AGREEMENT
AND PLAN OF MERGER
BY
AND AMONG
APEX
BIOVENTURES ACQUISITION CORPORATION
APEX
ACQUISITION SUB, INC.,
DYNOGEN
PHARMACEUTICALS, INC., AND
KATE
BINGHAM AND MICHAEL BIGHAM, ACTING JOINTLY
AS
THE HOLDER REPRESENTATIVES
Dated
as of February 5, 2008
TABLE
OF CONTENTS
Page
|
ARTICLE
I
|
THE
MERGER
|
2
|
| |
1.1.
|
The
Merger
|
2
|
| |
1.2.
|
Effective
Time
|
2
|
| |
1.3.
|
Effect
of the Merger
|
2
|
| |
1.4.
|
Certificate
of Incorporation and By-Laws of the Surviving
Corporation
|
2
|
| |
1.5.
|
Directors
and Officers
|
2
|
| |
1.6.
|
Conversion
of Capital Stock
|
3
|
| |
1.7.
|
Treatment
of Company Options.
|
4
|
| |
1.8.
|
Treatment
of Company Warrants.
|
5
|
| |
1.9.
|
Treatment
of Secured Warrants
|
6
|
| |
1.10.
|
Treatment
of Bridge Notes.
|
6
|
| |
1.11.
|
Success
Fees.
|
7
|
| |
1.12.
|
Closing
|
8
|
| |
1.13.
|
Dissenting
Shares
|
8
|
| |
1.14.
|
Taking
of Necessary Action; Further Action
|
9
|
| |
1.15.
|
Tax
Consequences
|
9
|
|
ARTICLE
II
|
CLOSING
PAYMENTS; PAYMENTS OF MERGER CONSIDERATION
|
9
|
| |
2.1.
|
Closing
Payments
|
9
|
| |
2.2.
|
Exchange
of Certificates.
|
10
|
|
ARTICLE
III
|
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
|
12
|
| |
3.1.
|
Organization,
Good Standing and Qualification of the Company
|
12
|
| |
3.2.
|
No
Subsidiaries
|
12
|
| |
3.3.
|
Authorization;
Binding Obligations.
|
12
|
| |
3.4.
|
Capitalization.
|
13
|
| |
3.5.
|
Consents
and Approvals
|
15
|
| |
3.6.
|
No
Violation
|
15
|
| |
3.7.
|
Corporate
Books
|
15
|
| |
3.8.
|
Licenses
and Permits
|
16
|
| |
3.9.
|
Required
Vote.
|
16
|
| |
3.10.
|
Title
to Properties and Assets.
|
17
|
| |
3.11.
|
Real
Property.
|
17
|
| |
3.12.
|
Environmental
Matters.
|
17
|
| |
3.13.
|
Financial
Statements; Undisclosed Liabilities.
|
18
|
| |
3.14.
|
Absence
of Certain Events
|
19
|
| |
3.15.
|
Legal
Proceedings; Orders
|
20
|
| |
3.16.
|
Compliance
with Laws
|
21
|
| |
3.17.
|
Employment
and Labor Matters.
|
21
|
| |
3.18.
|
Employee
Benefit Plans.
|
23
|
| |
3.19.
|
Taxes.
|
27
|
| |
3.20.
|
Contracts.
|
29
|
| |
3.21.
|
Transactions
With Related Parties.
|
31
|
| |
3.22.
|
Insurance
|
31
|
| |
3.23.
|
Certain
Business Practices
|
31
|
| |
3.24.
|
Intellectual
Property; Patents.
|
31
|
| |
3.25.
|
No
Brokers
|
34
|
| |
3.26.
|
Computer
Systems
|
34
|
| |
3.27.
|
Registration
Statement; Proxy Statement/Prospectus
|
35
|
| |
3.28.
|
FDA
and Related Matters.
|
35
|
| |
3.29.
|
Relationships
with Customers, Suppliers and Research
Collaborators
|
36
|
| |
3.30.
|
Powers
of Attorney
|
37
|
| |
3.31.
|
Representations
and Warranties Complete
|
37
|
|
ARTICLE
IV
|
REPRESENTATIONS
AND WARRANTIES OF PARENT AND ACQUISITION SUB
|
37
|
| |
4.1.
|
Organization,
Good Standing and Qualification.
|
37
|
| |
4.2.
|
Subsidiaries
|
38
|
| |
4.3.
|
Authorization;
Binding Obligations.
|
38
|
| |
4.4.
|
Capitalization.
|
39
|
| |
4.5.
|
Consents
and Approvals
|
40
|
| |
4.6.
|
No
Violation
|
40
|
| |
4.7.
|
Required
Vote.
|
41
|
| |
4.8.
|
Title
to Properties and Assets
|
41
|
| |
4.9.
|
SEC
Documents.
|
41
|
| |
4.10.
|
Financial
Statements; Undisclosed Liabilities.
|
42
|
| |
4.11.
|
Absence
of Certain Events
|
42
|
| |
4.12.
|
Restrictions
on Business Activities
|
43
|
| |
4.13.
|
Legal
Proceedings; Orders
|
43
|
| |
4.14.
|
Compliance
with Laws
|
43
|
| |
4.15.
|
Employment
and Labor Matters; Employee Benefit Plans
|
43
|
| |
4.16.
|
Contracts.
|
43
|
| |
4.17.
|
Transactions
With Related Parties
|
44
|
| |
4.18.
|
Indebtedness
|
45
|
| |
4.19.
|
Insurance
|
45
|
| |
4.20.
|
AMEX
|
45
|
| |
4.21.
|
Trust
Account
|
45
|
| |
4.22.
|
Ownership
of Company Stock
|
45
|
| |
4.23.
|
No
Brokers
|
45
|
| |
4.24.
|
Representations
and Warranties Complete
|
45
|
|
ARTICLE
V
|
COVENANTS
|
46
|
| |
5.1.
|
Conduct
Pending Closing.
|
46
|
| |
5.2.
|
Registration
Statement; Proxy Statement; Other Filings; etc.
|
49
|
| |
5.3.
|
HSR
Act Filings; Other Approvals, Filings and
Consents.
|
52
|
| |
5.4.
|
Access
to Information
|
53
|
| |
5.5.
|
Notice
of Certain Events
|
54
|
| |
5.6.
|
Public
Announcements; Non-Disclosure
|
54
|
| |
5.7.
|
Directors
and Officers of Parent and the Company After
Merger
|
54
|
| |
5.8.
|
Charter
Protections; Directors’ and Officers’ Liability
Insurance.
|
54
|
| |
5.9.
|
Treatment
as a Reorganization
|
55
|
| |
5.10.
|
No
Securities Transactions
|
55
|
| |
5.11.
|
No
Claim Against Trust Account
|
55
|
| |
5.12.
|
Updates
to Disclosure Schedule for Post-Signing Events
|
55
|
| |
5.13.
|
No
Solicitation
|
56
|
| |
5.14.
|
Cooperation;
Further Assurances.
|
56
|
| |
5.15.
|
Company
Affiliates
|
57
|
| |
5.16.
|
Registration
Rights Agreement
|
57
|
|
ARTICLE
VI
|
CONDITIONS
PRECEDENT TO MERGER
|
57
|
| |
6.1.
|
Conditions
to Obligation of Each Party to Effect the Merger
|
57
|
| |
6.2.
|
Additional
Conditions to Obligations of Parent and Acquisition
Sub
|
58
|
| |
6.3.
|
Additional
Conditions to Obligations of the Company
|
60
|
|
ARTICLE
VII
|
TERMINATION,
AMENDMENT, WAIVER AND EXPENSES
|
62
|
| |
7.1.
|
Termination
|
62
|
| |
7.2.
|
Effect
of Termination
|
63
|
| |
7.3.
|
Expenses.
|
63
|
|
ARTICLE
VIII
|
ESCROW;
REPRESENTATIVE
|
63
|
| |
8.1.
|
Escrow.
|
63
|
| |
8.2.
|
Holder
Representatives.
|
64
|
|
ARTICLE
IX
|
INDEMNIFICATION
|
66
|
| |
9.1.
|
Indemnification
of Parent.
|
66
|
| |
9.2.
|
Indemnification
of Third Party Claims
|
66
|
| |
9.3.
|
Indemnification
not Involving a Third Party Claim
|
68
|
| |
9.4.
|
Insurance
|
68
|
| |
9.5.
|
Limitations
on Indemnification.
|
69
|
| |
9.6.
|
Exclusive
Remedy
|
69
|
| |
9.7.
|
Adjustment
to Transaction Consideration
|
70
|
|
ARTICLE
X
|
MISCELLANEOUS
|
70
|
| |
10.1.
|
Entire
Agreement; Amendments
|
70
|
| |
10.2.
|
Assignment
|
70
|
| |
10.3.
|
Counterparts
|
70
|
| |
10.4.
|
Governing
Law; Venue; Waiver of Jury Trial
|
70
|
| |
10.5.
|
Specific
Performance
|
71
|
| |
10.6.
|
Interpretation
|
71
|
| |
10.7.
|
Severability
|
71
|
| |
10.8.
|
Notices
|
72
|
| |
10.9.
|
Representation
by Counsel
|
73
|
| |
10.10.
|
Construction
|
73
|
| |
10.11.
|
Waivers
|
73
|
| |
10.12.
|
Disclaimer
of Additional Representations and Warranties
|
73
|
| |
10.13.
|
No
Third Party Beneficiaries
|
74
|
AGREEMENT AND PLAN OF MERGER
AGREEMENT
AND PLAN OF MERGER (the “
Agreement ”),
dated as of February 5, 2008, by and among APEX BIOVENTURES
ACQUISITION CORPORATION, a Delaware corporation (“
Parent ”),
APEX ACQUISITION SUB, INC., a Delaware corporation and wholly-owned
subsidiary of Parent (“
Acquisition Sub ”),
DYNOGEN PHARMACEUTICALS, INC., a Delaware corporation (the
“
Company ”),
and the Holder Representatives (as defined below), as
representative on behalf of the Company Holders (as defined
below).
WHEREAS,
Parent seeks to acquire the Company upon the terms and subject
to the conditions set forth herein;
WHEREAS,
the Boards of Directors of Parent, Acquisition Sub and the
Company have each approved, and declared it to be advisable
and in the best interests of their respective stockholders,
for Parent to acquire the Company upon the terms and subject
to the conditions set forth herein;
WHEREAS,
Parent has received a written opinion (a “
Fairness Opinion ”)
of a reputable financial advisory or investment banking firm in the
business of rendering such opinions to the effect that the fair
market value of the Company equals or exceeds 80% of Parent’s
net assets as of the date of this Agreement (excluding deferred
underwriting discounts and commissions of approximately
$2,070,000);
WHEREAS,
in furtherance of such acquisition, the Boards of Directors of
Parent, Acquisition Sub and the Company have each approved and
declared advisable this Agreement and the merger (the
“
Merger ”)
of Acquisition Sub with and into the Company, in accordance with
the General Corporation Law of the State of Delaware (the
“
DGCL ”),
upon the terms, and subject to the conditions, set forth herein,
which Merger will result in, among other things, the Company
becoming a wholly-owned subsidiary of Parent;
WHEREAS,
Parent’s Board of Directors has determined to recommend
to the stockholders of Parent the adoption of this
Agreement;
WHEREAS,
Parent, as the sole stockholder of Acquisition Sub, has
adopted this Agreement;
WHEREAS,
concurrently with the execution of this Agreement, and as a
condition and inducement to Parent’s willingness to
enter into this Agreement, the stockholders of the Company
identified on
Schedule I hereto
(the “
Principal Stockholders ”)
are entering into a voting agreement with Parent in form and
substance mutually agreeable to Parent and the Principal
Stockholders (the “
Voting Agreement ”);
WHEREAS,
concurrently with the execution of this Agreement, and as a
condition and inducement to Parent’s willingness to
enter into this Agreement, the Company’s Key Employees
(as defined below) have executed and delivered to Parent
agreements (the “
Key Employee Letter Agreements ”)
pursuant to which each of them agree, among other things, not to
offer, sell, pledge, transfer or otherwise dispose of shares of
Parent Common Stock or other securities of Parent from and after
the date of this Agreement through the 180
th day
following the Closing Date; and
WHEREAS,
defined terms used in this Agreement are set forth in the
Schedule of Defined Terms attached hereto as
Schedule II ,
in each case, together with the applicable definition or reference
to the Section of this Agreement in which the definition may be
located;
NOW,
THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements herein
contained, and intending to be legally bound hereby, the
parties hereto agree as follows:
ARTICLE I
THE MERGER
1.1.
The Merger .
Upon the terms, and subject to the conditions, set forth in this
Agreement, and in accordance with the DGCL, Acquisition Sub shall
be merged with and into the Company at the Effective Time. From and
after the Effective Time, the separate corporate existence of
Acquisition Sub shall cease and the Company, as the surviving
corporation in the Merger, shall continue its existence under the
laws of the State of Delaware as a wholly-owned subsidiary of
Parent. The Company, as the surviving corporation after the Merger,
is sometimes referred to as the “
Surviving Corporation .”
1.2.
Effective Time .
On the Closing Date, subject to the terms and conditions set forth
in this Agreement, the parties shall cause the Merger to be
consummated by filing with the Secretary of State of the State of
Delaware a certificate of merger (the “
Certificate of Merger ”)
in form and substance mutually agreeable to Parent and the Company
and executed in accordance with the relevant provisions of the DGCL
(the date and time of such filing, or such later date and time as
may be specified in the Certificate of Merger by mutual agreement
of Parent and the Company, being the “
Effective Time ”).
1.3.
Effect of the Merger .
At the Effective Time, the effect of the Merger shall be as
provided in this Agreement and in the applicable provisions of the
DGCL. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time, all of the assets, properties,
rights, privileges, immunities, powers and franchises of the
Company and Acquisition Sub shall vest in the Surviving
Corporation, and all debts, liabilities and duties of the Company
and Acquisition Sub shall become the debts, liabilities and duties
of the Surviving Corporation.
1.4.
Certificate of Incorporation and By-Laws of the Surviving
Corporation .
At the Effective Time and without further action on the part of the
parties hereto, (a) the Certificate of Incorporation of Acquisition
Sub shall be amended in form and substance mutually agreeable to
the Company and Parent and shall be the Certificate of
Incorporation of the Surviving Corporation and (b) the By-Laws of
Acquisition Sub shall be the By-Laws of the Surviving Corporation,
in each case, until thereafter amended as provided by the
DGCL.
1.5.
Directors and Officers .
Following the date of this Agreement and prior to the Mailing Date,
Parent and the Company shall coordinate in good faith to determine
the individuals to serve as the initial officers of the Surviving
Corporation (the “
Initial Officers ”)
and the initial directors of the Surviving Corporation (the
“
Initial Directors ”
and, together with the Initial Officers, the “
Initial Officers and Directors ”),
each of whom shall hold office in accordance with the Certificate
of Incorporation and the By-Laws of the Surviving Corporation until
their respective successors are duly elected or appointed and
qualified or until their earlier death, or their resignation or
removal in accordance with the Surviving Corporation’s
Certificate of Incorporation and By-Laws or the terms of any
contract pursuant to which they may be serving as
such.
1.6.
Conversion of Capital Stock .
At the Effective Time, by virtue of the Merger and without any
action on the part of Parent, Acquisition Sub or the Company or
their respective stockholders:
(a)
Acquisition Sub Capital Stock .
Each share of common stock, par value $0.0001 per share, of
Acquisition Sub issued and outstanding immediately prior to the
Effective Time shall be converted into one validly issued, fully
paid and non-assessable share of common stock, par value $0.00001
per share, of the Surviving Corporation;
(b)
Treasury Shares .
Each share of capital stock of the Company held in the treasury of
the Company (the “
Treasury Shares ”)
shall be cancelled and retired, and no payment shall be made in
respect thereof;
(c)
Excluded Shares .
Each share of capital stock of the Company held by Parent or
Acquisition Sub or any of their respective Affiliates (the
“
Excluded Shares ”)
shall be cancelled and retired, and no payment shall be made in
respect thereof;
(d)
Conversion of Company Common Stock .
Each share of common stock, par value $0.00001 per share, of the
Company (the “
Company Common Stock ”),
issued and outstanding immediately prior to the Effective Time, but
excluding Dissenting Shares, Treasury Shares and the Excluded
Shares, shall be converted into the right to receive, subject to
the terms and conditions of this Agreement and the Escrow &
Exchange Agreement, such number of shares of Parent Common Stock,
as shall equal the quotient obtained by dividing (i) the quotient
of (A) the sum of $97,000,000
, plus an
amount equal to the Aggregate Exercise Price,
divided by (B)
the Parent Signing Price,
by (ii)
a number equal to the Fully-Diluted Share Number (the resulting
number being the “
Conversion Ratio ”
and the resulting number of shares of Parent Common Stock (or
fraction thereof) being the “
Per Share Merger Consideration ”);
(e)
Conversion of Company Preferred Stock .
Each share of preferred stock, par value $0.00001 per share, of the
Company (the “
Company Preferred Stock ”
and, together with the Company Common Stock, the “
Company Stock ”),
issued and outstanding immediately prior to the Effective Time, but
excluding Dissenting Shares, Treasury Shares and the Excluded
Shares, shall be converted into the right to receive, subject to
the terms and conditions of this Agreement and the Escrow &
Exchange Agreement, the Per Share Merger Consideration with respect
to each share of Company Common Stock issuable immediately prior to
the Effective Time upon conversion of such share of Company
Preferred Stock; and
(f)
Cancellation of Company Stock .
Each share of Company Stock issued and outstanding immediately
prior to the Effective Time, but excluding the Dissenting Shares,
Treasury Shares and the Excluded Shares, shall no longer be
outstanding and shall automatically be cancelled and shall cease to
exist, and, subject to Section 1.13 below, each holder of such
Company Stock (a “
Stockholder ”)
shall cease to have any rights with respect thereto, except the
right to receive the payment contemplated by Section 1.6(d) or (e)
and Section 1.11 above in accordance with the provisions of Section
2.2 below.
1.7.
Treatment of Company Options .
(a)
Following
the date of this Agreement and prior to the Closing Date, the
Company shall, in compliance with any notice requirements
under the Company’s Option Plan and the applicable
Option Agreement, notify each holder (each, an “
Optionholder ”)
of a Company Option of the proposed Merger and the effect of the
Merger on the Company Options. Upon the exercise of any Company
Option on or prior to the Business Day immediately preceding the
Closing Date, the holder thereof (i) will receive from the Company
a certificate, registered in such holder’s name, evidencing
the number of shares of Company Common Stock to which such holder
is entitled, and (ii) following such exercise shall be treated as a
Stockholder. For purposes of this Agreement, the term
“
Option Agreement ”
means collectively, all documents evidencing a Company
Option.
(b)
At
the Effective Time, by virtue of the Merger, and without
further action on the part of Parent, Acquisition Sub or the
Company or their respective stockholders, each unexercised
Company Option (whether or not exercisable, vested or
unvested) shall be assumed by Parent and shall become an
option under the Parent Plan (a “
Parent Option ”)
to acquire such whole number of shares of Parent Common Stock as
shall equal (i) the number of Option Shares subject to such Company
Option,
multiplied by (ii)
the Conversion Ratio (rounding the resulting number down to the
nearest whole number), at a per share exercise price equal to (A)
the per share exercise price at which such Company Option was
exercisable immediately prior to the Effective Time,
multiplied by (B)
the quotient of (x) one,
divided by (y)
the Conversion Ratio (rounding the resulting number up to the
nearest whole cent). Each Parent Option will be evidenced by an
option agreement, in form and substance reasonably satisfactory to
Parent and the Company, which shall include, among other things,
terms and conditions substantially similar to those applicable
under the Company’s Option Plan immediately prior to the
Effective Time (including, without limitation, any repurchase
rights, vesting provisions and provisions regarding acceleration of
vesting upon certain transactions). After such assumption and
conversion, each Company Option shall be deemed terminated and of
no further force or effect.
(c)
Notwithstanding
anything to the contrary, (i) in no event will (A) the excess
of the aggregate fair market value of the shares subject to
any unexercised Company Option as a result of the operation of
Section 1.7(b) over the aggregate option price of such shares
immediately after the Closing Date exceed the excess of the
aggregate fair market value of such shares before the Closing
Date; and (B) the ratio of the exercise price to the fair
market value of the shares subject to any unexercised Company
Option as a result of the operation of Section 1.7(b)
immediately after the Closing Date be greater than the ratio
of the exercise price to the fair market value of such
unexercised Company Option immediately before the Closing
Date, and (ii) in the case of a Company Option which is an
Incentive Stock Option (as defined in Section 421 of the
Code), in no event will the substitute Parent Option give the
holder thereof additional benefits which such holder did not
have under the Company Option. It is the intent of this
provision that the substitution of options under Section
1.7(b) comply with the requirements of Treas. Reg. Section
1.409A-1(b)(v)(D) (relating to substitutions and assumptions
of stock rights) and Treas. Reg. Section 1.424-1(a) (relating
to substitutions and assumptions of statutory
options).
1.8.
Treatment of Company Warrants .
(a)
Following
the date of this Agreement and prior to the Closing Date, the
Company shall, in compliance with any notice requirements
under the applicable Warrant Agreement, notify each holder
(each, a “
Warrantholder ”)
of a Company Warrant of the proposed Merger. A Warrantholder who
elects to exercise his, her or its Company Warrant prior to the
Effective Time (i) will receive from the Company a Certificate,
registered in such Warrantholders’s name, evidencing the
number of shares of Company Common Stock or Company Preferred Stock
to which such Warrantholder is entitled, and (ii) following such
exercise shall be treated as a Stockholder. For purposes of this
Agreement, the term “
Warrant Agreement ”
means, collectively, all documents evidencing a
Warrant.
(b)
At
the Effective Time, by virtue of the Merger, and without
further action on the part of Parent, Acquisition Sub or the
Company or their respective stockholders, each unexercised
Company Warrant (whether or not exercisable, vested or
unvested) shall be assumed by Parent and shall become a
warrant (a “
Parent Warrant ”)
to acquire such whole number of shares of Parent Common Stock as
shall equal (i) the number of Warrant Shares subject to such
Company Warrant,
multiplied by (ii)
the Conversion Ratio (rounding the resulting number down to the
nearest whole number), at a per share exercise price equal to (A)
the per share exercise price at which such Company Warrant was
exercisable immediately prior to the Effective Time,
multiplied by (B)
the quotient of (x) one,
divided by (y)
the Conversion Ratio (rounding the resulting number up to the
nearest whole cent). Each Parent Warrant will be evidenced by a
warrant agreement, in form and substance reasonably satisfactory to
Parent and the Company, which shall include, among other things,
terms and conditions substantially similar to those applicable to
the Company Warrants under the applicable Warrant Agreements
immediately prior to the Effective Time (including, without
limitation, any repurchase rights, vesting provisions and
provisions regarding acceleration of vesting upon certain
transactions). After such assumption and conversion, each Company
Warrant shall be deemed terminated and of no further force or
effect.
1.9.
Treatment of Secured Warrants .
At the Effective Time, by virtue of the Merger, and without further
action on the part of Parent, Acquisition Sub or the Company or
their respective stockholders, each unexercised Secured Warrant
(whether or not exercisable, vested or unvested) shall be assumed
by Parent and shall become a warrant (a “
Parent Secured Warrant ”)
to acquire such whole number of shares of Parent Common Stock as
provided for therein. Each Parent Secured Warrant will be evidenced
by a warrant agreement, in form and substance reasonably
satisfactory to Parent and the Company, which shall include, among
other things, terms and conditions substantially similar to those
applicable to the Secured Warrants immediately prior to the
Effective Time (including, without limitation, any repurchase
rights, vesting provisions and provisions regarding acceleration of
vesting upon certain transactions) and restrictions with respect to
the offer, sale, transfer or other disposition of the shares of
Parent Common Stock issuable upon exercise thereof through the
180
th day
following the Closing Date. After such assumption and conversion,
each Secured Warrant shall be deemed terminated and of no further
force or effect.
1.10.
Treatment of Bridge Notes .
(a)
At
the Effective Time, by virtue of the Merger, and without
further action on the part of Parent, Acquisition Sub or the
Company or their respective stockholders, each Bridge Note
issued and outstanding immediately prior to the Effective
Time:
(i)
shall
be converted into the right to receive, subject to the terms
and conditions of this Agreement and the Escrow & Exchange
Agreement, (A) such number of shares of Parent Common Stock as
shall equal (x) the principal amount of such Bridge
Note,
divided by (y)
the Parent Signing Price (rounding the resulting number down to the
nearest whole number), and (B) a warrant (a “
Parent Bridge Warrant ”)
to purchase such number of shares of Parent Common Stock as shall
equal (x) the principal amount of such Bridge Note,
multiplied by (y)
0.25,
divided by ,
(z) the Parent Signing Price (rounding the resulting number down to
the nearest whole number), at a per share exercise price equal to
the Parent Signing Price, subject to redemption at a per share
price of $0.01 if the volume weighted average price of Parent
Common Stock equals or exceeds $11.50 per share for any 20 trading
days within any 30 trading day period, and
(ii)
shall
no longer be outstanding and shall automatically be cancelled
and shall cease to exist, and each holder of such Bridge Note
(a “
Bridge Investor ”)
shall cease to have any rights with respect thereto, except the
right to receive the payment contemplated by this Section 1.10, in
accordance with the provisions of Section 2.2 below.
(b)
Each
Parent Bridge Warrant will be evidenced by a warrant
agreement, in form and substance reasonably satisfactory to
Parent and the Company, which shall include, among other
things, (i) restrictions with respect to the offer, sale,
transfer or other disposition of the shares of Parent Common
Stock issuable upon exercise thereof through the 180
th day
following the Closing Date, and (ii) rights relating to the
registration of the shares of Parent Common Stock issuable upon
exercise of the Parent Bridge Warrants.
1.11.
Success Fees .
(a)
Upon
the first dosing of a U.S. Phase III trial patient in a first
indication, following an “End of Phase II Meeting”
with the FDA as reflected in FDA minutes which enables the
Surviving Corporation to initiate a Phase III trial, provided,
that such closing occurs within the first five years
immediately following the Closing Date, each Success Fee
Recipient shall become entitled to receive, his, her or its
Proportionate Share of the First Success Fee
Shares.
(b)
Upon
the first dosing of a U.S. Phase III trial patient in a second
indication, following an “End of Phase II Meeting”
with the FDA as reflected in FDA minutes which enables the
Surviving Corporation to initiate a Phase III trial, provided,
that such closing occurs within the first five years
immediately following the Closing Date, each Success Fee
Recipient shall become entitled to receive, his, her or its
Proportionate Share of the Second Success Fee
Shares.
(c)
Upon
the occurrence of a Qualified Fundamental Transaction, if not
already paid pursuant to the foregoing provisions of this
Section 1.11, each Success Fee Recipient shall become entitled
to receive his, her or its Proportionate Share of the First
Success Fee Shares and/or the Second Success Fee
Shares.
(d)
For
purposes hereof, the following terms have the following
meanings:
“
Fundamental Transaction ”
means (i) any merger, consolidation, reorganization or other
similar transaction of Parent or the Surviving Corporation into or
with any other corporation or entity (other than with and into a
corporation or other entity, 100% of the outstanding capital stock
or other equity interests of which are held, directly or
indirectly, by Parent), as a result of which the holders of the
outstanding voting securities of the Parent or the Surviving
Corporation, as applicable, immediately prior to such transaction
hold less than 50% of the voting power of the voting securities of
the surviving entity immediately following such transaction, (ii)
sale of all of the capital stock of the Surviving Corporation to a
Person that is not an Affiliate of Parent, or (iii) a sale,
conveyance, mortgage, transfer, license, pledge, lease or other
disposition of all or substantially all of the assets of Parent or
the Surviving Corporation to a Person that is not an Affiliate of
Parent.
“
First Success Fee Shares ”
and “
Second Success Fee Shares ”
each mean such number of shares of Parent Common Stock as shall
equal (i) $23,000,000
, divided by (ii)
the Parent Signing Price.
“
Forfeiting Optionholder ”
means an Optionholder whose employment with the Surviving
Corporation is terminated (by the Surviving Corporation or by such
Optionholder, for any reason or no reason) prior to the time of
determination for the payment of the First Success Fee Shares or
the Second Success Fee Shares, as applicable, unless such
Optionholder exercises his or her right to purchase shares of
Parent Common Stock pursuant to a Parent Option.
“
Proportionate Share ”
means, with respect to any particular Success Fee Recipient, (i)
the number of shares of Parent Common Stock to which such Success
Fee Recipient is entitled pursuant to Sections 1.6(d) and (e), plus
the number of shares of Parent Common Stock issuable upon exercise
of Parent Options to which such Success Fee Recipient is entitled
pursuant to Section 1.7(b), but only to the extent such Parent
Options are vested and exercisable immediately following the
Closing Date by the terms thereof (and without giving effect to the
provisions of the Key Employee Letter Agreements), relative to (ii)
the aggregate number of shares of Parent Common Stock to which all
Success Fee Recipients are entitled pursuant to Sections 1.6(d) and
(e), plus the aggregate number of shares of Parent Common Stock
issuable upon exercise of all Parent Options to which all Success
Fee Recipients are entitled pursuant to Section 1.7(b), but only to
the extent such Parent Options are vested and exercisable
immediately following the Closing Date by the terms thereof (and
without giving effect to the provisions of the Key Employee Letter
Agreements).
“
Qualified Fundamental Transaction ”
means a Fundamental Transaction which occurs during the first five
years immediately following the Closing Date if the proceeds of
such Fundamental Transaction result in a cash payment or other
consideration to the holders of shares of Parent Common Stock in an
amount equal to or greater than the Parent Signing Price (as
appropriately adjusted for any stock split, combination,
capitalization or other similar transaction occurring after the
Closing Date and prior to such Fundamental Transaction). (If and to
the extent non-cash consideration is paid in connection with the
Fundamental Transaction, the value thereof for purposes of this
definition will be determined in good faith by Parent’s Board
of Directors.)
“
Success Fee Recipient ”
means each Stockholder and each Optionholder (other than a
Forfeiting Optionholder).
1.12.
Closing .
Subject to the terms and conditions hereof, the closing of the
Merger and the transactions contemplated by this Agreement (the
“
Closing ”)
will take place at 10:00 a.m., local time, no later than the third
Business Day following the date on which the last of the conditions
set forth in Article VI have been satisfied or waived (other than
any such conditions that by their terms cannot be satisfied until
the Closing Date, which conditions shall be required to be so
satisfied or waived on the Closing Date) and, in any event, subject
to extension as set forth in Section 7.1(b), no later than the
Outside Date, unless another time or date is agreed to in writing
by the Company and Parent (the date upon which the Closing occurs
being the “
Closing Date ”).
The Closing shall be held at the offices of Mintz, Levin, Cohn,
Ferris, Glovsky and Popeo, P.C., Chrysler Center, 666 Third Avenue,
New York, New York, or remotely via the exchange of executed
documents and other closing deliverables.
1.13.
Dissenting Shares .
Shares of Company Stock that are held by a Stockholder who (a) has
not voted such shares in favor of the Merger or delivered a written
consent in lieu of such vote, (b) shall have delivered a timely
written demand for appraisal of such shares in the manner provided
for in Section 262 of the DGCL, and (c) shall not have effectively
withdrawn or lost such right to appraisal as of the Effective Time
(such shares, the “
Dissenting Shares ”),
shall be entitled to such rights (but only such rights) as are
granted by Section 262 of the DGCL. Each holder of Dissenting
Shares who becomes entitled to payment for such Dissenting Shares
pursuant to Section 262 of the DGCL shall, subject to the terms of
this Agreement, receive payment therefor from the Surviving
Corporation in accordance with the DGCL; provided, however, that
(i) if any such holder of Dissenting Shares shall have failed to
establish such holder’s entitlement to appraisal rights as
provided in Section 262 of the DGCL, (ii) if any holder of
Dissenting Shares shall have effectively withdrawn its demand for
appraisal of such Dissenting Shares or lost its right to appraisal
and payment for its Dissenting Shares under Section 262 of the
DGCL, or (iii) if no holder of Dissenting Shares has filed a
petition demanding a determination of the value of all Dissenting
Shares within the time provided for the filing of such petition in
Section 262 of the DGCL, then (A) such holder shall forfeit the
right to appraisal of such Dissenting Shares and cease to be deemed
a holder of Dissenting Shares, and (B) each such Dissenting Share
shall be deemed to have been converted into, as of the Effective
Time, the right to receive the Per Share Merger
Consideration,
less any
required tax withholding, without any interest thereon, upon
surrender, in the manner provided in Article II below, of the
Certificate that formerly evidenced such share or, in the event
that such Certificate is lost, stolen, mutilated or destroyed, a
properly completed and executed Affidavit of Loss. The Company
shall give Parent (x) prompt written notice of any demands for
appraisal received by the Company, withdrawals of such demands, and
any other instruments served pursuant to the DGCL and received by
the Company, and (y) the opportunity to lead all negotiations and
proceedings with respect to demands for appraisal under the DGCL
(it being understood that the Company shall be entitled to
participate therein). The Company shall not make any payment with
respect to, or settle or offer to settle, any such demand, except
with the prior written consent of Parent or as may otherwise be
required by applicable Law.
1.14.
Taking of Necessary Action; Further Action .
If, at any time after the Effective Time, any further action is
necessary or desirable to carry out the purposes of this Agreement
and to vest the Surviving Corporation with full right, title and
possession to all assets, property, rights, privileges, powers and
franchises of the Company and Acquisition Sub, the officers and
directors of the Surviving Corporation are fully authorized, in the
name of the Company and Acquisition Sub respectively, to take all
such lawful and necessary action.
1.15.
Tax Consequences .
It is intended by the parties hereto that the Merger constitute a
reorganization within the meaning of Section 368 of the Code. The
parties hereto adopt this Agreement as a “plan of
reorganization” within the meaning of Sections 1.368-2(g) and
1.368-3(a) of the United States Income Tax
Regulations.
ARTICLE II
CLOSING PAYMENTS; PAYMENTS OF MERGER
CONSIDERATION
2.1.
Closing Payments .
On or prior to the Closing Date, each of Parent and the Company
will pay (or cause to be paid) their respective Transaction
Expenses, which, if paid at Closing, may be paid using funds from
the Parent’s Trust Account.
2.2.
Exchange of Certificates .
(a)
Agent .
Effective as of the Closing Date, Parent, the Company and the
Surviving Corporation will appoint Continental Stock Transfer &
Trust Company (“
Agent” )
to act as escrow agent for the escrow of the Indemnity Shares and
exchange agent for the payment of the Merger
Consideration.
(b)
Letter of Transmittal .
As soon as reasonably practicable after the Effective Time (but in
any event within five Business Days after the Effective Time),
Parent and the Surviving Corporation will cause the Agent to send
to each Stockholder, Optionholder, Warrantholder, Secured Lender
and Bridge Investor (each, a “
Company Holder ”),
a letter of transmittal (the “
Letter of Transmittal ”),
which shall, among other things, provide instructions for effecting
the surrender of stock certificates representing Company Stock,
Option Agreements, Warrant Agreements, warrant agreements
representing Secured Warrants or promissory notes representing
Bridge Notes (in any case, “
Certificates ”)
(or an affidavit of loss in form and substance acceptable to Parent
(an “
Affidavit of Loss ”)
in lieu of any lost, stolen, mutilated or destroyed Certificate) in
exchange for Merger Consideration.
(c)
Surrender of Certificates; Payment of Merger
Consideration .
Following surrender to the Agent of a Certificate (or, in lieu
thereof, an executed and completed Affidavit of Loss), together
with a duly executed and completed Letter of Transmittal and such
other documents as may reasonably be required by the Agent
(collectively, “
Surrender Documents ”):
(i)
subject
to the terms of the Escrow & Exchange Agreement, the
Company Holder shall be entitled to receive in exchange
therefore, (A) certificates, registered to such Company
Holder, evidencing such number of shares of Parent Common
Stock as to which he, she or it is entitled pursuant to
Section 1.6 above or 1.9, (B) if the Company Holder is an
Optionholder, an option agreement, registered to such Company
Holder, evidencing the Parent Option as to which he, she or it
is entitled pursuant to Section 1.7 above, (C) if the Company
Holder is a Warrantholder, a warrant agreement, registered to
such Company Holder, evidencing the Parent Warrant as to which
he, she or it is entitled pursuant to Section 1.8 above, (D)
if the Company Holder is a Secured Lender, a warrant
agreement, registered to such Company Holder, evidencing the
Parent Secured Warrant as to which he, she or it is entitled
pursuant to Section 1.9, and/or (E) if the Company Holder is a
Bridge Investor, a warrant agreement, registered in the name
of such Bridge Investor, evidencing the Parent Bridge Warrant
to which he, she or it is entitled pursuant to Section 1.10
above, in each case, after giving effect to the remaining
provisions of this Section 2.2, and
(ii)
the
surrendered Certificate shall immediately be
canceled.
(d)
No
dividends or other distributions declared or made after the
Effective Time with respect to Parent Common Stock with a
record date after the Effective Time will be paid to a Company
Holder with respect to the shares of Parent Common Stock to be
issued to him, her or it as Merger Consideration until such
Company Holder has surrendered to the Agent the Surrender
Documents. No interest will be paid or accrued with respect to
any Merger Consideration deliverable upon due surrender of any
Certificate (or delivery of an Affidavit of Loss). In the
event of a transfer of ownership of Company Stock, Company
Options, Company Warrants, Secured Warrants or a Bridge Note
(each, a “
Company Security ”)
that is not registered in the transfer records of the Company,
payment may be made to a transferee if, and only if, the
Certificate representing such Company Security is presented to the
Agent, accompanied by all documents required to evidence and effect
such transfer together with evidence that any applicable transfer
taxes have been paid. Until surrendered as contemplated by this
Section 2.2, each Certificate (other than the Certificates
representing Dissenting Shares) shall be deemed at any time after
the Effective Time for all purposes to represent only the right to
receive upon such surrender the Merger Consideration which the
holder thereof has the right to receive in respect of such
Certificate pursuant to this Section 2.2. Certificates representing
Dissenting Shares shall be deemed at any time after the Effective
Time for all purposes to represent only the right to receive the
fair value of such Dissenting Shares pursuant to the
DGCL.
(e)
No Further Ownership Rights .
All Merger Consideration paid in exchange of Company Securities
shall be deemed to have been paid in full satisfaction of all
rights pertaining to such Company Securities. After the Effective
Time, there shall be no further registration of transfers on the
stock transfer books of the Surviving Corporation of the Company
Securities that were outstanding immediately prior to the Effective
Time. If, after the Effective Time, Certificates are presented to
the Surviving Corporation for any reason, they shall be canceled
and exchanged as provided in this Section 2.2, subject to
applicable Law in the case of Certificates representing Dissenting
Shares. From and after the Effective Time, Company Holders shall
cease to have any rights as stockholders, optionholders,
warrantholders or investors of the Company, as applicable, except
as provided by Law.
(f)
No Liability .
None of Parent, the Company, the Surviving Corporation or the Agent
shall be liable to any Company Holder for any amount properly paid
to a Governmental Authority pursuant to any applicable abandoned
property, escheat or similar Law.
(g)
Withholding Rights .
Parent, the Surviving Corporation and the Agent shall be entitled
to deduct and withhold from the Merger Consideration otherwise
payable to any Company Holder such amounts as may be required to be
deducted and withheld with respect to the making of such payment
under the Code or under any provision of any state, county, local
or foreign tax Law, such deductions and withholdings to be effected
by reducing the number of shares of Parent Common Stock issuable to
a Company Holder, or the number of shares of Parent Common Stock
subject to a Parent Option, Parent Warrant, Parent Secured Warrant
or Parent Bridge Warrant issuable to a Company Holder, as
applicable, based on a per Parent Common Stock value equal to the
Parent Signing Price. To the extent that amounts are so withheld by
Parent, the Surviving Corporation or the Agent, such withheld
amounts shall be treated for all purposes of this Agreement as
having been paid to the Company Holder.
(h)
Rounding .
Parent, the Company and the Holder Representative shall act in good
faith to implement rounding procedures to ensure that each Company
Holder receives such number of shares of Parent Common Stock equal
to (i) the aggregate number of shares of Company Common Stock owned
by such Company Holder immediately prior to the Effective
Time,
plus the
aggregate number of shares of Company Common Stock issuable upon
conversion of Company Preferred Stock immediately prior to the
Effective Time,
multiplied by (ii)
the Per Share Merger Consideration.
(i)
Fractional Shares .
No fraction of a share of Parent Common Stock will be issued by
virtue of the Merger, and each Company Holder who would otherwise
be entitled to a fraction of a share of Parent Common Stock (after
giving effect to Section 2.2(f) and (g) above) shall receive, in
lieu of such fractional share, an amount in cash based on the
Parent Signing Price.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except
as disclosed by the Company in the Company’s Disclosure
Schedule, dated as of the date of this Agreement and delivered
by the Company to Parent together with this Agreement (the
“
Company’s Disclosure Schedule ”),
the Company hereby represents and warrants to Parent and
Acquisition Sub as follows:
3.1.
Organization, Good Standing and Qualification of the
Company .
The Company is a corporation validly existing and in good standing
under the DGCL, and is qualified or licensed as a foreign
corporation to do business, and is in good standing, in the
jurisdictions listed in Section 3.1 to the Company’s
Disclosure Schedule, which jurisdictions are the jurisdictions
where the character of the properties owned, leased or operated by
it or the nature of its activities makes such qualification or
licensing necessary, except for those jurisdictions where the
failure to be so qualified, licensed or in good standing would not
have a Company Material Adverse Effect. The Company has the
corporate power and authority, and is in possession of all
Approvals necessary, to own, lease and operate its properties and
to carry on its business as it is now being conducted or as
currently proposed to be conducted, other than those, the failure
of which to possess would not have a Company Material Adverse
Effect. The Company has previously provided to Parent and
Acquisition Sub true, correct and complete copies of (a) its
Certificate of Incorporation and all amendments thereto or
restatements thereof, and (b) its By-Laws and all amendments
thereto or restatements thereof. Such Certificate of Incorporation
and By-Laws are in full force and effect.
3.2.
No Subsidiaries .
The Company does not own, directly or indirectly, any equity,
partnership, membership or similar interest in, or any interest
convertible into or exchangeable or exercisable for, any equity,
partnership, membership or similar interest in, any Person, nor is
it under any obligation to form or participate in, or make any
loan, capital contribution or other investment in, any
Person.
3.3.
Authorization; Binding Obligations .
(a)
The
Company has all necessary corporate power and authority to
execute and deliver this Agreement, each Related Agreement to
which it is a party and each other instrument or document
required to be executed and delivered by it pursuant to this
Agreement or any such Related Agreement, and to perform its
obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby. The execution
and delivery by the Company of this Agreement and each Related
Agreement to which it is a party, the performance of its
obligations hereunder and thereunder, and the consummation by
the Company of the transactions contemplated hereby and
thereby, have been duly and validly authorized by all
corporate action on the part of the Company and no other
corporate proceedings on the part of the Company are necessary
to authorize this Agreement or any Related Agreement to which
it is a party or to consummate the transactions so
contemplated hereby and thereby other than the giving of
notice to the stockholders of the Company and the adoption of
this Agreement and the approval of the Merger by the
stockholders of the Company in accordance with the
DGCL.
(b)
This
Agreement has been, and each of the Related Agreements to
which the Company is a party, when executed and delivered by
the other parties hereto and thereto will be, duly and validly
executed and delivered by the Company and (assuming the due
authorization, execution and delivery by the other parties
hereto and thereto) this Agreement constitutes, and each
Related Agreement to which the Company is a party, when
executed and delivered, will constitute, a legal, valid and
binding obligation of the Company enforceable against the
Company in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium and similar
laws affecting creditors’ rights and remedies generally,
and subject, as to enforceability, to general principles of
equity, including principles of commercial reasonableness,
good faith and fair dealing (regardless of whether enforcement
is sought in a proceeding at law or in equity).
3.4.
Capitalization .
(a)
The
authorized capital of the Company consists of (i) 90,000,000
shares of Company Common Stock, and (ii) 73,361,921 shares of
Company Preferred Stock, of which 13,296,988 shares are
designated as Series A Preferred Stock, 45,454,545 shares are
designated as Series B Preferred Stock, 7,142,857 shares are
designated as Series C Preferred Stock, 1,038,961 shares are
designated as First Strategic Preferred Stock and 6,428,570
shares are designated as Second Strategic Preferred Stock. As
of the date of this Agreement, there are (i) 5,143,318 shares
of Company Common Stock issued and outstanding; (ii)
13,250,000 shares of Series A Preferred Stock issued and
outstanding; (iii) 45,454,545 shares of Series B Preferred
Stock issued and outstanding; (iv) 2,499,999 shares of Series
C Preferred Stock issued and outstanding; (v) 1,038,961 shares
of First Strategic Preferred Stock issued and outstanding;
(vi) 2,857,142 shares of Second Strategic Preferred Stock
issued and outstanding; (vii) no shares of Company Common
Stock held in the treasury of the Company; (viii) no shares of
Company Preferred Stock held in the treasury of the Company;
(ix) 6,468,136 shares of Company Common Stock reserved for
issuance pursuant to outstanding Company Options granted under
the Company’s Option Plan; (x) 3,788,546 shares of
Company Common Stock reserved for future issuance pursuant to
Company Options not currently outstanding but eligible to be
granted under the Company’s Option Plan, and (xi) 46,988
shares of Company Common Stock and 6,107 shares of Company
Preferred Stock reserved for future issuance pursuant to the
Company Warrants.
(b)
Section
3.4(b) of the Company’s Disclosure Schedule identifies
the name of, and the number and type of shares of Company
Stock held by each Stockholder as of the date of this
Agreement and, with respect to shares of Company Preferred
Stock, the number of shares of Company Common Stock issuable
upon conversion thereof (excluding shares of Company Common
Stock issuable upon conversion of accrued and unpaid
dividends). All outstanding shares of capital stock of the
Company are duly authorized, validly issued, fully paid and
non-assessable.
(c)
Section
3.4(c) of the Company’s Disclosure Schedule lists all
Company Options and Company Warrants outstanding as of the
date of this Agreement, including with respect to each such
Company Option and Company Warrant (i) the record holder
thereof, (ii) the exercise price thereof, and (iii) the number
of shares of Company Common Stock or Company Preferred Stock
that remain subject to such Company Option or Company Warrant,
as applicable, and, with respect to shares of Company
Preferred Stock underlying Company Warrants, the number of
shares of Company Common Stock issuable upon conversion
thereof (excluding shares of Company Common Stock issuable
upon conversion of accrued and unpaid dividends)), in each
case, without regard to vesting. All outstanding Company
Options that were granted under the Company’s Option
Plan, have been duly authorized and validly issued. All
outstanding Company Warrants have been duly authorized and
validly issued. If and to the extent issued, all Secured
Warrants and Bridge Notes will have been duly authorized and
validly issued. The Company has provided Parent with true,
correct and complete copies of (A) its standard form of option
agreement, (B) any option agreement which deviates in any
material respect from the standard form of option agreement,
(C) the Company’s Option Plan, (D) its standard form of
warrant agreement, and (E) any warrant agreement which
deviates in any material respect from the standard form of
warrant agreement. If issued, the Company will provide Parent
with true, correct and complete copies of the Secured Warrants
and the Bridge Notes.
(d)
As
of the date hereof, there are no (i) except as set forth in
Section 3.4(c) above, reserved or outstanding securities,
options (whether vested or unvested), warrants, calls, rights,
commitments or agreements to which the Company is a party or
by which it is bound obligating the Company to issue, deliver
or sell, or cause to be issued, delivered or sold, additional
shares of capital stock or other securities of the Company,
(ii) outstanding obligations, contingent or otherwise, of the
Company to repurchase, redeem or otherwise acquire any shares
of capital stock (or options to acquire any such shares) or
other securities or equity interests of the Company, (iii)
outstanding stock appreciation rights, phantom stock or other
equity equivalent or equity-based awards or rights to which
the Company is a party or by which it is bound, and the
Company is not obligated to grant or issue any of the
foregoing, (iv) voting trusts, proxies, rights plans,
anti-takeover plans or other agreements to which the Company
is a party or by which it is bound, or to the Company’s
Knowledge, to which any of its stockholders are a party, with
respect to the issuance, holding, acquisition, registration,
voting or disposition of any shares of capital stock or other
securities or equity interests of the Company, or (v) except
as disclosed in Section 3.4(d)(v) of the Company’s
Disclosure Schedule and as required under the Company’s
Certificate of Incorporation as in effect as of the date of
this Agreement, declared or accrued unpaid dividends with
respect to any of the Company’s securities and the
Company has no obligation (contingent or otherwise) to declare
or pay any dividend with respect to any of its securities or
to make any other distribution in respect
thereof.
(e)
Except
as set forth in Section 3.4(e) of the Company’s
Disclosure Schedule, none of the shares of Company Stock,
Company Options or Company Warrants were issued or have been
transferred in violation of, or are subject to, any preemptive
rights or rights of first offer. If and to the extent issued,
the Secured Warrants and the Bridge Notes will be issued
without violation of, and the transfer will not be subject to,
any preemptive rights or rights of first offer.
3.5.
Consents and Approvals .
Except as set forth in Section 3.5 of the Company’s
Disclosure Schedule, the execution and delivery by the Company of
this Agreement and each Related Agreement to which it is a party do
not, and the performance by the Company of its obligations under
this Agreement and each Related Agreement to which it is a party
shall not, require the Company to obtain any Approval of any
Person, or give notification to or observe any waiting period
imposed by, or make any filing with or notification to, any
Governmental Authority, except for (a) the filing of the S-4 with
the SEC, in accordance with the Securities Act, (b) applicable
requirements, if any, of the Securities Act, the Exchange Act, Blue
Sky Laws, and the rules and regulations thereunder, (c) any request
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the “
HSR Act ”),
from the United States Federal Trade Commission or the United
States Department of Justice or any other Governmental Authority
for additional information, letters to the Company from the
accountants, documents or other materials relating to the
pre-merger notification requirements of the HSR Act, (d) any
notices required under the U.S. Federal Food, Drug, and Cosmetic
Act, as amended (the “
FD&C Act ”),
(e) the filing of the Certificate of Merger in accordance with the
DGCL, and (f) such other Approvals as are not material to the
operation of the business of the Surviving Corporation from and
after the Effective Time.
3.6.
No Violation .
Except as set forth in Section 3.6 of the Company’s
Disclosure Schedule, the execution and delivery by the Company of
this Agreement and each Related Agreement to which it is a party do
not, and the performance by the Company of its obligations under
this Agreement and each Related Agreement to which it is a party,
will not (a) conflict with or violate any provision of its
Certificate of Incorporation or By-Laws as currently in effect, (b)
conflict with or violate any Law or Order to which the Company is
subject or by which any of its properties are bound, or (c)
conflict with, result in any breach or violation of or constitute a
default (or an event that with notice or lapse of time or both
would become a default) under, materially impair the
Company’s rights or alter the rights or obligations of any
third party under, result in the triggering of any event or
increase of any payment to any Person, or give to others any rights
of termination, amendment, acceleration or cancellation of, or
result in the creation of a Lien on any of the properties or assets
of the Company pursuant to, any Company Contract or Company License
to which the Company is a party or by which the Company or its
properties is bound or subject, which conflict, violation, breach
or default, in the case of subsections (b) and (c) hereof, would
have a Company Material Adverse Effect.
3.7.
Corporate Books .
The books of account, minute books, stock certificate books and
stock transfer ledgers and other similar books and records of the
Company (a) have at all times been maintained in accordance with
good business practice, are complete and correct in all material
respects and there have been no material transactions that are
required to be set forth therein and which are not so set forth,
and (b) contain true, complete and accurate records of all meetings
and consents in lieu of meetings of board(s) of directors (and any
committees thereof), similar governing bodies, if any, stockholders
and other equity holders as applicable. The stock, warrant, option
and other equity interest transfer and ownership records of the
Company contain true, complete and accurate records of the
securities ownership as of the date of this Agreement and all
transfers involving the capital stock and other securities since
the Company’s inception. True, correct and complete copies of
all of the foregoing have been provided to Parent.
3.8.
Licenses and Permits .
Except for matters governed by Environmental Laws which are
addressed in Section 3.12 below, the Company has all material
licenses, permits, consents, approvals, authorizations,
registrations, qualifications and certifications or other action
of, or any filing, registration or qualification with, any
Governmental Authority necessary for the business operations of the
Company as currently conducted (collectively, the “
Company Licenses ”).
Except for such defaults as would not have a Company Material
Adverse Effect, there currently is no default under any Company
License which has not been cured. Except as set forth in Section
3.8 of the Company’s Disclosure Schedule, there is no Action
pending or to the Company’s Knowledge, threatened, and no
event has occurred or is reasonably expected to occur, that could
result in the termination, revocation, limitation, suspension,
restriction or impairment of any Company License or the imposition
of any fine, penalty or other sanctions for violation of any legal
or regulatory requirements relating to any Company
License.
3.9.
Required Vote .
(a)
The
Company’s Board of Directors, by the unanimous vote of
all of the directors participating at a meeting duly called
and held (which directors constitute a majority of the
directors then in office), or by an executed written consent
in lieu of a meeting, has (i) approved and declared advisable
this Agreement and approved each Related Agreement to which
the Company is a party, (ii) determined that the transactions
contemplated hereby and thereby are advisable, fair to and in
the best interests of the Company and its stockholders, (iii)
resolved to recommend adoption of this Agreement, and the
approval of the Merger, the Related Agreements to which the
Company is a party and the other transactions contemplated
hereby and thereby to its stockholders and (iv) directed the
submission of this Agreement to the Company’s
stockholders for their adoption
(b)
The
affirmative vote of at least (i) a majority of all outstanding
capital stock of the Company, with the Company’s
Preferred Stock voting on as converted to Company Common Stock
basis, voting as a class, and (ii) 66⅔% of all
outstanding shares of Series A Preferred Stock, Series B
Preferred Stock and Series C Preferred Stock voting as a class
(such holders, collectively, the “
Requisite Holders ”),
at a special meeting of the Stockholders, or the approval of such
Requisite Holders evidenced by executed written consent in lieu of
a special meeting, are the only votes of the holders of any class
or series of capital stock of the Company necessary to adopt this
Agreement, and to approve the Merger, the Related Agreements to
which the Company is a party and the other transactions
contemplated hereby and thereby (“
Company Stockholder Approval ”).
Concurrently with the execution and delivery of this Agreement, the
Principal Stockholders, who together constitute the Requisite
Holders, have executed and delivered (for the benefit of the
Company and Parent) the Voting Agreement pursuant to which, and
subject to the terms and conditions thereof, each of them have
agreed to vote their respective shares of Company Stock in favor of
the adoption of this Agreement, and the approval of the Merger, the
Related Agreements to which the Company is a party and the other
transactions contemplated hereby and thereby at any special meeting
of Stockholders held for such purpose or, alternatively, to consent
in writing to the adoption of this Agreement, and the approval of
the Merger, the Related Agreements to which the Company is a party
and the other transactions contemplated hereby and
thereby.
3.10.
Title to Properties and Assets .
(a)
The
Company owns legally and beneficially, and has good title to,
all assets purported to be owned by it (collectively, the
“
Company Assets ”),
including: (i) all assets reflected on the Interim Financial
Statements; (ii) all assets referred to in the Company’s
Disclosure Schedule and all of the rights of the Company under the
Company Contracts; and (iii) all other assets reflected in its
respective books and records as being owned by the Company. Except
as set forth in Section 3.10 of the Company’s Disclosure
Schedule, the Company owns the Company Assets, free and clear of
all Liens other than Permitted Liens.
(b)
With
respect to personal properties and assets that are leased, the
Company has a valid leasehold interest in such properties and
assets and all such leases are in full force and effect and,
to the Company’s Knowledge, constitute valid and binding
obligations of the other party(ies) thereto. Neither the
Company nor, to the Company’s Knowledge, any other party
thereto is in violation of any of the terms of such lease, the
violation of which would constitute a Company Material Adverse
Effect.
(c)
All
material assets owned by or leased to the Company are adequate
for the uses to which they are being put, are in good
condition and repair (excluding (i) ordinary wear and tear,
and (ii) deferred maintenance requirements in an amount not to
exceed $100,000 in the aggregate) and are adequate for the
conduct of the Company’s business, as applicable, in the
manner in which such business is currently being
conducted.
3.11.
Real Property .
(a)
The
Company does not own any real property.
(b)
Section
3.11(b) of the Company’s Disclosure Schedule identifies
all real property leased by the Company (“
Leased Real Property ”).
True, correct and complete copies of all of the leases, subleases,
licenses or other contracts pursuant to which the Company leases
Leased Real Property (collectively, “
Real Property Leases ”)
have been provided to Parent. The Company has not leased,
subleased, licensed or sublicensed, or otherwise granted to any
Person, the right of use or occupancy of any portion of the Leased
Real Property.
3.12.
Environmental Matters .
(a)
Except
as listed in Section 3.12(a) of the Company’s Disclosure
Schedule, no Environmental Claim has been issued or filed, no
penalty has been assessed and no Action is pending or to the
Company’s Knowledge, threatened by any Governmental
Authority or any Third Party, which Environmental Claim,
penalty, or Action would have a Company Material Adverse
Effect, with respect to: (i) any alleged violation of,
noncompliance by the Company with, or Liability of the Company
under, any Environmental Law or Order by which the Company or
any of its assets are bound, (ii) any alleged failure by the
Company to have or comply with any Environmental Permits, or
(iii) the manufacture, processing, distribution, use,
generation, treatment, storage, disposal, transportation,
abatement, release, exposure to removal, remediation,
possession or handling by the Company, or presence on, under
or above, or discharge from, the Leased Real Property of
Hazardous Substances in violation of any Environmental Law or
Order. The Company has not (A) been notified that it is
potentially liable, (B) received any requests for information
or other correspondence concerning any site or facility, or
(C) received any notice that it is considered potentially
liable, under the Comprehensive Environmental Response
Compensation and Liability Act, 42 U.S.C. §§ 9601 et
seq.
(b)
Except
as disclosed in Section 3.12(b) of the Company’s
Disclosure Schedule, the Company and, to the Company’s
Knowledge, the Leased Real Property are and have been in
compliance in all material respects with all applicable
Environmental Laws, which compliance includes the possession
by or the taking of appropriate steps to obtain by the Company
of all Environmental Permits and other Approvals required
under applicable Environmental Laws, and compliance in all
material respects with the terms and conditions
thereof.
(c)
There
are no above-ground and, to the Company’s Knowledge, no
underground storage tanks, oil/water separators, sumps and
septic systems located on the Leased Real
Property.
(d)
The
Company is not in possession of, and has no Knowledge of, any
environmental reports, audits, assessments and investigations
relating to the Leased Real Property.
3.13.
Financial Statements; Undisclosed Liabilities
.
(a)
The
Company has provided to Parent true, complete and correct
copies of the audited balance sheet of the Company as at
December 31, 2006, December 31, 2005 and December 31, 2004 and
the related audited consolidated statements of income, cash
flow and stockholders’ equity for the fiscal year then
ended, certified by the Company’s independent public
accountants and accompanied by a copy of such auditor’s
report (the “
Year-End Financial Statements ”),
and the unaudited balance sheet of the Company as of September 30,
2007 (“
Interim Balance Sheet ”)
and the related unaudited consolidated statements of income, cash
flow and stockholders’ equity for the nine months then ended
(the “
Interim Financial Statements ”
and, together with the Year-End Financial Statements, the
“
Financial Statements ”).
The Financial Statements were prepared in accordance with the books
and records of the Company and fairly present in all material
respects the financial condition of the Company as of the dates
indicated, and the results of operations and cash flows of the
Company for the respective periods indicated, in accordance with
U.S. generally accepted accounting principles (“
GAAP ”),
applied on a consistent basis throughout the periods indicated
(unless otherwise required by GAAP) except that the Interim
Financial Statements are subject to customary inter-period and
year-end adjustments (which will not, individually or in the
aggregate, be material in magnitude) and do not contain all
footnotes required by GAAP.
(b)
Except
as otherwise noted in the Financial Statements, the accounts
and notes receivable of the Company reflected on the balance
sheets included in the Financial Statements (i) arose from
bona fide transactions in the ordinary course of business and
are payable on ordinary trade terms, (ii) are legal, valid and
binding obligations of the respective debtors enforceable in
accordance with their terms, except as such may be limited by
bankruptcy, insolvency, reorganization, or other similar laws
affecting creditors’ rights generally, and by general
equitable principles, (iii) are not subject to any valid
set-off or counterclaim except to the extent set forth in such
balance sheet contained therein, and (iv) are not the subject
of any Actions brought by or on behalf of the
Company.
(c)
Significant
deficiencies in the financial reporting of the Company which
are reasonably likely to materially and adversely affect the
ability to record, process, summarize and report financial
information, letters to the Company from the accountants, and
any fraud whether or not material that involves management or
other employees who have a significant role in financial
reporting, have been adequately and promptly disclosed to the
independent accountants and management of the Company as
required by applicable Law.
(d)
Except
for liabilities identified as such in the Interim Financial
Statements (including the footnotes thereto) the Company has
no accrued, contingent or other Liabilities of any nature,
either matured or unmatured and whether due or to become due
of a type required to be reflected in financial statements
prepared in accordance with GAAP, other than (i) liabilities
or obligations incurred in the ordinary course of business and
consistent with past practice in nature and amount since
September 30, 2007, (ii) Transaction Expenses, (iii)
liabilities not yet due under Company Contracts, to the extent
the nature and magnitude of such liabilities can be
specifically ascertained by reference to the text of such
Company Contracts, and (iv) liabilities identified in Section
3.13(d) of the Company’s Disclosure
Schedule.
3.14.
Absence of Certain Events .
Except as set forth in Section 3.14 of the Company’s
Disclosure Schedule or in the Interim Financial Statements, since
September 30, 2007, the Company has conducted its business in the
ordinary course and consistent with past practice. Since September
30, 2007, except as set forth in Section 3.14 of the
Company’s Disclosure Schedule, there has not
been:
(a)
any
sale, assignment, license or other disposition, of any
material portion of the assets or properties of the Company,
except in the ordinary course of business, consistent with
past practice in nature and amount, and in an aggregate amount
not to exceed $1,500,000;
(b)
any
damage, destruction or loss of any of the material assets or
properties of the Company by fire or other casualty, whether
or not covered by insurance;
(c)
any
termination (other than in accordance with its terms),
modification or amendment of any material Contract to which
the Company is a party except for any such termination,
modification or amendment that could not reasonably be
expected to have a Company Material Adverse
Effect;
(d)
any
change in the Company’s auditors, any of the accounting
principles adopted by the Company or any change in the
Company’s accounting policies, procedures, practices or
methods with respect to applying such principles, other than
as required by GAAP or by applicable Law;
(e)
any
(i) establishment or adoption by the Company of any Company
Plan, (ii) payment by the Company of any bonus, profit sharing
or similar payment to, or increase in the amount of the wages,
salary, commissions, fringe benefits or other compensation or
remuneration payable to, any of its directors, officers or
employees other than increases in the ordinary course of
business, consistent with past practice in nature and amount,
which increases, in the aggregate are not material to the
Company, (iii) any termination of any officer or other key
personnel of the Company or, to the Company’s Knowledge,
any expression of intention by any such officer or key
personnel to terminate employment with the Company, (iv) any
granting of, or increase in, severance or termination pay or
change of control payment, or (v) any entry into any currently
effective employment, severance, termination or
indemnification agreement or any agreement the benefits of
which are contingent or the terms of which are materially
altered upon the occurrence of a transaction involving the
Company of the nature contemplated hereby;
(f)
any
cancellation or forfeiture of any material debts or claims of
the Company or any waiver of any rights of material value to
the Company;
(g)
any
incurrence, assumption or guarantee by the Company of any
Indebtedness for borrowed money other than in the ordinary
course of business consistent with past practice in nature and
amount, and in an aggregate amount not to exceed
$1,000,000;
(h)
any
loan, advance or capital contribution made by the Company to,
or investment in, any Person other than (i) loans or advances
to employees in connection with business-related travel and
entertainment, in each case made in the ordinary course of
business consistent with past practice in nature and amount,
and (ii) liabilities set forth on Section 3.13(d) of the
Company’s Disclosure Schedule;
(i)
any
declaration, setting aside or payment of any dividend on, or
other distribution (whether in cash, stock or property) in
respect of, any of class or series of the Company’s
capital stock, or any purchase, redemption or other
acquisition by the Company of any shares of its capital stock
or any other securities of the Company or any options,
warrants, calls or rights to acquire any such shares or other
securities;
(j)
any
written notice to the Company that any material Contract to
which the Company was or is a party has been breached,
repudiated or terminated or will be breached, repudiated or
terminated;
(k)
any
capital expenditure by the Company which, when added to all
other capital expenditures made on behalf of the Company since
December 31, 2006, exceeds $150,000;
(l)
any
revaluation by the Company of any of its assets, including,
without limitation, writing down the value of capitalized
inventory or writing off notes or accounts
receivable;
(m)
any
Company Material Adverse Effect; or
(n)
any
written or oral agreement, understanding, authorization or
proposal for the Company to take any of the actions specified
in this Section 3.14.
3.15.
Legal Proceedings; Orders .
Except for matters governed by Environmental Laws which are
addressed in Section 3.12 and except as set forth in Section 3.15
of the Company’s Disclosure Schedule, (a) there is no Action
pending or, to the Company’s Knowledge, threatened by or
against the Company or relating to the Company or its business or
properties, except for any of the foregoing that could not
reasonably be expected to have a Company Material Adverse Effect,
and (b) no officer or director of the Company is a defendant in any
Action in connection with his or her status as such. Neither the
Company, nor any material property or asset of the Company, is
subject to any outstanding Order. There is no unsatisfied material
judgment, penalty or award against or affecting the Company or any
of its properties or assets.
3.16.
Compliance with Laws .
Except for matters governed by Environmental Laws which are
addressed in Section 3.12 and the Actions addressed in Section
3.15, the Company is, and at all times has been, in compliance in
all material respects with all Laws applicable to it or its assets
or properties. The Company has not received any notice to the
effect that it is not in compliance with any Laws and there is no
Action pending or, to the Company’s Knowledge, threatened by
any Governmental Authority with respect to any alleged violation by
the Company of any applicable Law.
3.17.
Employment and Labor Matters .
(a)
Set
forth in Section 3.17(a) of the Company’s Disclosure
Schedule is a list of all employees, officers and directors of
the Company and each such individual’s (i) rate of pay
or annual compensation (including actual or potential bonus
payments, deferred or contingent compensation, pensions,
“golden parachutes” and other similar benefits
paid or payable in the current fiscal year, (ii) job title,
(iii) status of employment or engagement, (iv) date of hire or
engagement and (v) annual vacation, sick and other paid time
off allowance. Also set forth in Section 3.17(a) of the
Company’s Disclosure Schedule is a list of each
independent contractor and consultant of the Company whose
engagement by the Company is not terminable by the Company
upon 90 or less days notice and, with respect to each such
Person, a brief description of the services provided to the
Company and such Person’s rate of pay.
(b)
Except
as set forth in Section 3.17(b) of the Company’s
Disclosure Schedule, (i) there are no employment, consulting,
independent contractor, severance pay, continuation pay,
termination or indemnification Contracts, covenants not to
compete, golden parachute agreements, or any other employment
or service-related Contracts, between the Company and (A) any
current stockholder, officer, director or employee or, to the
extent that the Company has any continuing obligations, any
former stockholder, officer, director or employee, or (B) any
current independent contractor or consultant whose engagement
with the Company is not terminable on less than 90 days notice
or, to the extent that the Company has any continuing
obligations, any former independent contractor or consultant,
and (ii) there are no obligations to pay bonuses, change of
control payments or other forms of compensation arising,
vesting (whether fully or partially) or payable (whether or
not at the Closing), to directors, officers, employees,
consultants or agents of the Company as a result of the
consummation of the transactions contemplated by this
Agreement (but excluding bonus compensation payable in the
ordinary course of business consistent with past practice that
is not contingent on the consummation of such
transactions).
(c)
Each
of the Company’s current and former officers, directors,
employees, independent contractors and consultants have
entered into the Company’s standard form of
non-disclosure, non-solicitation and assignment of inventions
agreement (a copy of which has been provided to Parent), and,
to the Company’s Knowledge, no such person has breached
such agreement.
(d)
The
Company is not a party to any collective bargaining Contracts
or any other Contracts with any labor unions or other
representatives of any employees of the Company, and no such
Contract is being negotiated, nor to the Company’s
Knowledge, are any union organizing efforts underway or
threatened. There is no charge or complaint against the
Company by the National Labor Relations Board or any
comparable state or foreign agency pending or to the
Company’s Knowledge, threatened to the effect that the
Company, any Subsidiary or their representatives or employees,
has committed any unfair labor practices in connection with
the operation of the business of the Company. There has not
been any labor strike, dispute, claim, charge, lawsuit,
proceeding, labor slowdown or stoppage and none of such
actions are pending or to the Company’s Knowledge,
threatened against or involving the Company or with respect to
any employees of the Company. No event has occurred, or to the
Company’s Knowledge, circumstance exists that could
provide the basis for any work stoppage or other labor
dispute.
(e)
The
Company has not implemented any plant closing or layoff of
employees that could implicate the WARN Act or any similar
state or local statute or regulation.
(f)
The
Company is currently in material compliance with all
applicable Laws relating to the employment of labor, including
those related to wages, hours, and the payment and withholding
of taxes and other sums as required by the appropriate
Governmental Authority and has withheld and paid to the
appropriate Governmental Authority or is holding for payment
not yet due to such Governmental Authority all amounts
required to be withheld from employees of the Company and is
not liable for any arrears of wages, taxes, penalties or other
sums for failure to comply with any of the foregoing. The
Company is not delinquent in payments to any of its employees
for any wages, salaries, commissions, bonuses or other direct
compensation for any services performed for it or amounts
required to be reimbursed to such employees. There is no claim
with respect to payment of wages, salary or overtime pay that
has been asserted or is now pending or to the Company’s
Knowledge, threatened before any Governmental Authority with
respect to any persons currently or formerly employed by the
Company. There are no pending claims against the Company under
any workers’ compensation plan or policy or for long
term disability.
(g)
There
is no charge or complaint against the Company by the National
Labor Relations Board or any comparable state or foreign
agency pending or to the Company’s Knowledge, threatened
to the effect that the Company or its representatives or
employees has committed any unfair labor practices in
connection with the operation of the business of the Company.
There is no charge of discrimination in employment or
employment practices against the Company, for any reason,
including, without limitation, age, gender, race, religion or
other legally protected category, which has been asserted or
is now pending or threatened before the United States Equal
Employment Opportunity Commission (the “
EEOC ”),
or any other Governmental Authority in any jurisdiction in which
the Company has employed or currently employs any person. To the
Company’s Knowledge, none of the Company’s employment
policies or practices is currently being audited or investigated by
any Governmental Authority.
(h)
Each
independent contractor of the Company has been properly
classified as an independent contractor for the purposes of
Tax laws, employee classification laws, laws applicable to
employee benefits and other applicable Laws. Each of the
employees of the Company has been properly classified as
either an exempt or a non-exempt employee for the purposes of
all applicable local, state and federal wage and hour laws and
all employees of the Company has received the pay to which
they are entitled to under the applicable local, state and
federal wage and hour laws.
(i)
To
the Company’s Knowledge, no officer, director, agent,
employee, consultant, or contractor of the Company is bound by
any contract that purports to limit the ability of such
officer, director, agent, employee, consultant, or contractor
(i) to engage in or continue or perform any conduct, activity,
duties or practice relating to the business of the Company or
(ii) to assign to the Company or to any other Person any
rights to any invention, improvement, or discovery. To the
Company’s Knowledge, no former or current employee of
the Company is a party to, or is otherwise bound by, any
contract that in any way adversely affected, affects, or will
affect the ability of the Company or Parent to conduct the
business of the Company as formerly or currently conducted or
as currently proposed to be conducted.
(j)
Except
as set forth in Section 3.17(j) of the Company’s
Disclosure Schedule, there are no EEOC or state agency
lawsuits, charges of discrimination filed with the EEOC or a
state agency, or any compliance agreements, letters of
commitment, settlement agreements, consent decrees,
conciliation agreements with any government agency, or other
pending or to the Company’s Knowledge, threatened
employee complaints.
(k)
Except
as set forth in Section 3.17(k) of the Company’s
Disclosure Schedule, there are not, and have not been within
the last five years (or longer if continuing obligations
remain), any other employment litigation or judgments entered
or settlement agreements reached.
(l)
Except
as set forth in Section 3.17(l) of the Company’s
Disclosure Schedule, none of the Department of Labor,
including OSHA and the Wage and Hour Division, the EEOC and
similar Governmental Authorities has issued or assessed a
penalty, and no Action is pending or, to the Company’s
Knowledge, threatened, with respect to any alleged violation
of, noncompliance by the Company, or Liability of the Company
under any Labor Law.
(m)
The
Company has not committed any unfair labor practice (as
determined under any applicable Law or
regulation).
3.18.
Employee Benefit Plans .
(a)
Section
3.18(a) of the Company’s Disclosure Schedule sets forth
a list of each Company Plan that provides benefits in respect
of any employee or former employee, director, officer or
consultant (or any dependent or beneficiary) of the Company.
Each Company Plan has been funded and administered in all
material respects in accordance with its terms and applicable
Law, including ERISA and the Code. For purposes of this
Agreement, the term “
Company Plan ”
shall include each “employee benefit plan,” as such
term is defined in Section 3(3) of ERISA, and all bonus, stock or
other security option, stock or other security purchase, stock or
other security appreciation rights, incentive, deferred
compensation, retirement or supplemental retirement, severance,
golden parachute, vacation, cafeteria, dependent care, medical
care, employee assistance program, education or tuition assistance
programs, insurance and other similar fringe or employee benefit
plans, programs or arrangements, and any current or former
employment or executive compensation or severance agreements,
written or otherwise, which have ever been sponsored or maintained
or entered into for the benefit of, or relating to, any present or
former employee, manager or director of the Company. The Company
has, to the extent applicable, provided to Parent true, correct and
complete copies of (i) each Company Plan (or, if not written a
written summary of its material terms), including all plan
documents, trust agreements, insurance contracts or other funding
vehicles and all amendments thereto, (ii) all summaries and summary
plan descriptions, including any summary of material modifications,
(iii) the most recent annual report (Form 5500 series) filed with
the IRS with respect to such Company Plan (and, if such annual
report is a Form 5500R, the corresponding Form 5500C filed with
respect to such Company Plan), (iv) the most recent actuarial
reports or other financial statements relating to such Company
Plan, (v) the most recent determination or opinion letter, if any,
issued by the IRS with respect to any Company Plan and any pending
requests for such a determination letter, (vi) the most recent
nondiscrimination test performed under the Code (including 401(k)
and 401(m) tests) for each Company Plan, and (vii) all material
filings made with any Governmental Authority, including any filings
under the Voluntary Compliance Resolution or Closing Agreement
Program or the Department of Labor Delinquent Filer Program, and
(viii) any other documents, forms or other instruments relating to
any Company Plan reasonably requested by Parent. Except as set
forth in Section 3.18(a) of the Company’s Disclosure
Schedule, no Company Plan has been established or maintained for
employees living outside of the United States. The Company has made
available to Parent copies of all material documents pursuant to
which each Company Plan is administered.
(b)
Except
as set forth in Section 3.18(b) of the Company’s
Disclosure Schedule, no Contract identified in Section 3.17(a)
of the Company’s Disclosure Schedule will, as a result
of the transactions contemplated hereby, either require any
payment by the Company (or the Surviving Corporation) or
Parent or any of their respective subsidiaries or any consent
or waiver from any stockholder, officer, director, employee,
consultant or independent contractor, or result in any change
in the nature of any rights of any stockholder, officer,
director, employee, consultant or independent contractor,
including, but not limited to, any accelerated payments,
deemed satisfaction of goals or conditions, new or increased
benefits or additional or accelerated vesting.
(c)
Except
as set forth in Section 3.18(c) of the Company’s
Disclosure Schedule, no individual will as a direct or
indirect result of the transactions contemplated hereby,
accrue or receive additional benefits, service or accelerated
rights to payments under any Company Plan, including the right
to receive any parachute payment (as defined in Section 280G
of the Code) or become entitled to severance, termination
allowance or similar payments that could result in the payment
of any such benefits or payments, and no such benefits, rights
or payments have accrued as of any other transaction or event
that remains unsatisfied as of the date of this Agreement.
Except pursuant to Contracts identified in Section 3.17(a) or
as set forth in Section 3.18(c) of the Company’s
Disclosure Schedule, the Company has not been and will not be
required to “gross up” or otherwise compensate any
individuals because of the imposition of any excise tax upon
payment to such individual.
(d)
Neither
the Company nor any ERISA Affiliate maintains or contributes
or, in the last seven years has ever maintained or contributed
to, or otherwise participates or, in the last seven years
participated in, a “defined benefit plan” within
the meaning of Section 3(35) of ERISA or Section 414(j) of the
Code, or a plan that is subject to the requirements of Section
412 of the Code or Title IV of ERISA, or, in the last seven
years was, a party to a “multiemployer plan”
within the meaning of Section 3(37), 4001(a)(3), 4063 or 4064
of ERISA or Section 414(f) of the Code. For purposes of this
Agreement, the term “
ERISA Affiliate ”
shall include any organization that is or has ever been treated as
a single employer with the Company under Sections 414(b), (c), (m)
or (o) of the Code or Section 4001(b) of ERISA. No liability under
Title IV or ERISA has been incurred by the Company or any ERISA
Affiliate that has not been satisfied in full, and no condition
exists that would give rise to any such liability thereunder.
Except as set forth in Section 3.18(d) of the Company’s
Disclosure Schedule, the Company does not maintain a Company Plan
providing retiree, medical or life benefits (as defined in Section
3(1) of ERISA) to employees or former employees after retirement or
other separation from service other than as required by
COBRA.
(e)
No
Action has been brought, is pending or to the Company’s
Knowledge, threatened, against or with respect to any Company
Plan, or any fiduciary thereof with respect to such
fiduciary’s duties to the Company Plan, or the assets of
any of the trusts thereunder. Except as set forth under ERISA,
the Code or the terms of the relevant Company Plan, there are
no material restrictions on the rights of the Company to amend
or terminate any Company Plan without incurring any liability
thereunder.
(f)
To
the Company’s Knowledge, no “party in
interest” (as defined in Section 3(14) of ERISA) or
“disqualified person” (as defined in Section
4975(e)(2) of the Code) with respect to any Company Plan has
engaged in any nonexempt “prohibited transaction”
(as described in Section 4975(c) of the Code or Section 406 of
ERISA). No tax under Code Sections 4980B or 5000 has been
incurred with respect to any Company Plan and no circumstances
exist that could give rise to such tax.
(g)
Except
as set forth in Section 3.18(g) of the Company’s
Disclosure Schedule, all of the Company Plans that are
intended to be qualified under Section 401(a) of the Code have
been administered in accordance with their terms and are in
compliance with the currently applicable provisions of ERISA
and the Code, have received favorable determination letters
from the IRS to the effect that such Company Plans are
qualified and that each trust established in connection with
any Company Plan which is intended to be exempt from federal
income taxation under Section 501(a) of the Code is so exempt,
or are entitled to rely on opinion letters issued to a
prototype sponsor, and no such letter has been revoked and
revocation is not threatened, and no fact or event has
occurred that adversely affects the qualified status of any
such Company Plan or the exempt status of any such
trust.
(h)
Except
as set forth in Section 3.18(h) of the Company’s
Disclosure Schedule, each Company Plan (and related trust,
insurance Contract, or fund) complies in form and in operation
in all material respects with the applicable requirements of
ERISA, the Code, other Laws, and its own terms. There have
been no prohibited transactions or breaches of any of the
duties imposed on “fiduciaries” (within the
meaning of ERISA Section 3(21)) by ERISA with respect to the
Company Plans that could result in any material liability or
excise tax under ERISA or the Code being imposed on the
Company. There is no pending or, to the Company’s
Knowledge, threatened assessment, complaint, proceeding or
investigation of any kind in any court or Governmental
Authority with respect to any Company Plan (other than routine
claims for benefits), nor to the Company’s Knowledge, is
there any basis for one.
(i)
Each
Company Plan that is a “group health plan” (within
the meaning of Section 5000(b)(1) of the Code) has been
operated in material compliance with applicable Law, its
terms, and with the group health plan continuation coverage
requirements of Section 4980B of the Code and Sections 601
through 608 of ERISA (“
COBRA Coverage ”),
Section 4980D of the Code and Sections 701 through 707 of ERISA,
Title XXII of the Public Health Service Act and the provisions of
the Social Security Act, to the extent such requirements are
applicable. No Company Plan or written or oral agreement exists
which obligates the Company or any ERISA Affiliate to provide
health care coverage, medical, surgical, hospitalization, death or
similar benefits (whether or not insured) to any employee, former
employee or director of the Company or any ERISA Affiliate
following such employee’s, former employee’s or
director’s termination of employment with the Company or any
ERISA Affiliate, including, but not limited to, retiree medical,
health or life benefits, other than COBRA Coverage.
(j)
Except
as set forth in Section 3.18(j) of the Company’s
Disclosure Schedule, all contributions, including insurance
premiums, to or with respect to each Company Plan that are due
have been paid in material compliance with all applicable
Laws, and all contributions and insurance premiums for any
period ending on or before the Closing Date that are not yet
due have been paid or accrued in the ordinary course of
business by the Company or the ERISA Affiliate, as applicable.
All material contributions, transfers and payments in respect
of any Company Plan, other than transfers incident to an
incentive stock option within the meaning of Code Section 422,
have been or are fully deductible under the Code.
(k)
Except
as set forth in Section 3.18(k) of the Company’s
Disclosure Schedule, no Company Plan provides benefits to any
individual who is not a current or former employee of the
Company, or the dependents or other beneficiaries of any such
current or former employee. No Company Plan provides, or has
any liability to provide, life insurance, medical, severance,
or other employee welfare benefits to any employee or any
dependent of any employee beyond retirement or termination of
service, other than coverage mandated by Law, and neither the
Company nor any ERISA Affiliate has ever represented, promised
or agreed to provide such to any employee or employees
(whether individually or as a group) other than coverage
mandated by Law.
(l)
The
Company has reserved all rights necessary to amend or
terminate each of the Company Plans without the consent of any
other person, and the execution of this Agreement and the
transactions contemplated hereby will not (either alone or
upon the occurrence of any additional or subsequent events)
result in the triggering or imposition of any restrictions or
limitations (other than those set forth under applicable Laws)
on the right of the Company to amend or terminate any Company
Plan.
(m)
Except
as set forth in Section 3.18(m) of the Company’s
Disclosure Schedule, no 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 of its
affiliates who is a “disqualified individual” (as
such term is defined in Treasury Regulation Section 1.280G-1)
under any employment, severance or termination agreement,
other compensation arrangement or Company Plan currently in
effect would be characterized as an “excess parachute
payment” (as such term is defined in Code Section
280G(b)(1)).
(n)
Other
than as set forth in Section 3.18(n) of the Company’s
Disclosure Schedule, no Company Plan or other agreement
provides for “deferred compensation” subject to
Code § 409A (“
Deferred Compensation Plan ”).
No Company Plan or other agreement providing for equity related
based compensation or payments, including, without limitation,
stock options, restricted stock, phantom stock or performance
shares, provides for “deferred compensation” subject to
Section 409A of the Code. Each Deferred Compensation Plan is in
“good faith” compliance with Section 409A of the Code
and the U.S. Treasury guidance related thereto, through and
including Notice 2007-86. Each stock option or stock appreciation
right issued by the Company or any ERISA Affiliate was granted with
an exercise price equal to or greater than the per share fair
market value (with the meaning of Code § 409A and the guidance
issued thereunder) of the Company’s or affiliate’s
common stock, and such common stock constitutes “service
recipient stock” (within the meaning of Treas. Reg. §
1.409A-1(b)(5)(iii)(A)). No amount material to the Company for
taxes are due or accrued because of violations of Code §
409A.
(o)
Each
Company Plan, if any, which is maintained outside of the
United States has been operated in all material respects in
conformance with the applicable statutes or governmental
regulations and rulings relating to such plans in the
jurisdictions in which such Company Plan is present or
operates and, to the extent relevant, the United
States.
(p)
Except
as set forth in Section 3.18(p) of the Company’s
Disclosure Schedule, (i) no Company Plan, excluding any
short-term disability, non-qualified deferred compensation or
flexible spending account plan or program, is self-funded,
self-insured or funded through the general assets of the
Company or an ERISA Affiliate, and (ii) no Company Plan which
is an employee welfare benefit plan under Section 3(1) of
ERISA is funded by a trust or is subject to Section 419 or
419A of the Code.
(q)
Neither
the Company nor any of its ERISA Affiliates is a party to any
union or collective bargaining agreement.
3.19.
Taxes .
(a)
Except
as set forth in Section 3.19(a) of the Company’s
Disclosure Schedule, all federal, state, local and foreign Tax
Returns required to be filed (taking into account extensions)
by or on behalf of the Company have been timely filed and have
been prepared in good faith in accordance with applicable Law.
All Taxes due and payable by or with respect to the Company
(whether or not shown on a Tax Return) have been timely paid,
or such amounts, together with Taxes accruing but not subject
to Tax Returns required to be filed are reserved for (other
than a reserve for deferred Taxes established to reflect
timing differences between book and Tax treatment) in
accordance with GAAP on the Financial Statements. Subject to
the results of any audit listed on Schedule 3.19(a) of the
Company’s Disclosure Schedule, no Taxes other than those
shown on such Tax Returns or so reserved for on the Financial
Statements are due and payable by or with respect to the
Company. No deficiencies for any Taxes have been proposed,
asserted or assessed against the Company that are not
adequately reserved for on the Financial
Statements.
(b)
Except
as set forth in Section 3.19(b) of the Company’s
Disclosure Schedule, there are no pending or, based on written
notice, threatened, audits, assessments or other actions
relating to Taxes of the Company. There are no matters under
discussion with any Tax authority, or known to the Company,
with respect to Taxes that are likely to result in an
additional Liability for Taxes with respect to any of the
Company.
(c)
Except
as set forth in Section 3.19(c) of the Company’s
Disclosure Schedule, the Company has not requested or been
granted any waiver of any federal, state, local or foreign
statute of limitations with respect to, or any extension of a
period for the assessment of, any Tax which has not since
expired. No extension or waiver of time within which to file
any Tax Return of, or applicable to, the Company has been
granted or requested which has not since expired.
(d)
No
unsatisfied deficiency, delinquency or default for any Tax has
been claimed, proposed or assessed against or with respect to
the Company, nor has the Company received notice of any such
deficiency, delinquency or default.
(e)
The
Company has complied with all applicable Laws relating to the
payment and withholding of Taxes and has, within the time and
in the manner required by Law, withheld from employee wages
and paid over to the proper Governmental Authorities all
amounts required to be so withheld and paid over under all
applicable Laws.
(f)
The
Company has provided to Parent true, correct and complete
copies of all federal, state, local and foreign Tax Returns,
and any amendments thereto, of the Company and its
predecessors (if any) for such company’s 2004 Tax year
and each year thereafter, and complete and accurate copies of
all examination reports and statements of deficiencies
assessed against or agreed to by the Company or any
predecessors with respect to such Tax Returns.
(g)
The
Company is not a party to any agreement or arrangement that
would result, separately or in the aggregate, in the actual or
deemed payment by the Company that could be disallowed as a
deduction under Section 280G or Section 162(m) of the
Code.
(h)
No
power of attorney (other than powers of attorney authorizing
employees and independent accountants of the Company to act on
behalf of the Company) with respect to any Taxes has been
executed or filed with any Tax authority.
(i)
The
Company is not a party to any tax sharing or allocation
agreement, nor has any of them given any indemnity against
Taxes imposed on any other Person, that has not expired by its
terms or otherwise have been terminated and for which no
amount is claimed to be owed.
(j)
The
Company has not been a United States real property holding
corporation within the meaning of Section 897(c)(2) of the
Code during the applicable period specified in Section
897(c)(1)(A)(ii) of the Code.
(k)
The
Company will not be required to include any item of income in,
or exclude any item of deduction from, taxable income for any
taxable period (or portion thereof) ending after the Closing
Date as a result of (i) any change in method of accounting for
a taxable period ending on or prior to the Closing Date, (ii)
any “closing agreement” as described in Section
7121 of the Code (or any corresponding or similar provision of
state, local of foreign Tax law) execute on or prior to the
Closing Date, (iii) any intercompany transaction or any excess
loss account described in the Treasury Regulations under
Section 1502 of Code (or any corresponding or similar
provision of state, local or foreign Tax law), (iv) any
installment sale or open transaction disposition made on or
prior to the Closing Date, or (v) any prepaid amounts received
on or prior to the Closing Date.
(l)
During
the five-year period ending on the date hereof, the Company
was not a distributing corporation or a controlled corporation
in a transaction intended to be governed by Section 355 or
Section 361 of the Code.
(m)
Except
as set forth in Section 3.19(m) of the Company’s
Disclosure Schedule, the Company has not issued or assumed (i)
any obligations described in Section 279(a) of the Code, (ii)
any applicable high yield discount obligations, as defined in
Section 163(i) of the Code, or (iii) any registration-required
obligations, within the meaning of Section 163(f)(2) of the
Code, that are not in registered form.
(n)
The
Company (i) is not a party to any “reportable
transaction” within the meaning of Section 1.6011-4 of
the Treasury Regulations. The Company has not been a party to
a transaction that is or is substantially similar to a
“listed transaction,” as such term is defined in
Treasury Regulations Section 1.6011 4(b)(2), or any other
transaction requiring disclosure under analogous provisions of
state, local or foreign Tax law. If the Company has entered
into any transaction such that, if the treatment claimed by it
were to be disallowed, the transaction would constitute a
substantial understatement of federal income tax within the
meaning of Section 6662 of the Code, then the Company believes
that it has either (a) substantial authority for the tax
treatment of such transaction, or (b) disclosed on its Tax
Return the relevant facts affecting the tax treatment of such
transaction.
3.20.
Contracts .
(a)
Section
3.20(a) of the Company’s Disclosure Schedule sets forth
a list of all Contracts of the following nature to which the
Company is a party or is otherwise bound or by which any
assets or properties of the Company is subject: (i) all
Contracts for capital expenditure projects in excess of
$350,000 for any single project; (ii) any Contract that
relates to any Indebtedness in excess of $350,000; (iii) any
Contract pursuant to which the Company purchases products or
services which involves (A) annual payments by the Company of
$350,000 or more, or (B) aggregate payments by the Company
under such Contract of more than $350,000 over the remaining
term of such Contract; (iv) any Contract pursuant to which the
Company sells any product or service to a Third Party which
involves annual payments to the Company of $350,000 or more;
(v) any Contract relating to the acquisition, transfer, use,
development, sharing or license of any technology or any
Intellectual Property; (vi) any Contract with any Affiliate of
the Company; (vii) any Real Property Lease; (viii) any lease
of personal property which is material to the business of the
Company; (ix) any contract that purports to limit the right of
the Company to (A) engage or compete in any line of business,
or (B) compete with any person or operate in any location; (x)
any acquisition Contract pursuant to which the Company has
“earn-out” or other contingent payment obligations
that would be reasonably likely to result in aggregate
payments in excess of $350,000; (xi) any employment,
consulting or independent contractor (not terminable by the
Company on 90 or less days’ notice), bonus,
compensation, pension, insurance, retirement, deferred
compensation or other similar Contract, plan, trust, fund or
other agreement for the benefit of employees, consultants and
independent contractors; (xii) all Contracts creating or
relating to any partnership or joint venture or any sharing of
revenues, profits, losses, costs or liabilities; (xiii) all
leases of personal property which are material to the business
of the Company; (xiv) all Contracts concerning research
collaboration; and (xv) to the extent not described by any of
the foregoing subclauses (i) through (xiv), all other
Contracts that were entered into outside the ordinary course
of business (collectively, the “
Company Contracts ”).
The Company has provided to Parent true, correct and complete
copies of all Company Contracts.
(b)
The
Company is not, nor has it at any time been, in material
default under the terms of any Company Contract (other than
defaults that have been cured or waived and for which the
Company has no continuing Liability), and the Company has not
received any written notice of any material default under the
terms of any Company Contract. To the Company’s
Knowledge, no other party to any Company Contract is, or is
alleged to be, in default under the terms thereof. To the
Company’s Knowledge, no event has occurred, and no
circumstance or condition exists, that (with or without notice
or lapse of time) will, or could reasonably be expected to,
(i) result in a violation or breach of any of the provisions
of any Company Contract, (ii) give any Person the right to
declare a default or exercise any remedy under any Company
Contract, (iii) give any Person the right to accelerate the
maturity or performance of any Company Contract, or (iv) give
any Person the right to cancel, terminate or modify any
Company Contract.
(c)
The
Company Contracts are in full force and effect and are valid
and binding obligations of the Company and, to the
Company’s Knowledge, the other parties thereto, except
that enforcement thereof may be limited by bankruptcy,
insolvency or similar laws affecting the enforcement of
creditor’s rights in effect from time to time and
general principles of equity. The Company has not received any
notice from any other party to a Company Contract of the
termination or threatened termination thereof, or of any
claim, dispute or controversy with respect
thereto.
3.21.
Transactions With Related Parties .
(a)
Except
as set forth in Section 3.21(a) of the Company’s
Disclosure Schedule, no Related Party is currently (i) a party
to any transaction with the Company (including, but not
limited to, any Contract providing for the employment of,
furnishing of goods or services by, rental of real or personal
property from, use or disclosure of Intellectual Property to,
borrowing money from or lending money to, or otherwise
requiring payments to, any such Person, but excluding payments
for normal salary and bonuses and reimbursement of expenses),
(ii) to the Company’s Knowledge, the direct or indirect
owner of a material interest in any Person which is a
competitor, supplier or customer of the Company, or (iii) the
direct or indirect owner of any property or assets used in the
business of the Company.
(b)
Except
as set forth in Section 3.21(b) of the Company’s
Disclosure Schedule, no Related Party has any outstanding
Indebtedness payable to the Company and the Company has not
guaranteed any obligation or Indebtedness of any such Related
Party to a third party.
3.22.
Insurance .
Section 3.22 of the Company’s Disclosure Schedule lists, by
type, carrier, policy number and expiration date, of all insurance
coverage carried by the Company. All such policies are in full
force and effect and all premiums which are due and payable with
respect thereto through the date hereof are currently paid. The
Company has not received written notice of cancellation or
non-renewal of any such policy or binder. Such policies are
sufficient for compliance with all Laws and Contracts to which the
Company is a party or by which it is bound, to the Company’s
Knowledge, there is no threatened termination of, or material
premium increase with respect to, any policy and none of such
polices provides for retroactive premium adjustments. To the
Company’s Knowledge, the Company is not in breach or default
(including any such breach or default with respect to any payment
of premiums or the giving of notice), and no event has occurred
which, with notice or lapse of time, would constitute a breach or
default, or permit termination or modification under the policy.
There are no material claims pending involving an amount in excess
of $25,000 or as to which coverage has been question, denied or
disputed.
3.23.
Certain Business Practices .
Neither the Company nor, to the Company’s Knowledge, any
director or officer or employee of the Company (on behalf of the
Company), has used any funds for unlawful contributions, gifts,
entertainment or other unlawful expenses related to political
activity, 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 made any
payments in the nature of criminal bribery.
3.24.
Intellectual Property; Patents .
(a)
Except
as set forth on Schedule 3.24(a), the Company owns, is
exclusively licensed or otherwise possesses the rights to use
and license, subject to any existing licenses or other grants
of rights to third parties pursuant to agreements previously
made available to Parent, all patents (including any
registrations, continuations, continuations in part,
divisionals, renewals, reexaminations, reissues and
applications therefor), copyrights, trademarks, service marks,
trade names, Uniform Resource Locators and Internet URLs,
designs, slogans, computer programs and other computer
software, databases, technology, trade secrets and other
confidential information, know-how, processes, formulae,
algorithms, models, user interfaces, customer lists,
inventions, source codes and object codes, methodologies,
architecture, structure, display screens, layouts, development
tools, instructions, templates, trade dress, logos and all
documentation and media constituting, describing or relating
to each of the foregoing, together with all goodwill related
to any of the foregoing, in each case as is necessary to
conduct their respective businesses as presently conducted,
the absence of which would reasonably be expected to have a
Company Material Adverse Effect (collectively, the
“
Company Intellectual Property Rights ”).
(b)
Section
3.24(b) of the Company’s Disclosure Schedule sets forth,
with respect to all Company Intellectual Property Rights
registered with any Governmental Authority or for which an
application has been filed with any Governmental Authority, as
of the date of this Agreement, (i) the registration or
application number, the date filed and the title, if
applicable, of the registration or application and (ii) the
names of the jurisdictions covered by the applicable
registration or application.
(c)
To
the Company’s Knowledge, all of the patents, registered
trademarks or copyrights included in the Company Intellectual
Property Rights owned or controlled by the Company are valid
and enforceable. There are no proceedings, claims or
challenges that cause or would cause any patents, registered
trademarks or copyrights included in the Company Intellectual
Property Rights owned or purported to be owned by, the Company
to be invalid or unenforceable, or that challenge the
Company’s rights therein and, to the Company’s
Knowledge, there are no such proceedings, claims or challenges
with respect to any licensed Company Intellectual Property
Rights. To the Company’s Knowledge, there are no facts
or prior art that cause or would cause any patents, registered
trademarks or copyrights included in the Company Intellectual
Property Rights owned or purported to be owned by, or licensed
to, the Company to be invali
