-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, F4XmPwH2wtLW1TBZ7zNhkRECavYXkR3/A+G3UdWGJaJ5YIpg4TorYtoOhHCQeIUZ PupPuRc+RftJZKekTIiTRw== 0000950124-97-000112.txt : 19970110 0000950124-97-000112.hdr.sgml : 19970110 ACCESSION NUMBER: 0000950124-97-000112 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19961231 ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19970109 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: JONES MEDICAL INDUSTRIES INC /DE/ CENTRAL INDEX KEY: 0000793613 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 431229854 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-15098 FILM NUMBER: 97502991 BUSINESS ADDRESS: STREET 1: P.O. BOX 46903 STREET 2: 1945 CRAIG RD CITY: ST LOUIS STATE: MO ZIP: 63146 BUSINESS PHONE: 3145766100 MAIL ADDRESS: STREET 1: 1945 CRAIG ROAD CITY: ST. LOUIS STATE: MO ZIP: 63146 8-K 1 8-K DATED DECEMBER 31, 1996 1 SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): December 31, 1996 JONES MEDICAL INDUSTRIES, INC. (Exact name of registrant as specified in its charter) Delaware 0-15098 43-1229854 (State or other jurisdiction (Commission (IRS Employer of incorporation) File Number) Identification No.) 1945 Craig Road, St. Louis, MO 63146 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (314) 576-6100 -------------------------------------------------------------------- (Former name or former address, if changed since last report) ITEM 2. ACQUISITION OF ASSETS On December 31, 1996 (the "Closing Date"), Abana Pharmaceuticals, Inc., a Delaware corporation ("Abana"), was merged (the "Merger") with and into a wholly-owned subsidiary of Jones Medical Industries, Inc. ("Registrant") in accordance with Section 251 of the Delaware General Corporation Law ("DGCL"). Pursuant to the Merger, (i) each outstanding share of the common stock of Abana (other than noted below) was converted into twenty-two one-hundredths (0.22) of a share of the Common Stock of the Registrant; (ii) fractional share interests in the Common Stock of the Registrant arising from the Merger and conversion were settled in cash, based on the closing bid price of $36.25 per share of the Registrant's Common Stock on the Closing Date as quoted by the Nasdaq National Market; and (iii) shares of the common stock of Abana held in Abana's treasury or which were beneficially owned by the Registrant were canceled and retired. No holders of the common stock of Abana exercised statutory appraisal or dissenters' rights in respect of the Merger under Section 262 of the DGCL nor did they object in writing to the adoption of the Merger and the agreements relating to the Merger by Messrs. Perry N. Cole and Dale E. Eads, holders of approximately 58% of the outstanding common stock of Abana (the "Principal Holders"). Accordingly, an aggregate of 420,554 shares of the Registrant's Common Stock were issued to the Abana shareholders, together with cash in the amount of approximately $677 in settlement of fractional share interests. 2 Under the terms of the agreements relating to the Merger, an aggregate of 60,000 shares of the Registrant's Common Stock received by the Principal Holders has been placed in escrow to provide indemnification to the Registrant in connection with certain representations and covenants contained in said agreements. Holders of the common stock of Abana other than the Principal Holders were not required to provide indemnification to the Registrant or to escrow any shares of the Common Stock of the Registrant received pursuant to the Merger. As of March 31, 1998, the number of shares held in escrow will be reduced to approximately 10,000 shares the Registrant's Common Stock (plus such additional number of shares of the Registrant's Common Stock , if any, as may be needed in respect of claims pending, but not resolved, as of March 31, 1998); provided, however, that if the time for asserting claims has expired, no retention of shares of the Registrant's Common Stock will be required. Final distribution of the shares held in escrow shall occur at the later of (i) the date upon which all pending claims against the escrow are resolved and (ii) September 15, 1999. Abana, formed in 1988 by the Principal Holders, is engaged in the marketing, distribution and sale of generic pharmaceutical products marketed as prescription drugs. Headquartered in Birmingham, Alabama, Abana's primary area of operations is in the southeastern and south-central United States, where it markets its products through a network of trained medical sales representatives. Abana distributes seven (7) generic pharmaceuticals under its own trademarks and trade names. Abana has grown to approximately $6 million in annual sales and sixty-five (65) employees which include fifty-five (55) full-time pharmaceutical sales representatives. Abana is a distributor of its own brand name prescription pharmaceutical products. Abana's customers are drug wholesale companies, which distribute the products to retail pharmacies. Abana's sales respresentatives make sales presentations and sample the products directly to the prescribing physicians. Abana's product line is categorized in three (3) distinct areas: analgesics; cough and cold products; and weight control products. The offer and sale of the Common Stock of the Registrant in connection with the Merger (other than with respect to respect to shares of the Registrant's Common Stock issuable to the Principal Holders) was registered under the Securities Act of 1933, as amended (the "Securities Act"), by the filing of a Registration Statement on Form S-4 ("Registration Statement") with the Securities and Exchange Commission ("Commission") on November 8, 1996 (Registration No. 333-15889). The Registration Statement was declared effective by the Commission on November 21, 1996. Included in the Registration Statement are: (i) the Financial Statements of Abana for the years ended December 31, 1993, 1994 and 1995; and (ii) the Unaudited Pro Forma Condensed Combined Financial Statements of the Registrant and Abana for the nine months ended September 30, 1996. With respect to shares of Common Stock of the Registrant issued to the Principal Holders pursuant to the Merger, the offer and sale of such Common Stock of the Registrant is not being registered under the Securities Act of 1933, as amended (the "Securities Act"), in reliance by the Registrant upon the availability of one or more exemptions from the requirements of Section 5 of the Securities Act. The certificates evidencing such shares issued to the Principal Holders are 2 3 subject to "stop transfer" restrictions and bear appropriate restrictive legends which will be removed from such certificates at such times as the holding period under Rule 144 of the Securities Act ("Rule 144") establishes that, in accordance with paragraph (k) of Rule 144, volume limitations and notice of sale requirements are no longer applicable. Pursuant to the agreements relating to the Merger, the Registrant has provided certain Securities Act registration rights to the Principal Holders in the event that they elect to sell shares received in the transaction prior to the time at which Rule 144 becomes available. Each of the Registrant and Abana have agreed to bear their respective expenses incurred in connection with the Merger. Funds for the payment of expenses relating to the Merger, estimated at $200,000 with respect to the Registrant, and $75,000 with respect to Abana, were provided from the available working capital of the Registrant or Abana, as the case may be. Since June 1, 1992, the Registrant has been the holder of an aggregate of 362,159 shares of the common stock of Abana, representing approximately 16% of the outstanding common stock of Abana. Dennis M. Jones, Chairman of the Board and President of the Registrant, served as a director of Abana from June, 1992, until October, 1996, in accordance with rights granted to the Registrant in connection with its acquisition of such shares of the common stock of Abana. As a result of the Registrant's investment in Abana and Mr. Jones' position as a member of the board of directors of Abana, the Registrant has been familiar with the development of Abana's product lines and marketing and sales efforts since 1992. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (a) Financial Statements of Businesses Acquired Not applicable. (b) Pro Forma Financial Information Not applicable. (c) Exhibits. Exhibit No. Exhibit 2.1 Plan of Reorganization and Agreement dated as of October 24, 1996, by and among Registrant, Abana Pharmaceuticals, Inc., Dale Eads and Perry Cole (included as Exhibit 2.1 to the Registrant's Registration Statement on Form S-4 (Registration No. 333-15889) filed with the Securities and Exchange Commission on November 8, 1996). 3 4 2.2 Indemnification and Escrow Agreement dated as of December 31, 1996 by and among Registrant, Dale Eads, Perry Cole and Mark Twain Bank as Escrow Agent. 2.3 Certificate of Merger of Abana Pharmaceuticals, Inc. into Abana Acquisition Corporation. 99 .1 Registrant's Press Release announcing completion of the acquisition transaction. The Registrant agrees to furnish supplementally a copy of any schedules or other attachments to the above exhibits to the Commission upon request. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. JONES MEDICAL INDUSTRIES, INC. By: /s/ Dennis M. Jones ---------------------------- Name: Dennis M. Jones Title: President Date: January 9, 1997 4 EX-2.2 2 INDEMNIFICATION AND ESCROW AGREEMENT 1 INDEMNIFICATION AND ESCROW AGREEMENT This Agreement is made and entered into this 31st day of December, 1996, by and among JONES MEDICAL INDUSTRIES, INC., a Delaware corporation ("JMED"), Dale Eads and Perry Cole, individually and as Principal Holders of the capital stock of Abana Pharmaceuticals, Inc. ("Abana"), a Delaware corporation, and Mark Twain Bank, a Missouri banking association, as escrow agent (the "Escrow Agent"). W I T N E S S E T H: WHEREAS, pursuant to the Plan of Reorganization and Agreement, dated as of October 24, 1996 (the "Reorganization Agreement"), by and among JMED, Abana, and the Principal Holders, Abana is to be merged (the "Merger") with and into Abana Acquisition Corporation ("AAC," a wholly-owned subsidiary of JMED); and WHEREAS, the Reorganization Agreement provides that the obligations of JMED to the transactions contemplated thereby are subject to the execution and delivery as of the Closing Date (as defined in the Reorganization Agreement) of this Agreement providing (i) for indemnification of JMED (and of AAC as the surviving corporation in the Merger) by the Principal Holders in respect of certain matters and (ii) for the delivery of certain shares of the Common Stock of JMED into Escrow to secure such indemnification and provide for pro-rata participation by the Principal Holders in accordance with their respective deposits of such shares; and WHEREAS, the Escrow Agent is willing to act as escrow agent hereunder; NOW, THEREFORE, in consideration of the premises and the mutual promises, covenants and agreements contained herein, the parties hereto, intending to be legally bound, hereby agree as follows: ARTICLE ONE: INDEMNIFICATION Section 1.1 Indemnification 1.1.1 Each Principal Holder jointly and severally agrees to indemnify and hold JMED harmless from and against any loss, claim, damage, liability or expense (hereinafter, collectively "Claims") suffered by JMED, or by AAC as the Surviving Corporation under the transactions contemplated by the Reorganization Agreement, including reasonable attorneys' fees and expenses incurred by JMED or AAC in the defense of such claims, and arising from: 2 (i) any failure of Abana to observe, perform and discharge its covenants, agreements and undertakings set forth in the Reorganization Agreement, including without limitation, those set forth in Sections 3.4 and 3.5 of the Reorganization Agreement; (ii) any breach, failure, omission or untruth of the representations and warranties of Abana and the Principal Holders with respect to the representations and warranties set forth in Article VII of the Reorganization Agreement; and (iii) the amounts, if any, (A) of any claims to entitlement to business, financial advisory fees or other brokerage fees or commissions arising in connection with the transactions contemplated by the Reorganization Agreement on behalf of Abana or any Principal Holder or (B) by which expenses incurred by or on behalf of Abana for consulting, legal and accounting fees and cost reimbursements in connection with the Reorganization Agreement and the transactions contemplated thereby exceed $75,000, or (C) by which bonuses paid or payable by Abana to the Principal Holders or to any other employee exceed the bonus amounts disclosed on Schedule 3.4 to the Reorganization Agreement; provided, however, that such indemnification shall be limited as hereinafter provided. 1.1.2 JMED and each Principal Holder further agree that except as otherwise agreed in writing between JMED and Abana at or prior to the Closing Date, any waiver given by JMED to any breach or failure of any covenant or representation which is a condition to JMED's obligations to the transactions contemplated by the Reorganization Agreement shall not prevent JMED from asserting a Claim if such breach or failure is otherwise entitled to indemnification under the provisions of this Agreement; however, in the event of a Claim based upon any such breach or failure disclosed in writing to JMED at or prior to the Closing Date, then in the event that JMED elects to proceed with Closing, the indemnification to JMED provided for herein shall be limited to sixty percent (60%) of the aggregate loss, claim, damage or expense resulting from such breach or failure. Section 1.2 Limitation as to Maximum Amount of Claim. The indemnification pursuant to Section 1.1 shall be provided solely from the assets deposited into and held as the Escrow Fund pursuant to Article Two of this Agreement and except for the pro-rata beneficial interest of each Principal Holder in the assets comprising the Escrow Fund, no Principal Holder shall be directly liable to JMED or AAC as a result of the indemnification provided herein. Section 1.3 Limitation as to Minimum Amounts of Certain Claims. JMED agrees with each Principal Holder that it shall not be entitled to indemnification in respect of Claims unless the amount of any Claim or Claims asserted equals or exceeds the following threshold amounts: 2 3 (i) as to Claims arising under clause (i) or clause (iii) of Section 1.1 above and with respect to Claims, if any, from a breach, failure, omission or misrepresentation of or in the representations contained in paragraph 7.6 of the Reorganization Agreement, no minimum or threshold shall be required and JMED shall be entitled to assert, establish and collect with respect to all such Claims; and (ii) as to Claims arising under clause (ii) of Section 1.1 above other than with respect to Claims arising pursuant to paragraph 7.6 of the Reorganization Agreement, no indemnification shall be required until the aggregate of all Claims equals $50,000 but if such aggregate is reached, JMED shall be entitled to indemnification in respect of all such Claims. In determining whether the $50,000 threshold established in clause (ii) above is reached, there shall be excluded Claims under clause (i) above as to which no threshold applies. Section 1.4 Limitation in Respect of Time to assert Certain Claims. 1.4.1 Except with respect to Claims arising under paragraph 7.5 of the Reorganization Agreement, JMED shall not assert Claims for indemnification hereunder after March 31, 1998. JMED may assert Claims arising under paragraph 7.5 of the Reorganization Agreement until the earlier of (i) thirty (30) days following the completion of any and all audits of the federal and state tax returns of Abana for periods ending on or prior to the Closing Date or (ii) September 15, 1999. Notwithstanding the foregoing, JMED acknowledges that (i) the preparation, filing and final payment with respect to federal and state income tax returns of Abana for periods subsequent to December 31, 1995 (collectively, the "Final Returns") will be the responsibility of AAC as the Surviving Corporation and, therefore, subject to control by JMED and (ii) that JMED's entitlement to assert any Claim for taxes due in such Final Returns shall be limited to the amount, if any by which payments or accruals in respect of such taxes, as reflected on the Abana Interim Statements, are less than the amount of such payments or accruals which should have been made or reflected as of September 30, 1996. 1.4.2 JMED agrees that it will not, without the written consent of the Principal Holders, consent or agree or permit AAC to consent or agree to any extension or waiver of the statute of limitations with respect to the federal income tax returns of Abana. Section 1.5 Notice of All Claims to the Principal Holders. In addition to notices to the Escrow Agent and to the Principal Holders in respect of Claims by JMED for indemnification from the Escrow Fund as hereinafter provided, JMED shall give notice to the Principal Holders in respect of Claims as to which it is not currently entitled to indemnification as a result of the thresholds applicable under Section 1.3 above. The amount of such Claims shall be recorded and applied against the applicable threshold unless either Principal Holder objects in writing to such Claims within thirty (30) days, in which event the Claims will be resolved as set forth in Section 2.2 hereof. 3 4 Section 1.6 Third-Party Claims; Participation in Defense. In the case of any Claim which arises as the result of an assertion of a claim against JMED or AAC by a third party, including without limitation any government or regulatory body, JMED agrees that the Principal Holders may, at their expense (subject to reimbursement as provided in Article Two below), participate in the defense of such third party claim, provided, however, that unless JMED shall otherwise consent in writing JMED shall have the sole right to defend, settle or compromise as to any such third party claim which (a) affects either the reputation or future operations of JMED or AAC or (b) has an aggregate value exceeding the then value of the Escrow Fund in excess of any pending asserted Claims. Notwithstanding the right of the Principal Holders to participate in the defense of certain third party claims, the right to settle or compromise such claims shall rest solely with the party or parties of record against whom such claim is asserted by the third party; provided, however, that (i) no Claim for indemnification hereunder shall exist with respect to the amount, if any, by which the ultimate cost of such claim (including the defense thereof) exceeds the sum of the amount of any settlement or compromise thereof rejected by JMED but accepted by both Principal Holders and by the third party claimant(s) plus the cost of defense in respect thereof as of the date of such consent and (ii) in the event that JMED or AAC shall elect to settle or compromise such third party claim over the objection of the Principal Holders, JMED shall have the burden in any Claim asserted by it hereunder against the Principal Holders in establishing that the amount of such settlement was fair and reasonable in the circumstances. Section 1.7 JMED Claim to Include Certain Costs and to Reflect Certain Recoveries. 1.7.1 Subject only to the limitation in Section 1.2 above, the amount of any indemnification to which JMED is otherwise entitled under this Agreement shall include, without limitation, its reasonable costs and expenses in enforcing its rights under this Agreement but only to the extent that it is entitled to an award or payment in respect of the matter as to which its Claim relates. 1.7.2 The amount of any loss, claim, damage or liability included by JMED in any Claim for indemnification hereunder shall be computed net of any net benefit or recovery (other than the benefit or recovery due from the Principal Holders hereunder) received or receivable by JMED. Accordingly and without limiting the generality of the foregoing, (i) any claim arising from the assertion of additional tax liabilities due from Abana shall be offset to the extent of any current or future tax deduction or benefit due JMED, adjusted to reflect, if appropriate, the loss of use of funds pending the realization of any such future benefit and (ii) any claim or loss which is partially or wholly offset by insurance recovery shall be reduced by such recover, net of any increase in future insurance costs arising directly therefrom. 4 5 ARTICLE TWO: THE ESCROW Section 2.1. Establishment of Escrow Fund. Simultaneously with the execution of this Agreement, JMED and the Principal Holders are delivering to the Escrow Agent stock certificates evidencing 60,000 shares of the Common Stock, par value $0.04 per share of JMED (the "Jones Stock"), to be registered in the name of Escrow Agent. The Jones Stock is delivered equally on behalf of the Principal Holders and each Principal Holder shall have a pro-rata interest in the assets comprising the Escrow Fund in accordance with such Principal Holder's percentage of the aggregate shares of the Jones Stock initially deposited to constitute the Escrow Fund, as the same may be modified due to any "non-pro rata" distributions to the Principal Holders in accordance with the provisions of this Agreement. The Escrow Agent hereby acknowledges receipt of the certificate evidencing the Jones Stock. Section 2.2. Claims Against the Escrow Fund. 2.2.1 Purpose of Escrow. The Escrow Fund shall secure the obligations of the Principal Holders pursuant to Article One of this Agreement subject to the release or distribution of the shares constituting the Escrow Fund as provided in this Agreement. 2.2.2 Notices. If at any time on or before the expiration of the Escrow Fund as hereinafter provided, JMED shall claim a right to payment pursuant to Article One of this Agreement, JMED shall notify the Escrow Agent and the Principal Holders in writing. Such notice shall specify the basis of such Claim. If such Claim is liquidated in amount, the notice shall so state, and such amount shall be deemed the amount of the Claim of JMED against the Escrow Fund. If the amount is not liquidated, then (i) the notice shall so state and shall state JMED's good faith estimate of the amount of such Claim, and a claim shall be deemed asserted against the Escrow Fund on behalf of JMED, but no payment shall be made on account thereof until the amount of such Claim is liquidated and (ii) promptly after the amount of such unliquidated Claim shall have become liquidated, JMED shall notify the Escrow Agent and the Principal Holders in writing of the liquidated amount of such Claim, and such amount shall be deemed the amount of the claim of JMED against the Escrow Fund. Any notice of a Claim pursuant to this Section 2.2.2 that states the liquidated amount of such Claim of JMED against the Escrow Fund shall be referred to herein as a "Liquidated Claim Notice." 2.2.3 Consent to Validity of Claim. If neither Principal Holder, within thirty (30) days after the mailing of a Liquidated Claim Notice, advises the Escrow Agent in writing that he disputes JMED's rights asserted in such notice, then the Escrow Agent shall pay to JMED, in accordance with the provisions of Section 2.3 of Article Two hereof, the amount of JMED's Claim stated in such notice. Such payment shall be made promptly after the end of the thirty-day period mentioned above. 2.2.4 Dispute. If either or both of the Principal Holders shall, within the thirty-day period referred to in Section 2.2.3 hereof, notify the Escrow Agent in writing that he or they, as the case may be, dispute JMED's rights asserted in any Liquidated Claim Notice, then said Principal Holder(s) shall give written notice to JMED of such dispute. As promptly thereafter as possible, JMED and the 5 6 Principal Holder(s) shall endeavor to settle and compromise the subject Claim, or may agree to submit the same to arbitration, and, if unable to agree on any settlement or compromise or on submission to arbitration, such Claim shall be settled by litigation or by any other means chosen by the parties jointly or individually. Upon final determination of the merits of such Claim, JMED and the Principal Holder(s) shall notify the Escrow Agent (either by means of a written instrument executed by JMED and the Principal Holder(s), a certified copy of the arbitration decision, or a certified copy of any court judgment) of the terms of such determination. Upon receipt of such document (the "Settlement Document"), the Escrow Agent shall thereupon pay the amount (if any) indicated in such Settlement Document to JMED in accordance with the provisions of Section 2.3 of Article Two hereof. Nothing set forth in this Agreement shall prevent a Principal Holder (without the consent of any other Principal Holder) from settling all or part of a Claim with respect to his pro rata share of the Escrow Fund. 2.2.5 No Payment on Claims Unless Threshold Met. Anything to the contrary in this Agreement notwithstanding, no payment in respect of a Claim shall be made unless such Claim meets or exceeds the applicable minimum set forth in Section 1.3 above. Section 2.3. Payments by Escrow Agent. 2.3.1 Transfer of Cash to JMED. If the Escrow Agent is required to make any payment to JMED pursuant to this Agreement, then to the extent any cash is available in the Escrow Fund, any and all payments made to JMED shall first be made from said cash in the Escrow Fund. If the cash available in the Escrow Fund shall be insufficient to make such payment in full, then Escrow Shares or other property shall be transferred to JMED as set forth in Section 2.3.2. 2.3.2 Transfer of Escrow Shares or Other Property to JMED. If there is insufficient cash in the Escrow Fund to satisfy any payments to JMED required by Sections 2.2.3 or 2.2.4 hereof, then the Escrow Agent shall make such payment, or any unpaid balance thereof, by transferring to JMED a portion of the shares or other securities or property in the Escrow Fund, or any combination thereof, having a value (determined in accordance with Section 2.3.3 hereof) equal to the dollar amount of such required payment or unpaid balance thereof. 2.3.3 Valuation of Escrow Shares or Other Property. For purposes of any transfer pursuant to Section 2.3.2, the value of such shares of the Jones Stock held in the Escrow Fund shall be an amount equal to the average closing price per share for the JMED Common Stock as reported by the Nasdaq National Market quotation system for the ten trading days preceding the date of the Escrow Agent's payment to JMED. In the event of any exchange listing for JMED Common Stock, such exchange closing price shall replace the Nasdaq National Market quotation system. 2.3.4 No Fractional Shares. The number of the shares of the Jones Stock to be transferred pursuant to Section 2.3 at any time shall not include a fractional share; JMED may, at its sole option, elect either to waive such fractional share interest or to purchase the balance of such fractional share interest based on the value of the JMED Common Stock used in Section 2.3.3 above. 6 7 Section 2.4. Rights as to Escrow Shares During Term of This Agreement. 2.4.1 Voting. The Escrow Agent shall exercise all rights and privileges of election, voting and consent with respect to the shares of Jones Stock and other securities in the Escrow Fund in accordance with the written instruments, if any, received by the Escrow Agent from the respective Principal Holders. 2.4.2 Dividends. Any cash dividends paid with respect to the shares the Jones Stock, and any cash dividends or interest paid with respect to other securities in the Escrow Fund, shall be paid to the Escrow Agent. The Escrow Agent shall promptly pay the amount of any such dividends or interest to the Principal Holders in accordance with their pro-rata interests in the Escrow Fund as of the date such income is received. 2.4.3 Other Distributions. All other securities or property distributed from time to time with respect to the assets comprising the Escrow Fund, including without limitation, any JMED securities issued as a result of any stock dividend, stock split, consolidation of shares, reclassification, or other reorganization, any noncash dividends, and any distributions (either cash or noncash) in complete or partial liquidation of JMED, shall be deemed to be a part of the Escrow Fund and shall be held by the Escrow Agent pursuant to the provisions of this Agreement. Section 2.5. Distributions from Escrow Fund 2.5.1. First Distribution to Principal Holders. On March 31, 1998, there shall be released from escrow such portion of the assets then comprising the Escrow Fund as shall exceed (i) 10,000 shares of Jones Stock plus (ii) such additional assets as are necessary to satisfy in full any pending asserted Claims, whether or not then liquidated in amount, as to which JMED or AAC may be entitled to indemnification under the provisions of Article One of this Agreement. In the event that the time for asserting Claims arising under paragraph 7.5 of the Reorganization Agreement shall have expired as of March 31, 1998, the retention of shares of pursuant to clause (i) of this Section 2.5.1 shall not be required. In the event of any stock dividends or stock splits applicable to the Jones Stock subsequent to the date of this Agreement, the 10,000 share figure used herein shall be adjusted to include the additional shares of Jones Stock arising from such stock dividends or stock splits. 2.5.2 Final Distribution to Principal Holders. Unless all assets comprising the Escrow Fund shall have been distributed in accordance with Section 2.5.1 above, the remaining assets comprising the Escrow Fund shall, unless JMED shall consent to an earlier distribution in whole or in part, be distributed and released from escrow at the later of (i) the date upon which all pending Claims by JMED or AAC for indemnification have been resolved or (ii) the earlier of (a) thirty (30) days following the completion of any and all audits of the federal and state tax returns of Abana for periods ending on or prior to the Closing Date or (b) September 15, 1999. 2.5.3 Method of Distribution. In connection with any distribution to the Principal Holders pursuant to this Section 2.5, distribution shall be made first to the Escrow Agent in reimbursement of any expenses incurred by it in connection with its duties hereunder or in defense of Claims by 7 8 JMED or third party claims and then pro rata to the Principal Holders in accordance with their respective beneficial interests in the assets comprising the Escrow Fund. Section 2.6. Termination of Escrow Fund. The Escrow established hereby shall terminate at the time all distributions required under Section 2.5 above have been completed. Section 2.7. Escrow Agent. 2.7.1 Duties. In performing any of its duties hereunder, the Escrow Agent shall not incur any liability to anyone for any damages, losses or expenses, except for bad faith, willful default or breach of trust, and accordingly, the Escrow Agent shall not incur any such liability with respect to any action taken or omitted (a) in good faith upon advice of its counsel given with respect to any action taken or omitted (b) in good faith upon advice of its counsel given with respect to any questions relating to the duties and responsibilities of the Escrow Agent under this Agreement, or (c) in reliance upon any instrument not only as to its due execution and validity and effectiveness of its provisions but also as to the truth and accuracy of any information contained therein, which the Escrow Agent shall in good faith believe to be genuine, to have been signed or presented by a proper person or persons and to conform with the provisions of this Agreement. 2.7.2 Indemnity. JMED and the Principal Holders hereby jointly and severally agree to indemnify and hold harmless the Escrow Agent against any and all losses, claims, damages, liabilities and expenses, including reasonable costs of investigation and counsel fees and disbursements, which may be imposed upon the Escrow Agent or incurred by the Escrow Agent in connection with its acceptance of appointment as the escrow agent hereunder, or the performance of its duties hereunder, including any litigation arising from this Agreement or involving the subject matter hereof. 2.7.3 Disputes. In the event of a dispute between the parties hereto sufficient in the discretion of the Escrow Agent to justify its doing so, the Escrow Agent shall be entitled to tender into the registry or custody of any court of competent jurisdiction all money or property in its hand under this Agreement, together with such legal pleadings as it deems appropriate, and thereupon be discharged from all further duties and liabilities under this Agreement. Any such legal action may be brought in such court as the Escrow Agent shall determine to have jurisdiction thereof. The filing of any such legal proceedings shall not deprive the Escrow Agent of its compensation earned prior to such filing. 2.7.4 Fees. The Escrow Agent's fees hereunder shall be $1,000 per annum, the first installment of which has been paid to the Escrow Agent by JMED contemporaneously with the 8 9 execution of this Agreement. Subsequent annual installments shall be paid by JMED upon receipt of invoices therefor from the Escrow Agent. ARTICLE THREE - MISCELLANEOUS 3.1 Binding Effect. This Agreement shall inure to the benefit of and shall be binding upon JMED, the Principal Holders and the Escrow Agent and their respective heirs, personal representatives, successors and assigns. 3.2 Interests of Principal Holders; Non-Assignability. Neither the Escrow Agent nor JMED shall be required to give effect to any attempted sale or transfer of an interest in the Escrow Fund, other than a transfer by operation of law to the estate or personal representative of a Principal Holder. 3.3 Construction. This Agreement shall be deemed to be made in, and in all respects shall be interpreted, construed and governed by and in accordance with the laws of the State of Missouri. No provision of this Agreement or any related document shall be construed against or interpreted to the disadvantage of any party hereto by any court or other governmental or judicial authority by reason of such party's having or being deemed to have structured or drafted such provision. 3.4 Headings. The section and paragraph headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. 3.5 Notices. All notices or other communications required or permitted to be given hereunder shall be deemed validly given if in writing and sent (i) by certified United States Mail, postage prepaid, return receipt requested, (ii) by prepaid independent overnight courier or delivery service, or (iii) by confirmed tele-facsimile communication with receipt acknowledged from the receiving machine, and addressed as follows: If to the Principal Holders, as follows: Dale E. Eads 259 Norwick Forest Drive Alabaster, AL 35007 facsimile:(205) 669-6877 Perry N. Cole 3508 Altabrook Drive Birmingham, AL 35243 facsimile: 9 10 With a copy to: Sirote & Permutt 2222 Arlington Avenue South P.O. Box 55727 Birmingham, Alabama 35255-5727 Attn: John H. Cooper, Esq. facsimile: 205-930-5301 If to JMED, as follows: Jones Medical Industries, Inc. 1945 Craig Road St. Louis, Missouri 63146 Attn: President facsimile: 314-469-5749 With a copy to: Greensfelder, Hemker & Gale, P.C. 2000 Equitable Building 10 South Broadway St. Louis, Missouri 63102 Attn: Edward A. Chod, Esq. facsimile:314-241-8624 If to the Escrow Agent, addressed to: Mark Twain Bank P.O. Box 14259-A St. Louis, Missouri 63178 Attn: Hary Starr or in any case to such other address or addresses as hereafter shall be furnished by any party hereto to the other party. 3.6 Registration and Sale of Jones Stock. The shares of the Jones Stock deposited as, and initially constituting, the Escrow Fund are subject to registration rights granted by JMED in Article II of the Reorganization Agreement. In the event that such shares shall be registered for offering and sale under the Securities Act of 1933 at the request of the Principal Holders in accordance with such rights, such shares may be sold by the Escrow Agent in the discretion and as directed by a Principal 10 11 Holder with respect to his pro rata share of said Jones Stock. Any such sale shall be allocated to such selling Principal Holder. In the event of any such sale, the proceeds shall be invested in U.S. Government securities or such other investments to which JMED shall consent. 3.7 Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original but all of which together shall constitute one and the same instrument. 3.8 Modification. This Agreement may be modified only by a written instrument signed by JMED, the Principal Holders and the Escrow Agent. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above. JONES MEDICAL INDUSTRIES, INC. By /s/ Dennis M. Jones ----------------------- Name: Dennis M. Jones Title: President MARK TWAIN BANK By /s/ Hary Starr ----------------------- Name: Hary Starr -------------------- The Principal Holders: Title: Executive Vice-President ------------------------- /s/ Dale E. Eads - ----------------------------- Dale E. Eads /s/ Perry N. Cole - ----------------------------- Perry N. Cole 11 EX-2.3 3 CERTIFICATE OF MERGER 1 CERTIFICATE OF MERGER OF ABANA PHARMACEUTICALS, INC. INTO ABANA ACQUISITION CORPORATION The undersigned corporation organized and existing under and by virtue of the General Corporation Law of Delaware, DOES HEREBY CERTIFY: FIRST: That the name and state of incorporation of each of the constituent corporations of the merger is as follows: NAME STATE OF INCORPORATION Abana Pharmaceuticals, Inc. Delaware Abana Acquisition Corporation Delaware SECOND: That an agreement of merger ("Agreement of Merger") between the parties to the merger has been approved, adopted, certified, executed and acknowledged by each of the constituent corporations in accordance with the requirements of Section 251 of the General Corporation Law of Delaware. THIRD: That the Agreement of Merger was duly adopted pursuant to Section 228 of the General Corporation Law of Delaware by the written consent of the stockholders holding 1,323,864 shares of the capital stock of Abana Pharmaceuticals, Inc., same being more than a majority of the shares issued and outstanding having voting power. FOURTH: That written notice of adoption of the Agreement of Merger has been given as provided in Section 228 of the General Corporation Law of Delaware to every stockholder entitled to such notice. 2 FIFTH: That the name of the surviving corporation of the merger is Abana Acquisition Corporation. SIXTH: That the Certificate of Incorporation of Abana Acquisition Corporation, a Delaware corporation, which will survive the merger, shall be the Certificate of Incorporation of the surviving corporation with the exception that the Certificate of Incorporation is hereby amended by deleting Article One in its entirety and inserting in lieu thereof a new Article One to read in words and figures as follows: ARTICLE ONE The name of the Corporation is JMI-Abana Pharmaceuticals, Inc. SEVENTH: That the executed Agreement of Merger is on file at the principal place of business of the surviving corporation, the address of which is 1945 Craig Road, St. Louis, Missouri 63146. EIGHTH: That a copy of the Agreement of Merger will be furnished by the surviving corporation, on request and without cost, to any stockholder of any constituent corporation. NINTH: That this Certificate of Merger shall be effective on December 31, 1996. Dated: December 31, 1996 ABANA ACQUISITION CORPORATION By /s/ Dennis M. Jones --------------------------- Dennis M. Jones, President 2 EX-99.1 4 PRESS RELEASE 1 [Jones Medical Industries, Inc. Letterhead] FOR IMMEDIATE RELEASE JANUARY 2, 1997 JONES MEDICAL COMPLETES ABANA PHARMACEUTICALS ACQUISITION St. Louis, MO - Jones Medical Industries, Inc. (NASDAQ: JMED) today announced the completion of the acquisition of Abana Pharmaceuticals, Inc., of Birmingham, Alabama, effective as of the close of business on December 31, 1996. JMED issued an aggregate of approximately 420,000 shares of its common stock in exchange for the 84% of Abana held by other investors. Abana is a growing regional marketer of specialty prescription pharmaceuticals, principally branded generic products used by internists in the treatment of chronic conditions and respiratory ailments. The company has grown to approximately $6 million in annual sales and sixty-five employees which include fifty-five full-time sales representatives. Abana generated its first profitable year in 1995. In 1992 Jones Medical acquired approximately 16% of Abana. Dennis M. Jones, Chairman and CEO of JMED, observed that "The Abana acquisition increases our total field sales headcount to more than 100 sales personnel and represents a fitting strategic conclusion to a year of extraordinary growth for the company. The established physician sales force, in place as a result of the August 1996 acquisition of Daniels and the Abana acquisition, enables us to expand our strategy of aggressively promoting our recently expanded portfolio of prescription driven drug products. I believe that the growth of Tapazole(R) and Levoxyl(R) will accelerate with an 85 person national sales force directed toward prescribing physicians." 2 Jones Medical Industries, Inc., founded in 1981, is an emerging specialty pharmaceutical manufacturer and niche marketer of prescription pharmaceuticals, hospital pharmaceuticals and nutritional products. The Company has five manufacturing facilities and employs approximately 500 people. Jones Medical has now made a total of fifteen strategic acquisitions, four of which were completed in the past fourteen months. In September, 1995, the Company acquired the exclusive U.S. marketing rights to Eli Lilly and Company's I.V. anesthetic, Brevital(R), which competes within a $525 million U.S. market. In March, 1996, the Company acquired the exclusive U.S. marketing rights to Eli Lilly and Company's anti-thyroid product, Tapazole(R), which is for the treatment of hyperthyroidism (Graves Disease). In August, 1996, the Company acquired Daniels Pharmaceuticals whose leading product is the second most widely prescribed brand of Levothyroxine, Levoxyl(R), which is for the treatment of hypothyroidism and competes within a $300 million U.S. market. Jones Medical has an ongoing strategy of screening strategic acquisition opportunities in its quest to achieve $250 million in annual sales by the year 2000. For further information contact Investor Relations at (314) 576-6100. 2 -----END PRIVACY-ENHANCED MESSAGE-----