AGREEMENT AND PLAN OF MERGER

Exhibit 10.1

AGREEMENT AND PLAN OF MERGER

by and among:

L IGAND P HARMACEUTICALS I NCORPORATED ,

a Delaware corporation;

N EON S IGNAL , LLC,

a Delaware limited liability company; and

N EUROGEN C ORPORATION ,

a Delaware corporation

 

Dated as of August 23, 2009

 

 

INDEX OF DEFINED TERMS

 

AGREEMENT AND PLAN OF MERGER

T HIS A GREEMENT A ND P LAN O F M ERGER (“ Agreement ”) is made and entered into as of August 23, 2009, by and among L IGAND P HARMACEUTICALS I NCORPORATED , a Delaware corporation (“ Parent ”); N EON S IGNAL , LLC, a Delaware limited liability company and a wholly-owned Subsidiary of Parent (“ Merger Sub ”); and N EUROGEN C ORPORATION , a Delaware corporation (the “ Company ”). Capitalized terms used but not otherwise defined in this Agreement shall have the meanings given to them in Article I .

R ECITALS

WHEREAS, the respective boards of directors of each of Parent, Merger Sub and the Company have approved the acquisition of the Company by Parent upon the terms and subject to the conditions set forth in this Agreement;

WHEREAS, upon the terms and subject to the conditions set forth in this Agreement, Merger Sub shall merge with and into the Company (the “ Merger ”) and each Company Share that is issued and outstanding immediately before the Effective Time (other than (i) as provided in Section 2.09 and (ii) Dissenting Shares) will be canceled and converted into the right to receive the Merger Consideration, all upon the terms and subject to the conditions set forth herein;

WHEREAS, the board of directors of the Company (the “ Company Board ”) has, upon the terms and subject to the conditions set forth herein, unanimously and duly adopted resolutions (i) determining that the transactions contemplated by this Agreement, including the Merger (collectively, the “ Transactions ”), are advisable and in the best interests of the Company and its stockholders, (ii) approving this Agreement and the Transactions in accordance with the Delaware General Corporation Law (the “ DGCL ”), (iii) directing that this Agreement be submitted to the stockholders of the Company for adoption, and (iv) recommending that the stockholders of the Company adopt this Agreement and approve the Transactions;

WHEREAS, the board of directors of Parent and the Manager of Merger Sub have, upon the terms and subject to the conditions set forth herein, unanimously and duly approved and declared advisable this Agreement and the Transactions, and Parent, in its capacity as the sole limited liability company interest holder of Merger Sub, has adopted this Agreement, in each case, in accordance with the DGCL;

WHEREAS, as an inducement to Parent’s willingness to enter into this Agreement, simultaneously with the execution of this Agreement, Parent and certain stockholders of the Company owning in the aggregate approximately 33% of the Outstanding Company Shares have executed and delivered to the Company the applicable voting agreements (the “ Voting Agreements ”);

WHEREAS, simultaneously with the execution of this Agreement, each of the non-employee members of the Company Board (the “ Non-Employee Directors ”) have entered into letter agreements with the Company (the “ Non-Employee Director Agreements ”) pursuant to which the Non-Employee Directors have agreed that they will be given the opportunity, on the Closing Date, to exercise all previously unexercised Company Options held by them and that any such Company Options not so exercised will, immediately before the Effective Time, automatically be terminated and canceled without any payment or obligation on the part of the Company or any further action on the part of any Non-Employee Director;

WHEREAS, for U.S. federal income tax purposes, it is intended that the Merger not qualify as a tax-free reorganization within the meaning of Section 368(a) of the Code and the Treasury Regulations promulgated thereunder; and

 

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WHEREAS, Parent, Merger Sub and the Company desire to make certain representations, warranties, covenants and agreements in connection with the Merger and the other transactions contemplated by this Agreement and also to prescribe certain conditions to the Merger as specified herein;

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements herein contained, and intending to be legally bound hereby, Parent, Merger Sub and the Company hereby agree as follows:

ARTICLE I

CERTAIN DEFINITIONS

For purposes of the Agreement:

“ Acquisition Proposal ” shall mean any unsolicited, bona fide offer or proposal (other than an offer or proposal made or submitted by Parent or Merger Sub) relating to a possible Acquisition Transaction.

“ Acquisition Transaction ” shall mean any transaction or series of related transactions (other than the transactions contemplated by this Agreement) involving or resulting in: (i) any acquisition or purchase by any Person or “group” (as defined in or under Section 13(d) of the Exchange Act), directly or indirectly, of more than 20% of the total outstanding voting securities of the Company, or any tender offer or exchange offer that, if consummated, would result in the Person or “group” (as defined in or under Section 13(d) of the Exchange Act) making such offer beneficially owning more than 20% of the total outstanding voting securities of the Company; (ii) any merger, consolidation, share exchange, business combination, acquisition of securities, recapitalization, tender offer, exchange offer or other similar transaction involving the Company pursuant to which the stockholders of the Company immediately before the consummation of such transaction would hold less than 80% of the equity interests in the surviving or resulting entity of such transaction immediately after consummation thereof; or (iii) any sale, lease, exchange, transfer, license, acquisition or disposition of assets (other than the Aplindore Program and/or the Real Estate) constituting more than 20% of the assets of the Company (measured by either book or fair market value thereof) or the net revenues or net income of the Company and the Company Subsidiaries taken as a whole.

“ Actual Net Cash Amount ” shall mean the Net Cash Amount calculated as of the Determination Date and set forth in a certificate delivered by an executive officer of the Company to Parent on the first Business Day following the Determination Date.

“ Adjusted Reference Amount ” shall mean the Reference Amount (i) plus the amount, if any, by which the Actual Net Cash Amount exceeds the Target Net Cash Amount or (ii) minus the amount, if any, by which the Target Net Cash Amount exceeds the Actual Net Cash Amount.

“ Affiliate ” shall mean a Person who is related to another Person such that such Person directly or indirectly controls, is directly or indirectly controlled by or is directly or indirectly under common control with such other Person.

“ Aplindore ” shall mean a small molecule partial agonist for the D2 dopamine receptor for the treatment of Restless Leg Syndrome and Parkinson’s disease.

“ Aplindore CVR ” shall mean a right having the terms and conditions set forth in the Aplindore CVR Agreement, to be issued in accordance with Section 2.06 in respect of each Outstanding Company Share, to receive a pro rata portion (based on the number of Outstanding Company Shares) of any Aplindore Program Consideration received by Parent or the Surviving Corporation (as opposed to the Company) before the CVR Outside Date (as defined in the Aplindore CVR Agreement).

“ Aplindore CVR Agreement ” shall mean the agreement governing the terms and conditions of the Aplindore CVRs substantially in the form attached hereto as Exhibit A .

 

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“ Aplindore Program ” shall mean the Company’s two active programs for the development of Aplindore for the treatment of Restless Leg Syndrome and Parkinson’s disease, including all rights and obligations of the Company under the Wyeth License Agreement, all related Intellectual Property and other related rights of the Company, and all clinical and non-clinical data compiled by the Company, in each case arising from the Company’s operation of such programs.

“ Aplindore Program Consideration ” shall mean any of (a) if the Aplindore Program is sold on or before Effective Time, the Aplindore Program Payment; (b) if the Aplindore Program is sold after the Effective Time but on or before the six month anniversary of the Effective Time, the Aplindore Program Payment plus the remaining Expense Reserve Amount, if any; or (c) if the Aplindore Program is not sold before the six month anniversary of the Effective Time, the remaining Expense Reserve Amount, if any.

“ Aplindore Program Payment ” shall mean the aggregate cash proceeds paid by and/or the aggregate number of shares of stock issued by any third-party purchaser of the Aplindore Program after the date hereof but on or before the CVR Outside Date (as defined in the Aplindore CVR Agreement) in accordance with the terms of this Agreement or the Aplindore CVR Agreement, as the case may be, less any costs and expenses reasonably incurred by the Company or Parent, as the case may be, in connection with such sale (including amounts paid to the Consulting Committee in accordance with an arrangement entered into pursuant to Section 5.15(c)) ; provided that if the consideration for the Aplindore Program in any such sale is to consist in whole or in part of shares of stock of the third-party purchaser, such shares must be of a class listed for trading on a U.S. national securities exchange.

“ Average Price ” shall mean a price equal to the arithmetic average of the Volume Weighted Average Price on each of the last 20 Trading Days preceding the Determination Date.

“ Business Day ” shall mean any day other than a Saturday, Sunday or a day on which the banks in New York, New York or San Diego, California are authorized by applicable Legal Requirement or executive order to be closed.

“ Code ” shall mean the Internal Revenue Code of 1986, as amended from time to time.

“ Company Equity Plans ” shall mean the Neurogen Corporation 1993 Omnibus Incentive Plan, the Neurogen Corporation 1993 Non-Employee Director Stock Option Program, the Neurogen Corporation 2000 Non-Employee Directors Stock Option Program, the Company’s September 25, 2000 Special Committee Stock Option Grant and the Amended and Restated Neurogen Corporation 2001 Stock Option Plan, in each case, as amended from time to time.

“ Company Intellectual Property ” shall mean the Intellectual Property, IP Licenses and Software held for use or used in the business of the Company or any Company Subsidiary as presently conducted.

“ Company Material Adverse Effect ” shall mean, in reference to any fact, circumstance, event, change or occurrence, any such fact, circumstance, event, change or occurrence that, individually or in the aggregate with all other facts, circumstances, events, changes or occurrences, has or would reasonably be expected to have a material adverse effect on the results of operations or financial condition of the Company and the Company Subsidiaries, taken as a whole, other than changes, events, occurrences or effects arising out of, resulting from or attributable to (i) changes in conditions in the United States or global economy or capital or financial markets generally, including changes in interest or exchange rates, (ii) conditions (or changes therein) in any industry or industries in which the Company and the Company Subsidiaries operate, (iii) any change in Legal Requirements or GAAP or interpretation of any of the foregoing, (iv) the negotiation, execution, announcement or performance of this Agreement or the consummation of the Transactions, including the impact thereof on relationships, contractual or otherwise, with customers, suppliers, distributors, partners, collaborators or employees, (v) acts of war, sabotage or terrorism, or any escalation or worsening of any such acts of war, sabotage or terrorism threatened or underway as of the date of this Agreement, (vi) storms, earthquakes or other natural disasters,

 

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(vii) any action taken by the Company or any Company Subsidiary as contemplated or permitted by this Agreement or with Parent’s consent, (viii) the initiation of any litigation by any stockholder of the Company relating to this Agreement or the Merger, (ix) any decline in the market price, or change in trading volume, of the capital stock of the Company or any failure of the Company to meet revenue or earnings projections , either published by the Company or any third party ( provided that this exception shall not prevent or otherwise affect a determination that any changes, state of facts, circumstances, events or effects underlying a change described in this clause (ix) has resulted in, or contributed to, a Company Material Adverse Effect), (x) any adverse changes, developments, circumstances, events or occurrences relating to the Company’s ongoing research programs to the extent resulting from an action by Parent or any of its Affiliates, (xi) the determination by, or the delay of a determination by, the FDA, or any panel or advisory body empowered or appointed thereby, with respect to the approval, non-approval or disapproval of any products similar to or competitive with the Company’s product candidates, (xii) the results of any clinical trial of one or more products or product candidates of any Person other than the Company, (xiii) the entry or threatened entry into the market of a generic version of one or more product candidates of the Company, or (xiv) the sale of the Aplindore Program or the Real Estate in accordance with Section 5.14 , regardless of the price obtained therefor; except , in the case of the foregoing clauses (i), (ii), (iii), (v) and (vi), to the extent that any such condition has a materially disproportionate adverse effect on the Company and the Company Subsidiaries, taken as a whole, relative to other companies of comparable size to the Company and the Company Subsidiaries operating in industry or industries in which the Company and the Company Subsidiaries operate.

“ Company Options ” shall mean options to purchase Company Shares from the Company, whether granted by the Company pursuant to the Company Equity Plans or otherwise.

“ Company Subsidiary ” shall mean a Subsidiary of the Company.

“ Company Warrants ” shall mean the warrants issued by the Company pursuant to the Securities Purchase Agreement among the Company and the purchasers listed therein, dated April 7, 2008, to purchase Company Shares for $2.30 per Company Share.

“ Confidentiality and Exclusivity Agreement ” shall mean the Confidentiality and Exclusivity Agreement dated August 3, 2009, and as thereafter extended/amended, between Parent and the Company.

“ Contract ” shall mean any loan or credit agreement, bond, debenture, note, mortgage, indenture, guarantee, lease or other contract, commitment, agreement, instrument, arrangement, understanding, obligation, undertaking or license (each, including all amendments thereto).

“ Copyrights ” shall mean all registered and unregistered copyrights (including those in Software) and registrations and applications to register the same.

“ CVR Agreements ” shall mean, collectively, the Aplindore CVR Agreement, the H3 CVR Agreement, the Merck CVR Agreement and the Real Estate CVR Agreement.

“ CVRs ” shall mean, collectively, the Aplindore CVRs, the H3 CVRs, the Merck CVRs and the Real Estate CVRs.

“ Determination Date ” shall mean the 3rd Trading Day preceding the date of the Special Meeting.

“ Encumbrance ” shall mean, with respect to any property or asset, any mortgage, easement, lien, pledge (including any negative pledge), security interest or other encumbrance of any nature whatsoever in respect of such property or asset.

“ Entity ” shall mean any corporation (including any non-profit corporation), general partnership, limited partnership, limited liability partnership, joint venture, estate, trust, company (including any company limited by shares, limited liability company or joint stock company), firm, society or other enterprise, association, organization or entity (including any Governmental Entity).

 

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“ ERISA ” shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time.

“ Exchange ” shall mean The NASDAQ Global Market of The NASDAQ Stock Market LLC.

“ Exchange Act ” shall mean the Securities Exchange Act of 1934, as amended.

“ Exchange Ratio ” shall mean a decimal fraction (calculated to the nearest one-thousandth), the numerator of which is the quotient derived by dividing the Adjusted Reference Amount by the Average Price, and the denominator of which is the number of Outstanding Company Shares.

“ Executive ” shall mean any executive officer of the Company.

“ Expense Reserve Amount ” shall mean, in the event the Aplindore Program is not terminated or sold by the Company before the Effective Time and if the Closing occurs (a) before November 22, 2009, an amount in cash equal to $350,000, or (b) after November 22, 2009, an amount in cash equal to $100,000, in either case to be used by Parent solely in connection with the Aplindore Program as provided in Section 5.15(a) .

“ FDA ” shall mean the United States Food and Drug Administration.

“ GAAP ” shall mean United States generally accepted accounting principles.

“ Governmental Authorization ” shall mean any permit, license, registration, qualification, certificate, clearance, variance, waiver, exemption, certificate of occupancy, exception, franchise, entitlement, consent, confirmation, order, approval or authorization granted by any Governmental Entity.

“ Governmental Entity ” shall mean any federal, state or local government or body or any agency, authority, subdivision or instrumentality of any of the foregoing, including any court, tribunal, department, bureau, administrative agency, commission or board, or any quasi-governmental or private body duly exercising any regulatory, taxing, inspecting or other governmental authority.

“ H3 Antagonist Program ” shall mean an antagonist program intended to create an H3 receptor drug.

“ H3 CVR ” shall mean a right having the terms and conditions set forth in the H3 CVR Agreement, to be issued in accordance with Section 2.06 in respect of each Outstanding Company Share, to receive (among other possible amounts) a pro rata portion (based on the number of Outstanding Company Shares) of either (i) $4,000,000 in cash if Parent licenses the H3 Antagonist Program on or before the third anniversary of the Effective Time, or (ii) in the event Parent sells the H3 Antagonist Program on or before the third anniversary of the Effective Time and before such a licensing, 50% of the net cash proceeds from such sale; provided that all decisions relating to the matters described in this paragraph shall be in the sole discretion of Parent exercised in good faith.

“ H3 CVR Agreement ” shall mean the agreement governing the terms and conditions of the H3 CVRs substantially in the form attached hereto as Exhibit B .

“ Indebtedness ” shall mean (i) indebtedness for borrowed money, including indebtedness evidenced by a note, bond, debenture or similar instrument, or (ii) obligations in respect of outstanding letters of credit, acceptances and similar obligations created for the account of such Person.

“ Indemnified Party ” shall mean each individual who is or was an officer or director of the Company at any time on or before the Effective Time.

“ Intellectual Property ” shall mean all U.S. and foreign (i) Trademarks, (ii) Patents, (iii) Copyrights, (iv) Trade Secrets and (v) databases and compilations, including any and all electronic data and electronic collections of data.

 

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“ IP Licenses ” shall mean any license or sublicense rights in or to any Intellectual Property.

“ Knowledge of Parent ” shall mean the actual knowledge of John Higgins, John Sharp or Charles Berkman.

“ Knowledge of the Company ” shall mean the actual knowledge of Stephen Davis or Thomas Pitler.

“ Legal Proceeding ” shall mean any claim (presented formally to a judicial or quasi-judicial Governmental Entity), lawsuit, court action, suit, arbitration or other judicial or administrative proceeding.

“ Legal Prohibition ” shall mean any final, permanent Legal Requirement that is in effect and that prevents or prohibits consummation of the Transactions.

“ Legal Requirement ” shall mean any federal, state or local law, statute, code, ordinance, regulation, code, order, judgment, writ, injunction, decision, ruling or decree promulgated by any Governmental Entity.

“ Maximum Amount ” shall mean 4,200,000 shares of Parent Common Stock.

“ Merck ” shall mean Merck Sharpe & Dohme Limited and its affiliates.

“ Merck Agreement ” shall mean the Research Collaboration and License Agreement, effective as of November 24, 2003, between Merck and the Company, as amended from time to time.

“ Merck CVR ” shall mean a right having the terms and conditions set forth in the Merck CVR Agreement, to be issued in accordance with Section 2.06 in respect of each Outstanding Company Share, to receive a pro rata portion (based on the number of Outstanding Company Shares) of either (i) $3,000,000 in cash promptly after receipt by Parent of the milestone payment from Merck upon the Phase III VR1 Trial Initiation or (ii) in the event Parent sells the program that is the subject of the Phase III VR1 Trial to Merck before the initiation of a Phase III VR1 Trial, 50% of the net cash proceeds from such sale; provided that all decisions relating to the matters described in this paragraph shall be in the sole discretion of Parent exercised in good faith.

“ Merck CVR Agreement ” shall mean the agreement governing the terms and conditions of the Merck CVRs substantially in the form attached hereto as Exhibit C .

“ Net Cash Amount ” shall mean, as of the applicable date, an amount equal to (i) the sum of (A) all cash (including any payments received by the Company from the exercise by any Non-Employee Director of Company Options, as contemplated by the Non-Employee Director Agreements or otherwise), cash equivalents, marketable securities and accounts receivable (net of accounts receivable reserves established in accordance with GAAP) held by the Company and the Company Subsidiaries (but excluding the Aplindore Program Consideration and the Real Estate Consideration, if any, received by the Company before the Effective Time) and (B) in the event the Company purchases a “tail” prepaid policy on the D&O Insurance Policy in accordance with the penultimate sentence of Section 5.10(c) , any amount (up to a maximum of $270,000) paid before the Determination Date by the Company for such “tail” policy; minus (ii) the sum of (A) in the event the Company purchases the “tail” prepaid policy on the D&O Insurance Policy in accordance with the penultimate sentence of Section 5.10(c) , any amount by which the cost of such “tail” policy exceeds $270,000 to the extent such excess has not been paid by the Company before the Determination Date, (B) any amount payable by the Company or the Surviving Corporation after the Determination Date for the out-of-pocket transaction fees and expenses of the Company to its legal and financial advisors and accountants in connection with this Agreement and the Transactions, (C) any amount payable by the Company or the Surviving Corporation after the Determination Date for expenses incurred by the Company in connection with the preparation, filing, printing and mailing of the Proxy Statement and the solicitation of proxies for use at the Special Meeting, (D) the Expense Reserve Amount, (E) except as otherwise covered in subclause (F) below, all severance payments, stay bonuses and performance bonuses payable to all employees, consultants and directors of the Company and the Company Subsidiaries assuming that the service relationship of all such employees, consultants and directors with the Company and the

 

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Company Subsidiaries is terminated as of the Closing Date, even if such service relationship in fact does continue after the Closing Date, (F) all severance payments, stay bonuses and performance bonuses remaining payable at the Closing Date to all employees, consultants and directors of the Company and the Company Subsidiaries whose service relationship with the Company and the Company Subsidiaries is terminated on or before the Closing Date, (G) the salary, employer-tax and benefits cost of the continuation of employment of any Company employees, as a result of the advance-notice requirements of their respective employment agreements, beyond the Closing Date until their actual termination date, if before the Closing Date Parent requests the Company to terminate such employees, provided that the costs described in this subclause (G) shall only be deducted if before the Closing Date Parent requests the Company to terminate any such employee and delivers any such request to the Company at least 33 calendar days before the Closing Date, (H) all amounts payable by the Company in order to comply with the covenant contained in Section 5.16 and (I) to the extent not included in any other subclause of this clause (ii), all accounts payable of the Company and the Company Subsidiaries; provided that all such amounts shall be determined in a manner consistent with the manner in which such items were determined by the Company in the most recent balance sheet included in the Company Financial Statements.

“ Outstanding Company Shares ” shall mean the Company Shares issued and outstanding immediately before the Effective Time (not including, for purposes of calculating the Exchange Ratio or Merger Consideration, any Company Shares to be cancelled pursuant to Section 2.06(a)(i) and (ii)) .

“ Parent Equity Plans ” shall mean the 2002 Stock Incentive Plan and the Pharmacopeia, Inc. 2000 Stock Option Plan, in each case, as amended from time to time.

“ Parent Material Adverse Effect ” shall mean, in reference to any fact, circumstance, event, change or occurrence, any such fact, circumstance, event, change or occurrence that, individually or in the aggregate with all other facts, circumstances, events, changes or occurrences, has or would reasonably be expected to have a material adverse effect on the results of operations or financial condition of Parent and the Parent Subsidiaries, taken as a whole, other than changes, events, occurrences or effects arising out of, resulting from or attributable to (i) changes in conditions in the United States or global economy or capital or financial markets generally, including changes in interest or exchange rates, (ii) conditions (or changes therein) in any industry or industries in which Parent and the Parent Subsidiaries operate, (iii) any change in Legal Requirements or GAAP or interpretation of any of the foregoing, (iv) acts of war, sabotage or terrorism, or any escalation or worsening of any such acts of war, sabotage or terrorism threatened or underway as of the date of this Agreement, (v) storms, earthquakes or other natural disasters, (vi) the initiation of any litigation by any stockholder of Parent relating to this Agreement or the Merger, (vii) any decline in the market price, or change in trading volume, of the capital stock of Parent or any failure of Parent to meet revenue or earnings projections, either published by Parent or any third party ( provided that this exception shall not prevent or otherwise affect a determination that any changes, state of facts, circumstances, events or effects underlying a change described in this clause (vii) has resulted in, or contributed to, a Parent Material Adverse Effect), (viii) the negotiation, execution, announcement or performance of this Agreement or the consummation of the Transactions, including the impact thereof on relationships, contractual or otherwise, with customers, suppliers, distributors, partners, collaborators or employees, (ix) any action taken by Parent or any Parent Subsidiary as contemplated or permitted by this Agreement or with the Company’s consent, (x) the determination by, or the delay of a determination by, the FDA, or any panel or advisory body empowered or appointed thereby, with respect to the approval, non-approval or disapproval of any products similar to or competitive with Parent’s product candidates, (xi) the results of any clinical trial of one or more products or product candidates of any Person other than Parent, or (xii) the entry or threatened entry into the market of a generic version of one or more product candidates of Parent, except , in the case of the foregoing clauses (i), (ii), (iii), (iv) and (v), to the extent that any such condition has a materially disproportionate adverse effect on Parent and the Parent Subsidiaries, taken as a whole, relative to other companies of comparable size to Parent and the Parent Subsidiaries operating in such industry or industries.

“ Parent Options ” shall mean options to purchase shares of Parent Common Stock from Parent, whether granted by Parent pursuant to Parent Equity Plans or otherwise.

 

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“ Parent Rights Agreement ” shall mean the 2006 Preferred Shares Rights Agreement, by and between Ligand Pharmaceuticals Incorporated and Mellon Investor Services LLC, dated October 13, 2006.

“ Parent Subsidiary ” shall mean a Subsidiary of Parent.

“ Patents ” shall mean all patents and pending patent applications, invention disclosure statements, and any and all divisions, continuations, continuations-in-part, reissues, reexaminations and extensions thereof, any counterparts claiming priority therefrom and like statutory rights.

“ Permitted Encumbrances ” shall mean: (i) Encumbrances for Taxes not yet due and payable or for Taxes that are being contested in good faith by appropriate proceedings; (ii) Encumbrances or imperfections of title resulting from or otherwise relating to any of the contracts referred to in the Company Disclosure Letter, to the extent the Company Disclosure Letter expressly identifies such Encumbrance or imperfection of title (or such is obvious on the face of the contract); (iii) Encumbrances or imperfections of title relating to liabilities reflected in the financial statements (including any related notes) contained in the Company SEC Documents; (iv) Encumbrances arising from or otherwise relating to transfer restrictions under the Securities Act and the securities laws of the various states of the United States or foreign jurisdictions; and (v) mechanics’, materialmen’s and similar statutory liens arising or incurred in the ordinary course of business for amounts not overdue.

“ Person ” shall mean any individual or Entity.

“ Phase III VR1 Trial ” shall mean a Phase III clinical trial as referred to in Section 6.4(b)(ii)(B) of the Merck Agreement.

“ Phase III VR1 Trial Initiation ” shall mean the enrollment of the first subject in a Phase III VR1 Trial.

“ Real Estate ” shall mean the properties currently owned by the Company located at 15, 35 and 45 NE Industrial Road, Branford, Connecticut 06405.

“ Real Estate Consideration ” shall mean the aggregate cash proceeds paid by any purchaser of the Real Estate after the date hereof and in accordance with the terms of this Agreement or the Real Estate CVR Agreement, as the case may be, less any costs and expenses reasonably incurred by the Company in connection with such sale (including secured loan payoffs and amounts paid to the Consulting Committee in accordance with an arrangement entered into pursuant to Section 5.15(b)) .

“ Real Estate CVR ” shall mean a right having the terms and conditions set forth in the Real Estate CVR Agreement, to be issued in accordance with Section 2.06 in respect of each Outstanding Company Share, to receive a pro rata portion (based on the number of Outstanding Company Shares) of any Real Estate Consideration received by Parent on or before the CVR Outside Date (as defined in the Real Estate CVR Agreement).

“ Real Estate CVR Agreement ” shall mean the agreement governing the terms and conditions of the Real Estate CVRs substantially in the form attached hereto as Exhibit D .

“ Reference Amount ” shall mean $11,000,000.

“ SEC ” shall mean the United States Securities and Exchange Commission.

“ Software ” means all computer programs, including any and all software implementations of algorithms, models and methodologies whether in source code or object code form, and all documentation, including user manuals and training materials, related to any of the foregoing.

“ Special Meeting ” shall mean a special meeting of the stockholders of the Company held for the purpose of considering and taking action upon this Agreement and the Merger.

 

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“ Subsidiary ” shall mean an Entity that is related to another Entity such that such other Entity directly or indirectly owns, beneficially or of record: (i) an amount of voting securities or other interests in such Entity that is sufficient to enable such other Entity to elect at least a majority of the members of such Entity’s board of directors or comparable governing body; or (ii) more than 50% of the outstanding equity interests issued by such Entity.

“ Superior Proposal ” shall mean any unsolicited, bona fide written offer made by a third party unaffiliated with the Company to directly or indirectly acquire (by way of merger, tender or exchange offer or otherwise) greater than 95% of the Company’s assets (other than any such offer relating only to the Aplindore Program and/or the Real Estate and/or the proceeds of the pre-Closing Date sale thereof) or greater than 95% of the outstanding Company Shares (other than Company Shares already held by such third party) that the Company Board shall have determined in good faith (after consultation with the Company’s outside legal counsel and financial advisor, and after taking into account, among other things, the financial, legal and regulatory aspects of such offer (including any financing required and the availability thereof), as well as any revisions to the terms hereof proposed by Parent pursuant to Section 5.04(c)) , is more favorable to the stockholders of the Company than the terms of the Merger (taking into account any revisions to the terms hereof proposed by Parent pursuant to Section 5.04(c)) and is reasonably capable of being consummated on the terms proposed.

“ Target Net Cash Amount ” shall mean $7,900,000 if the Effective Time occurs on any date during the month of September 2009, with a $5,000 decrease for each calendar day thereafter if the Effective Time occurs on any date thereafter.

“ Tax ” or “ Taxes ” shall mean (i) all federal, state, local or foreign taxes, including all net income, gross receipts, capital, sales, use, ad valorem, value added, transfer, franchise, profits, inventory, capital stock, license, withholding, payroll, employment, social security, unemployment, excise, severance, stamp, occupation, property and estimated taxes or other taxes any kind whatsoever, and (ii) all interest, penalties, fines, additions to tax or additional amounts imposed by any Governmental Entity in connection with any item described in clause (i).

“ Tax Returns ” shall mean any return, report, claim for refund, estimate, information return or statement or other similar document relating to or required to be filed with any Governmental Entity with respect to Taxes, including any schedule or attachment thereto, and including any amendment thereof.

“ Termination Fee ” shall mean, for purposes of Section 7.03(a) and Section 7.03(c) , $475,000, and for purposes of Section 7.03(b) , $225,000.

“ Trade Secrets ” shall mean confidential technology, know-how, plans, data, designs, protocols, plans, strains, molecules, works of authorship, inventions, processes, formulae, algorithms, models and methodologies, and trade secrets as defined in applicable state law.

“ Trademarks ” shall mean all registered and unregistered trademarks, service marks, trade names, Internet domain names, designs, logos and slogans, together with goodwill, registrations and applications relating to the foregoing.

“ Trading Day ” shall mean any day on which securities are traded on the Exchange.

“ Volume Weighted Average Price ” shall mean, for any Trading Day, the daily volume weighted average price of the Parent Common Stock for such date (or the nearest preceding date) on the Exchange as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York time) to 4:02 p.m. (New York time).

“ Wyeth License Agreement ” shall mean the License Agreement between Wyeth (acting through its Wyeth Pharmaceuticals division) and the Company, effective as of November 22, 2006.

“ Wyeth Maintenance Fee ” shall mean the $250,000 fee required under the Wyeth License Agreement for 2009.

 

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ARTICLE II

THE MERGER; EFFECTIVE TIME

 

Section 2.01

Merger of Merger Sub into the Company.

Upon the terms and subject to the conditions set forth in this Agreement and in accordance with the DGCL, at the Effective Time, Merger Sub shall be merged with and into the Company, and the separate existence of Merger Sub shall cease. The Company will continue as the surviving corporation in the Merger (the “ Surviving Corporation ”).

 

Section 2.02

Effect of the Merger.

The Merger shall have the effects set forth 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 the property rights, privileges, immunities, powers and franchises of the Company and Merger Sub shall vest in the Surviving Corporation and all the debts, liabilities and duties of the Company and Merger Sub shall become the debts, liabilities and duties of the Surviving Corporation.

 

Section 2.03

Effective Time

Subject to the provisions of this Agreement, Parent, Merger Sub and the Company will cause a properly executed certificate of merger conforming to the requirements of the DGCL (the “ Certificate of Merger ”) to be filed with the Secretary of State of the State of Delaware on the Closing Date. The Merger shall become effective at the time the Certificate of Merger is filed with the Secretary of State of the State of Delaware, or at such later time as is agreed to in writing by the parties hereto and specified in the Certificate of Merger (the time at which the Merger becomes effective being referred to in this Agreement as the “ Effective Time ”).

 

Section 2.04

Closing

The closing of the Transactions (the “ Closing ”) will take place at 10:00 a.m. (San Diego time) on the date (the “ Closing Date ”) that is the second Business Day after the satisfaction or waiver (if such waiver is permitted and effective under applicable Legal Requirements) of the latest to be satisfied or waived of the conditions set forth in Article VI (excluding conditions that, by their terms, are to be satisfied on the Closing Date), unless another time or date is agreed to in writing by the parties. The Closing shall be held at the offices of Stradling Yocca Carlson & Rauth located at 4365 Executive Drive, Suite 1500, San Diego, CA 92121, unless another place is agreed to in writing by the parties.

 

Section 2.05

Certificate of Incorporation and Bylaws; Officers and Directors.

Unless otherwise jointly determined by Parent and the Company before the Effective Time:

(a) Subject to Section 5.10(a) , (i) the certificate of incorporation of the Company as in effect immediately before the Effective Time shall be the certificate of incorporation of the Surviving Corporation, until thereafter changed or amended as provided therein or by applicable Legal Requirements, and (ii) the bylaws of the Company as in effect immediately before the Effective Time shall be the bylaws of the Surviving Corporation, until thereafter changed or amended as provided therein or by applicable Legal Requirements.

(b) The manager and officers of Merger Sub immediately before the Effective Time shall be the initial director and officers, respectively, of the Surviving Corporation, each to hold office in accordance with the Certificate of Incorporation and Bylaws of the Surviving Corporation.

 

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Section 2.06

Conversion of Company Shares.

(a) At the Effective Time, by virtue of the Merger and without any further action on the part of Parent, Merger Sub, the Company or any member of Merger Sub or stockholder of the Company:

(i) any Company Shares then held by the Company or any wholly-owned Company Subsidiary (or held in the Company’s treasury) shall cease to exist, and no consideration shall be paid in exchange therefor;

(ii) any Company Shares then held by Parent, Merger Sub or any other wholly-owned Parent Subsidiary shall cease to exist, and no consideration shall be paid in exchange therefor;

(iii) except as provided in clauses (i) and (ii) above, each issued and outstanding Company Share (other than Dissenting Shares) shall be converted, subject to Section 2.09 , into the right to receive (A) a portion of a validly issued, fully paid and nonassessable share of common stock, par value $0.001 per share, of Parent equal to the Exchange Ratio, including the associated rights under the Parent Rights Agreement (the “ Parent Common Stock ”); provided, that subject to Section 7.01(i) the maximum number of shares of Parent Common Stock that Parent shall be required to issue pursuant to this Section 2.06(a)(iii) shall not exceed the Maximum Amount, (B) in the event the Aplindore Program is sold by the Company before the Effective Time, an amount in cash and/or a number of shares of third-party stock, as the case may be, equal to the Aplindore Program Consideration which has been received as of the Effective Time divided by the total number of Outstanding Company Shares, (C) in the event the Real Estate is sold by the Company before the Effective Time, an amount in cash equal to the Real Estate Consideration which has been received as of the Effective Time divided by the total number of Outstanding Company Shares, (D) one Aplindore CVR (unless the Aplindore Program is sold by and all proceeds thereof are received by the Company before the Effective Time, or the Aplindore Program is terminated by the Company before the Effective Time), (E) one H3 CVR, (F) one Merck CVR, and (G) one Real Estate CVR (unless the Real Estate is sold by and all proceeds thereof are received by the Company before the Effective Time) (collectively, the “ Merger Consideration ”); and

(iv) each unit of limited liability company interest of Merger Sub then outstanding shall be converted into one share of the common stock of the Surviving Corporation, such that immediately after the Effective Time Parent shall, as the former holder of all the units of limited liability company interest of Merger Sub, own a number of shares of the common stock of the Surviving Corporation equal to the number (immediately before the Effective Time) of Outstanding Common Shares.

(b) The Exchange Ratio and the Maximum Amount shall be adjusted to the extent appropriate to reflect the effect of any stock split, division or subdivision of shares, stock dividend, reverse stock split, consolidation of shares, reclassification, recapitalization or other similar transaction with respect to Company Shares or Parent Common Stock occurring or having a record date on or after the date of this Agreement and before the Effective Time.

 

Section 2.07

Closing of the Company’s Transfer Books.

At the Effective Time: (a) all Company Shares outstanding immediately before the Effective Time shall cease to exist as provided in Section 2.06 and all holders of certificates representing Company Shares that were outstanding immediately before the Effective Time shall cease to have any rights as stockholders of the Company except the right to receive the Merger Consideration therefor; and (b) the stock transfer books of the Company shall be closed with respect to all Company Shares. No further transfer of any such Company Shares shall be made on such stock transfer books after the Effective Time. If, after the Effective Time, a valid certificate previously representing any Company Shares (a “ Company Stock Certificate ”) is presented to the Exchange Agent, the Surviving Corporation or Parent, such Company Stock Certificate shall be canceled and, if it represents Outstanding Company Shares, shall be exchanged as provided in Section 2.08 .

 

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Section 2.08

Exchange of Certificates.

(a) Before the Effective Time: (i) Parent shall select a bank or trust company (reasonably acceptable to the Company) to act as exchange agent with respect to the payment of the Merger Consideration (the “ Exchange Agent ”); and (ii) Parent (or, as applicable, the Company) shall deposit with the Exchange Agent certificates representing the shares of Parent Common Stock, the Aplindore Program Consideration (to the extent already received by the Company) in the event the Aplindore Program is sold by the Company at or before the Effective Time, the Real Estate Consideration (to the extent already received by the Company) in the event the Real Estate is sold by the Company at or before the Effective Time, sufficient to enable the Exchange Agent to make payments pursuant to Section 2.06 and Section 2.09 to the holders of Outstanding Company Shares. After the Effective Time, Parent shall, if applicable, deposit with the Escrow Agent cash or securities for payment of any dividends or distributions sufficient to enable the Exchange Agent to make payments pursuant to Section 2.10 . Such cash amounts deposited with the Exchange Agent shall, pending its disbursement to such holders, be invested by the Exchange Agent in (i) direct obligations of the United States of America, (ii) obligations for which the full faith and credit of the United States of America is pledged to provide for the payment of principal and interest, or (iii) money market funds investing solely in a combination of the foregoing. Any interest and other income resulting from such investments shall be the property of, and shall be paid to, Parent. Parent shall promptly replace any funds deposited with the Exchange Agent lost through any investment made pursuant to this paragraph.

(b) Promptly after the Effective Time, Parent shall cause the Exchange Agent to mail to each Person who was, immediately before the Effective Time, a holder of record of Company Shares a form of letter of transmittal and instructions for use in effecting the surrender of Company Stock Certificates representing such Company Shares in exchange for payment therefor. Parent shall ensure that, upon surrender to the Exchange Agent of each such Company Stock Certificate, together with a properly executed letter of transmittal, the holder of such Company Stock Certificate (or, under the circumstances described in Section 2.08(f) , the transferee of the Company Shares represented by such Company Stock Certificate) shall promptly receive in exchange therefor the Merger Consideration (including the CVRs and including any cash in lieu of fractional shares of Parent Common Stock to which such holder is entitled pursuant to Section 2.09 ) and any dividends or other distributions to which such holder is entitled pursuant to Section 2.10 .

(c) On or after the sixth month anniversary of the Effective Time, Parent or the Surviving Corporation shall be entitled to cause the Exchange Agent to deliver to Parent or the Surviving Corporation any funds made available by Parent to the Exchange Agent which have not been disbursed to holders of Company Shares, and thereafter such holders shall be entitled to look only to Parent and the Surviving Corporation with respect to the consideration payable and issuable upon surrender of their Company Shares.

(d) Neither the Exchange Agent, Parent nor the Surviving Corporation shall be liable to any holder of Company Shares for any amount properly paid to a public official pursuant to any applicable abandoned property or escheat law. If any Company Stock Certificates shall not have been surrendered on the day immediately before the day that such property is required to be delivered to any public official pursuant to any applicable abandoned property, escheat or similar Legal Requirement, any such Merger Consideration in respect thereof shall, to the extent permitted by applicable Legal Requirements, become the property of Parent, free and clear of all claims or interest of any Person previously entitled thereto.

(e) If any Company Stock Certificate shall have been lost, stolen or destroyed, then, upon the making of an affidavit of that fact by the Person claiming such Company Stock Certificate to be lost, stolen or destroyed in a form reasonably satisfactory to Parent (together with an indemnity in form reasonably satisfactory to Parent against any claim that may be made against the Exchange Agent or Parent or otherwise with respect to such certificate and, if required by Parent, the posting by such Person of a bond in such reasonable amount as Parent may direct to support such indemnity), Parent shall cause the Exchange Agent to pay in exchange for such lost, stolen or destroyed Company Stock Certificate the Merger Consideration (including any cash in lieu of fractional shares of Parent Common Stock to which such holder is entitled pursuant to Section 2.09 ) and any dividends or other distributions to which such holder is entitled pursuant to Section 2.10 .

 

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(f) In the event of a transfer of ownership of Company Shares which is not registered in the transfer records of the Company, the Merger Consideration (including any cash in lieu of fractional shares of Parent Common Stock to which such holder is entitled pursuant to Section 2.09 ) and any dividends or other distributions to which such holder is entitled pursuant to Section 2.10 may be paid and issued with respect to such Company Shares to a transferee of such Company Shares if the Company Stock Certificate representing such Company Shares is presented to the Exchange Agent, accompanied by all documents reasonably required by the Exchange Agent to evidence and effect such transfer and to evidence that any applicable stock transfer taxes relating to such transfer have been paid.

(g) The Surviving Corporation or Parent shall bear and pay all charges and expenses, including those of the Exchange Agent, incurred in connection with the exchange of the Company Shares.

(h) Parent, the Surviving Corporation and the Exchange Agent shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to the Merger or this Agreement to any holder of Company Shares, such amounts as Parent, the Surviving Corporation or the Exchange Agent are required to deduct and withhold under the Code with respect to the making of such payment. To the extent that amounts are so withheld and paid over to the appropriate Tax authority or other Governmental Entity by Parent, the Surviving Corporation or the Exchange Agent, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the holder of Company Shares, in respect of whom such deduction and withholding was made by Parent, the Surviving Corporation or the Exchange Agent.

 

Section 2.09

Fractional Shares

(a) No certificates or scrip representing fractional shares of Parent Common Stock shall be issued upon the surrender for exchange of Company Stock Certificates, no dividend or distribution with respect to Parent Common Stock shall be payable on or with respect to any fractional share and such fractional share interests will not entitle the owner thereof to any rights of a stockholder of Parent.

(b) As promptly as practicable following the Effective Time, the Exchange Agent shall determine the difference between (i) the number of full shares of Parent Common Stock delivered to the Exchange Agent by Parent pursuant to Section 2.08 and (ii) the aggregate number of full shares of Parent Common Stock to be distributed to holders of Company Shares pursuant to Section 2.06(a)(iii) (such difference being the “ Excess Shares ”). As soon after the Effective Time as practicable, the Exchange Agent, as agent for such holders of Parent Common Stock, shall sell the Excess Shares at then prevailing prices on the Exchange, all in the manner provided in this Section 2.09 .

(c) The sale of the Excess Shares by the Exchange Agent shall be executed on the Exchange through one or more member firms of the Exchange and shall be executed in round lots to the extent practicable. Until the net proceeds of any such sale or sales have been distributed to such holders of Company Shares, the Exchange Agent will hold such proceeds in trust for such holders of Company Shares as part of the Exchange Fund. Parent shall pay all commissions, transfer taxes and other out-of-pocket transaction costs of the Exchange Agent incurred in connection with such sale or sales of Excess Shares. In addition, Parent shall pay the Exchange Agent’s compensation and expenses in connection with such sale or sales. The Exchange Agent shall determine the portion of such net proceeds to which each holder of Company Shares shall be entitled, if any, by multiplying the amount of the aggregate net proceeds by a fraction, the numerator of which is the amount of the fractional share interest to which such holder of Company Shares is entitled (after taking into account all shares of Parent Common Stock to be issued to such holder) and the denominator of which is the aggregate amount of fractional share interests to which all holders of Company Shares are entitled.

(d) As soon as practicable after the determination of the amount of cash, if any, to be paid to holders of Company Shares with respect to any fractional share interests, the Exchange Agent shall promptly pay such amounts to such holders of Company Shares subject to and in accordance with the terms of Section 2.10 .

 

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Section 2.10

Distributions with Respect to Unexchanged Shares of Parent Common Stock.

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 shall be paid to the holder of any unsurrendered Company Stock Certificate with respect to the shares of Parent Common Stock represented thereby, no cash payment in lieu of fractional shares shall be paid to any such holder pursuant to Section 2.09 , and no payment in respect of the Merger Consideration shall be made with respect to such Company Shares represented thereby pursuant to Section 2.06(a)(iii) , unless and until the holder of such Company Stock Certificate shall surrender such Company Stock Certificate. Subject to the effect of escheat, tax or other applicable Laws, following proper surrender of any such Company Stock Certificate, there shall be paid to the holder of the certificates representing whole shares of Parent Common Stock issued in exchange therefor, without interest, (A) promptly, the amount of any cash payable with respect to a fractional share of Parent Common Stock to which such holder is entitled pursuant to Section 2.09 and the amount of dividends or other distributions with a record date after the Effective Time theretofore paid with respect to such whole shares of Parent Common Stock, (B) the Merger Consideration pursuant to Section 2.06(a)(iii) , and (C) at the appropriate payment date, the amount of dividends or other distributions, with a record date after the Effective Time but before surrender and a payment date occurring after surrender, payable with respect to such whole shares of Parent Common Stock.

 

Section 2.11

Company Stock Options; Company Warrants.

(a) By operation of the Company Equity Plans, all outstanding Company Options, whether or not then vested, will become fully vested and exercisable on the Closing Date. The Company Board, by operation of existing agreements, including the Non-Employee Director Agreements, or by resolution, will take all requisite actions such that immediately before the Effective Time (i) each holder of outstanding Company Options shall be entitled to exercise in full all Company Options held by such holder by paying the exercise price therefor in exchange for the Company Shares in accordance with the applicable Company Equity Plan, and (ii) all outstanding Company Options not exercised pursuant to clause (i) of this Section 2.11(a) , other than any unexercised Company Options remaining outstanding under the Company’s 1993 Omnibus Incentive Plan (the “ 1993 Company Options ”), shall be terminated and canceled without any payment or liability on the part of the Company.

(b) Between the date of this Agreement and the Effective Time, the Company shall use reasonable best efforts to enter into agreements with the holders of the outstanding Company Warrants to terminate and cancel all such Company Warrants, effective immediately before the Effective Time, without any payment or liability on the part of the Company; provided that the ability of the Company to terminate and cancel all such Company Warrants shall not limit in anyway Parent’s obligation to consummate the Merger and the Transactions.

(c) If any Company Warrant or 1993 Company Option remains outstanding after the Effective Time and the holder thereof exercises such Company Warrant or 1993 Company Option, as the case may be, before its expiration date, then Parent shall issue and pay in respect of each exercised Company Warrant or 1993 Company Option, as the case may be, in exchange for the payment of the applicable exercise price, on a per-exercised-share basis, equivalent consideration to the Merger Consideration (or the proceeds thereof) as was paid in respect of each issued and outstanding Company Share in the Merger; provided that any such payment in respect of the 1993 Company Options shall be made in compliance with Section 409A of the Code.

 

Section 2.12

Dissenting Shares

Notwithstanding anything in this Agreement to the contrary, any Company Share issued and outstanding immediately before the Effective Time held by a holder who is entitled to demand and properly demands appraisal of such Company Shares (the “ Dissenting Shares ”), pursuant to, and who complies in all respects with, Section 262 of the DGCL (the “ Appraisal Rights ”), shall not be converted into the right to receive the Merger Consideration, but instead shall be converted into the right to receive such consideration as may be due such holder pursuant to Section 262 of the DGCL unless such holder fails to perfect, withdraws or otherwise loses

 

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such holder’s right to such payment or appraisal. From and after the Effective Time, a holder of Dissenting Shares shall not have and shall not be entitled to exercise any of the voting rights or other rights of a stockholder of the Company or the Surviving Corporation. If, after the Effective Time, such holder fails to perfect, withdraws or otherwise loses any such Appraisal Rights, each such share of such holder shall no longer be considered a Dissenting Share and shall be deemed to have converted as of the Effective Time into the right to receive the Merger Consideration in accordance with Section 2.06(a)(iii) . The Company shall give prompt notice to Parent of any demands received by the Company for appraisal of Company Shares, withdrawals of such demands and any other instruments served pursuant to the DGCL received by the Company, and Parent shall have the right to control all negotiations and proceedings with respect to such demands. Before the Effective Time, the Company shall not, except with the prior written consent of Parent, voluntarily make any payment with respect to, or settle or offer to settle, any such demands or agree to do or commit to do any of the foregoing.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

The Company hereby represents and warrants to Parent and Merger Sub that except as set forth in the letter delivered by the Company to Parent immediately before the execution of this Agreement (the “ Company Disclosure Letter ”) or the Company SEC Documents either filed with or furnished to the SEC before the date of this Agreement (the “ Filed Company SEC Documents ”) (it being understood that any matter set forth in the Company Disclosure Letter or in such Filed Company SEC Documents shall be deemed disclosed with respect to any Section of this Article III to which the matter relates, to the extent the relevance of such matter to such Section is reasonably apparent):

 

Section 3.01

Organization, Standing and Corporate Power.

(a) The Company is a corporation duly organized, validly existing and in good standing under the Legal Requirements of the State of Delaware and has all requisite corporate power and authority necessary to own or lease all of its properties and assets and to carry on its business as it is now being conducted. The Company is duly licensed or qualified to do business and is in good standing in each jurisdiction in which the nature of the business conducted by it or the character or location of the properties and assets owned or leased or held under license by it makes such licensing or qualification necessary, except where the failure to be so licensed, qualified or in good standing would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect, impair in any material respect the ability of the Company to perform its obligations hereunder or prevent or materially delay consummation of the Transactions.

(b) Each Company Subsidiary is a corporation or other organization duly organized, validly existing and in good standing under the Legal Requirements of the jurisdiction of its organization. Each Company Subsidiary is duly licensed or qualified to do business and is in good standing in each jurisdiction in which the nature of the business conducted by it or the character or location of the properties and assets owned or leased or held under license by it makes such licensing or qualification necessary, except where the failure to be so licensed, qualified or in good standing would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect. Section 3.01(b) of the Company Disclosure Letter sets forth a true and complete list of each Company Subsidiary and the jurisdiction of organization of each Company Subsidiary. All the outstanding shares of capital stock of, or other equity interests in, each Company Subsidiary are duly authorized, have been validly issued, are fully paid, non-assessable and free of preemptive rights, and are owned directly or indirectly by the Company free and clear of all Encumbrances, except for such transfer restrictions of general applicability as may be provided under the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder (the “ Securities Act ”) and other applicable securities laws and rules and regulations promulgated thereunder.

 

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(c) The Company has delivered to Parent complete and correct copies of the certificate of incorporation and bylaws (or other comparable organizational documents) of the Company and each Company Subsidiary, in each case as amended through the date of this Agreement (the “ Company Charter Documents ”). The Company has made available to Parent and its representatives true and complete copies of the minutes (or, in the case of minutes that have not yet been finalized, a brief summary of the meeting, including in each case a summary of any resolutions adopted by the Company Board) of all meetings of the stockholders, the Company Board and each committee of the Company Board held since January 1, 2007 and equivalent documents of each Company Subsidiary. ¹

 

Section 3.02

Capitalization.

(a) The authorized capital stock of the Company consists of: (i) 150,000,000 shares of common stock, par value $0.025 per share (each, a “ Company Share ” and, collect