TABLE OF CONTENTS

 

ARTICLE 1	DEFINITIONS	1
1.1	Definitions	1
ARTICLE 2	PURCHASE AND SALE OF THE NOTE	10
2.1	Purchase and Sale of the Note	10
2.2	Closing	10
2.3	Use of Proceeds	10
2.4	Purchaser Deliveries	10
2.5	Company Deliveries	11
ARTICLE 3	REPRESENTATIONS AND WARRANTIES OF THE COMPANY	12
3.1	Corporate Existence and Power	12
3.2	Subsidiaries	12
3.3	Corporate Authorization; No Contravention	13
3.4	Governmental Authorization; Third Party Consents	14
3.5	Binding Effect	14
3.6	Capitalization of the Company and its Subsidiaries	14
3.7	SEC Documents; Sarbanes-Oxley Compliance	15
3.8	Absence of Certain Developments	16
3.9	No Undisclosed Liabilities	17
3.10	Compliance with Laws	17
3.11	Litigation	18
3.12	Material Contracts	18
3.13	Environmental	19
3.14	Taxes	21
3.15	Title to Property and Assets; Leases	21
3.16	Compliance with ERISA	23
3.17	Labor Relations; Employees	24
3.18	Regulatory Matters	25
3.19	Insurance	26
3.20	Intellectual Property	26
3.21	Affiliate Transactions	28
3.22	Investment Company Act	28
3.23	Board Approval	28
3.24	Conversion Shares	29
3.25	No Brokers or Finders	29
3.26	Disclosure	29
ARTICLE 4	REPRESENTATIONS AND WARRANTIES OF THE PURCHASER	29
4.1	Existence and Power	29
4.2	Authorization; No Contravention	30

 

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4.3	Governmental Authorization; Third Party Consents	30
4.4	Binding Effect	30
4.5	Purchase for Own Account, Etc	30
4.6	No Brokers or Finders	31
4.7	Litigation	31
ARTICLE 5	COVENANTS OF THE COMPANY	31
5.1	Conduct of Business	31
5.2	No Solicitation	34
5.3	Regulatory Approval; Litigation	36
5.4	Access; Information Rights	37
5.5	Notice to Stockholders	39
ARTICLE 6	OTHER AGREEMENTS	39
6.1	Preemptive Rights	39
6.2	Registration Rights	40
6.3	Rule 144	40
6.4	Availability of Common Stock	40
6.5	No Rights Plan	40
6.6	Legends	40
6.7	Board of Directors	40
6.8	Takeover Statutes	41
6.9	Amendments to the Certificate of Incorporation	41
6.10	Imagify Product	42
ARTICLE 7	CONDITIONS PRECEDENT TO THE OBLIGATION OF THE PURCHASER TO CLOSE	43
7.1	Conditions to Closing	43
ARTICLE 8	CONDITIONS PRECEDENT TO THE OBLIGATION OF THE COMPANY TO CLOSE	44
8.1	Conditions to Closing	44
ARTICLE 9	TERMINATION OF AGREEMENT	45
9.1	Termination	45
9.2	Survival	46
ARTICLE 10	INDEMNIFICATION	46
10.1	Indemnification	46
10.2	Terms of Indemnification	47
ARTICLE 11	MISCELLANEOUS	47
11.1	Survival	47

 

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11.2	Fees and Expenses	47
11.3	Notices	48
11.4	Successors and Assigns	49
11.5	Amendment and Waiver	49
11.6	Counterparts	50
11.7	Headings	50
11.8	Governing Law; Consent to Jurisdiction; Waiver of Jury Trial	50
11.9	Severability	50
11.10	Entire Agreement	50
11.11	Further Assurances	51
11.12	Public Announcements	51
11.13	Specific Performance	51

 

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EXHIBITS

 

Exhibit A		Note
Exhibit B		Security Agreement
Exhibit C		Registration Rights Agreement
Exhibit D		Celecoxib Agreement
Exhibit E		Assignment Agreement
Exhibit F		Imagify License
Exhibit G		Opinion of Goodwin Procter LLP

 

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NOTE PURCHASE AGREEMENT

 

NOTE PURCHASE AGREEMENT, dated as of October 24, 2008 (this “ Agreement ”), by and between Cephalon, Inc., a Delaware corporation (the “ Purchaser ”), and Acusphere, Inc., a Delaware corporation (the “ Company ”).

 

WHEREAS, the Purchaser wishes to purchase from the Company, and the Company wishes to sell to the Purchaser, an 8% Senior Convertible Note in the aggregate principal amount of Fifteen Million Dollars ($15,000,000) in the form of Exhibit A (the “ Note ”), subject to and in accordance with the terms and conditions of this Agreement;

 

WHEREAS, shares of common stock, par value $0.01 per share, of the Company (the “ Common Stock ”) shall be issuable upon the conversion of, and as interest payments on, the Note;

 

WHEREAS, as a condition to the consummation of the Closing of this Agreement, the Purchaser and the Company have agreed to enter into a Pledge and Security Agreement in the form of Exhibit B (the “ Security Agreement ”);

 

WHEREAS, as a condition to the consummation of the Closing of this Agreement, the Purchaser and the Company have agreed to enter into a Registration Rights Agreement in the form of Exhibit C (the “ Registration Rights Agreement ”); and

 

WHEREAS, as a condition to the consummation of the Closing of this Agreement, the Purchaser and the Company have agreed to enter into a License Agreement in the form of Exhibit D (the “ Celecoxib License Agreement ”).

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein and for good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the parties hereto agree as follows:

 

ARTICLE 1

 

DEFINITIONS

 

1.1           Definitions .  As used in this Agreement, and unless the context requires a different meaning, the following terms shall have the meanings set forth below:

 

“ Acquisition Agreement ” has the meaning assigned to such term in Section 5.2.

 

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“ Acquisition Proposal ” has the meaning assigned to such term in Section 5.2.

 

“Action” means any action, causes of action, suit, claim, complaint, Order, inquiry, hearing, demand, litigation or legal, administrative or arbitral proceeding.

 

“Affiliate” of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person and, for purposes of Section 3.21 only, with respect to any individual, the spouse, parent, sibling, child, step-child, grandchild, niece or nephew of such individual or the spouse thereof and any trust for the benefit of such Stockholder or any of the foregoing.  For the purposes of this definition, “control” when used with respect to any specified Person means the power to direct the management and policies of such Person, whether through the ownership of Voting Securities, by contract or otherwise; and the terms “controlling” and “controlled” have meanings correlative to the foregoing.

 

“Agreement” has the meaning assigned to such term in the preamble.

 

“ Assignment Agreement ” means the Assignment Agreement by and between the Company and the Purchaser in the form of Exhibit E.

 

“associate” has the meaning assigned in Rule 12b-2 promulgated by the Commission under the Exchange Act.

 

“beneficially own” with respect to any securities means having “beneficial ownership” of such securities as determined pursuant to Rule 13d-3 under the Exchange Act, as in effect on the date hereof.

 

“Board of Directors” means either the board of directors of the Company or any duly authorized committee thereof.

 

“Business Day” means any day other than (i) a Saturday or Sunday or (ii) a day on which banking institutions in New York City are authorized or obligated by law or executive order to remain closed.

 

“Bylaws” means the bylaws of the Company, as the same may have been amended.

 

“ Celecoxib License Agreement ” has the meaning assigned to such term in the recitals.

 

“ CERCLA ” means the Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. §§ 9601 et seq .

 

“ Certificate Amendment ” has the meaning assigned to such term in Section 6.9.

 

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“Certificate of Incorporation” means the certificate of incorporation of the Company, as the same may have been amended.

 

“Claims” means losses, claims, damages, costs expenses, awards, liabilities, joint or several, deficiencies or other charges.

 

“Closing” has the meaning assigned to such term in Section 2.2.

 

“Closing Date” has the meaning assigned to such term in Section 2.2.

 

“Code” means the Internal Revenue Code of 1986, as amended from time to time, and the rules and regulations promulgated thereunder from time to time.

 

“Commission” means the Securities and Exchange Commission or any similar agency then having jurisdiction to enforce the Securities Act.

 

“Common Stock” has the meaning assigned to such term in the recitals.

 

“Company” has the meaning assigned to such term in the preamble.

 

“Company Agreements” has the meaning assigned to such term in Section 3.12(b).

 

“Company Benefit Plans” means all employee benefit plans providing benefits to any current or former employee or director of the Company or any of its Subsidiaries or any beneficiary or dependent thereof that are sponsored or maintained by the Company or any of its Subsidiaries or ERISA Affiliates or to which the Company or any of its Subsidiaries or ERISA Affiliates contributes or is obligated to contribute or with respect to which the Company could have any liability, including without limitation all employee welfare benefit plans within the meaning of Section 3(1) of ERISA, all employee pension benefit plans within the meaning of Section 3(2) of ERISA, all Company Plans and all other bonus, incentive, deferred compensation, vacation, stock purchase, stock option, restricted stock, severance, termination pay and fringe benefit plans.

 

“ Company Disclosure Letter ” means the Company Disclosure Letter delivered by the Company to the Purchaser on the date hereof.

 

“Company Options” has the meaning assigned to such term in Section 3.6.

 

“Company Plans” has the meaning assigned to such term in Section 3.6.

 

“ Company Property ” means any real or personal property, plant, building, facility, structure, underground storage tank, equipment or unit, or other asset owned, leased or operated by the Company or any of its Subsidiaries.

 

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“ Company Stockholder Notice ” has the meaning assigned to such term in Section 5.5.

 

“Confidentiality Agreement” means the confidentiality agreement dated October 9, 2008, between the Purchaser and the Company.

 

“ Contaminant ” means any waste, pollutant, hazardous or toxic substance or waste, petroleum, petroleum-based substance or waste, special waste, or any constituent of any such substance or waste.

 

“Contract” means any commitment, contract, purchase order, lease, license, sublicense, note, instrument or other agreement, undertaking or arrangement of any nature, whether written or oral.

 

“Conversion Shares” the shares of Common Stock issuable upon conversion of the Note.

 

“ Convertible Securities ” has the meaning assigned to such term in Section 6.1.

 

“ Copyrights ” means United States and non-U.S. copyrights and mask works (as defined in 17 U.S.C. §901), whether registered or unregistered, and pending applications to register the same.

 

“DGCL” means the Delaware General Corporation Law.

 

“ Environmental Encumbrance ” means a Lien in favor of any Governmental Authority for (i) any liability under any Environmental Law, or (ii) damages arising from, or costs incurred by such Governmental Authority in response to, a Release or threatened Release of a Contaminant into the environment.

 

“ Environmental Law ” means all Requirements of Laws derived from or relating to all non-U.S., federal, state and local laws or regulations relating to or addressing the environment, health or safety, including CERCLA, OSHA and RCRA and any state equivalent thereof.

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated thereunder from time to time.

 

“ERISA Affiliate” means each entity which is a member of a “controlled group of corporations,” under “common control” or an “affiliated service group” with the Company or its Subsidiaries within the meaning of Sections 414(b), (c) or (m) of the Code, or required to be aggregated with the Company or its Subsidiaries under Section 414(o) of the Code, or is under “common control” with the Company or its Subsidiaries, within the meaning of Section 4001(a)(14) of ERISA.

 

“Event of Default” has the meaning assigned to such term in the Note.

 

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“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder by the Commission from time to time.

 

“ FDA ” means the United States Food and Drug Administration.

 

“GAAP” means United States generally accepted accounting principles consistently applied.

 

“Governance Notice” has the meaning assigned to such term in Section 6.9.

 

“Governmental Authority” means any court, tribunal, arbitrator, arbitrational panel or authority, agency, commission, official or other instrumentality of the United States or any other country, or any supra-national organization, state, county, city or other political subdivision or any self-regulatory organization.

 

“ Holding Period ” has the meaning assigned to such term in Section 5.4.

 

“ HSR Act ” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

 

“ Indebtedness ” has the meaning assigned to such term in Section 3.12(a)(vi).

 

“Intellectual Property” means Copyrights, Patent Rights, Trademarks and Trade Secrets.

 

“ Imagify License ” means the License Agreement by and between the Company and the Purchaser in the form of Exhibit F to be entered into under certain circumstances described in the Note and herein.

 

“ Imagify Product ” means Imagify (perflubutane polymer microspheres for delivery in an injectable suspension, formerly known as AI-700), a cardiovascular drug and ultrasound imaging agent in development by the Company for the detection of coronary artery disease as in existence on the date hereof and all improvements thereto, including all Intellectual Property relating thereto or embodied therein necessary to make, have made, sell, use or import such product.

 

“ Imagify Restriction Period ” has the meaning assigned to such term in Section 6.10(a).

 

“Knowledge of the Company” means the actual knowledge of any executive officer of the Company or any of its Subsidiaries, after reasonable inquiry of those persons employed by the Company or its Subsidiaries charged with administrative or operational responsibility for such matter.

 

“Lien” means any mortgage, deed of trust, pledge, hypothecation, assignment, encumbrance, lien (statutory or other), voting or other restriction, preemptive right or other security interest of any kind or nature whatsoever.

 

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“Material Adverse Effect” means any material adverse change in or affecting the business, properties, assets, liabilities, operations, results of operations (financial or otherwise), condition, or prospects of the Company and its Subsidiaries taken as a whole or the ability of the Company or any of its Subsidiaries to consummate the transactions contemplated by the Transaction Agreements.

 

“NASD” means the National Association of Securities Dealers, Inc.

 

“NASDAQ” means The Nasdaq Stock Market, Inc.

 

“ NASDAQ Announcement ” has the meaning assigned to such term in Section 5.5.

 

“NASDAQ Voting Exception Provisions” means Rule 4350(i)(2) of the NASDAQ Marketplace Rules.

 

“ Note ” has the meaning assigned to such term in the recitals.

 

“ Order ” means any writ, judgment, decree, injunction, award or similar order of any Governmental Authority, including any award in an arbitration proceeding (in each case, whether preliminary or final).

 

“ Patent Rights ” means United States and non-U.S. patents, provisional patent applications, patent applications, continuations, continuations-in-part, divisions, reissues, patent disclosures, industrial designs, inventions (whether or not patentable or reduced to practice) and improvements thereto.

 

“Permits” has the meaning assigned to such term in Section 3.10(b).

 

“ Permitted Equity Offering ” means the issuance of shares of Common Stock or Company Options to investors (other than any Person whose principal business activity is the development, marketing and sale of pharmaceuticals) in connection with capital raising transactions that are consummated after the Closing Date and prior to the conversion of the Note.

 

“ Permitted Liens ” means (i) Liens for Taxes and other governmental charges and assessments yet due or delinquent or being contested in good faith by appropriate proceedings for which adequate reserves have been established in accordance with GAAP; (ii) any statutory Lien arising in the ordinary course of business by operation of law with respect to a liability that is not yet due or delinquent other than any Lien imposed by ERISA; (iii) any Lien created by operation of law, such as materialmen’s liens, mechanics’ liens and other similar liens, arising in the ordinary course of business with respect to a liability that is not yet due or delinquent and for which adequate reserves have been established in accordance with GAAP; and (iv) Liens (A) upon or in any equipment acquired or held by the Company or any of its Subsidiaries to secure the purchase price of such equipment or indebtedness incurred solely for the purpose of

 

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financing the acquisition or lease of such equipment, or (B) existing on such equipment at the time of its acquisition, provided that the Lien is confined solely to the property so acquired and improvements thereon, and the proceeds of such equipment, (v) Liens incurred in connection with the extension, renewal or refinancing of the indebtedness secured by Liens of the type described in clause (iv) above, provided that any extension, renewal or replacement Lien shall be limited to the property encumbered by the existing Lien and the principal amount of the Indebtedness being extended, renewed or refinanced does not increase, (vi) leases or subleases and licenses and sublicenses granted to others in the ordinary course of the Company’s business, not interfering in any material respect with the business of the Company and its Subsidiaries taken as a whole, (vii) Liens arising from judgments, decrees or attachments in circumstances not constituting an Event of Default, (viii) Liens securing the Company’s obligations under the Notes, (ix) Liens arising out of pledges or deposits under workmen’s compensation laws, unemployment insurance, old age pensions, or other social security benefits other than any Lien imposed by ERISA, (x) Liens incurred or deposits made in the ordinary course of business to secure surety bonds provided that such Liens shall extend only to cash collateral for such surety bonds and (xi) Liens listed on Schedule 1.1(b) of the Company Disclosure Letter.

 

“Person” means a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint-stock company, company, limited liability company, trust, unincorporated association, Governmental Authority, or any other entity of whatever nature.

 

“Preferred Stock” has the meaning assigned to such term in Section 3.6.

 

“ Products ” means the products of the Company described on Schedule 1.1(a) of the Company Disclosure Letter.

 

“Purchase Price” has the meaning assigned to such term in Section 2.1.

 

“Purchaser” has the meaning assigned to such term in the preamble.

 

“ Purchaser Percentage Interest ” means the percentage of the total voting power of the Company, determined on the basis of the number of Voting Securities actually outstanding, that is controlled directly or indirectly by the Purchaser, including as beneficially owned.

 

“ Qualifying Ownership Interest ” means shares of Common Stock that constitute 25% or more of the Voting Securities.

 

“ RCRA ” means the Resource Conservation and Recovery Act, 42 U.S.C. §§ 6901 et seq .

 

“ Real Property Lease ” has the meaning assigned to such term in Section 3.12(a)(vii).

 

“Registration Rights Agreement” has the meaning assigned to such term in the recitals.

 

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“ Release ” means any release, spill, emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching or migration of a Contaminant into the indoor or outdoor environment or into or out of any Seller Property, including the movement of Contaminants through or in the air, soil, surface water, groundwater or Seller Property.

 

“ Remedial Action ” means actions required to (i) clean up, remove, treat or in any other way address Contaminants in the indoor or outdoor environment; (ii) prevent the Release or threatened Release or minimize the further Release of Contaminants or (iii) investigate and determine if a remedial response is needed and to design such a response and post-remedial investigation, monitoring, operation and maintenance and care.

 

“Requirement of Law” means any law, statute, code, treaty, Order, ordinance, rule, regulation or other requirement promulgated or enacted by any Governmental Authority.

 

“ Response Proposal ” has the meaning assigned to such term in Section 5.2.

 

“Restricted Period” has the meaning assigned to such term in Section 5.1(b).

 

“Rule 144” means Rule 144 promulgated by the Commission under the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission.

 

“SEC Reports” means each registration statement, report, proxy statement or information statement (other than preliminary materials) or other documents filed by the Company or any of its Subsidiaries with the Commission pursuant to the Securities Act or the Exchange Act or the rules and regulations thereunder, each in the form (including exhibits and any amendments) filed with the Commission.

 

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder by the Commission from time to time.

 

“ Security Agreement ” has the meaning assigned to such term in the recitals.

 

“ Software ” means computer software programs and software systems, including databases, compilations, tool sets, compilers, higher level or “proprietary” languages and related documentation and materials, whether in source code, object code or human readable form.

 

“Subsidiary” of any specified Person means any other Person more than 50% of the outstanding voting securities of which is owned or controlled, directly or indirectly, by such specified Person or by one or more other Subsidiaries of such specified Person, or by such specified Person and one or more other Subsidiaries of such specified Person.  For the purposes of this definition, “voting securities” means securities which ordinarily have voting power for the election of directors (or other Persons having similar functions), whether at all times or only so

 

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long as no senior class of securities has such voting power by reason of any contingency, or other ownership interests ordinarily constituting a majority voting interest.

 

“ Superior Acquisition Proposal ” has the meaning assigned to such term in Section 5.2.

 

“Tax” or “Taxes” means any taxes, assessment, duties, fees, levies, imposts, deductions, or withholdings, including income, gross receipts, ad valorem, value added, excise, real or personal property, asset, sales, use, license, payroll, transaction, capital, net worth and franchise taxes, estimated taxes, withholding, employment, social security, workers’ compensation, utility, severance, production, unemployment compensation, occupation, premium, windfall profits, transfer and gains taxes, or other governmental charges of any nature whatsoever, imposed by any taxing authority of any government or country or political subdivision of any country, and any liabilities with respect thereto, including any penalties, additions to tax, fines or interest thereon and includes any liability for Taxes of another Person by Contract, as a transferee or successor, under Treasury Regulation Section 1.1502-6 or analogous state, local or foreign Requirement of Law provision or otherwise.

 

“Tax Return” means any return, report or similar statement requires to be filed with respect to any Tax (including any attached schedules), including any information return, claim for refund, amended return or declaration of estimated Tax.

 

“ Trade Secrets ” means trade secrets and confidential ideas, know-how, concepts, methods, processes, formulae, technology, algorithms, models, reports, data, customer lists, supplier lists, mailing lists, business plans and other proprietary information, all of which derive value, monetary or otherwise, from being maintained in confidence.

 

“ Trademarks ” means United States, state and non-U.S. trademarks, service marks, trade names, Internet domain names, designs, logos, slogans and general intangibles of like nature, whether registered or unregistered, and pending registrations and applications to register the foregoing.

 

“Transaction Agreements” means this Agreement, the Note, the Security Agreement, the Registration Rights Agreement, the Celecoxib License Agreement and the Assignment Agreement.

 

“Voting Securities” mean any class or classes of stock of the Company pursuant to which the holders thereof have the general power under ordinary circumstances to vote with respect to the election of the Board of Directors, irrespective of whether or not, at the time, stock of any other class or classes shall have, or might have, voting power by reason of the happening of any contingency.

 

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ARTICLE 2

 

PURCHASE AND SALE OF THE NOTE

 

2.1                                  Purchase and Sale of the Note.  Subject to the terms set forth herein, the Company shall issue and sell to the Purchaser and the Purchaser shall purchase from the Company the Note, for an aggregate purchase price of $15,000,000 (the “ Purchase Price ”).

 

2.2                                  Closing.  The issuance, sale and purchase of the Note shall take place at a closing (the “ Closing ”) to be held at the offices of Sidley Austin LLP, One South Dearborn, Chicago, Illinois, at 10:00 A.M., local time, on the Closing Date.  The Closing shall occur on the first Business Day after the conditions set forth in Sections 7.1 and 8.1 (other than those to be satisfied on the Closing Date, which shall be satisfied or waived on such date) have been satisfied or waived by the party entitled to waive such conditions or such later date and time as the parties may agree in writing (the “ Closing Date ”), (a) the Purchaser shall (i) deliver to the Company by wire transfer in immediately available funds to an account or accounts designated in writing by the Company to the Purchaser at least two (2) Business Days prior to the Closing Date, funds in an amount equal to the Purchase Price (which funds will be used by the Company in accordance with Section 2.3) and (ii) make or cause to be made the deliveries set forth in Section 2.4 and (b) the Company shall (i) issue and deliver to the Purchaser the fully executed Note and (ii) make or cause to be made the deliveries set forth in Section 2.5.

 

2.3                                  Use of Proceeds.  All of the proceeds received from the Purchaser pursuant to Section 2.2 hereof shall be used by the Company solely for general working capital purposes, capital expenditures, repayment of debt and in the operation of the Company’s business.

 

2.4                                  Purchaser Deliveries .  Subject to fulfillment or waiver of the conditions set forth in Article 7, at the Closing Purchaser shall deliver to the Company all of the following:

 

(a)                                   A certificate of good standing of the Purchaser, issued as of a recent date by the Secretary of State of Delaware.

 

(b)                                  The certificate contemplated by Section 8.1(a), duly executed by an authorized representative of the Purchaser.

 

(c)                                   The Assignment Agreement, duly executed by an authorized officer of the Purchaser.

 

(d)                                  The Celecoxib License Agreement, duly executed by an authorized officer of the Purchaser.

 

(e)                                   The Registration Rights Agreement, duly executed by an authorized officer of the Purchaser.

 

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(f)                                     The Security Agreement, duly executed by an authorized officer of the Purchaser.

 

(g)                                  Such other documents, instruments, approvals or opinions relating to the transaction contemplated by the Transaction Agreements as the Company may reasonably request.

 

2.5                                  Company Deliveries .  Subject to fulfillment or waiver of the conditions set forth in Article 8, at the Closing the Company shall deliver to the Purchaser all of the following:

 

(a)                                   A copy of the Certificate of Incorporation, as amended, certified as of a recent date by the Secretary of State of Delaware.

 

(b)                                  A certificate of good standing of the Company, issued as of a recent date by each of the Secretary of State of Delaware and the Secretary of State of the Commonwealth of Massachusetts.

 

(c)                                   Certificate of the secretary of the Company, dated as of the Closing Date, in a form and substance reasonably satisfactory to Purchaser, as to: (i) no amendments to the Certificate of Incorporation since a specified date; (ii) the Bylaws; (iii) the resolutions of the Board of Directors, or committee thereof, authorizing the execution, delivery and performance of this Agreement, the other Transaction Agreement and the transactions contemplated thereby; and (iv) incumbency and signatures of the officers of the Company executing this Agreement and any Transaction Agreement.

 

(d)                                  The certificate contemplated by Section 7.1(a), duly executed by an executive officer of the Company.

 

(e)                                   The legal opinion of Goodwin Procter LLP, counsel to the Company, dated the Closing Date, addressed to the Purchaser, in the form of Exhibit G.

 

(f)                                     The Note, duly executed by an authorized officer of the Company.

 

(g)                                  The Assignment Agreement, duly executed by an authorized officer of the Company.

 

(h)                                  The Celecoxib License Agreement, duly executed by an authorized officer of the Company.

 

(i)                                      The Registration Rights Agreement, duly executed by an authorized officer of the Company.

 

(j)                                      The Security Agreement, duly executed by an authorized officer of the Company.

 

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(k)                                   All consents, waivers or approvals obtain by the Company with respect to the consummation of the transactions contemplated by the Transaction Agreements.

 

(l)                                      Such other documents, instruments, approvals or opinions relating to the transaction contemplated by the Transaction Agreements as the Purchaser may reasonably request.

 

ARTICLE 3

 

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

 

The Company hereby represents and warrants to the Purchaser as follows:

 

3.1                                  Corporate Existence and Power.  The Company (a) is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware; (b) has all requisite corporate power and authority to own and operate its properties, to lease the properties it operates as lessee and to carry on its business as currently conducted and currently contemplated to be conducted; (c) has all requisite corporate power and authority to execute, deliver and perform its obligations under this Agreement, the Note and each of the other Transaction Agreements; (d) has all requisite corporate power and authority to issue the Note and the shares of Common Stock issuable upon the conversion of the Note (the “ Conversion Shares ”), in the manner and for the purpose contemplated by this Agreement, the Note and each of the other Transaction Agreements; and (e) has all requisite corporate power and authority to execute, deliver and perform its obligations under all other agreements and instruments executed and delivered by it pursuant to or in connection with this Agreement, the Note and each of the other Transaction Agreements.  The Company is duly qualified to do business as a foreign corporation in, and is in good standing under the laws of, each jurisdiction in which the conduct of its business or the nature of the property owned requires such qualification except where the failure to be so qualified or in good standing, individually or in the aggregate, has not had and would not reasonably be expected to have a Material Adverse Effect.

 

3.2                                  Subsidiaries.  Except as set forth on Schedule 3.2 of the Company Disclosure Letter, the Company has no Subsidiaries and no interest or investments in any corporation, partnership, limited liability company, trust or other entity or organization.  Each Subsidiary listed on Schedule 3.2 of the Company Disclosure Letter has been duly organized, is validly existing and in good standing under the laws of the jurisdiction of its organization, has all requisite corporate (or, in the case of an entity other than a corporation, other) power and authority to own and operate its properties, to lease the properties it operates as lessee and to carry on its business as currently conducted and currently contemplated to be conducted, and is duly qualified to transact business and is in good standing in each jurisdiction in which the conduct of its business or the nature of its properties requires such qualification except where the failure to be so qualified or in good standing, individually or in the aggregate, has not had and would not reasonably be expected to have a Material Adverse Effect.  Except as set forth on

 

*CONFIDENTIAL TREATMENT REQUESTED

 

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Schedule 3.2 of the Company Disclosure Letter, all of the issued and outstanding stock (or equivalent interests) of each Subsidiary set forth on Schedule 3.2 of the Company Disclosure Letter has been duly authorized and validly issued, is fully paid and nonassessable and is owned by the Company free and clear of any Liens and there are no rights, options or warrants outstanding or other agreements to acquire shares of stock (or equivalent interests) of such Subsidiary.  Schedule 3.2 of the Company Disclosure Letter sets forth the capitalization of each of the Subsidiaries, including the amount and kind of equity interests held by the Company in the Subsidiary.

 

3.3                                  Corporate Authorization; No Contravention.  The execution, delivery and performance by the Company of this Agreement, the Note and each of the other Transaction Agreements and the consummation of the transactions contemplated thereby and delivery of the Conversion Shares (when issued), (a) have been duly authorized by all necessary corporate action of the Company; (b) do not contravene the terms of the Certificate of Incorporation or Bylaws or the other organizational documents of the Company or its Subsidiaries; (c) do not entitle any Person to exercise any statutory or contractual preemptive rights to purchase shares of capital stock or any equity interest in the Company; and (d) except as set forth in Schedule 3.3 of the Company Disclosure Letter, do not, and will not, violate or result in any breach or contravention of, a default under, or an acceleration of any obligation under or the creation (with or without notice, lapse of time or both) of any Lien under, result in the termination or loss of any right or the imposition of any penalty under, any Contract of the Company or its Subsidiaries or by which their respective assets or properties are bound or any Requirement of Law or Order applicable to the Company or its Subsidiaries or by which their respective assets or properties are bound.  The transactions contemplated by this Agreement and the Transaction Agreements have been approved by the Audit Committee of the Company in compliance with the NASDAQ Voting Exception Provisions and the Company has received an written exception from NASDAQ with respect to the transactions contemplated by this Agreement and the Transaction Agreements, including the issuance of the Note, in accordance with the NASDAQ Voting Exception Provisions.  This Agreement constitutes and the Note and each of the other Transaction Agreements when executed by the Company will constitute, valid and legally binding obligations of the Company, enforceable in accordance with their respective terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or similar laws affecting creditors’ rights generally and the general principles of equity, regardless of whether considered in a proceeding in equity or at law.  No event has occurred and no condition exists which (upon notice or the passage of time or both) would constitute, or give rise to: (i) any breach, violation, default, change of control or right to cause the Company to repurchase or redeem under, (ii) any Lien on the assets of the Company or any of its Subsidiaries under, (iii) any termination right of any party, or any loss of any right or imposition of any penalty, under or (iv) any change or acceleration in the rights or obligations of any party under, the Certificate of Incorporation or Bylaws or the organizational documents of the Company’s Subsidiaries.

 

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3.4                                  Governmental Authorization; Third Party Consents.  Except as set forth on Schedule 3.4 of the Company Disclosure Letter and, with respect to the conversion of the Note, except as required under the HSR Act, no approval, consent, qualification, order, exemption, authorization or other action by, or notice to, or filing with, any Governmental Authority, or any other Person in respect of any Requirement of Law, Order, Contract or otherwise, and no lapse of a waiting period under a Requirement of Law, is necessary or required in connection with the execution, delivery or performance (including, without limitation, the issuance, sale and delivery of the Note) by the Company, or enforcement against the Company, of this Agreement, the Note and each of the other Transaction Agreements or the consummation of the transactions contemplated thereby.

 

3.5                                  Binding Effect.  The Company has full power and authority to execute, deliver and perform this Agreement, the Note and each of the other Transaction Agreements.  The execution, delivery and performance of this Agreement, the Note and each of the other Transaction Agreements by Seller have been duly authorized and approved by the Board of Directors and do not require any further authorization or consent of the Company or its stockholders.  This Agreement has been duly authorized, executed and delivered by the Company and is the legal, valid and binding obligation of the Company enforceable in accordance with its terms, and the Note and each of the other Transaction Agreements has been duly authorized by the Company and upon execution and delivery by the Company will be a legal, valid and binding obligation of the Company enforceable in accordance with its terms.

 

3.6                                  Capitalization of the Company and its Subsidiaries.  The authorized capital stock of the Company consists of (a) 98,500,000 shares of Common Stock (and immediately following the filing of an amendment to the Certificate of Incorporation pursuant to Section 7.1(g), 250,000,000 shares of Common Stock) and (b) 5,000,000 shares of preferred stock, par value $0.01, of the Company (the “ Preferred Stock ”) of which 1,000,000 shares of Preferred Stock are designated as 6.5% Convertible Exchangeable Preferred Stock.  As of the date hereof, (i) 310,000 shares of Convertible Exchangeable Preferred Stock are issued and outstanding, (ii) 49,488,907 shares of Common Stock are issued and outstanding, (iii) 15,321,645 shares of Common Stock are reserved for or subject to issuance upon the exercise of outstanding Company Options (as defined below) and (iv) 2,470,426 shares of Common Stock are reserved for or subject to issuance upon the conversion of Preferred Stock.  Schedule 3.6 of the Company Disclosure Letter sets forth a true and correct list of all outstanding rights, options or warrants to purchase shares of any class or series of capital stock of the Company (collectively, “ Company Options ”) and a true and correct list of each of the Company’s stock option, incentive, purchase or other plans pursuant to which options or warrants to purchase stock of the Company may be issued (collectively, the “ Company Plans ”).  Except (A) for shares of Common Stock issued pursuant to the exercise of outstanding Company Options, (B) for shares of Common Stock issuable upon conversion of the Preferred Stock and (C) for shares of Common Stock issuable upon conversion of the Note, on the Closing Date there are no shares of Common Stock or any other equity security of the Company or any of its Subsidiaries issuable upon conversion or

 

*CONFIDENTIAL TREATMENT REQUESTED

 

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exchange of any security of the Company or any of its Subsidiaries nor any rights, options or warrants outstanding or other agreements to acquire shares of stock of the Company or any of its Subsidiaries nor is the Company or any of its Subsidiaries be contractually obligated to issue any shares of stock or to purchase, redeem or otherwise acquire any of its outstanding shares of stock.  Neither the Company nor any of its Subsidiaries has created any “phantom stock,” stock appreciation rights or other similar rights the value of which is related to or based upon the price or value of the Common Stock.  Neither the Company nor any of its Subsidiaries has outstanding debt or debt instruments providing for voting rights with respect to the Company or any of its Subsidiaries to the holders thereof.  No stockholder of the Company or other Person is entitled to any preemptive or similar rights to subscribe for shares of stock of the Company or any of its Subsidiaries.  All of the issued and outstanding shares of Common Stock are duly authorized, validly issued, fully paid, and nonassessable.  Except as set forth on Schedule 3.6 of the Company Disclosure Letter, neither the Company nor any of its Subsidiaries has granted to any Person the right to demand or request that the Company or such Subsidiary effect a registration under the Securities Act of any securities held by such Person or to include any securities of such Person in any such registration by the Company or such Subsidiary.

 

3.7                                  SEC Documents; Sarbanes-Oxley Compliance.  (a)  The Company has made available to the Purchaser the SEC Reports filed with the Commission from January 1, 2006 to the date hereof.  The Company and each of its Subsidiaries have timely filed each registration statement, report, proxy statement or information statement (other than preliminary materials) or other documents required to be filed by it with the Commission pursuant to the Securities Act or the Exchange Act or the rules and regulations thereunder since January 1, 2005.  As of their respective dates, the SEC Reports (i) were prepared in all material respects in accordance with the applicable requirements of the Securities Act, the Exchange Act, and the rules and regulations thereunder and complied in all material respects with the then applicable accounting requirements, (ii) did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements made therein, in the light of the circumstances under which they were made, not misleading, except for those statements, if any, as have been modified by subsequent filings with the Commission prior to the date hereof and (iii) complied in all material respects with the applicable requirements of the Sarbanes-Oxley Act of 2002.  The financial statements and other financial information included in each of the SEC Reports fairly present, in all material respects, the financial condition, results of operations and cash flows of the Company and its Subsidiaries as of, and for the periods presented in, the applicable SEC Reports.  Each of the consolidated balance sheets of the Company and its Subsidiaries included in or incorporated by reference into the SEC Reports (including the related notes and schedules) present fairly, in all material respects, the financial position of the Company and its Subsidiaries as of its date and each of the consolidated statements of operations, cash flows and shareholders’ equity of the Company and its Subsidiaries included in or incorporated by reference into the SEC Reports (including any related notes and schedules) present fairly, in all material respects, the results of operations and cash flows of the Company and its Subsidiaries for the periods set forth, in each case in conformity

 

*CONFIDENTIAL TREATMENT REQUESTED

 

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with GAAP consistently applied during the periods involved, except as may be noted (subject, in the case of unaudited statements, to those exceptions as may be permitted by Form 10-Q of the Commission and to normal year-end audit adjustments).

 

(b)                                  The management of the Company has (i) designed disclosure controls and procedures to ensure that material information relating to the Company, including its consolidated Subsidiaries, is made known to the management of the Company by others within those entities and (ii) has disclosed, based on its most recent evaluation, to the Company’s outside auditors and the audit committee of the Board of Directors (A) any significant deficiencies in the design or operation of internal controls which could adversely affect the Company’s ability to record, process, summarize and report financial data and have identified for the Company’s outside auditors any material weaknesses in internal controls and (B) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal controls.  A summary of any of those disclosures made by management to the Company’s auditors and audit committee has been furnished to the Purchaser.  The Company and each of its Subsidiaries maintains a system of internal accounting controls sufficient to provide reasonable assurance that (w) transactions are executed in accordance with management’s general or specific authorizations, (x) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability, (y) access to assets is permitted only in accordance with management’s general or specific authorization and (z) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.

 

(c)                                   Since January 1, 2005, neither the Company nor any of its Subsidiaries nor, to the Knowledge of the Company, any director, officer, employee, auditor, accountant or representative of the Company or any of its Subsidiaries has received or otherwise had or obtained knowledge of any complaint, allegation, assertion or claim, whether written or oral, regarding the accounting or auditing practices, procedures, methodologies or methods of the Company or any of its Subsidiaries or their respective internal accounting controls, including any complaint, allegation, assertion or claim that the Company or any of its Subsidiaries has engaged in questionable accounting or auditing practices.

 

3.8                                  Absence of Certain Developments.  Since the date of the most recent audited financial statements of the Company included in the SEC Reports, except as described in the SEC Reports filed with the Commission prior to the date hereof, or as contemplated by the Transaction Agreements, each of the Company and its Subsidiaries has operated in the ordinary course and there has not been:

 

(a)                                   any event, change, effect, circumstance or development that, individually or in the aggregate, has had or would reasonably be expected to have a Material Adverse Effect.

 

*CONFIDENTIAL TREATMENT REQUESTED

 

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(b)                                  any change to, or resolutions adopted to effect any change to, the Certificate of Incorporation or By-Laws;

 

(c)                                   any incurrence of any Lien (except Permitted Liens) on any material assets of the Company or any of its Subsidiaries;

 

(d)                                  any material loss, damage or destruction to, or any material interruption in the use of, any material assets of the Company or any of its Subsidiaries;

 

(e)                                   any acquisition, sale or transfer (including by license) of any material asset by the Company or any of its Subsidiaries;

 

(f)                                     any declaration, setting aside or payment of any dividend or other distribution (whether in cash, stock or property) with respect to any capital stock of the Company or any repurchase for value by the Company of any capital stock of the Company;

 

(g)                                  any split, combination or reclassification of any capital stock of the Company or any issuance or the authorization of any issuance of any other securities in respect of, in lieu of or in substitution for shares of capital stock of the Company;

 

(h)                                  any change in accounting methods, principles or practices by the Company or any of its Subsidiaries materially affecting the consolidated assets, liabilities or results of operations of the Company, except insofar as may have been required by a change in GAAP; or

 

(i)                                      any change in material elections with respect to Taxes by the Company or any of its Subsidiaries or settlement or compromise by the Company or any of its Subsidiaries of any material Tax liability or refund.

 

3.9                                  No Undisclosed Liabilities.  Neither the Company nor any of its Subsidiaries has any liabilities or obligations of any nature, whether or not accrued, contingent or otherwise, except (a) liabilities or obligations disclosed or reserved against in the SEC Reports filed with the Commission prior to the date hereof and (b) liabilities or obligations which arose after the last date of any such SEC Report, in the ordinary course of business consistent with past practice that, individually or in the aggregate, have not had and would not reasonably be expected to have a Material Adverse Effect.

 

3.10                            Compliance with Laws.  (a)  Except as set forth in the SEC Reports filed with the Commission prior to the date hereof or as set forth on Schedule 3.10(a) of the Company Disclosure Letter, neither the Company nor any of its Subsidiaries, is, or since January 1, 2005, has been, in violation of any Requirement of Law in any material respect, or any Order, applicable thereto.

 

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(b)                                  The Company and its Subsidiaries as applicable, have obtained or made, as the case may be, all permits, licenses, authorizations, orders and approvals, and all filings, applications and registrations with, all Governmental Authorities (“ Permits ”), that are required to conduct the businesses of the Company and its Subsidiaries in the manner and to the full extent as currently conducted or currently contemplated to be conducted except where such failure to obtain or make, individually or in the aggregate, has not had and would not reasonably be expected to have a Material Adverse Effect.  None of such Permits is subject to any restriction or condition that limits or would reasonably be expected to limit in any material way the full operation of the business of the Company or its Subsidiaries as currently conducted or currently contemplated to be conducted.  Each of the Permits has been duly obtained, is valid and in full force and effect, and is not subject to any pending or threatened proceeding to limit, condition, suspend, cancel, suspend, or declare such Permit invalid.  Neither the Company nor any of its Subsidiaries is in default in any material respect with respect to any of the Permits, and to the Knowledge of the Company, no event has occurred which constitutes, or with due notice or lapse of time or both may constitute, a default by the Company or any such Subsidiary under any Permit.

 

3.11                            Litigation.  Except as set forth on Schedule 3.11 of the Company Disclosure Letter, there is no Action or, to the Knowledge of the Company, other legal, administrative or other governmental investigation or inquiry pending or claims asserted (or, to the Knowledge of the Company, any threat thereof) relating to the Company or any of its Subsidiaries or relating to this Agreement, the Note, any of the other Transaction Agreements or the Company Agreements or the transactions contemplated thereby or against any officer, director or employee of the Company in connection with such Person’s relationship with or actions taken on behalf of the Company.  Except as set forth on Schedule 3.11 of the Company Disclosure Letter, the Company is not subject to any Order.

 

3.12                            Material Contracts.  (a)  Except as set forth in Schedule 3.12(a)  of the Company Disclosure Letter neither the Company nor any of its Subsidiaries is a party to or bound by:

 

(i)                                      any Contract for the purchase or sale of real property;

 

(ii)                                   any Contract for the purchase of services, materials, supplies or equipment which involved the payment of more than $250,000 in 2007, which the Company reasonably anticipates will involve the payment of more than $250,000 in 2008 or which extends beyond December 31, 2009;

 

(iii)                                any Contract for the sale of goods or services which involved the payment of more than $250,000 in 2007, which the Company reasonably anticipates will involve the payment of more than $250,000 in 2008 or which extends beyond December 31, 2009;

 

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(iv)                               any guarantee of the obligations of customers, suppliers, officers, directors, employees, Affiliates or others;

 

(v)                                  any Contract which limits or restricts where the Company or any of its Subsidiaries may conduct its current business or the type or line of business in which the Company or its Subsidiaries may engage;

 

(vi)                               any Contract which provides for, or relates to, the incurrence of indebtedness for borrowed money (including any interest rate or currency swap, cap, collar, hedge or insurance agreements, or options or forwards on such agreements, or other similar agreements for the purpose of managing the interest rate and/or non-U.S. exchange risk associated with its financing) (“ Indebtedness ”);

 

(vii)                            any Contract for the leasing (as lessor or lessee) of any real property (“ Real Property Leases ”);

 

(viii)                         any Contract for the leasing (as lessor or lessee) of any personal property with an annual rental amount in excess of $250,000; or

 

(ix)                                 any other Contract that is a “material contract” (as such term is defined in Item 601(b)(10) of regulation S-K under the Securities Act.

 

(b)                                  Except as set forth in Schedule 3.12(b) of the Company Disclosure Letter, each of the Contracts listed in Schedules 3.12(a), 3.16 and 3.20(c) of the Company Disclosure Letter (collectively, the “ Company Agreements ”) constitutes a valid and binding obligation of the parties thereto and is in full force and effect and (except as set forth in Schedule 3.4 of the Company Disclosure Letter ) will continue in full force and effect after the Closing Date without breaching the terms thereof or resulting in the forfeiture or impairment of any rights thereunder and without the consent, approval or act of, or the making of any filing with, any other Person.  Each of the Company and its Subsidiaries has fulfilled and performed its obligations under each of the Company Agreements, and is not in, or alleged to be in, breach or default under, nor is there or is there alleged to be any basis for termination of, any of the Company Agreements and no other party to any of the Company Agreements has breached or defaulted thereunder, and no event has occurred and no condition or state of facts exists which, with the passage of time or the giving of notice or both, would constitute such a default or breach by the Company or any of its Subsidiaries or by any such other party.  Complete and correct copies of each of the Company Agreements have heretofore been delivered or made available to the Purchase by the Company.

 

3.13                            Environmental.  (a)  Except as set forth in Schedule 3.13 of the Company Disclosure Letter:

 

(i)                                      the operations of the Company and its Subsidiaries comply in all material respects with all applicable Environmental Laws;

 

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(ii)                                   the Company and its Subsidiaries have obtained all environmental, health and safety Permits necessary for their operation, and all such Permits are in good standing and the Company and its Subsidiaries are in compliance in all material respects with all terms and conditions of such permits;

 

(iii)                                none of the Company and its Subsidiaries nor any of their past or present operations or properties is subject to any on-going investigation by, order from or agreement with any Person respecting (A) any Environmental Law, (B) any Remedial Action or (C) any Claim arising from the Release or threatened Release of a Contaminant into the environment;

 

(iv)                               the Company and its Subsidiaries are not subject to any Order alleging or addressing a violation or liability under any Environmental Law;

 

(v)                                  the Company and its Subsidiaries have not:

 

(A) reported a Release of a hazardous substance pursuant to Section 103(a) of CERCLA, or any state equivalent;

 

(B) filed a notice pursuant to Section 103(c) of CERCLA;

 

(C) filed notice pursuant to Section 3010 of RCRA indicating the generation of any hazardous waste, as that term is defined under 40 CFR Part 261 or any state equivalent; or

 

(D) filed any notice under any applicable Environmental Law reporting a substantial violation of any applicable Environmental Law;

 

(vi)                               there is not now, nor to the Knowledge of the Company, has there ever been, on or in any Company Property:

 

(A) any treatment, recycling, storage or disposal of any hazardous waste, as that term is defined under 40 CFR Part 261 or any state equivalent, that requires or required a Permit pursuant to Section 3005 of RCRA; or

 

(B) any underground storage tank or surface impoundment or landfill or waste pile;

 

(vii)                            there is not now on or in any Company Property any polychlorinated biphenyls (PCB) used in pigments, hydraulic oils, electrical transformers or other equipment;

 

*CONFIDENTIAL TREATMENT REQUESTED

 

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(viii)                         neither the Company not any of its Subsidiaries have received any notice or claim to the effect that it is or may be liable to any Person as a result of the Release or threatened Release of a Contaminant;

 

(ix)                                 no Environmental Encumbrance has attached to any Company Property; and

 

(x)                                    any asbestos-containing material which is on or part of any Company Property is in good repair according to the current standards and practices governing such material, and its presence or condition does not violate any currently applicable Environmental Law.

 

3.14                            Taxes.   (a)  Except as set forth on Schedule 3.14 of the Company Disclosure Letter:

 

(i)                                      all Tax Returns required to be filed by the Company and each of its Subsidiaries have been timely filed (after giving effect to any valid extensions of time in which to make such filings) and all such Tax Returns are true, complete, and correct in all material respects;

 

(ii)                                   all Taxes that are due or claimed to be due from the Company and each of its Subsidiaries have been timely paid;

 

(iii)                                there are no proposed, asserted, ongoing or, to the Knowledge of the Company, threatened, assessments, examinations, claims, deficiencies, Liens or other litigation with regard to any Taxes or Tax Returns of the Company or any of its Subsidiaries;

 

(iv)                               to the Knowledge of the Company, the accruals and reserves on the books and records of the Company and its Subsidiaries in respect of any Tax liability for any taxable period not finally determined are adequate to meet any assessments of Tax for any such period;

 

(v)                                  the Company is not a United States real property holding corporation as defined in Section 897(c)(2) of the Code;

 

(vi)                               the Company and each of its Subsidiaries is not currently the beneficiary of any extension of time within which to file any Tax Return;

 

(vii)                            all material amounts required to be collected or withheld by the Company or any of its Subsidiaries have been collected or withheld and any such amounts that are required to be remitted to any taxing authority have been duly and timely remitted;

 

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(viii)                         neither the Company nor any of its Subsidiaries has waived any statute of limitations in respect of Taxes or agreed to any extension of time with respect to a Tax assessment or deficiency;

 

(ix)                                 the Company and each of its Subsidiaries (A) has not been a member of a group of corporations filing Tax Returns on a consolidated, combined or unitary basis (other than a group of which the Company was the common parent) or (B) does not have any liability for the Taxes of any Person (other than the Company) under Treasury Regulation Section 1.1502-6 (or any similar provision of state, local, or foreign Requirement of Law), as a transferee or successor, by contract, or otherwise; and 2

 

(x)                                    the Company and each of its Subsidiaries will not be required to include any item of income in, or exclude any item of deduction from, taxable income for any taxable period (or portion thereof) ending after the Closing Date as a result of any: (A) “closing agreement” as described in Section 7121 of the Code (or any corresponding or similar provision of state, local or foreign income Tax Requirement of Law) executed on or prior to the Closing Date; or (B) prepaid amount received on or prior to the Closing Date.

 

(b)                                  As a direct or indirect result of the transactions contemplated by this Agreement, no payment or other benefit, and no acceleration of the vesting of any options, payments or other benefits, will be, an “excess parachute payment” to a “disqualified individual” as those terms are defined in Section 280G of the Code and the Treasury Regulations thereunder.  Except as set forth on Schedule 3.14 of the Company Disclosure Letter, as a direct or indirect result of the transactions contemplated by this Agreement and the other Transaction Agreements, no payment or other benefit, and no acceleration of the vesting of any options, payments or other benefits will be (or under Section 280G of the Code and the Treasury Regulations thereunder be presumed to be) a “parachute payment” to a “disqualified individual” as those terms are defined in Section 280G of the Code and the Treasury Regulations thereunder, without regard to whether such payment or acceleration is reasonable compensation for personal services performed or to be performed in the future.

 

3.15                            Title to Property and Assets; Leases.  Except as set forth on Schedule 3.15 of the Company Disclosure Letter, each of the Company and its Subsidiaries has good and marketable title, free and clear of all Liens to all of its assets, including all real property leased, subleased or otherwise occupied by the Company and its Subsidiaries and any assets and properties which it purports to own, except for Permitted Liens.  The Company and its Subsidiaries enjoy a peaceful and undisturbed possession under all Real Property Leases to which any of them is a party as lessee.  With respect to each Real Property Lease, to the Knowledge of the Company, either (a) such Real Property Lease is not subject or subordinate to any mortgage, deed of trust or other lien which has priority over such Real Property Lease or (b) the holder of any such lien has entered into a valid, binding and enforceable nondisturbance agreement in favor of the lessee pursuant to which the Real Property Lease cannot be extinguished or terminated by reason of any

 

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foreclosure or other acquisition of title by such holder if the lessee thereunder is not in default under the Real Property Lease as of the date of acquisition of title.  As used herein, the term “ Real Property Lease ” shall also include subleases or other occupancy agreements (and any amendments thereto) and the term “lessee” shall also include any sublessee or other occupant.  Neither the Company nor any of its Subsidiaries own any real property.

 

3.16                            Compliance with ERISA .  Schedule 3.16 of the Company Disclosure Letter sets forth the name of each Company Benefit Plan.  The Company has made available to the Purchaser true and complete copies of each Company Benefit Plan, as well as all material related documents, including, but not limited to, (a) the actuarial report for such Company Benefit Plan (if applicable) for each of the last two (2) years, (b) the most recent determination letter from the IRS (if applicable) for such Company Benefit Plan, (c) the two (2) most recent annual reports (Series 5500 and related schedules) required under ERISA (if any) and (d) the most recent summary plan descriptions (with all material modifications).  Each of the Company Benefit Plans has been operated and administered in all material respects in compliance with its terms and all applicable laws and regulations relating thereto, and there has been no notice issued by any governmental authority questioning or challenging such compliance.  Each of the Company Benefit Plans intended to be “qualified” within the meaning of Section 401(a) of the Code is so qualified, and no circumstance exists which might cause such Company Benefit Plan to cease being so qualified.  There are no pending, or to the Knowledge of Company, threatened Actions or Claims (other than routine Actions for benefits) by, on behalf of or against any of the Company Benefit Plans or any trusts or assets related thereto.  Neither the Company nor any current or former ERISA Affiliate currently sponsors, maintains or contributes to, and is not required to contribute to, nor has ever sponsored, maintained or contributed to, or been required to contribute to, incurred any liability, or has any potential liability, with respect to any “employee benefit plan” (within the meaning of Section 3(3) of ERISA) that is subject to Section 302 of the Code or Title IV of ERISA.  No non-exempt “prohibited transaction,” within the meaning of Section 4975 of the Code or Section 406 of ERISA, has occurred with respect to any Company Benefit Plan which could, individually or in the aggregate, reasonably be expected to result in a material liability to the Company.  The Company has no material liability of any kind whatsoever, whether direct, indirect, contingent, or otherwise (i) on account of any violation of the health care requirements of Part 6 of Title I of ERISA or Section 4980B of the Code, or (ii) under Section 502(i) or Section 502(l) of ERISA.  No material liability under any Company Benefit Plan has been funded nor has any such obligation been satisfied with the purchase of a contract from an insurance company as to which the Company has received notice that such insurance company is insolvent or is in rehabilitation or any similar proceeding.  No Company Benefit Plan is under audit or is the subject of a proceeding with respect to, or, to the Knowledge of the Company, investigation by, the IRS, the Department of Labor or the Pension Benefit Guaranty Corporation, and, to the Knowledge of the Company, no such audit, investigation or proceeding is threatened.  Except as set forth on Schedule 3.16 of the Company Disclosure Letter, with respect to each Company Benefit Plan which provides medical benefits, short-term disability benefits or long-term disability benefits (other than any “pension plan” within the

 

*CONFIDENTIAL TREATMENT REQUESTED

 

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meaning of Section 3(2) of ERISA), all Claims incurred by the Company under such Company Benefit Plan are either insured pursuant to a contract of insurance whereby the insurance company bears any risk of loss with respect to such Claims or covered under a contract with a health maintenance organization pursuant to which such health maintenance organization bears the liability for such Claims.  Except as set forth on Schedule 3.16 of the Company Disclosure Letter or disclosed in the SEC Reports filed with the Commission prior to the date hereof, neither the execution and delivery of this Agreement, the Transaction Agreements nor the transactions contemplated thereby will (either alone or in conjunction with any other event such as termination of employment) (i) result in, or cause any increase, acceleration or vesting of, any payment, benefit or award under any Company Benefit Plan to any director or employee of Company or any of its Subsidiaries, (ii) give rise to any obligation to fund for any such payments, awards or benefits, (iii) give rise to any limitation on the ability of the Company or any of its Subsidiaries to amend or terminate any Company Benefit Plan or (iv) result in any payment or benefit that will or may be made by the Company or any of its Subsidiaries or affiliates that will be characterized as an “excess parachute payment,” within the meaning of Section 280G of the Code.  Except as set forth on Schedule 3.16 of the Company Disclosure Letter, neither the Company nor any of its Subsidiaries or ERISA Affiliates has any liability to provide any post-retirement or post-termination life, health, medical or other welfare benefits to any current or former employees or beneficiaries or dependents thereof which, individually or in the aggregate, is material, except for health continuation coverage as required by Section 4980B of the Code or Part 6 of Title I of ERISA or applicable state healthcare continuation coverage laws which, individually or in the aggregate, is at no material expense to the Company and its Subsidiaries.  With respect to each Company Benefit Plan, there are no understandings, agreements or undertakings that would prevent the Company from amending or terminating such Company Benefit Plan at any time without incurring material liability thereunder other than in respect of accrued obligations and medical or welfare claims incurred prior to such amendment or termination.  All Company Benefit Plans subject to Section 409A of the Code are in good faith compliance with the currently applicable requirements of Section 409A and the regulations, rulings and notices thereunder.

 

3.17                            Labor Relations; Employees.  Except as set forth on Schedule 3.17 of the Company Disclosure Letter, the Company is not in any material respect delinquent in payments to any of its current or former employees for any wages, salaries, commissions, bonuses or other direct compensation for any services performed by such employee or for reimbursement of expenses.  The Company is in compliance in all material respects with all applicable Requirements of Law respecting employment, employment practices, labor, terms and conditions of employment and wages and hours.  The Company is not a party to any Contract with any labor union, and no labor union has requested or sought to represent any of the employees, representatives or agents of the Company.  There is no labor strike, dispute, slowdown or stoppage pending or, to the Knowledge of the Company, threatened against or involving the Company.  To the Knowledge of the Company, no executive officer of the Company has announced plans to terminate his or her employment with the Company.

 

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3.18                            Regulatory Matters.  (a)  Complete and correct copies of each submission of the Company or any of its Subsidiaries to the FDA with respect to the Products, and all amendments and supplements thereto, including all related pre-clinical and clinical data, have heretofore been provided or made available to Purchaser by the Company.  Complete and correct copies of all correspondence received by of the Company or any of its Subsidiaries from the FDA with respect to the Products and the responses thereto have heretofore been provided to Purchaser by the Company.

 

(b)                                  To the extent applicable, the Company has been and is in substantial compliance with 21 U.S.C. Section 355 and applicable FDA implementing regulations, including 21 C.F.R. Parts 312 or 314, and similar Requirements of Laws and all terms and conditions of the applicable new drug application and investigational new drug exemption submission under Section 505(i) of the Federal Food, Drug, and Cosmetic Act.  The Company has been and is in substantial compliance with the clinical trial reporting and disclosure requirements of 42 U.S.C. Section 282(j).  The Company and its officers, employees or agents have included in the applications for the Products, where required, the certification described in 21 U.S.C. Section 335a(k)(1) or any similar Requirements of Law, and such certification and such list was in each case true and accurate when made and remained true and accurate in all material respects thereafter.  In addition, the Company is in compliance in all material respects with all applicable registration and listing requirements set forth in 21 U.S.C. Section 360 and 21 C.F.R. Part 207 and all similar Requirements of Laws with respect to the Products.

 

(c)                                   Each article of the Products manufactured and/or distributed by the Company (including Products in inventory) is not adulterated within the meaning of 21 U.S.C. Section 351 (or similar Requirement of Law) or misbranded within the meaning of 21 U.S.C. Section 352 (or similar Requirement of Law), and is not in violation of 21 U.S.C. Section 355 (or similar Requirement of Law).

 

(d)                                  Neither the Company nor any of its officers, employees or agents has made an untrue statement of a material fact or fraudulent statement to the FDA or other Governmental Authority, failed to disclose a material fact required to be disclosed to the FDA or any other Governmental Authority, or committed an act, made a statement, or failed to make a statement that, at the time such disclosure was made, could reasonably be expected to provide a basis for the FDA or any other Governmental Authority to invoke its policy respecting “Fraud, Untrue Statements of Material Facts, Bribery, and Illegal Gratuities” set forth in 56 Fed. Reg. 46191 (September 10, 1991) or any similar policy and, to the Knowledge of the Company, neither the Company nor any of its officers, employees or agents is the subject, officially or otherwise, of any pending or threatened investigation by any Governmental Authority under such policy or under the Federal Anti-Kickback Statute or the Civil False Claims Act or any regulations promulgated thereunder.  Neither the Company nor any of its officers, employees or agents has been convicted of any crime or engaged in any conduct with respect to the Products for which

 

*CONFIDENTIAL TREATMENT REQUESTED

 

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debarment is mandated by 21 U.S.C. Section 335a(a) or any similar Requirement of Law or authorized by 21 U.S.C. Section 335a(b) or any similar Requirement of Law.

 

(e)                                   To the Knowledge of the Company, all pre-clinical and clinical investigations conducted or sponsored by it with respect to the Products have been and are being conducted in compliance with all recommendations of the FDA, 21 C.F.R. Parts 50, 54, 56, 58 and 312 and all other applicable Requirements of Laws, including those with respect to good laboratory practices, investigational new drug requirements, good clinical practice requirements (including informed consent and institutional review boards designed to ensure the protection of the rights and welfare of human subjects), and federal and state laws restricting the use and disclosure of individually identifiable health information.

 

3.19                            Insurance.  The Company and its Subsidiaries maintain, with financially sound and reputable insurers, insurance in such amounts, including deductible arrangements, and of such a character as is, in the judgment of the Board of Directors, reasonable in light of the risks faced by the Company in the conduct of its business.  All policies of title, fire, liability, casualty, business interruption, workers’ compensation and other forms of insurance including, but not limited to, directors and officers insurance, held by the Company and its Subsidiaries, are in full force and effect in accordance with their terms.  Neither the Company nor any of its Subsidiaries is in default in any material respect under any provisions of any such policy of insurance that has not been remedied and no such Person has received notice of cancellation of any such insurance.

 

3.20                            Intellectual Property.  (a)  Schedule 3.20(a) of the Company Disclosure Letter contains a list and description (showing in each case the registered or other owner, expiration date and registration or application number, if any) of all Copyrights, Patent Rights and Trademarks (including all assumed or fictitious names) owned by, licensed to or used by the Company or any of its Subsidiaries.

 

(b)                                  Schedule 3.20(b) of the Company Disclosure Letter contains a list and description (showing in each case any owner, licensor or licensee) of all material Software licensed to or used by the Company or any of its Subsidiaries, provided that Schedule 3.20(b) of the Company Disclosure Letter does not list mass market Software licensed that is commercially available and subject to “shrink-wrap” or “click-through” license agreements.  The Company and its Subsidiaries do not own any Software.

 

(c)                                   Schedule 3.20(c) contains of the Company Disclosure Letter a list and description of all Contracts that relate to:  (i) any Copyrights, Patent Rights or Trademarks required to be identified in Schedule 3.20(a) of the Company Disclosure Letter; (ii) any Trade Secrets owned by, licensed to or used by the Company or any of its Subsidiaries; and (iii) any Software required to be identified in Schedule 3.20(b) of the Company Disclosure Letter.

 

(d)                                  Except as disclosed in Schedule 3.20(d) of the Company Disclosure Letter, the Company either:  (i) owns the entire right, title and interest in and to the Intellectual Property and

 

*CONFIDENTIAL TREATMENT REQUESTED

 

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Software listed on Schedule 3.20(a) and 3.20(b) of the Company Disclosure Letter, free and clear of any Liens; or (ii) has the perpetual, royalty-free right to use the same.  Except as set forth in Schedule 3.20(d) of the Company Disclosure Letter, the Company is listed in the records of the appropriate United States, state or non-U.S. registry as the sole current owner of record for each application or registration required to be identified in Schedule 3.20(a) of the Company Disclosure Letter as being owned by the Company or any of its Subsidiaries.  There exists no “Improvements” under and as defined in Section 3.08 of the Patent License Agreement, dated June 1, 2006, between the Company and Bracco International BV.  Under the Collaboration, License and Supply Agreement, dated as of July 6, 2004, between the Company and Nycomed Danmark ApS, as amended, no indications have been added to the “Field” (as defined therein), pursuant to Section 3.02(e) thereof or otherwise.

 

(e)                                   Except as disclosed in Schedule 3.20(e) of the Company Disclosure Letter:  (i) all registrations for Copyrights, Patent Rights and Trademarks required to be identified in Schedule 3.20(a) of the Company Disclosure Letter as being owned by the Company and its Subsidiaries are valid and in force, and all applications to register any unregistered Copyrights, Patent Rights and Trademarks so identified are pending and in good standing, all without challenge of any kind; (ii) the Intellectual Property owned by the Company and its Subsidiaries has not been cancelled or abandoned and is valid and enforceable; (iii) the Company has the sole and exclusive right to bring actions for infringement, misappropriation, dilution, violation or unauthorized use of the Intellectual Property owned by the Company and its Subsidiaries, and to the Knowledge of the Company, there is no basis for any such action; (iv) the Company and its Subsidiaries have taken all actions reasonably necessary to protect and where necessary register, the Intellectual Property owned by or licensed exclusively to them; and (v) the Company and its Subsidiaries are not in breach of any Contract affecting the Intellectual Property used by the Company and its Subsidiaries and have not taken any action that would impair or otherwise adversely affect their rights in the Intellectual Property used by the Company and its Subsidiaries.  Correct and complete copies of: (x) registrations for all registered Copyrights, Patent Rights and Trademarks identified in Schedule 3.20(a) of the Company Disclosure Letter as being owned by the Company and its Subsidiaries; and (y) all pending applications to register unregistered Copyrights, Patent Rights and Trademarks identified in Schedule 3.20(a) of the Company Disclosure Letter as being owned by the Company and its Subsidiaries (together with any subsequent correspondence or filings relating to the foregoing) have heretofore been delivered or made available to the Purchaser by the Company.

 

(f)                                     Except as set forth in Schedule 3.20(f) of the Company Disclosure Letter:  (i) no infringement, misappropriation, violation or dilution of any Intellectual Property, or any rights of publicity or privacy relating to the use of names, likenesses, voices, signatures or biographical information, of any other Person has occurred or results in any way from the operations of the Company and its Subsidiaries; (ii) no claim of any infringement, misappropriation, violation or dilution of any Intellectual Property or any such rights of any other Person has been made or asserted in respect of the operations of the Company and its Subsidiaries; (iii) no claim of

 

*CONFIDENTIAL TREATMENT REQUESTED

 

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invalidity of any Intellectual Property owned by the Company and its Subsidiaries has been made by any other Person; (iv) no proceedings are pending or, to the Knowledge of the Company, threatened that challenge the validity, ownership or use of any Intellectual Property owned by the Company and its Subsidiaries; and (v) the Company has not had notice of, or to the Knowledge of the Company is there any basis for, a claim against the Company and its Subsidiaries that the operations, activities, products, Software, equipment, machinery or processes the Company and its Subsidiaries infringe, misappropriate, violate or dilute any Intellectual Property or any such rights of any other Person.

 

3.21                            Affiliate Transactions.  Except for transactions described on Schedule 3.21 of the Company Disclosure Letter and except for the transactions between the Company and the Purchaser, (a)(i) no current officer, director or employee of the Company or any of its Subsidiaries, (ii) to the Knowledge of the Company, no former officer, director or employee of the Company or any of its Subsidiaries, (iii) to the Knowledge of the Company, no Affiliate or associate of any current officer, director or employee of the Company or any of its Subsidiaries and (iv) to the Knowledge of the Company, no Affiliate or associate of any former officer, director or employee of the Company or any of its Subsidiaries has, directly or indirectly, any interest in any Contract or property (real or personal, tangible or intangible) used by the Company or any such Subsidiary or in their respective businesses, or in any supplier, distributor or customer of the Company or any such Subsidiary (other than indirectly through such Person’s ownership of the securities of a corporation whose stock is traded on a national securities exchange or in the over-the-counter market and less than 1% of the stock of such corporation is beneficially owned by such Person) and (b) neither the Company nor any of its Subsidiaries shares any assets, rights or services with any entity that is controlled by any current officer, director or employee of the Company or any of its Subsidiaries or, to the Knowledge of the Company, by any former officer, director or employee of the Company or any of its Subsidiaries.

 

3.22                            Investment Company Act.  Neither the Company nor any of its Subsidiaries is, and, after giving effect to consummation of the transactions contemplated hereby and by the other Company Agreements, will be, an “investment company” or an entity “controlled by” an “investment company” (as such terms are defined in the Investment Company Act of 1940, as amended).

 

3.23                            Board Approval.  (a)  The Finance Committee of the Board of Directors, pursuant to the authority delegated to it by the Board of Directors, at a meeting duly called and held has unanimously determined that this Agreement and the transactions contemplated by the Transaction Agreements are advisable and in the best interests of the Company and its stockholders and has approved this Agreement, the Note, and the other Transaction Agreements and the transactions contemplated thereby.

 

(b)                                  The Board of Directors (or a committee thereof) has taken all action required in order to (i) exempt the Purchaser, in respect to its purchase and conversion of the Note and any other securities of the Company acquired pursuant to the transactions contemplated by the

 

*CONFIDENTIAL TREATMENT REQUESTED

 

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Transaction Agreements , from “interested stockholder” status as defined under Section 203 of the DGCL and (ii) exempt the transactions contemplated by the Transaction Agreements from the requirements of, and from triggering any provisions under, any “moratorium,” “control share,” “fair price,” “interested stockholder,” “affiliate transaction,” “business combination” or other anti-takeover laws and regulations of any Governmental Authority.

 

(c)                                   Except as set forth on Schedule 3.23(c) of the Company Disclosure Letter, no approval of the Transaction Agreements or of the transactions contemplated thereby by the holders of any shares of capital stock or Indebtedness of the Company is required in connection with the execution or delivery of the Transaction Agreements or the consummation of the transactions contemplated by thereby, whether pursuant to the DGCL, the Certificate of Incorporation or Bylaws, the rules and regulations of the NASD, NASDAQ or otherwise.

 

3.24                            Conversion Shares.  The Conversion Shares will be duly and validly issued, fully paid and nonassessable and free and clear of any Liens (other than any Liens granted by the Purchaser), not subject to preemptive or similar rights and constitute valid and legally binding obligations of the Company, enforceable against the Company in accordance with their terms, and such Conversion Shares will be issued in compliance with all applicable federal and state securities laws, when issued, sold and delivered in accordance with the terms of the Note and this Agreement.  The Conversion Shares will be listed on NASDAQ.  No approval of the stockholders of the Company is required to issue the Note or the Conversion Shares.

 

3.25                            No Brokers or Finders.  No agent, broker, finder, or investment or commercial banker or other Person (if any) engaged by or acting on behalf of the Company or any Subsidiary or Affiliate is or will be entitled to any brokerage or finder’s or similar fee or other commission as a result of this Agreement, the Note, the other Transaction Agreements or the transactions contemplated thereby.

 

3.26                            Disclosure.  Neither this Agreement nor any certificate, instrument or written statement furnished or made to the Purchaser by or on behalf of the Company in connection with the transactions contemplated by the Transaction Agreements contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained herein and therein in light of the circumstances under which they were made not misleading.

 

ARTICLE 4

 

REPRESENTATIONS AND WARRANTIES OF THE PURCHASER

 

The Purchaser hereby represents and warrants to the Company as follows:

 

4.1                                  Existence and Power.  The Purchaser (a) is duly organized, validly existing and in good standing under the laws of the State of Delaware and (b) has all requisite power and

 

*CONFIDENTIAL TREATMENT REQUESTED

 

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authority to execute, deliver and perform its obligations under this Agreement and the other Transaction Agreements.

 

4.2                                  Authorization; No Contravention.  The execution, delivery and performance by the Purchaser of this Agreement and each other Transaction Agreement to which it is a party and the consummation of the transactions contemplated thereby (a) have been duly authorized by all necessary corporate or other action, (b) do not contravene the terms of the Purchaser’s organizational documents and (c) do not violate, conflict with or result in any breach or contravention of, or the creation of any Lien under, any Contract of the Purchaser or any Requirement of Law or Order applicable to the Purchaser, except for such violations, conflicts, breaches or Liens which, individually or in the aggregate, have not had and would not reasonably be expected to have a material adverse effect on the Purchaser’s ability to consummate the transactions contemplated by this Agreement and the other Transaction Agreements.

 

4.3                                  Governmental Authorization; Third Party Consents.  Except as required by the HSR Act and except for the consent referred to in Schedule 3.4 of the Company Disclosure Letter, in each case with respect to the conversion of the Note, no approval, consent, qualification, order, exemption, authorization or other action by, or notice to, or filing with, any Governmental Authority, or any other Person in respect of any Requirement of Law, Order, Contract or otherwise, and no lapse of a waiting period under a Requirement of Law, is necessary or required in connection with the execution, delivery or performance by the Purchaser, or enforcement against the Purchaser, of this Agreement and each of the other Transaction Agreements to which it is a party or the consummation of the transactions contemplated thereby, except for the failure of which to be obtained would not have a material adverse effect on the ability of the Purchaser to consummate the transactions contemplated by the Transaction Agreements.

 

4.4                                  Binding Effect.  This Agreement has been duly executed and delivered by the Purchaser and constitutes the legal, valid and binding obligation of the Purchaser, enforceable against it in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or similar laws affecting creditors’ rights generally and the general principles of equity, regardless of whether considered in a proceeding in equity or at law.

 

4.5                                  Purchase for Own Account, Etc.  (a)  Purchase for Own Account.  The Note is being acquired by the Purchaser for its own account and with no current intention of distributing or reselling the Note or any part thereof in any transaction that would be in violation of the securities laws of the United States of America or any state, without prejudice, however, to the rights of the Purchaser at all times to sell or otherwise dispose of all or any part of the Conversion Shares under an effective registration statement under the Securities Act or under an exemption from said registration available under the Securities Act.

 

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(b)                                  Purchaser Status.  The Purchaser is an “Accredited Investor” (as defined in Rule 501(a)) under the Securities Act.

 

(c)                                   Restricted Shares.  The Purchaser understands (i) Conversion Shares will not (other than pursuant to the Registration Rights Agreement) be registered under the Securities Act or any state securities laws, by reason of their issuance by the Company in a transaction exempt from the registration requirements thereof and (ii) the Conversion Shares may not be sold unless such disposition is registered under the Securities Act and applicable state securities laws or is exempt from registration thereunder.

 

4.6                                  No Brokers or Finders.  Except as contemplated by this Agreement, no agent, broker, finder, or investment or commercial banker or other Person (if any) engaged by or acting on behalf of the Purchaser or any of its Affiliates is or will be entitled to any brokerage or finder’s or similar fee or other commission as a result of this Agreement, the Transaction Agreements or the transactions contemplated thereby.

 

4.7                                  Litigation.  There is no Action pending or, to the knowledge of the Purchaser, threatened against or affecting the Purchaser or relating to any of the Transaction Agreements or the transactions contemplated thereby which, if determined adversely to the Purchaser would have a material adverse effect on the Purchaser’s ability to consummate the transactions contemplated by the Transaction Agreements.  The Purchaser is not subject to any Action that would have a material adverse effect on the Purchaser’s ability to consummate the transactions contemplated by the Transaction Agreements.

 

ARTICLE 5

 

COVENANTS OF THE COMPANY

 

5.1                                  Conduct of Business.  (a)  Except as expressly contemplated by this Agreement or consented to in writing by the Purchaser, from the date hereof through the Closing Date, the Company and its Subsidiaries shall conduct their businesses in the ordinary course, consistent with past practice.  The Company shall give the Purchaser prompt notice of any event, condition or circumstance known or that becomes known to the Company occurring from the date hereof through the Closing Date that would constitute a violation or breach of (a) any representation or warranty, whether made as of the date hereof or as of the Closing Date or (b) any covenant of the Company contained in this Agreement; provided, however, that no such notification shall relieve or cure any such breach or violation of any such representation, warranty or covenant or otherwise affect the accuracy of any such representation or warranty for the purposes of Section 7.1.

 

(b)                                  Without limiting the provisions of Section 5.1(a), except as otherwise expressly contemplated by the terms of this Agreement or agreed in writing by the Purchaser, from and after the date hereof through the Closing Date and following the Closing Date for so long as (x)

 

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the Note remains convertible into Common Stock or (y) the Purchaser owns a Qualifying Ownership Interest (collectively, the “ Restricted Period ”), the Company shall not, and will cause its Subsidiaries not to:

 

(i)                                      amend the Certificate of Incorporation or Bylaws or the organizational documents of the Company or any of its Subsidiaries, or increase or decrease its authorized capital, except (1) as contemplated by Sections 5.1(b)(iv), 6.4 and 6.9 or Section 7(b) of the Note and (2) as required in order to designate one or more series of Preferred Stock or to increase the number of authorized shares of Common Stock, in each case, to the extent necessary to consummate a Permitted Equity Offering;

 

(ii)                                   recapitalize or otherwise change its capital structure in a manner that would result in a change of control of the power to vote 50% or more of the Voting Securities or other interests of the Company having the voting power to direct or cause the direction of management policies of the Company;

 

(iii)                                authorize or issue, or obligate itself to issue, any equity security (including any Company Option or other security convertible into or exercisable or exchangeable for any equity security), except for (A) the issuance of the Note or the Conversion Shares, (B) the issuance of any Common Stock upon the exercise of Company Options, (C) the issuance of Company Options to purchase not more than 3,500,000 shares of Common Stock in the aggregate pursuant to the Company Plans and (D) a Permitted Equity Offering (subject to the terms of this Agreement including, without limitation, Sections 5.1(b)(ii), 5.2 and 6.1 hereof), or institute any stock option, incentive, purchase or other similar plans;

 

(iv)                               purchase, redeem, retire or otherwise acquire, split, combine or reclassify, directly or indirectly, any of the Common Stock or other equity securities of the Company or give notice of any intention to exercise any right to purchase, redeem or otherwise acquire, split, combine or reclassify, any of the Common Stock or other equity securities of the Company (including any such purchase, redemption or acquisition in accordance with the terms of the Certificate of Incorporation or Bylaws or any stockholders agreement), other than (1) redemptions in accordance with any employee or consultant agreement approved by the Board of Directors in connection with a separation of service and (2) a reverse stock split consummated in order to maintain the listing of the Common Stock on NASDAQ;

 

(v)                                  except with respect to the shares of 6.5% Convertible Exchangeable Preferred Stock issued and outstanding as of the Closing Date, declare or pay any dividends on or make other distributions (whether in cash, stock or property or any combination thereof), directly or indirectly, in respect of the Common Stock or other equity securities;

 

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(vi)                               enter into or permit to exist any agreement or undertaking (other than this Agreement) which prohibits, restricts or limits the ability of any Subsidiary of the Company to pay dividends or distributions to the Company, or otherwise to transfer assets or engage in transactions with the Company;

 

(vii)                            form any material joint venture or partnership;

 

(viii)                         have a subsidiary which is not wholly-owned by the Company, either directly or indirectly through one or more of its Subsidiaries;

 

(ix)                                 voluntarily dissolve or liquidate;

 

(x)                                    incur, create, assume, become or be liable in any manner with respect to, or permit to exist, any Indebtedness other than (a) the Note, (b) trade payables incurred in the ordinary course of business, (c) the Indebtedness listed on Schedule 3.12(a) of the Company Disclosure Letter or (d) other Indebtedness not to exceed $1,000,000 in the aggregate at any one time outstanding;

 

(xi)                                 enter into any Contract with respect to the acquisition by the Company (whether by purchase or merger or consolidation of the Company or any of its Subsidiaries with another Person) of any business, assets (including by license of any product) or property (real, personal or mixed, tangible or intangible, including stock or other equity interests in, or evidences of the indebtedness of, any other corporation, partnership or entity), other than acquisitions of assets in the ordinary course of business and consistent with past practice and other than any such acquisition resulting in an aggregate expenditure by the Company and its Subsidiaries of less than $100,000;

 

(xii)                              other than dispositions of the collateral secured by the Liens granted to General Electric Capital Corporation listed on Schedule 1.1(b) of the Company Disclosure Letter, sell, lease, license, surrender, relinquish, encumber, pledge, transfer, assign, amend, convey or otherwise dispose of in one or more transactions any business, property or assets (whether tangible or intangible) having an aggregate market value of in excess of $100,000 individually or $500,000 in the aggregate (it being understood that the foregoing shall not prohibit any merger, consolidation or reorganization involving the Company otherwise permitted by this Section 5.1(b));

 

(xiii)                           discontinue, permit to lapse or otherwise fail to keep in full force and effect any material policies of insurance or knowingly take any action that would cause any such policy to terminate or be terminable prior to the expiration of its stated term;

 

(xiv)                          settle any Action of, or against, the Company or its Subsidiaries that is in excess of $100,000;

 

*CONFIDENTIAL TREATMENT REQUESTED

 

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(xv)                             change any method of accounting or accounting practice used by the Company or any of its Subsidiaries, except for any change required by GAAP, by any Governmental Authority or by a change in Requirements of Law;

 

(xvi)                          file a voluntary petition in bankruptcy or commence a voluntary legal procedure for reorganization, arrangement, adjustment, release or composition of Indebtedness in bankruptcy or other similar Requirements of Law now or hereafter in effect, consent of the entry of an order for relief in an involuntary case under any such Requirements of Law or apply for or consent to the appointment of a rescuer, liquidator, assignee, custodian or trustee (or similar office) of the Company or any of its Subsidiaries;

 

(xvii)                       enter into the active management or business that is not primarily related to, or in furtherance of, being a pharmaceutical company focused on the research, development and commercialization of proprietary healthcare products;

 

(xviii)                    grant any put, registration or similar rights to any Person that would reasonably be expected to affect adversely the rights of the Purchaser under this Agreement, the Note or the other Transaction Agreements;

 

(xix)                            prepare or file any Tax Return inconsistent with past practice or, on any such Tax Return, take any position, make any election, or adopt any method that is inconsistent with positions taken, elections made or methods used in preparing or filing similar Tax Returns in prior periods;

 

(xx)                               take any corporate or other action in furtherance of any of the foregoing; or

 

(xxi)                            agree to do any of the foregoing.

 

(c)                                   Without limiting Section 5.1(b)(v), so long as the Note remains outstanding, the Company shall not declare or pay any dividends on or make other distributions (whether in cash, stock or property or any combination thereof), directly or indirectly, in respect of the Common Stock without the prior written consent of the Purchaser.

 

(d)                                  To the extent permitted by applicable Requirements of Law, the Company agrees to treat the Note as indebtedness for United States federal tax purposes.

 

5.2                                  No Solicitation.  Without limiting the Company’s other obligations under this Agreement, the Company agrees that, from the date hereof until the Closing, neither it nor any of its Subsidiaries nor any of the officers and directors of it or its Subsidiaries shall, and that it shall use its reasonable best efforts to cause its and its Subsidiaries’ employees, agents and representatives (including any investment banker, attorney or accountant retained by it or any of

 

*CONFIDENTIAL TREATMENT REQUESTED

 

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its Subsidiaries) not to, directly or indirectly, (a) initiate, solicit, encourage or knowingly facilitate (including by way of furnishing information) any inquiries or the making of any proposal or offer with respect to, or a transaction to effect, a merger, reorganization, share exchange, consolidation, business combination, recapitalization, liquidation, dissolution or similar transaction involving it or any of its Subsidiaries, or any purchase or sale of 15% or more of the consolidated assets (including without limitation stock of its Subsidiaries) of it and its Subsidiaries, taken as a whole, or any purchase or sale of, or tender or exchange offer for, the equity securities of the Company that, if consummated, would result in any Person (or the stockholders of such Person) beneficially owning or having the right to acquire securities representing 15% or more of the Voting Securities (or of the surviving parent entity in such transaction) (any such proposal, offer or transaction, including any single or multi-step transaction or series of related transactions (other than a proposal or offer made by the Purchaser or any of its Affiliates) being hereinafter referred to as an “ Acquisition Proposal ”), (b) have any discussion with or provide any confidential information or data to any Person relating to an Acquisition Proposal, or engage in any negotiations concerning an Acquisition Proposal, or take action to facilitate any effort or attempt to make or implement an Acquisition Proposal, (c) approve or recommend, or propose publicly to approve or recommend, any Acquisition Proposal or (d) approve or recommend, or propose to approve or recommend, or execute or enter into, any letter of intent, agreement in principle, merger agreement, acquisition agreement, option agreement or other similar agreement relating to an Acquisition Proposal (an “ Acquisition Agreement ”) or propose publicly or agree to do any of the foregoing related to any Acquisition Proposal; provided, however, that the provisions of this Section 5.2 (except for the last five (5) sentences of this Section 5.2) shall not apply to discussions with respect to a Permitted Equity Offering with the Persons listed on Schedule 5.2 of the Company Disclosure Letter; provided, further, however, the foregoing shall not prohibit the Company, (i) from complying with Rule 14e-2 and Rule 14d-9 under the Exchange Act with regard to a bona fide tender offer or exchange offer or (ii) from participating in negotiations or discussions with or furnishing information to any Person in connection with an unsolicited bona fide Acquisition Proposal which is submitted in writing by such Person to the Board of Directors after the date hereof; provided, further, however , that prior to participating in any such discussions or negotiations or furnishing any information, (A) the Company receives from such Person an executed confidentiality agreement on terms no less favorable to the Company than the Confidentiality Agreement, a copy of which shall be provided only for informational purposes to the Purchaser and (B) the Board of Directors shall have concluded in good faith, after consulting with its outside financial advisors and counsel, that such Acquisition Proposal is reasonably likely to be or to result in a Superior Acquisition Proposal (as defined below).  If, prior to the Closing, the Board of Directors receives an Acquisition Proposal, the Company shall promptly (and in no event later than 24 hours after receipt of such Acquisition Proposal) inform the Purchaser in writing of the terms and conditions of such proposal and the identity of the Person making it, and will keep the Purchaser informed, on a current basis, of the status and terms of any such proposals or offers by any Person (whether written or oral).  The Company will, and will cause its Affiliates to, immediately cease and cause to be terminated any activities, discussions or

 

*CONFIDENTIAL TREATMENT REQUESTED

 

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negotiations existing as of the date hereof with any Persons (other than the Purchaser and its Affiliates) conducted heretofore with respect to any Acquisition Proposal, and request the return or destruction of all non-public information furnished in connection therewith.  The Company shall not release any third party from, or waive any provisions of, any confidentiality or standstill agreement to which such party or its Subsidiaries is a party.  If, prior to the Closing, the Board of Directors receives a Superior Acquisition Proposal that was not initiated, solicited, encouraged or facilitated in breach of this Agreement and the Board of Directors determines in good faith, after consultation with outside counsel, that it is necessary to do so in order to comply with the directors’ fiduciary obligations to the Company’s stockholders under applicable Requirements of Law, the Board of Directors may terminate this Agreement and cause the Company to enter into an Acquisition Agreement with respect to the Superior Acquisition Proposal; provided , that the Company shall not be entitled to terminate this Agreement pursuant to this Section 5.2 if the Company is not in compliance with the process of this Section 5.2; provided , further , that the Board of Directors may not take the actions specified above unless (1) the Board of Directors shall have first provided prior written notice to the Purchaser of its intention to take such actions, which notice shall describe the material terms of the transaction that constitutes such Superior Acquisition Proposal, and shall attach the most current draft of any written agreement relating thereto (if available) and (2) the Purchaser does not make, within three (3) Business Days after the receipt of such notice, a revised offer that the Board of Directors determines, in good faith, after consultation with outside counsel and its financial advisor, is at least as favorable to the stockholders of the Company as such Superior Acquisition Proposal (a “ Response Proposal ”).  The Company agrees that during the three (3) Business Day period prior to its effecting the actions specified above, the Company (as directed by the Board of Directors) and its representatives shall negotiate in good faith with the Purchaser regarding a possible Response Proposal to be submitted by the Purchaser.  The Company acknowledges and agrees that each successive material modification of a Superior Acquisition Proposal shall be deemed to constitute a new Superior Acquisition Proposal for purposes of this Section 5.2.  “ Superior Acquisition Proposal ” means any written proposal made by any Person (other than the Purchaser or its Subsidiaries) to acquire at least 75% of the equity securities or consolidated assets of the Company, pursuant to a tender or exchange offer, a merger, a consolidation, a liquidation or dissolution, a recapitalization, or a sale of its assets, (x) on terms which the Board of Directors determines in good faith after consultation with its outside counsel and financial advisor to be more favorable from a financial point of view to the Company’s stockholders than the transactions contemplated by this Agreement and the other Transaction Agreements, taking into account all the terms and conditions of such proposal and this Agreement (including any Response Proposal by the Purchaser) and (y) that is reasonably capable of being completed, taking into account all financial, regulatory, legal and other aspects of such proposal.

 

5.3                                  Regulatory Approval; Litigation.  (a)  Each of the Purchaser and the Company agrees that it will use its reasonable efforts to take, or cause to be taken, all actions and to do, or cause to be done, and to assist and cooperate with the other party in doing all things, which may be required to obtain all necessary actions or non-actions, waivers, consents and approval from

 

*CONFIDENTIAL TREATMENT REQUESTED

 

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Governmental Authorities required to consummate the transactions contemplated by the Transaction Agreements; provided, however, that, in connection with obtaining any such action, non-action, waiver, consent or approval, the Purchaser shall not be required to agree, and the Company, without the written consent of the Purchaser shall not agree, to any condition or action that the Purchaser reasonably believes would, individually or in the aggregate, adversely affect Purchaser’s ability to obtain the benefits (financial or otherwise) of the transactions contemplated by the Transaction Agreements.

 

(b)                                  The Company will act diligently and reasonably in attempting to obtain, before the Closing Date, the consent, approval or waiver, in form and substance reasonably satisfactory to the Purchaser, from any party to any Company Agreement required to be obtained to assign or transfer any such Agreements to the Purchase or to otherwise satisfy the conditions set forth in Section 7.1; provided , that neither the Company nor the Purchaser shall have any obligation to offer or pay any consideration in order to obtain any such consents or approvals; and provided, further , that the Company, without the written consent of the Purchaser, shall not make any agreement or understanding, agree to any condition or action that the Purchaser reasonably believes would, individually or in the aggregate, adversely affect the Purchaser’s ability to obtain the benefits of (financial or otherwise) of the transactions contemplated by the Transaction Agreements.

 

(c)                                   During the period prior to the Closing Date, the Company will notify the Purchaser of (i) any Material Adverse Effect in the Company, (ii) any Action that is threatened, brought, asserted or commenced against the Company or any of its Subsidiaries which would have been listed in Schedule 3.11 of the Company Disclosure Letter if such Action had arisen prior to the date hereof, (iii) any notice or other communication from any third Person alleging that the consent of such third Person is or may be required in connection with the transactions contemplated by the Transaction Agreements and (iv) any material default under any Company Agreement or event which, with notice or lapse of time or both, would become such a default on or prior to the Closing Date and of which the Company has knowledge.

 

5.4                                  Access; Information Rights.   (a)  Except as otherwise expressly contemplated by the terms of this Agreement or agreed in writing by the Purchaser, from and after the date hereof and for so long as (x) the Note remains outstanding, (y) the Purchaser owns at least 5% of the Voting Securities or (z) the Purchaser is required to include or reflect the financial results of the Company in the Purchaser’s financial statements included in its reports filed with the Commission (collectively, the “ 2Holding Period ”), upon reasonable notice, the Company shall (and shall cause its Subsidiaries to) permit (i) the officers, employees, accountants, counsel, financial advisors and other representatives of the Purchaser reasonable access during normal business hours to all of its books, records, properties and personnel (including the ability to discuss the Company’s affairs, finances and accounts with its officers) and (ii) reasonable access during normal business hours for the independent registered public accounting firm of the Purchaser to perform audit procedures as needed to support work on the Purchaser’s audit.

 

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(b)                                  During the Holding Period, the Company shall deliver to the Purchaser:

 

(i)                                      as soon as practicable, but in any event within ninety (90) days after the end of each fiscal year of the Company, an income statement for such fiscal year, a balance sheet of the Company and statement of stockholders’ equity as of the end of such year, and a schedule as to the sources and applications of funds for such year, such year-end financial reports to be in reasonable detail, prepared in accordance with GAAP, and audited and certified by independent public accountants of nationally recognized standing selected by the Company;

 

(ii)                                   as soon as practicable, but in any event within forty-five (45) days after the end of each of the first three (3) quarters of each fiscal year of the Company, an unaudited profit or loss statement and schedule as to the sources and application of funds for such fiscal quarter and an unaudited balance sheet as of the end of such fiscal quarter;

 

(iii)                                within five (5) days of the end of each month, an unaudited income statement and schedule as to the sources and application of funds and balance sheet for and as of the end of such month, in reasonable detail and, within ten (10) days of the end of each month, additional supporting documents and schedules reasonably requested by the Purchaser, each prepared using accounting policies reasonably acceptable to the Purchaser;

 

(iv)                               as soon as practicable, but in any event fifteen (15) days prior to the end of each fiscal year or fiscal quarter, as applicable, a budget and business plan for the next fiscal year or fiscal quarter, as applicable, prepared on a monthly basis, including balance sheets and sources and applications of funds statements for such months and, as soon as prepared, any other budgets or revised budgets prepared by the Company

 

(v)                                  with respect to the financial statements called for in subsections (i), (ii) and (iii) of this Section 5.4(b), an instrument executed by the chief financial officer or chief executive officer of the Company and certifying that such financials were prepared in accordance with GAAP consistently applied with prior practice for earlier periods (with the exception of footnotes that may be required by GAAP) and fairly present the financial condition of the Company and its results of operation fo