,000, (vi) the right (whether or not currently exercisable) to use,
license (including any "in-license" or "outlicense"), sublicense or
otherwise exploit any intellectual property right or other proprietary
asset of the Company or of any of Subsidiary of the Company or any other
Person which, when considered together with all such other rights, is
material to the Company; (vii) any material collaboration or joint venture
or similar arrangement; (viii) the restriction on the right or ability of
the Company or any Subsidiary of the Company (A) to compete with any other
Person, (B) to acquire any product or other asset or any services from any
other Person, (C) to solicit, hire or retain any Person as an employee,
consultant or independent contractor, (D) to develop, sell, supply,
distribute, offer, support or service any product or any technology or
other asset to or for any other Person, (E) to perform services for any
other Person, or (F) to transact business or deal in any other manner with
any other Person; (ix) any currency hedging; or (x) individual capital
expenditures or commitments in excess of $100,000. All such contracts and
agreements are duly and validly executed by the Company or such
Subsidiary, and are in full force and effect. Neither the Company nor any
of its Subsidiaries has violated or breached, or committed any default
under, any contract or agreement, and, to the knowledge of the Company, no
other Person has violated or breached, or committed any default under, any
contract or agreement, which violation, breach or default (alone or in
combination with other violations, breaches or defaults under such
contract or agreement or under other contracts or agreements) has had or
may reasonably be expected to have a material adverse effect on the
Company and its Subsidiaries taken as a whole. No event has occurred
which, after notice or the passage of time or both, would constitute a
default by the Company or any Subsidiary of the Company under any contract
or agreement or give any Person the right to (A) declare a default or
exercise any remedy under any contract or agreement, (B) receive or
require a rebate, chargeback, penalty or change in delivery schedule under
any contract or agreement, (C) accelerate the maturity or performance of
any contract or agreement, or (D) cancel, terminate or modify any contract
or agreement, in each case which, together with all other events of the
types referred to in clauses (A), (B), (C) and (D) of this sentence has
had or may reasonably be expected to have a material adverse effect on the
Company or any of its Subsidiaries taken as a whole. Except as
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disclosed on Schedule 3.1(s), all such contracts and agreements will
continue, after the Effective Time, to be binding in accordance with their
respective terms until their respective expiration dates. As soon as
practicable after the date hereof, the Company shall provide Parent with a
list of all leases for real property for rent of more than $30,000 per
annum which are not listed on Schedule 3.1(s).
(t) ACCOUNTING MATTERS. The Company knows of no reasons why the
Merger will not be capable of being treated as a pooling of interest
transaction under APB 16. Neither the Company nor any of its Subsidiaries
nor (to the Company's knowledge) any other Affiliate of the Company has
taken any action that will prevent the Merger from being recorded as a
pooling of interest transaction under APB 16.
(u) TAX TREATMENT. Neither the Company nor any of its Subsidiaries
has taken or agreed to take any action that would prevent the Merger from
qualifying as a reorganization within the meaning of Section 368(a) of the
Code.
(v) CERTAIN BUSINESS PRACTICES. Neither the Company nor any of its
Subsidiaries nor (to the knowledge of the Company) any director, officer,
agent or employee of the Company or any of its Subsidiaries has (i) used
any funds for unlawful contributions, gifts, entertainment or other
unlawful expenses relating to political activity, (ii) made any unlawful
payment to foreign or domestic government officials or employees or to
foreign or domestic political parties or campaigns or violated any
provision of the Foreign Corrupt Practices Act of 1977, as amended, or
(iii) made any other unlawful payment.
(w) GOVERNMENTAL AUTHORIZATIONS. The Company and its Subsidiaries
hold all permits, consents, approvals, variances, licenses, registrations
and other governmental authorizations necessary to enable them to conduct
their respective businesses in the manner in which such businesses are
currently being conducted, except where the failure to hold such permits,
consents, approvals, variances, licenses, registrations and other
governmental authorizations, when considered together with all such other
failures, has not had and would not reasonably be expected to have a
material adverse effect on the Condition of the Company and its
Subsidiaries taken as a whole. All such permits, consents, approvals,
variances, licenses, registrations and other governmental authorizations
are valid and in full force and effect except where the failure to be
valid and in full force and effect, when considered together with all
other such failures, has not had and would not reasonably be expected to
have a material adverse effect on the Company and its Subsidiaries taken
as a whole. The Company and its Subsidiaries are, and at all times since
January 1, 1996
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have been, in substantial compliance with the terms and requirements of
such permits, consents, approvals, variances, licenses, registrations and
other governmental authorizations, except where the failure, when
considered together with all such other failures, to be in compliance with
the terms and requirements of such permits, consents, approvals,
variances, licenses, registrations and other governmental authorizations
has not had and would not reasonably be expected to have a material
adverse effect on the Condition of the Company and its Subsidiaries taken
as a whole. Neither the execution, delivery or performance of this
Agreement or the Share Option Agreement, nor the consummation of the
Merger or any of the other transactions contemplated by this Agreement and
the Share Option Agreement will (with or without notice or lapse of time)
give any Governmental Entity or other Person the right to revoke,
withdraw, suspend, cancel, terminate or modify: (i) any material grant,
incentive, subsidy, provided to the Company or any of its Subsidiaries; or
(ii) any material permit, consent, approval, variance, license,
registration or other governmental authorization.
(x) INSURANCE. The Company has made available to Parent a summary of
all material insurance policies and all material self insurance programs
and arrangements relating to the business, assets and operations of the
Company and its Subsidiaries. Each of such insurance policies is in full
force and effect. Since January 1, 1996, neither the Company nor any of
its Subsidiaries has received any notice or other communication regarding
any actual or possible (i) cancellation or invalidation of any material
insurance policy, (ii) refusal of any coverage or rejection of any
material claim under any insurance policy, or (iii) material adjustment in
the amount of the premiums payable with respect to any insurance policy.
Except as set forth in Schedule 3.1(x) delivered to Parent by the Company
prior to the execution of this Agreement, there is no pending workers'
compensation or other claim under or based upon any insurance policy of
the Company or any of its Subsidiaries other than claims incurred in the
ordinary cause of business.
(y) Y2K COMPLIANCE. To the knowledge of the Company and its
Subsidiaries, except as set forth in Schedule 3.1(y) delivered to Parent
by the Company prior to the execution of this Agreement, each computer,
computer program and other item of software (whether installed on a
computer or on any other piece of equipment, including firmware) that is
owned, licensed or used by the Company or any of its Subsidiaries for its
internal business operations is Year 2000 Compliant. Except as set forth
in Schedule 3.1(y) delivered to Parent by the Company prior to the
execution of this Agreement, the Company and each of its Subsidiaries has
conducted
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sufficient Year 2000 compliance testing for each computer, computer
program and item of software referred to in the preceding sentence to be
able to determine whether such computer, computer program or item of
software is Year 2000 Compliant, and to the Company's knowledge, each of
the Company's principal suppliers' products or services provided by such
suppliers to the Company and its Subsidiaries is Year 2000 Compliant
except, in each case where the failure to be Year 2000 Compliant, when
considered together with all such other failures, would not reasonably be
expected to have a material adverse effect on the Company and its
Subsidiaries taken as a whole. A computer, computer program or other item
of software will be deemed "Year 2000 Compliant" only if: (i) the
functions, calculations, and other computing processes of such computer,
program or software (collectively, "Processes") perform in a consistent
and correct manner without interruption regardless of the date on which
the Processes are actually performed and regardless of the date input to
the applicable computer system (whether before, on, or after January 1,
2000); (ii) such computer, program or software accepts, calculates,
compares, sorts, extracts, sequences, and otherwise processes date inputs
and date values, and returns and displays date values, in a consistent and
correct manner regardless of the dates used (whether before, on, or after
January 1, 2000); (iii) such computer, program or software accepts and
responds to year input, if any, in a manner that resolves any ambiguities
as to century in a defined, predetermined and appropriate manner; (iv)
such computer, program or software stores and displays date information in
ways that are unambiguous as to the determination of the century; and (v)
leap years are determined by the following standard: (A) if dividing the
year by 4 yields an integer, it is a leap year, except for years ending in
00, but (B) a year ending in 00 is a leap year if dividing it by 400
yields an integer.
(z) SUPPLY. To the knowledge of the Company, there are no
circumstances or facts concerning third party suppliers of active
ingredients, bulk product and finished product to the Company or any of
its Subsidiaries (as they relate to DaunoXome, AmBisome or MiKasome) that
would have a material adverse effect on the continued and timely supply of
such materials.
(aa) RECEIVABLES. Except as set forth in Schedule 3.1(aa) delivered
to Parent by the Company prior to the execution of this Agreement, all
existing accounts receivable of the Company and its Subsidiaries
(including those accounts receivable reflected on the Company Balance
Sheet that have not yet been collected and those accounts receivable that
have arisen since September 30, 1998 and have not yet been collected)
represent valid obligations of
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customers of the Company and its Subsidiaries arising from bona fide
transactions entered into in the ordinary course of business. Annexed to
such Schedule 3.1(aa) is an accounts receivable aging report as of
December 31, 1998 which report is true and complete in all material
respects.
SECTION 3.2. REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB.
Parent and Sub represent and warrant to the Company as follows:
(a) DUE ORGANIZATION, GOOD STANDING AND POWER. Each of Parent and
its Subsidiaries (including Sub) is a corporation duly organized, validly
existing and in good standing (where applicable) under the laws of its
jurisdiction of incorporation and each such corporation has all requisite
power and authority to own, lease and operate its properties and to carry
on its business as now being conducted. Each of Parent and its
Subsidiaries is duly qualified or licensed to do business and is in good
standing (where applicable) in each jurisdiction in which the property
owned, leased or operated by it or the nature of the business conducted by
it makes such qualification necessary, except in such jurisdictions where
the failure to be so qualified or licensed and in good standing (where
applicable) would not have a material adverse effect on the Condition of
Parent and its Subsidiaries taken as a whole.
(b) AUTHORIZATION AND VALIDITY OF AGREEMENT. Each of Parent and Sub
has full power and authority to execute and deliver this Agreement, to
perform its obligations hereunder and, subject to obtaining any necessary
stockholder approval of the issuance of Parent Shares in the Merger, to
consummate the transactions contemplated hereby. The execution, delivery
and performance of this Agreement by each of Parent and Sub, and the
consummation by it of the transactions contemplated hereby, have been duly
authorized by all necessary corporate action on the part of Parent and
Sub, subject to the approval of the issuance of Parent Shares in the
Merger by Parent's stockholders in accordance with the rules of the
National Association of Securities Dealers, Inc., and no other corporate
action on the part of either of Parent or Sub is necessary to authorize
the execution, delivery and performance of this Agreement by each of
Parent and Sub and the consummation of the transactions contemplated
hereby (other than the approval of the issuance of Parent Shares in the
Merger in accordance with the rules of the National Association of
Securities Dealers, Inc.). This Agreement has been duly executed and
delivered by each of Parent and Sub and is a valid and binding obligation
of each of Parent and Sub, enforceable against each of Parent and Sub in
accordance with its terms, except to the extent that its enforceability
may be subject to applicable bankruptcy, insolvency, reorganization,
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moratorium and similar laws affecting the enforcement of creditors' rights
generally and by general equitable principles.
(c) CAPITALIZATION. (i) The authorized capital stock of Parent
consists of 5,000,000 shares of preferred stock (of which 400,000 shares
have been designated Series A Junior Participating Preferred Stock and
1,133,786 shares have been designated Series B Preferred Stock) and
60,000,000 Parent Shares. As of January 31, 1999, (i) there were no shares
of Series A Junior Participating Preferred Stock, 1,133,786 shares of
Series B preferred stock and 30,775,227 Parent Shares issued and
outstanding and (ii) options to subscribe for an aggregate of 4,518,120
Parent Shares were outstanding. All such issued and outstanding Parent
Shares and all Parent Shares issued in connection with the Merger have
been, or will be, as the case may be, duly authorized and validly issued
in compliance with applicable securities laws as fully paid or credited as
fully paid and were not and, in the case of Parent Shares issued in
connection with the Merger, will not have been, issued in violation of any
preemptive right. None of the outstanding shares of Parent Common Stock is
subject to any right of first refusal or similar right of Parent or any of
its Subsidiaries, and, except as set forth in Schedule 3.2(c) delivered to
the Company by Parent prior to the execution of this Agreement, there is
no contract or arrangement relating to the voting or registration of, or
restricting any Person from purchasing, selling, pledging or otherwise
disposing of (or granting any option or similar right with respect to),
any Parent Shares and Parent is under no obligation, nor is it bound by
any contract or arrangement pursuant to which it may become obligated, to
repurchase, redeem or otherwise acquire any outstanding Parent Shares.
Except as set forth in this Section 3.2(c) or on Schedule 3.2(c) delivered
to the Company by Parent and except for changes since January 31, 1999
resulting from the granting or exercise of options or stock purchase
rights under any applicable Parent Employee Benefit Plan (defined below)
or the conversion of shares of convertible preferred stock into Parent
Shares, (i) there is no capital stock of Parent authorized, issued or
outstanding and (ii) there are not as of the date hereof, and at the
Effective Time there will not be, any outstanding options, warrants,
rights, subscriptions, claims of any character, agreements, obligations,
convertible or exchangeable securities, or other commitments, contingent
or otherwise, relating to Parent Shares or any other capital stock of
Parent, pursuant to which Parent is or may become obligated to issue,
sell, grant or purchase, redeem or otherwise acquire Parent Shares or any
other capital stock or securities convertible into, exchangeable for, or
evidencing the right to subscribe for, any capital stock of Parent.
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(ii) All of the outstanding shares of capital stock of each
of Parent's Subsidiaries (other than directors' qualifying shares), except
for corporate Subsidiaries with no material assets or liabilities,
contingent or otherwise, have been validly issued as fully paid or
credited as fully paid, were not issued in violation of any preemptive
rights and are beneficially owned, directly or indirectly, by Parent, free
and clear of all liens, encumbrances, options or claims whatsoever.
(d) CONSENTS AND APPROVALS; NO VIOLATIONS. Assuming that (i) the
filings required under the HSR Act are made and the waiting period
thereunder has been terminated or has expired; (ii) the filing of the
Joint Proxy Statement is made; (iii) the Registration Statement is
declared effective; (iv) the filing of the Certificate of Merger and other
appropriate merger documents, if any, as required by the laws of the State
of Delaware is made; (v) approval of the issuance of Parent Shares in the
Merger by a majority of the total votes cast at the Parent Stockholders'
Meeting (as defined in Section 4.7(b)) is obtained; and (vi) any
applicable state securities or Blue Sky laws are complied with, the
execution and delivery of this Agreement by Parent and Sub and the
consummation by Parent and Sub of the transactions contemplated hereby
will not: (1) violate any provision of the Certificate of Incorporation or
Bylaws of Parent or the Certificate of Incorporation or By-Laws of Sub, or
any resolution adopted by the stockholders of Parent or the Board of
Directors of Parent or Sub or any committee thereof; (2) to the knowledge
of Parent and Sub, violate any statute, ordinance, rule, regulation, order
or decree of any court or of any governmental or regulatory body, agency
or authority applicable to Parent or any of its Subsidiaries or by which
any of their respective properties or assets may be bound, including,
without limitation, any consent decrees, court orders or judgments; (3)
require any filing with, or permit, consent or approval of, or the giving
of any notice to any Governmental Entity; or (4) except as set forth on
Schedule 3.2(d) delivered to the Company by Parent prior to the execution
of this Agreement, result in a violation or breach of, conflict with,
constitute (with or without due notice or lapse of time or both) a default
(or give rise to any right of termination, cancellation or acceleration)
under, or result in the creation of any lien, security interest, charge or
encumbrance upon any of the properties or assets of Parent or any of its
Subsidiaries under, any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, license, franchise, permit, agreement,
lease or other instrument or obligation to which Parent or any of its
Subsidiaries is a party, or by which it or any of their respective
properties or assets may be bound or under which Parent or any of its
Subsidiaries has or may acquire any rights, excluding from the foregoing
clauses (2), (3)
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and (4) filings, permits, consents, approvals and notices, the absence of
which, and violations, breaches, defaults, conflicts and liens which, in
the aggregate, would not have a material adverse effect on the Condition
of Parent and its Subsidiaries taken as a whole.
(e) PARENT REPORTS AND FINANCIAL STATEMENTS; ACCOUNTING Records. (i)
Since January 1, 1996, Parent has filed all forms, reports and documents
with the Commission required to be filed by it pursuant to the U.S.
federal securities laws and the rules and regulations promulgated
thereunder, and, except for preliminary filings, all such forms, reports
and documents filed with the Commission have complied in all material
respects with all applicable requirements of the U.S. federal securities
laws and the Commission rules and regulations promulgated thereunder.
Parent has heretofore made available to the Company true and complete
copies of all forms, reports, registration statements and other filings
filed by the Company with the Commission since January 1, 1996 (such
forms, reports, registration statements and other filings, together with
any amendments thereto, but excluding any preliminary filings, are
sometimes collectively referred to as the "Parent Commission Filings"). As
of their respective dates, the Parent Commission Filings did not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.
(ii) The audited consolidated financial statements included
in the Parent Commission Filings comply as to form in all material
respects with applicable accounting requirements and with the rules and
regulations of the Commission with respect thereto, were prepared in
accordance with US GAAP (as in effect from time to time), applied on a
consistent basis (except as may be indicated therein or in the notes or
schedules thereto) and fairly present in all material respects the
consolidated financial position of Parent and
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its consolidated Subsidiaries as of the dates thereof and the results of
their operations and cash flows and changes in stockholders' equity, as
the case may be, for the periods then ended. The unaudited interim
financial statements included in the Parent Commission Filings comply as
to form in all material respects with applicable accounting regulations
and with the rules and regulations of the Commission with respect thereto,
were prepared in accordance with US GAAP (as in effect from time to time)
applied on a basis consistent with the basis on which the audited
financial statements referred to in the preceding sentence were prepared
(except as may be indicated therein or in the notes or schedules thereto)
and fairly present the consolidated financial position of Parent and its
consolidated Subsidiaries as of the dates thereof and the results of their
operations and cash flows and changes in stockholders' equity, as the case
may be, for the periods then ended subject to normal and recurring
year-end audit adjustments and any other adjustments described therein and
the fact that certain information and notes have been condensed or omitted
in accordance with the Exchange Act and the rules promulgated thereunder.
(iii) The audited consolidated financial statements of Parent
as of and for the year ended December 31, 1998 delivered to the Company by
Parent prior to the execution of this Agreement comply as to form in all
material respects with applicable accounting requirements, were prepared
in accordance with US GAAP applied on a basis consistent with the basis on
which the financial statements referred to in Section 3.2(e)(ii) were
prepared and fairly present in all material respects the consolidated
financial position of Parent and its consolidated Subsidiaries as of
December 31, 1998, and the results of their operations and cash flows and
changes in stockholders' equity for the year ended December 31, 1998.
(iv) Parent and its Subsidiaries keep proper accounting
records in which all material assets and liabilities, and all material
transactions, of Parent and its Subsidiaries are recorded in conformity
with applicable accounting principles. No part of Parent's or any
Subsidiary's accounting system or records, or access thereto, is under the
control of a Person who is not an employee of Parent or such Subsidiary.
(f) ABSENCE OF CERTAIN CHANGES. Except as disclosed on Schedule
3.2(f) delivered to the Company by Parent, since December 31, 1998: (i)
there has not been any material adverse change in the Condition of Parent
and its Subsidiaries taken as a whole; (ii) the businesses of Parent and
its Subsidiaries have been conducted in all material respects only in the
ordinary course; and (iii) Parent and its Subsidiaries have not, other
than in the ordinary course of business, increased the compensation of any
officer or granted any general salary or benefits increase to their
employees.
(g) COMPLIANCE WITH LAWS. (i) GENERAL. Except with respect to
FDA-related regulatory matters (which are covered by Section 3.2(q)
hereof) and environmental matters (which are covered by Section 3.2(g)(ii)
below), Parent and its Subsidiaries are, and at all times since January 1,
1996 have been, in compliance with all applicable laws, regulations,
orders, judgments and decrees, except where the failure to so comply would
not have a material adverse effect on the Condition of Parent and its
Subsidiaries taken
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as a whole. Since January 1, 1996, neither Parent nor any of its
Subsidiaries has received any notice or other communication from any
Governmental Entity or other Person regarding any actual or possible
material violation of, or material failure to comply with, any law,
regulation, order, judgment or decree.
(ii) ENVIRONMENTAL MATTERS. Except to the extent that the
inaccuracy of any of the following (or the circumstances giving rise to
such inaccuracy), individually or in the aggregate, would not reasonably
be expected to have a material adverse effect on the Condition of Parent
and its Subsidiaries taken as a whole (after taking into account any
reserves therefor reflected in the audited consolidated balance sheet of
Parent as of December 31, 1998) or as set forth on Schedule 3.2(g)(ii)
delivered to the Company by Parent prior to the execution of this
Agreement (none of which scheduled items are expected to have a material
adverse effect on the Condition of the Parent and its Subsidiaries taken
as a whole):
(A) Parent and its Subsidiaries are and have been
at all relevant times in compliance with all applicable
Environmental Laws and any permits, authorizations, licenses
and certificates issued by any governmental regulatory
authority or entity pursuant to Environmental Laws;
(B) Parent and its Subsidiaries have obtained, or
made timely application for, all permits required for their
operations under Environmental Laws;
(C) there have been no Releases of any Hazardous
Materials for which the Parent or any of its Subsidiaries is
liable or, to Parent's or any of its Subsidiaries' knowledge,
may be held liable, at any location, and there are no
uncontrolled Hazardous Materials present in the environment
or, to Parent's or any of its Subsidiaries' knowledge,
imminent threatened Releases of Hazardous Materials into the
environment at any of Parent's or its Subsidiaries'
facilities; and
(D) neither Parent nor its Subsidiaries have
received any written notice that it is or may be liable for
cleanup or other costs relating to environmental matters as a
result of (1) any Hazardous Materials in the environment at
any facility owned or operated by Parent or its Subsidiaries
or (2) the off-site disposal of
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Hazardous Materials generated by Parent or its Subsidiaries at
any of its facilities.
(h) LITIGATION. Except as disclosed in Parent Commission Filings
filed with the Commission prior to the date hereof or as set forth on
Schedule 3.2(h) delivered to the Company by Parent, there is no action,
suit or proceeding at law or in equity, or any arbitration or any
administrative or other proceeding by or before (or to the knowledge of
Parent any investigation by) any governmental or other instrumentality or
agency, pending, or, to the knowledge of Parent, threatened, against or
affecting Parent or any of its Subsidiaries, or any of their properties or
rights which if adversely determined would be reasonably likely to have a
material adverse effect on the Condition of Parent and its Subsidiaries
taken as a whole. Except as disclosed in Parent Commission Filings filed
with the Commission prior to the date hereof, neither Parent nor any of
its Subsidiaries is subject to any judgment, order or decree entered in
any lawsuit, proceeding or arbitration which is reasonably likely to have
a material adverse effect on the Condition of Parent and its Subsidiaries
taken as a whole or on the ability of Parent or any Subsidiary of Parent
to conduct its business as presently conducted.
(i) TAXES. Each material Tax Return required to be filed by or
on behalf of Parent and each material Tax Return required to be filed by
or on behalf of Parent's Subsidiaries with any Governmental Entity with
respect to any taxable period ending on or before the Closing Date (the
"Parent Returns") (a) has been or will be filed on or before the
applicable due date, and (b) has been, or will be when filed, prepared in
all material respects in compliance with all applicable laws, regulations,
orders, judgments and decrees. All amounts shown on the Parent Returns to
be due on or before the Closing Date have been or will be paid on or
before the Closing Date.
(ii) Parent's audited consolidated balance sheet as of
December 31, 1998 (the "Parent Balance Sheet") fully accrues all actual
and contingent liabilities for Taxes with respect to all periods through
December 31, 1998 in accordance with US GAAP. Parent and its Subsidiaries
will establish, in the ordinary course of business and consistent with
their past practices, reserves adequate for the payment of all Taxes that
accrue during the period from December 31, 1998 through the Closing Date.
Since December 31, 1998, neither Parent nor any of its Subsidiaries has
incurred any material liability (accrued, unaccrued, matured, unmatured,
contingent or otherwise) for any Tax other than in the ordinary course of
its business.
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(iii) No material Parent Return has ever been examined or
audited by any Governmental Entity. No extension or waiver of the
limitation period applicable to any material Parent Returns has been
granted (by Parent, any Subsidiary of Parent or any other Person), and no
such extension or waiver has been requested from Parent or any Subsidiary
of Parent.
(iv) No claim or action, suit, proceeding or arbitration is
pending or, to the knowledge of Parent, has been threatened against or
with respect to Parent or any Subsidiary of Parent in respect of any
material Tax. No claim has ever been made by an authority in a
jurisdiction where Parent or any of its Subsidiaries does not file Tax
Returns that it is or may be subject to taxation by that jurisdiction.
There are no unsatisfied liabilities for material Taxes (including
liabilities for interest, additions to tax and penalties thereon and
related expenses) with respect to any notice of deficiency or similar
document received by Parent or any Subsidiary of Parent with respect to
any material Tax (other than liabilities for Taxes asserted under any such
notice of deficiency or similar document which are being contested in good
faith by Parent or any Subsidiary of Parent and with respect to which
adequate reserves for payment have been established on the Parent Balance
Sheet). There are no liens or other security interests for material Taxes
upon any of the assets of Parent or any Subsidiary of Parent except liens
for current Taxes not yet due and payable. Neither Parent nor any
Subsidiary of Parent has entered into or become bound by any agreement or
consent pursuant to Section 341(f) of the Code (or any comparable
provision of state or foreign Tax laws). Neither Parent nor any Subsidiary
of Parent has been, and neither Parent nor any Subsidiary of Parent will
be, required to include any adjustment in taxable income for any tax
period (or portion thereof) pursuant to Section 481 or 263A of the Code
(or any comparable provision under state or foreign Tax laws) as a result
of transactions or events occurring, or accounting methods employed, prior
to the Closing.
(v) There is no contract or arrangement covering any employee
or independent contractor or forme