CONFIDENTIAL TREATMENT AGREEMENT AND PLAN OF MERGERAgreement and Plan of Merger |
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CUBIST PHARMACEUTICALS INC | Cubist Pharmaceuticals, Inc | Edison Merger Corp | IB Securityholders, LLC | Illumigen Biosciences, Inc | Surviving Corporation. RealDealDocs™ contains millions of easily searchable legal documents and clauses from top law firms. Search for free - click here. |
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CONFIDENTIAL TREATMENT AGREEMENT AND PLAN OF MERGER This Agreement and Plan of Merger (this " Agreement ") is made and entered into as of December 24, 2007 (the " Agreement Date "), by and among (i) Cubist Pharmaceuticals, Inc. , a Delaware corporation (" Parent "), (ii) Edison Merger Corp. , a Delaware corporation and a wholly owned Subsidiary of Parent (" Merger Sub "), (iii) Illumigen Biosciences, Inc. a Washington corporation (the " Company "), and (iv) IB Securityholders, LLC as the Holders Representative referred to herein for the limited purposes specifically set forth herein and only in its capacity as such. Capitalized terms used herein without definition shall have the respective meanings set forth in Article 1 hereof. WHEREAS , in accordance with the terms set forth herein, the Merger Sub shall merge with and into the Company (the " Merger "), following which the Company shall continue as the surviving corporation and a wholly owned subsidiary of the Parent (the surviving corporation is referred to herein as the " Surviving Corporation "), upon the terms and subject to the conditions set forth in this Agreement and in accordance with the provisions of Washington Law and Delaware Law; WHEREAS , the board of directors of the Company (the " Company Board ") has carefully considered the terms of this Agreement and has determined that this Agreement and the terms and conditions of the transactions contemplated hereby, including the Merger, are fair and in the best interests of, and are advisable to, the Company and the Company Shareholders (as defined below); WHEREAS , concurrently with the execution and delivery of this Agreement, Company and certain Company Shareholders are executing and delivering a Voting and Support Agreement in the form of Exhibit A hereto pursuant to which, among other things, such Company Shareholders are covenanting to: (i) immediately after the execution and delivery of this Agreement, vote in favor of the adoption of this Agreement and the transactions contemplated hereby, including, but not limited to, the Merger, (ii) retain ownership of the shares of Company Stock held by them as of the date hereof until the earlier of the consummation of the Merger or the termination of this Agreement pursuant to Article 10 hereof and (iii) otherwise to support this Agreement and the transactions contemplated hereby; and WHEREAS , the Company Board will be submitting this Agreement and the performance of the transactions contemplated hereby to the holders of the shares of the capital stock of the Company (collectively, the " Company Shareholders "), for their adoption by written consent in accordance with Section 23B.07.040 of Washington Law, and the Company Board is recommending that the Company Shareholders vote for the adoption of this Agreement and the transactions contemplated hereby. NOW, THEREFORE , in consideration of the foregoing and the mutual covenants and agreements herein contained and intending to be legally bound hereby, the Parent, the Merger Sub and the Company hereby agree as follows:
" Abandonment Notice " means the delivery by Parent to the Holders Representative, at any time after the Effective Time, of a written notice disclosing the Parent's election to henceforth cease development of any and all Contingent Payment Products. " Abandonment Grantback Notice " has the meaning ascribed to such term in Section 6.10(a) hereof. " Accountants " has the meaning ascribed to such term in Section 2.7(k) hereof. " Adverse Recommendation " has the meaning ascribed to such term in Section 7.24(d) hereof. " Affiliate " shall mean, with respect to any person or entity, any person or entity that, directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such person or entity. " Affiliated Group " has the meaning ascribed to it in Section 1504 of the Code, and in addition includes any analogous combined, consolidated or unitary group, as defined under any applicable state, local, or foreign income Tax law. " Agreed Contingent Payment Amount " has the meaning ascribed to such term in Section 2.7(j) hereof. " Agreement " has the meaning ascribed to such term in the introductory paragraph hereof. " Agreement Date " has the meaning ascribed to such term in the introductory paragraph hereof. " Amended Articles " has the meaning ascribed to such term in Section 4.30 hereof. " Application For Marketing Approval " means a new drug application or a biologics license application or any functional equivalent of such an application seeking approval to market a pharmaceutical product in the United States or elsewhere. " Appraiser " has the meaning ascribed to such term in Section 2.7(k) hereof. " Articles of Merger " has the meaning ascribed to such term in Section 2.2 hereof. " Available Closing Cash " means the amount of the Company's and its Subsidiaries' cash that, as of the close of business on the business day immediately preceding the Closing Date, is held on hand by the Company or any of its Subsidiaries or on deposit in any bank account in full compliance with the provisions of Section 6.14 hereof, subject to the following adjustments: (i) minus the aggregate amount of the Company's and its Subsidiaries' uncollected checks or other payment orders or instructions as of the close of business on the business day immediately preceding the Closing Date; and (ii) minus the aggregate amount of any checks or other payment orders or instructions made, given or executed by the Company and its Subsidiaries on the Closing Date; provided , that the amount of any items listed in clauses (ii) or (iii) shall not be a reduction of Available Closing Cash to the extent that such items have been made, given or executed for the purpose of paying one or more Closing Liabilities that resulted in an adjustment of Closing Consideration.
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" Blocking Third Party Patent " has the meaning ascribed to such term in Section 2.7(f) hereof. " Blocking Third Party Patent Application " has the meaning ascribed to such term in Section 2.7(f) hereof. " Board of Managers " has the meaning ascribed to such term in Section 3.7(a) hereof. " Breach Dispute Notice " has the meaning ascribed to such term in Section 6.10(c) hereof. " business day " (whether such term is capitalized or not) means any day (other than Saturday, Sunday or a legal holiday) that banks located in Boston, Massachusetts are open for business. " Buyer Group " means Parent and its direct and indirect Subsidiaries, Affiliates, successors, permitted assignees and permitted licensees of any Compound, any Contingent Payment Product, the Company Program, or any portion of or interest in any of the foregoing, and includes, after the Effective Time, the Surviving Corporation and its Affiliates, successors, permitted assignees and permitted licensees of any Compound, any Contingent Payment Product, the Company Program, or any portion of or interest in any of the foregoing (all of the foregoing being collectively referred to as the " Members of the Buyer Group "). " Capitalization Certificate " has the meaning ascribed to such term in Section 8.3(d)(ii) hereof. " Certificate " or " Certificates " has the meaning ascribed to such term in Section 3.2 hereof. " CERCLA " has the meaning ascribed to such term in Section 4.14(b) hereof. " Closing " has the meaning ascribed to such term in Section 2.2 hereof. " Closing Consideration " means nine million dollars ($9,000,000.00), subject to the following adjustments: (i) minus the aggregate amount of all Closing Liabilities that have not been paid, satisfied or discharged as of the close of business on the business day immediately preceding the Closing Date; and (ii) plus the aggregate amount of all Available Closing Cash. " Closing Date " has the meaning ascribed to such term in Section 2.2 hereof.
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" Closing Liabilities " has the meaning ascribed to such term in Section 2.6(b) hereof. " Code " means the Internal Revenue Code of 1986, as amended. " Commercially Reasonable Efforts " means the level of efforts and resources reasonably appropriate to develop and/or commercialize (as applicable) a Section 6.9 Contingent Payment Product in a sustained manner consistent with the efforts and resources that a similarly situated biopharmaceutical company would typically devote to a product of similar market potential, profit potential, and/or proprietary protection, and similar scientific, technical, development, regulatory and competitive risks, based on market conditions then prevailing; for this purpose, in order to be considered "similarly situated" to Parent and Company, a comparable biopharmaceutical company shall be presumed not to have []*. " Common Warrants " shall mean all outstanding warrants exercisable for shares of Company Common Stock. " Company " has the meaning ascribed to such term in the introductory paragraph hereof. " Company Board " has the meaning ascribed to such term in the recitals hereof. " Company Common Stock " means the Company's common stock, $.0001 par value per share. " Company Disclosure Schedule " has the meaning ascribed to such term in Article 4 hereof. " Company Employee Benefit Plan " has the meaning ascribed to such term in Section 4.13(a) hereof. " Company Grantback Assets " has the meaning ascribed to such term in Section 6.10(a) hereof. " Company Indemnified Party " has the meaning ascribed to such term in Section 9.3 hereof. " Company Intellectual Property " means (i) Company Patents and (ii) all Intellectual Property (other than Company Patents) owned by, or licensed to, the Company. " Company Options " means the issued and outstanding options to purchase shares of Company Common Stock granted under the Company Plan. " Company Patents " means those United States, international and foreign patents and patent applications (including provisional applications), in each case that are listed in Schedule 4.9 of the Company Disclosure Schedule, and any subsequent continuations, continuations-in-part, divisionals, reexaminations, reissues, restorations (together with supplemental protection certificates in Europe), provisions, foreign counterparts and extensions thereof. " Company Plan " means the Company's 2000 Stock Option Plan.
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" Company Preferred Stock " means any or all of the Company's Series A Preferred Stock, $.0001 par value per share and any or all of the Company's Series B Preferred Stock, $.0001 par value per share. " Company Products " has the meaning ascribed to such term in Section 4.25(a) hereof. " Company Program " means all of the Company's programs as currently being conducted, and as currently contemplated to be conducted, by the Company related to the application of the Compound for the treatment of infections caused by HCV. " Company Program Assets " means all assets of the Company used in or related to the Company Program, including, without limitation, (a) any Compound, (b) all patent rights, inventions, know-how, trade secrets, trademarks and other intellectual property rights owned or controlled by the Company that are necessary or useful to carry out such program or to research, develop, make, have made, use, import, export, market, distribute, have distributed, offer to sell, sell and have sold any Compound, and (c) all non-disclosure, invention assignment and non-competition agreements entered into by the Company with its employees and consultants. " Company Program Contract " has the meaning ascribed to such term in Section 4.17(a) hereof. " Company Program Expenditures " means identifiable expenditures specifically related to the development of a Contingent Payment Product with an indication for the treatment of infections caused by HCV (but excluding overhead and other expense allocations not specifically identifiable thereto). " Company Registered Intellectual Property " means those United States, international and foreign: (a) patents and patent applications (including provisional applications); (b) registered trademarks, registered service marks, applications to register trademarks or service marks, intent-to-use applications, or other registrations or applications related to trademarks or service marks; (c) registered copyrights and applications for copyright registration; and (d) registered domain names and applications for domain name registrations, in each case that are owned by or licensed to the Company. " Company Stock " means, as the context may require, any or all of the Company Common Stock and the Company Preferred Stock. " Company Shareholders " has the meaning ascribed to such term in the recitals hereof. " Company's Most Recent Balance Sheet " has the meaning ascribed to such term in Section 4.6 hereof. " Compensation Liabilities " has the meaning ascribed to such term in Section 6.16(b) hereof. " Complementary Technology " has the meaning ascribed to such term in Section 2.7(f) hereof.
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" Compound " means IB657 and any oligoadenylate synthetase protein, []*. " Confidentiality Agreement " has the meaning ascribed to such term in Section 6.11 hereof. " Contingent Consideration " means the aggregate amount that Parent is required to pay, if any, pursuant to, and in accordance with, the provisions of Section 2.7 hereof, to the Holders Representative for the benefit of the Participating Holders. " Contingent Earn-Out Payment " has the meaning ascribed to such term in Section 2.7(b) hereof. " Contingent Earn-Out Payment Amount " means, with respect to all Contingent Payment Products, a payment amount equal to (i) []* of the portion of Net Sales from sales of all Contingent Payment Products, if any, by Buyer Group everywhere in the world during any calendar year after the Effective Time that is less than or equal to []*, plus , (ii) []* of the portion of Net Sales from sales of all Contingent Payment Products, if any, by Buyer Group everywhere in the world during any calendar year after the Effective Time that exceeds []*. " Contingent Earn-Out Payment Year " means each calendar year in which Net Sales of any Contingent Payment Product occur. " Contingent Payment " means any payment resulting from the Contingent Consideration. " Contingent Payment Amount " has the meaning ascribed to such term in Section 2.7(g) hereof. " Contingent Payment Audit " has the meaning ascribed to such term in Section 2.7(h) hereof. " Contingent Payment Audit Period " has the meaning ascribed to such term in Section 2.7(h) hereof. " Contingent Payment Certificate " has the meaning ascribed to such term in Section 2.7(g) hereof. " Contingent Payment Dispute Period " has the meaning ascribed to such term in Section 2.7(h) hereof. " Contingent Payment Product " means any pharmaceutical composition or product that includes a Compound as an active pharmaceutical ingredient, provided that the composition, use, or production of such Compound is the subject of a Valid and Enforceable Claim of a Company Patent, which Company Patent (i) was owned or controlled by the Company immediately prior to the Effective Time, which ownership or control shall be deemed to have included any subsequent continuations, continuations in part, divisionals, reexaminations, reissues, restorations (together with supplemental protection certificates in Europe), provisions, foreign counterparts, and extensions, and (ii) is owned or controlled by Parent or the Surviving Corporation or any of their Affiliates, successors, permitted assignees and permitted licensees at all times following the Effective Time.
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" Corresponding HCV Milestone Payment " means, (i) with respect to HCV Milestone One, the HCV Milestone One Payment, (ii) with respect to HCV Milestone Two, the HCV Milestone Two Payment, (iii) with respect to HCV Milestone Three, the HCV Milestone Three Payment, (iv) with respect to HCV Milestone Four, the HCV Milestone Four Payment, (v) with respect to HCV Milestone Five, the HCV Milestone Five Payment, (vi) with respect to HCV Milestone Six, the HCV Milestone Six Payment, (vii) with respect to HCV Milestone Seven, the HCV Milestone Seven Payment, (viii) with respect to HCV Milestone Eight, the HCV Milestone Eight Payment and (ix) with respect to HCV Milestone Nine, the HCV Milestone Nine Payment. " Corresponding HCV []* Milestone Payment " means, (i) with respect to HCV []* Milestone Four, the HCV []* Milestone Four Payment, (ii) with respect to HCV []* Milestone Five, the HCV []* Milestone Five Payment, (iii) with respect to HCV []* Milestone Six, the HCV []* Milestone Six Payment and (iv) with respect to HCV []* Milestone Seven, the HCV []* Milestone Seven Payment. " Corresponding Non-HCV Milestone Payment " means, (i) with respect to Non-HCV Milestone One, the Non-HCV Milestone One Payment, (ii) with respect to Non-HCV Milestone Two, the Non-HCV Milestone Two Payment, (iii) with respect to Non-HCV Milestone Three, the Non-HCV Milestone Three Payment, (iv) with respect to Non-HCV Milestone Four, the Non-HCV Milestone Four Payment, (v) with respect to Non-HCV Milestone Five, the Non-HCV Milestone Five Payment, (vi) with respect to Non-HCV Milestone Six, the Non-HCV Milestone Six Payment and (vii) with respect to Non-HCV Milestone Seven, the Non-HCV Milestone Seven Payment. " Corresponding Sales-Based Milestone Payment " means, (i) with respect to Sales-Based Milestone One, the Sales-Based Milestone One Payment and (ii) with respect to Sales-Based Milestone Two, the Sales-Based Milestone Two Payment. " CPR " has the meaning ascribed to such term in Section 6.10(c) hereof. " Cure Notice " has the meaning ascribed to such term in Section 6.10(c) hereof. " D&O Policy " has the meaning ascribed to such term in Section 6.8 hereof. " Damages " means all damages, losses, claims, demands, actions, causes of action, diminutions of value, suits, litigations, arbitrations, liabilities, costs, and expenses, including court costs and the reasonable fees and expenses of legal counsel, in each case, regardless of whether relating to a third-party claim. " Delaware Law " means the Delaware General Corporation Law, as amended from time to time. " Dispute Notice " has the meaning ascribed to such term in Section 2.7(i) hereof. " Disputed Contingent Payment Amount " has the meaning ascribed to such term in Section 2.7(j) hereof.
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" Disqualified Shareholder " means (with respect to any securities of the Company) Parent, Merger Sub or any Subsidiary of Parent or Merger Sub or any of their respective Affiliates or any transferees of any such securities of the Company at any time held by any of the foregoing. " Dissenting Shares " means shares of Company Stock that are outstanding immediately prior to the Effective Time of the Merger and which are held by shareholders who shall have not voted in favor of the Merger or consented thereto in writing and who shall have exercised rights of appraisal for such shares of Company Stock in accordance with Washington Law and who, as of the Effective Time, have not effectively withdrawn or lost such dissenters' rights. " dollars " (whether such word is capitalized or not) means United States dollars, the lawful currency of the United States of America. " Effective Time " has the meaning ascribed to such term in Section 2.2 hereof. " Eligible Company Option " has the meaning ascribed to such term in Section 3.1(c) hereof. " EMEA " means the European Medicines Agency of the European Union with headquarters in London, United Kingdom. " Environmental Laws " has the meaning ascribed to such term in Section 4.14(b) hereof. " Environmental Permits " has the meaning ascribed to such term in Section 4.14(f) hereof. " EPA " has the meaning ascribed to such term in Section 4.14(c) hereof. " EPO " means the European Patent Office. " ERISA " has the meaning ascribed to such term in Section 4.13(c) hereof. " Escrow Agent " has the meaning ascribed to such term in Section 2.6(a)(ii) hereof. " Escrow Agreement " has the meaning ascribed to such term in Section 2.6(a)(ii) hereof. " Escrow Deposit Amount " has the meaning ascribed to such term in Section 2.6(a)(ii) hereof. " Escrow Funds " shall mean the aggregate amounts being held by the Escrow Agent in escrow pursuant to the Escrow Agreement. " Facility Leases " means (i) that certain Sublease, dated as of December 1, 2005, by and between the Company and Cell Therapeutics, Inc and (ii) any lease or sublease that the Company may enter into in connection with relocating its operations to a different location from the location specified in the Sublease set forth in clause (i) of this definition. " FDA " means the United States Food and Drug Administration.
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" FDCA " has the meaning ascribed to such term in Section 4.25(a) hereof. " Financial Statements " has the meaning ascribed to such term in Section 4.6 hereof. " First Commercial Sale " means the []* by a Member of the Buyer Group of a Contingent Payment Product []* to a purchaser []* for such sale in whichever country such sale occurs. " First European Commercial Sale " means the []* by a Member of the Buyer Group of a Contingent Payment Product []* to a purchaser []* for such sale []*. " First U.S. Commercial Sale " means the []* by a Member of the Buyer Group of a Contingent Payment Product []* to a purchaser []* for such sale []*. " Fraud Claim " has the meaning ascribed to such term in Section 9.6(a) hereof. " Governmental Authority " means any United States (federal, state or local) or foreign government, or governmental, regulatory or administrative authority, agency or commission. " Governmental Entity " means any government or any agency, bureau, board, commission, court, department, official, political subdivision, tribunal or other instrumentality of any government, whether federal, state or local, domestic or foreign, as well as any corporations owned or chartered by any such governmental agency, bureau, board, commission, court, department, official, political subdivision, tribunal or other instrumentality. " Government Contract " means any Government Prime Contract or Government Subcontract, together with any modifications, amendments or waivers thereto, as to which either (a) any performance is outstanding; (b) the Government has not made final payment; (c) any routine cost audits have not been completed; or (d) there is any outstanding audit, investigation, or dispute. A task order or delivery order is not itself a Government Contract but is a part of the Government Contract under which it was issued. " Government Prime Contract " means any prime contract, basic ordering agreement, letter contract, or purchase order between the Company and any state or the Federal government. " Government Subcontract " means any subcontract, basic ordering agreement, letter subcontract, or purchase order between the Company and any higher-tier contractor with respect to a Government Prime Contract. " Grantback Assets " has the meaning ascribed to such term in Section 6.10(a) hereof. " Grantback Date " means the date upon which Parent grants any and all licenses to the Holders Representative pursuant to Section 6.10(a) or Section 6.10(d), as applicable. " Grantback Licensed Patents " has the meaning ascribed to such term in Section 6.10(f) hereof. " Hazardous Substances " has the meaning ascribed to such term in Section 4.14(c) hereof.
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" HCV " means the hepatitis C virus and all genotypes, strains, quasispecies, and clinical isolates thereof. " HCV First Commercial Sale " has the meaning ascribed to such term in Section 6.9(a) hereof. " HCV Milestone " means any of HCV Milestone One, HCV Milestone Two, HCV Milestone Three, HCV Milestone Four, HCV Milestone Five, HCV Milestone Six, HCV Milestone Seven, HCV Milestone Eight and HCV Milestone Nine. " HCV Milestone One " means the []* by a Member of the Buyer Group of a []*. " HCV Milestone Two " means the []* by a Member of the Buyer Group of a []*. " HCV Milestone Three " means the []* by a Member of the Buyer Group for any Contingent Payment Product that includes treatments of infections caused by HCV []*. " HCV Milestone Four " means []* of any Contingent Payment Product []* with an indication for the treatment of infections caused by HCV. " HCV Milestone Five " means []* of any Contingent Payment Product []* with an indication for the treatment of infections caused by HCV. " HCV Milestone Six " means the []* by a Member of the Buyer Group of an []* any Contingent Payment Product []* with an indication for the treatment of infections caused by HCV. " HCV Milestone Seven " means the []*, by a Member of the Buyer Group of []* any Contingent Payment Product []* with an indication for the treatment of infections caused by HCV. " HCV Milestone Eight " means the []* of a Contingent Payment Product with an indication for treatment of infections caused by HCV. " HCV Milestone Nine " means the []* of a Contingent Payment Product with an indication for treatment of infections caused by HCV. " HCV Milestone Payment " means any of HCV Milestone One Payment, HCV Milestone Two Payment, HCV Milestone Three Payment, HCV Milestone Four Payment, HCV Milestone Five Payment, HCV Milestone Six Payment, HCV Milestone Seven Payment, HCV Milestone Eight Payment and HCV Milestone Nine Payment. " HCV Milestone One Payment " means one million two hundred fifty thousand dollars ($1,250,000.00). " HCV Milestone Two Payment " means one million two hundred fifty thousand dollars ($1,250,000.00).
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" HCV Milestone Three Payment " means three million dollars ($3,000,000.00), provided that if the Non-HCV Milestone One Payment has been made by the Parent prior to the occurrence of HCV Milestone Three, then the " HCV Milestone Three Payment " shall mean zero dollars ($0.00). " HCV Milestone Four Payment " means thirty million dollars ($30,000,000.00), provided that if the HCV []* Milestone Four Payment has been made by the Parent prior to the occurrence of HCV Milestone Four, then the " HCV Milestone Four Payment " shall mean fifteen million dollars ($15,000,000.00). " HCV Milestone Five Payment " means twenty five million dollars ($25,000,000.00), provided that if the HCV []* Milestone Five Payment has been made by the Parent prior to the occurrence of HCV Milestone Five*, then the " HCV Milestone Five Payment " shall mean twelve million five hundred thousand dollars ($12,500,000.00)*. " HCV Milestone Six Payment " means ten million dollars ($10,000,000.00), provided that if the HCV []* Milestone Six Payment has been made by the Parent prior to the occurrence of HCV Milestone Six, then the " HCV Milestone Six Payment " shall mean five million dollars ($5,000,000.00). " HCV Milestone Seven Payment " means five million dollars ($5,000,000.00), provided that if the HCV []* Milestone Seven Payment has been made by the Parent prior to the occurrence of HCV Milestone Seven, then the " HCV Milestone Seven Payment " shall mean two million five hundred thousand dollars ($2,500,000.00). " HCV Milestone Eight Payment " means thirty million dollars ($30,000,000.00). " HCV Milestone Nine Payment " means ten million dollars ($10,000,000.00). " HCV [] * Milestone " means any of HCV []* Milestone Four, HCV []* Milestone Five, HCV []* Milestone Six and HCV []* Milestone Seven. " HCV [] * Milestone Four " means []* of any Contingent Payment Product []* with an indication for the treatment of infections caused by HCV. " HCV []* Milestone Five " means []* of any Contingent Payment Product []* with an indication for the treatment of infections caused by HCV. " HCV []* Milestone Six " means the []* by a Member of the Buyer Group of an []* any Contingent Payment Product []* with an indication for the treatment of infections caused by HCV. " HCV []* Milestone Seven " means the []*, by a Member of the Buyer Group of an []* any Contingent Payment Product []* with an indication for the treatment of infections caused by HCV. " HCV []* Milestone Payment " means any of HCV []* Milestone Four Payment, HCV []* Milestone Five Payment, HCV []* Milestone Six Payment and HCV []* Milestone Seven Payment.
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" HCV []* Milestone Four Payment " means fifteen million dollars ($15,000,000.00), provided that if the HCV Milestone Four Payment has been made by the Parent prior to the occurrence of HCV []* Milestone Four, then the " HCV []* Milestone Four Payment " shall mean zero dollars ($0.00). " HCV []* Milestone Five Payment " means twelve million five hundred thousand dollars ($12,500,000.00), provided that if the HCV Milestone Five Payment has been made by the Parent prior to the occurrence of HCV []* Milestone Five, then the " HCV []* Milestone Five Payment " shall mean zero dollars ($0.00). " HCV []* Milestone Six Payment " means five million dollars ($5,000,000.00), provided that if the HCV Milestone Six Payment has been made by the Parent prior to the occurrence of HCV []* Milestone Six, then the " HCV []* Milestone Six Payment " shall mean zero dollars ($0.00). " HCV []* Milestone Seven Payment " means two million five hundred thousand dollars ($2,500,000.00), provided that if the HCV Milestone Seven Payment has been made by the Parent prior to the occurrence of HCV []* Milestone Seven, then the " HCV []* Milestone Seven Payment " shall mean zero dollars ($0.00). " Holders Representative " means IB Securityholders, LLC, pursuant to its appointment to serve as such under Section 3.7 hereof. " Holders Representative Reimbursement Amount " has the meaning ascribed to such term in Section 2.6(a)(i) hereof. " HSR Act " means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. " IB657 " means the compound known as IB657 that is owned or exclusively licensed by the Company immediately prior to the Effective Time and is being developed by the Company immediately prior to the Effective Time for the treatment of infections caused by HCV. " Indebtedness ," as applied to any person, means (a) all indebtedness of such person for borrowed money, whether current or funded, or secured or unsecured, (b) all indebtedness of such person for the deferred purchase price of property or services represented by a note or other security, (c) all indebtedness of such person created or arising under any conditional sale or other title retention agreement (even if the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of specific property), (d) all indebtedness of such person secured by a purchase money mortgage or other Lien to secure all or part of the purchase price of property subject to such mortgage or other Lien, (e) all accounts payable, notes payable and accrued expenses of such person, (f) all indebtedness or liabilities of such person that would be required to be reflected on a balance sheet or referred to in the notes thereto in accordance with generally accepted accounting principles, (g) all indebtedness, liabilities or obligations of such person that are identified in Schedule 4.10 of the Company Disclosure Schedule as "Indebtedness," if any, (h) all other obligations of such person under leases that have been or must be, in accordance with generally accepted accounting principles, recorded as capital leases in respect of which such person is liable as lessee, (i) any liability of such person in respect of banker's acceptances or letters of credit, and (j) all indebtedness referred to in clauses (a), (b), (c), (d), (e), (f), (g), (h) or (i) hereof that is directly or indirectly guaranteed by such person or which such person has agreed (contingently or otherwise) to purchase or otherwise acquire or in respect of which such person has otherwise assured a creditor against loss.
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" Indemnified Party " has the meaning ascribed to such term in Section 9.4 hereof. " Indemnifying Party " has the meaning ascribed to such term in Section 9.4 hereof. " Initial Press Release " has the meaning ascribed to such term in Section 11.15 hereof. " Intellectual Property " means any or all of the following and all rights in, arising out of, or associated therewith: (a) all United States, international and foreign patents and applications thereof and all reissues, divisions, renewals, extensions, provisionals, continuations and continuations-in-part thereof; (b) all inventions (whether patentable or not), invention disclosures, improvements, drug candidates, trade secrets, proprietary information, know how, technology, technical data and customer lists, and all documentation relating to any of the foregoing; (c) all copyrights, copyright registrations and applications therefor, and all other rights corresponding thereto throughout the world; (d) all industrial designs and any registration and applications therefor throughout the world; (e) all trade names, logos, common law trademarks and service marks, trademark and service mark registration and applications therefor throughout the world; (f) all databases and data collections and all rights therein throughout the world; and (g) any similar or equivalent rights to any of the foregoing everywhere in the world. " IRB " has the meaning ascribed to such term in Section 4.25(d) hereof. " IRS " has the meaning ascribed to such term in Section 4.13(b) hereof. " knowledge ," when used to qualify a representation or warranty in this Agreement, has the following meaning: Where a representation or warranty is made to the Company's knowledge, or with a similar qualification, the Company will be conclusively deemed to have knowledge of any matter with respect to which any of Charles Magness, Shawn Iadonato or Donald Elmer has actual knowledge or which a reasonable investigation of facts or information in the possession of any of the Company's employees, attorneys or agents, including but not limited to, any information contained in the patent searches described on Schedule 4.9(k) of the Company Disclosure Schedule, prior to the Effective Time would have disclosed to any of them. Where a representation or warranty is made to the Parent's knowledge, or with a similar qualification, Parent will be conclusively deemed to have knowledge of any matter with respect to which Parent's Chief Executive Officer, Chief Financial Officer, General Counsel, Senior Vice President of Research and Development and Corporate Development or Senior Vice President of Commercial Operations has actual knowledge or which a reasonable investigation of facts or information in the possession of any employee, attorney or agent of Parent (or any of its Subsidiaries or controlled Affiliates) prior to the Effective Time would have disclosed to any of them.
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" Liens " means any and all liens, claims, mortgages, security interests, pledges, options, rights of first offer or refusal, charges, encumbrances, limitations on voting rights, and restrictions on transfer of any kind, except (i) in the case of references to securities, those arising under applicable securities laws solely by reason of the fact that such securities were issued pursuant to exemptions from registration under such securities laws, (ii) mechanic's, materialmen's and similar liens, (iii) liens for Taxes not yet due and payable and (iv) liens arising under worker's compensation, unemployment insurance, social security, retirement and similar legislation. " LLC Agreement " shall mean the Limited Liability Company Agreement of IB Securityholders, LLC dated December 21, 2007 in the form attached hereto as Exhibit B . " Lost Certificate or Document Affidavit " has the meaning ascribed to such term in Section 3.4 hereof. " Material Adverse Effect " means (a) with respect to the Company any change or effect that, when taken individually or together with all other similar or related adverse changes or effects, is or is reasonably likely to be materially adverse to the business, results of operations and financial condition of the Company and its Subsidiaries, taken as a whole, or to adversely affect the ability of the Company to consummate the transactions contemplated hereby, and (b) with respect to Parent any change or effect that, when taken individually or together with all other similar or related adverse changes or effects, is or is reasonably likely to be materially adverse to the business, results of operations and financial condition of Parent and its Subsidiaries, taken as a whole, or to adversely affect the ability of the Parent or the Merger Sub to consummate the transactions contemplated hereby, except, in each case of (a) and (b) above, for any such changes or effects resulting from or arising as a result of (i) changes in general political or geopolitical conditions, (ii) changes in the healthcare, pharmaceutical or biotechnology industries generally, or (iii) changes generally applicable to the economy or securities market in the United States or the world economy or international securities markets, unless in any such instance such change described in (i), (ii) or (iii) above impacts the Company or Parent, as the case may be, in a materially disproportionate manner relative to the majority of other similar entities impacted by such change. A decline or any fluctuation in the trading price or prices of Parent Common Stock shall in no event constitute a Material Adverse Effect with respect to Parent. " Material Contract " has the meaning ascribed to such term in Section 4.17(a) hereof. " Maximum Amount " has the meaning ascribed to such term in Section 6.8 hereof. " Member of the Buyer Group " has the meaning ascribed to such term in the definition of " Buyer Group " hereof. " Merger " has the meaning ascribed to such term in the recitals hereof. " Merger Certificate " has the meaning ascribed to such term in Section 2.2 hereof. " Merger Consideration " means, collectively, the Closing Consideration, the Contingent Consideration and any amounts distributed pursuant to Section 2.6(c).
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" Merger Consideration Certificate " has the meaning ascribed to such term in Section 2.6(b) hereof. " Merger Documents " has the meaning ascribed to such term in Section 2.2 hereof. " Merger Sub " has the meaning ascribed to such term in the introductory paragraph hereof. " Net Sales " means, with respect to a Contingent Payment Product, gross revenues recorded by Parent and gross revenues recorded by all other Members of the Buyer Group in the aggregate during any calendar year (or portion of a calendar year as to which Contingent Earn-Out Payments may be due under Section 2.7(b)) arising from sales of such Contingent Payment Product in all countries of the world, except to the extent otherwise provided below in this definition and subject to certain deductions specified further below. Net Sales shall be computed in accordance with generally accepted accounting principles as prescribed for application by publicly traded companies in the United States, but in any case such gross revenues shall be reduced by the following amounts to the extent applicable with respect to any sale to a particular customer that is not a Member of the Buyer Group: applicable fees; discounts; refunds; rebates; replacement or other credits allowed for return of product or as reimbursement for damaged product; freight and other shipping charges not borne by the customer; customs duties; sales and use taxes, value added taxes (VAT) and any other governmental tax or charge (except income taxes) imposed on or at the time of the importation, exportation, use, transportation, or sale of product to a particular customer, to the extent not borne by that customer. " Net Sales " shall not, however, include (A) gross revenues with respect to sales of any Contingent Payment Product that (i) are recorded by any Member of the Buyer Group in a country where such sales by a person who is not a Member of the Buyer Group would not infringe a Valid and Enforceable Claim of an issued patent in such country that is within the definition of Company Patents, and (ii) either (x) []* or (y) arise after the time at which there is a generic or unlicensed version or equivalent of such Contingent Payment Product that has been lawfully marketed or received governmental marketing approval in such country, (B) gross revenues with respect to sales of any Contingent Payment Product for non-commercial use in any country of the world, including sales for compassionate use or for research, pre-clinical development or clinical development, or (C) gross revenues with respect to sales of any Contingent Payment Product by any member of the Buyer Group to any other member of the Buyer Group in any country of the world if such sales are for re-sale or re-transfer purposes or for purposes of manufacturing or packaging a product for re-sale or re-transfer. If a Contingent Payment Product is sold in combination with other products or other components proprietary to the Buyer Group, then " Net Sales " shall be based on the []*. " Non-Compliance Grantback Notice " has the meaning ascribed to such term in Section 6.10(d) hereof. " Non-Compliance Grantback " has the meaning ascribed to such term in Section 6.10(d) hereof.
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" Non-Compliance Notice " has the meaning ascribed to such term in Section 6.10(b) hereof. " Non-HCV Indication " means any indication for treatment other than an indication for treatment of infections caused by HCV. " Non-HCV Milestone " means any of Non-HCV Milestone One, Non-HCV Milestone Two, Non-HCV Milestone Three, Non-HCV Milestone Four, Non-HCV Milestone Five, Non-HCV Milestone Six and Non-HCV Milestone Seven. " Non-HCV Milestone One " means the []* by a Member of the Buyer Group of an []* for any Contingent Payment Product that includes treatment of a Non-HCV Indication []*. " Non-HCV Milestone Two " means []* of any Contingent Payment Product for the treatment of a Non-HCV Indication. " Non-HCV Milestone Three " means []* of any Contingent Payment Product for the treatment of a Non-HCV Indication. " Non-HCV Milestone Four " means the []* by a Member of the Buyer Group of an []* any Contingent Payment Product with a Non-HCV Indication. " Non-HCV Milestone Five " means []* by a Member of the Buyer Group with the []*, of an []* any Contingent Payment Product with a Non-HCV Indication. " Non-HCV Milestone Six " means []* by a Member of the Buyer Group of []* or its functional equivalent with respect to any Contingent Payment Product for the treatment of a Non-HCV Indication. " Non-HCV Milestone Seven " means []* by a Member of the Buyer Group of []*, with respect to any Contingent Payment Product for the treatment of a Non-HCV Indication. " Non-HCV Milestone Payment " means any of Non-HCV Milestone One Payment, Non-HCV Milestone Two Payment, Non-HCV Milestone Three Payment, Non-HCV Milestone Four Payment, Non-HCV Milestone Five Payment, Non-HCV Milestone Six Payment and Non-HCV Milestone Seven Payment. " Non-HCV Milestone One Payment " means three million dollars ($3,000,000.00), provided that if the HCV Milestone Three Payment has been made by the Parent prior to the occurrence of Non-HCV Milestone One, then the " Non-HCV Milestone One Payment " shall mean zero dollars ($0.00). " Non-HCV Milestone Two Payment " means (i) thirteen million dollars ($13,000,000.00) upon the first occurrence, if any, of Non-HCV Milestone Two and (ii) six million five hundred thousand dollars ($6,500,000.00) upon the second occurrence, if any, of Non-HCV Milestone Two. " Non-HCV Milestone Three Payment " means (i) twenty million dollars ($20,000,000.00) upon the first occurrence, if any, of Non-HCV Milestone Three and (ii) ten million dollars ($10,000,000.00) upon the second occurrence, if any, of Non-HCV Milestone Three.
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" Non-HCV Milestone Four Payment " means (i) ten million dollars ($10,000,000.00) upon the first occurrence, if any, of Non-HCV Milestone Four and (ii) five million dollars ($5,000,000.00) upon the second occurrence, if any, of Non-HCV Milestone Four. " Non-HCV Milestone Five Payment " means (i) five million dollars ($5,000,000.00) upon the first occurrence, if any, of Non-HCV Milestone Five and (ii) two million five hundred thousand dollars ($2,500,000.00) upon the second occurrence, if any, of Non-HCV Milestone Five. " Non-HCV Milestone Six Payment " means (i) twenty million dollars ($20,000,000.00) upon the first occurrence, if any, of Non-HCV Milestone Six and (ii) ten million dollars ($10,000,000.00) upon the second occurrence, if any, of Non-HCV Milestone Six. " Non-HCV Milestone Seven Payment " means (i) ten million dollars ($10,000,000.00) upon the first occurrence, if any, of Non-HCV Milestone Seven and (ii) five million dollars ($5,000,000.00) upon the second occurrence, if any, of Non-HCV Milestone Seven. " Option Agreement " means that certain letter agreement between Parent and the Company dated as of October 15, 2007. " Outside Date " has the meaning ascribed to such term in Section 10.1(g) hereof. " Parent " has the meaning ascribed to such term in the introductory paragraph hereof. " Parent Disclosure Schedule " has the meaning ascribed to such term in Article 5 hereof. " Parent Grantback Assets " has the meaning ascribed to such term in Section 6.10(a) hereof. " Parent Grantback Work Product " has the meaning ascribed to such term in Section 6.10(a) hereof. " Parent Indemnified Parties " has the meaning ascribed to such term in Section 9.2 hereof. " Participating Holders " means those persons (other than the holders of Dissenting Shares, the Company, any Disqualified Shareholder or any Subsidiary of the Company) who, immediately prior to the Effective Time of the Merger, were holders of shares of Company Common Stock or Company Preferred Stock or holders of Common Warrants or Eligible Company Options, and whose interests therein, as the result of the Merger, are converted into the right to receive a portion of the Merger Consideration. " person " (whether such term is capitalized or not) means an individual, corporation, partnership, limited partnership, limited liability company, syndicate, person (including a "person" as defined in Section 13(d)(3) of the Exchange Act), trust, association or entity or government, political subdivision, agency or instrumentality of a government.
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" Personnel " has the meaning ascribed to such term in Section 6.16(a) hereof. " Phase I " means a clinical trial, either singular or one of several such clinical trials, intended to provide an initial evaluation of the safety, pharmacokinetic and/or pharmacological effects of a Contingent Payment Product in human subjects, either healthy or diseased, and to gather sufficient information about the drug's pharmacokinetics and pharmacological effects to permit the design of a well-controlled, scientifically valid, Phase II study; provided that for certain indications, administration to diseased patients may be required, necessary or useful in order for such trial to provide an indication of activity or effectiveness and in such instance(s) such a trial shall nonetheless be deemed " Phase I ". " Phase II " means a clinical trial, either singular or one of several such clinical trials, usually but not always conducted after the completion of a Phase I trial, intended to evaluate the effectiveness and/or side effects and risks of a Contingent Payment Product in human subjects, and to gather sufficient information about the drug's effectiveness and/or side effects and risks to permit the design of a well-controlled, scientifically valid, Phase III study. " Phase III " means a clinical trial, usually but not always conducted after the completion of a Phase II trial, that is intended to gather additional information as to the effectiveness and safety of a Contingent Payment Product in human subjects, in order to evaluate the overall benefits and risks of such Contingent Payment Product and to provide an adequate basis for physician labeling. " Post-Approval Notice " has the meaning ascribed to such term in Section 6.5 hereof. " Preferred Stock Closing Amount " has the meaning ascribed to such term in Section 2.6(a)(iii) hereof. " Presumed Breach Events " has the meaning ascribed to such term in Section 6.9(b) hereof. " PTO " means the United States Patent and Trademark Office. " RCRA " has the meaning ascribed to such term in Section 4.14(b) hereof. " Reimbursable Expenses " has the meaning ascribed to such term in Section 2.6(a)(i) hereof. " Required Shareholder Approval " has the meaning ascribed to such term in Section 4.30 hereof. " Rights Documents " has the meaning ascribed to such term in Section 3.2(a) hereof. " Sales-Based Milestone " means any of Sales-Based Milestone One and Sales-Based Milestone Two. " Sales-Based Milestone One " means the first occurrence of Net Sales of Contingent Payment Products in excess of []* after the Effective Time.
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" Sales-Based Milestone Two " means the first occurrence of Net Sales of Contingent Payment Products in excess of []* after the Effective Time other than the year in which the Sales-Based Milestone One occurs. " Sales-Based Milestone One Payment " means thirty million dollars ($30,000,000.00). " Sales-Based Milestone Two Payment " means seventy million dollars ($70,000,000.00). " Sales-Based Milestone Payment " means any of Sales-Based Milestone One Payment and Sales-Based Milestone Two Payment. " SARA " has the meaning ascribed to such term in Section 4.14(b) hereof. " SEC " has the meaning ascribed to such term in Section 5.4 hereof. " Section 6.9 Contingent Payment Product " means any Contingent Payment Product that includes Section 6.9 IB657 as an active pharmaceutical ingredient and that is being developed for the treatment of infections caused by HCV as an indication. " Section 6.9 IB657 " means []*. " Securities Act " means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder. " Services Agreement " means the services agreement between Parent and ServicesCo substantially in the form of Exhibit C attached hereto. " ServicesCo " shall mean Lecura, Inc., a Washington corporation. " Subsidiary " or " Subsidiaries " (whether or not capitalized) of any person means (i) any corporation, or other legal entity of which such person (either above or through or together with any other Subsidiary or Subsidiaries), owns, directly or indirectly, more than 50% of the stock or other equity interests the holders of which are generally entitled to vote for the election of the board of directors or other governing body of such corporation or other legal entity or (ii) any partnership, limited partnership, limited liability company, joint venture, association, trust, or other entity in which such person (directly or indirectly through another Subsidiary or Subsidiaries) holds more than 50% of the equity interests the holders of which are generally entitled to vote for the election of the governing body of such legal entity. " Superior Proposal " has the meaning ascribed to such term in Section 7.24(a) hereof. " Surviving Corporation " has the meaning ascribed to such term in the recitals hereof. " Surviving Corporation Articles " has the meaning ascribed to such term in Section 2.4(a) hereof. " Takeover Proposal " has the meaning ascribed to such term in Section 7.24(a) hereof.
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" Tax " or " Taxes " (and with correlative meaning, " Taxable " and " Taxing ") means any federal, state, local, or non-United States income, gross receipts, franchise, estimated, alternative minimum, add-on minimum, sales, use, transfer, registration, value added, import value added, excise, export, natural resources, severance, stamp, occupation, premium, windfall profit, environmental, customs, duties, real property, personal property, capital stock, net worth, intangibles, social security, pension insurance contributions, unemployment, disability, payroll, license, employee, withholding tax, including, but not limited to, on salaries and wages, or other tax or levy or contribution, of any kind whatsoever, including any interest, penalties, special charges or additions to tax in respect of the foregoing. " Tax Return " means any return, declaration, report, claim for refund, information return or other document (including any related or supporting estimates, elections, schedules, statements or information) filed or required to be filed in connection with the determination, assessment or collection of any Tax or the administration of any laws, regulations or administrative requirements relating to any Tax. " Taxation Authority " means any Governmental Authority having any responsibility for (a) the determination, assessment or collection or payment of any Tax, or (b) the administration, implementation or enforcement of or compliance with any law relating to any Tax. " Third Party Consideration Claim " has the meaning ascribed to such term in Section 9.2 hereof. " Third Party Payment " has the meaning ascribed to such term in Section 2.7(d) hereof. " Third Party Payment Offset " has the meaning ascribed to such term in Section 2.7(d) hereof. " Threshold Amount " has the meaning ascribed to such term in Section 9.6(a) hereof. " Transaction Expenses " means all expenses of each of the Company, its Subsidiaries and the Participating Holders incurred by the Company or any of its Subsidiaries in connection with the preparation, execution and consummation of this Agreement, the transactions contemplated hereby and the Closing, including all fees and disbursements of attorneys, accountants and other advisors (including, but not limited to, P2 Partners, LLC) and service providers of the Participating Holders or the Company or any of its Subsidiaries. " Valid and Enforceable Claim " means (i) a claim of any issued patent which has not expired, lapsed, or been held invalid, unpatentable or unenforceable by court or other authority of competent jurisdiction in the issuing country in a decision which is not subject to pending appeal or was not or is no longer appealable, or (ii) a claim in any pending patent application which has not been the subject of a final rejection notice from which an appeal cannot be taken or with respect to which the applicable period of appeal has expired. " Washington Law " means the Business Corporation Act of the State of Washington (Title 23B of the Revised Code of Washington), as amended from time to time.
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2.1 The Merger. Subject to the other terms and conditions of this Agreement, including those set forth in Article 8 hereof, and in accordance with Washington Law and Delaware Law, at the Effective Time (as defined below), Merger Sub shall be merged with and into the Company. As a result of the Merger, the separate corporate existence of Merger Sub shall cease and the Company shall continue as the surviving corporation of the Merger. 2.2 Consummation of the Merger; Effective Time. Subject to the fulfillment or waiver of all of the conditions contained in Article 8, as soon as is reasonably practicable after, but in no event later than, the fifth business day following the fulfillment or waiver of such conditions, a closing (the " Closing ") will be held at the offices of Bingham McCutchen LLP in Boston, Massachusetts (or such other place as the parties may agree). The date on which the Effective Time (as defined below) occurs is referred to herein as the " Closing Date ." On the Closing Date, Parent, Merger Sub and the Company shall cause the Merger to be consummated by filing (i) with the Secretary of State of the State of Delaware a certificate of merger, substantially in the form of Exhibit D-1 hereto, executed in accordance with the relevant provisions of Delaware Law (the " Merger Certificate ") and (ii) with the Secretary of State of the State of Washington articles of merger, substantially in the form of Exhibit D-2 hereto, executed in accordance with the relevant provisions of Washington Law (the " Articles of Merger " and together with the Merger Certificate, the " Merger Documents "). The term " Effective Time " means the later of the date and time of the filing of the Merger Documents with (i) the Secretary of State of the State of Delaware and (ii) the Secretary of State of the State of Washington, as applicable (or such later time as may be agreed by each of the parties hereto and specified in the Merger Documents in accordance with Delaware Law and Washington Law, as applicable). 2.3 Effect of the Merger. At the Effective Time, the effect of the Merger shall be as provided in this Agreement, the Merger Documents and as provided by the applicable provisions of Delaware Law and Washington Law. Without limiting the generality of the foregoing, and subject thereto, upon the consummation of the Merger, all the property (including, but not limited to, the Company Program Assets and all related Intellectual Property and licenses to Intellectual Property), rights, privileges, powers and franchises of the Company and the Merger Sub shall remain vested in the Surviving Corporation, and, subject to this Agreement, all debts, liabilities, obligations, restrictions, disabilities and duties of each of those corporations shall continue to be the debts, liabilities, obligations, restrictions, disabilities and duties of the Surviving Corporation. 2.4 Charter; Bylaws.
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2.5 Directors and Officers. The directors of the Merger Sub immediately prior to the Effective Time shall be the initial directors of the Surviving Corporation, each to hold office in accordance with the Surviving Corporation Articles and the bylaws of the Surviving Corporation, and until their respective successors are duly elected and qualified or until their earlier death, disability, resignation or removal. The officers of the Merger Sub immediately prior to the Effective Time shall be the initial officers of the Surviving Corporation, in each case until their respective successors are duly elected or appointed and qualified or until their earlier death, disability, resignation or removal. 2.6 Closing Date Consideration.
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2.7 Contingent Consideration.
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Appraiser in the course of the dispute proceeding, is discovered by the Holders Representative after the completion of any determination by an Appraiser, and such material fact, if taken into account in the calculation of the applicable Contingent Payment Amount, would have resulted in an increase in such Contingent Payment Amount. The fees and expenses of the Appraiser shall be paid by the party who demands submission of the dispute to appraisal; provided , that if any Contingent Payment Amount calculated on the basis of matters determined by the Appraiser in any examination conducted pursuant to this Section 2.7(k) is greater than the corresponding Contingent Payment Amount set forth on the relevant Contingent Payment Certificate by an amount equal to more than the greater of (i) []* or (ii) five percent (5%) of the Contingent Payment Amount set forth in the relevant Contingent Payment Certificate, then Parent shall pay all of the fees and expenses of the Appraiser; all reasonable out-of-pocket costs and expenses actually incurred by the Holders Representative in connection with such Contingent Payment Audit; and if any final Contingent Payment Amount calculated on the basis of matters determined by the Appraiser in any examination conducted pursuant to this Section 2.7(k) is less than the corresponding Contingent Payment Amount set forth on the relevant Contingent Payment Certificate, then (x) Holders Representative shall pay all of the reasonable out-of-pocket costs and expenses actually incurred by Parent in connection with such Contingent Payment Audit and (y) Parent shall be entitled to offset the difference between the Contingent Payment Amount set forth on the relevant Contingent Payment Certificate and such lesser amount against any and all amounts that Parent would otherwise be required to pay pursuant to this Section 2.7 (after giving effect to any other adjustments thereto pursuant to this Section 2.7). For purposes of clarification, any dispute over any matter relevant to any Contingent Payment Amount that the Appraiser is not authorized to determine pursuant to the foregoing provisions of this Section 2.7(k) shall fall within the purview of the dispute resolution mechanics contemplated by Section 11.13 hereof.
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ARTICLE 3 3.1 Conversion of Securities.
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shares of Company Common Stock so converted shall cease to have any rights with respect thereto, except the right to receive the consideration set forth in this Section 3.1(a) following the surrender of such certificate in accordance with the provisions of Sections 3.1 and 3.2 hereof and Section 3.1 of the LLC Agreement.
All shares of Company Preferred Stock (other than Dissenting Shares), when so converted pursuant to this Section 3.1(b), shall no longer be outstanding and shall automatically be cancelled and cease to exist, and each holder of a certificate representing any share of Company Preferred Stock so converted shall cease to have any rights with respect thereto, except the right to receive the consideration set forth in this Section 3.1(b) following the surrender of such certificate in accordance with Sections 2.6(d), 3.1 and 3.2 hereof.
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Option Notice and Termination Agreement attached as Exhibit B to the LLC Agreement, a portion of any Contingent Consideration that may be paid or become payable by the Parent to the Holders Representative, such portion to be determined in accordance with the provisions of Section 3.1 of the LLC Agreement; and (iv) terminate all unvested Company Options without consideration. Notwithstanding the foregoing, the portion of the Contingent Consideration, if any, that any holder of an Eligible Company Option shall be entitled to receive in exchange for such Eligible Company Option shall be reduced by the total amount (including all principal and interest), if any, owed by such holder to the Company under any promissory note outstanding at the Effective Time that was made by such holder to the Company in connection with the exercise of any such Eligible Company Option. All Company Options, when terminated as contemplated under this Section 3.1(c), shall no longer be outstanding and shall automatically cease to exist, and each holder of a Company Option shall cease to have any rights with respect thereto, except the right to receive the consideration set forth in this Section 3.1(c) with respect to any Company Option that is an Eligible Company Option.
3.2 Exchange of Certificates and Instruments.
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and collectively the " Certificates ") and the grant and other documents evidencing any Eligible Company Options or Common Warrants (the " Rights Documents ") held by such Participating Holder, or Lost Certificate or Document Affidavits pursuant to Section 3.4 hereof. Pursuant to Section 2.6(d), the receipt by Parent and the Holders Representative of such transmittal letter and the Certificates for outstanding shares of Company Preferred Stock shall be a condition precedent to the delivery by Parent to holders of any such shares of Company Preferred Stock of any portion of the Preferred Stock Closing Amount to which such Participating Holder may be entitled under Sections 2.6(a) and 2.6(d) of this Agreement in respect of the shares of Company Preferred Stock held by such Participating Holder. Pursuant to Section 3.1 of the LLC Agreement, the receipt by Parent and the Holders Representative of such transmittal letter and the Certificates and Rights Documents for all other shares of Company Stock, Eligible Company Options or Common Warrants held by any Participating Holder shall be a condition precedent to the distribution by the Holders Representative of any portion of the Contingent Consideration to which such Participating Holder may be or become entitled under Sections 2.7(a) or 2.7(b) of this Agreement. Whether or not surrendered as contemplated by this Section 3.2(a), each Certificate and Rights Document shall be deemed at any time after the Effective Time to represent only the right to receive following such surrender the applicable amounts of the Merger Consideration payable with respect thereto pursuant to this Agreement and Section 3.1 of the LLC Agreement. The transmittal materials contemplated by this Section 3.2(a) may include any certifications Parent may request with respect to compliance with any withholding obligations of Parent or the Surviving Corporation under the Code or other applicable Tax law.
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3.3 No Transfers.
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3.4 Lost Certificates, Etc. In the event that any Certificate or Rights Document has been lost, stolen, or destroyed, then upon receipt by Parent or the Holders Representative, as applicable, of appropriate evidence as to such loss, theft, or destruction, and to the ownership of such Certificate or Rights Document by the person claiming such Certificate or Rights Document to be lost, stolen, or destroyed, the receipt by Parent or the Holders Representative, as applicable, (or their designees) of an affidavit (a " Lost Certificate or Document Affidavit ") with appropriate and customary indemnification and the surrender pursuant to Section 3.2(a) hereof by such person of all other Certificates and Rights Documents registered in the name of such person that have not been lost, stolen, destroyed or previously surrendered, then such person shall be entitled to receive the appropriate portion of the Merger Consideration pursuant to the provisions of Sections 2.6 and 2.7 hereof and Section 3.1 of the LLC Agreement. 3.5 No Interest. Except as otherwise provided in Section 2.7(l), no interest shall be paid or shall accrue on the Merger Consideration or any portion thereof payable by Parent or the Holders Representative pursuant to, and in accordance with, the provisions of this Agreement or the LLC Agreement. 3.6 Dissenting Shares.
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and in accordance with, the provisions of Article 9 hereof in connection with any Damages suffered or incurred by Parent in connection with such exercise of appraisal rights (other than costs incurred by Parent as a result of participation at its own expense, as described above). 3.7 Holders Representative.
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negligence. The death or incapacity, or dissolution or other termination of existence, of any Participating Holder shall not terminate the authority and agency of the Holders Representative. By virtue of the adoption of this Agreement and the approval of the Merger by the shareholders of the Company, each Participating Holder (regardless of whether or not such Participating Holder votes in favor of the adoption of this Agreement and the approval of the Merger, whether at a meeting or by written consent in lieu thereof) hereby agrees to the provisions of this Agreement, including, without limitation, the provisions of this Section 3.7 and Article 9 hereof.
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ARTICLE 4 The Company hereby represents and warrants to Parent, the Merger Sub and the Surviving Corporation as follows as of each of (a) the Agreement Date and (b) the Closing Date, subject in each case to such exceptions as are set forth in the Company's disclosure schedule attached to this Agreement which disclosure schedule complies with Section 11.5 hereof (the " Company Disclosure Schedule "): 4.1 Incorporation; Authority. The Company is a corporation duly organized, validly existing, and in good standing under the laws of the State of Washington and has all requisite corporate power and authority to own or lease and operate its properties and to carry on its business as presently conducted and as presently proposed to be conducted. The Company is duly qualified to transact business and is in good standing in each jurisdiction where such qualification is required and in which failure to so qualify would have a Material Adverse Effect on the Company. The Company has delivered to Parent complete and correct copies of its articles of incorporation and by-laws, in each case with all amendments thereto, which articles of incorporation and by-laws are in full force and effect. 4.2 Authorization and Enforceability. The Company has all requisite corporate power to enter into this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of the Company, subject only to the approval of the Merger and the adoption of this Agreement by the Company's shareholders. The Company Board has (i) approved and declared the advisability of this Agreement and the transactions contemplated hereby and (ii) determined that the Merger is in the best interests of the shareholders of the Company and is on terms that are fair to such shareholders. This Agreement has been duly executed and delivered by the Company and constitutes the valid and binding obligation of the Company, enforceable in accordance with its terms, except as such enforcement may be limited by (i) the effect of bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors' rights, or (ii) the rules governing the availability of specific performance, injunctive relief or other equitable remedies and general principles of equity, regardless of whether considered in a proceeding in law or equity. 4.3 Governmental and Other Third-Party Consents, Non-Contravention, Etc. No consent, approval, order or authorization of, or registration, qualification, designation, declaration or filing with, any federal, state or local governmental authority on the part of the Company is required in connection with the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby, except for (i) the filing of Merger Documents with the Delaware Secretary of State and Washington Secretary of State, as applicable; and (ii) such other consents, authorizations, filings, approvals and registrations which, if not obtained or made, would not have a Material Adverse Effect on the Company and would not prevent, or materially alter or delay any of the transactions contemplated by this Agreement. The execution, delivery, and performance of this Agreement and the consummation of such transactions will not violate (a) any provision of the Company's articles of incorporation or by-laws, as amended and in effect at the Effective Time, (b) any order, judgment, injunction, award or decree of any court or state or federal governmental or regulatory body applicable to the Company, or (c) any judgment, decree, order, statute, rule, regulation, agreement, instrument, or other obligation to which the Company is a party or by or to which it or any of its assets is bound or subject, which violation will not have a Material Adverse Effect on the Company.
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4.4 Capitalization. The authorized and outstanding capital stock and other securities of the Company are as set forth in Schedule 4.4 of the Company Disclosure Schedule including (1) the total number of shares of Company Common Stock for which all shares of Company Preferred Stock outstanding immediately prior to the Effective Time are then convertible in the aggregate, (2) the number of shares of Company Common Stock for which each share of Company Preferred Stock outstanding immediately prior to the Effective Time is then convertible, (3) the total number of shares of Company Common Stock issued and outstanding immediately prior to the Effective Time, (4) a list of each Eligible Company Option and each Common Warrant, the exercise price per share thereof, the aggregate exercise price thereof and the name of the holder thereof, (5) the number of shares of Company Common Stock issuable upon exercise of the Common Warrants immediately prior to the Effective Time, (6) the total number of shares of Company Common Stock issuable upon exercise of all Eligible Company Options, |
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