Exhibit 99.1
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SHARE EXCHANGE AGREEMENT
by and among
EPIMMUNE INC.,
A Corporation Organized Under the Laws of the State of Delaware,
United States of America;
and
CERTAIN SHAREHOLDERS OF IDM S.A.,
Listed on Exhibit A Attached Hereto
Dated as of March 15, 2005
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TABLE OF CONTENTS
Page
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ARTICLE I
EXCHANGE OF SHARES
SECTION 1.01. Exchange of Shares.......................................................... 3
SECTION 1.02. Exchange Ratio.............................................................. 3
SECTION 1.03. The Closing................................................................. 4
SECTION 1.04. Closing Deliveries by the Principal Company Shareholders.................... 4
SECTION 1.05. Closing Deliveries by the Issuer............................................ 5
SECTION 1.06. Escrow Shares............................................................... 5
SECTION 1.07. Treatment of Company Stock Options.......................................... 6
SECTION 1.08. Treatment of Company Warrants............................................... 7
SECTION 1.09. Treatment of Company Securities Held in an Individual Shares Savings Plan... 8
SECTION 1.10. Notices to Other Shareholders............................................... 9
ARTICLE II
REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANY
SECTION 2.01. Corporate Organization...................................................... 10
SECTION 2.02. Corporate Books and Records................................................. 11
SECTION 2.03. Capitalization.............................................................. 11
SECTION 2.04. Authority Relative to This Agreement........................................ 12
SECTION 2.05. No Conflict; Required Filings and Consents.................................. 12
SECTION 2.06. Permits; Compliance......................................................... 13
SECTION 2.07. Financial Statements........................................................ 15
SECTION 2.08. Absence of Certain Changes or Events........................................ 16
SECTION 2.09. Absence of Litigation....................................................... 17
SECTION 2.10. Employee Benefit Plans...................................................... 17
SECTION 2.11. Labor and Employment Matters................................................ 19
SECTION 2.12. Property and Leases......................................................... 22
SECTION 2.13. Intellectual Property....................................................... 23
SECTION 2.14. Taxes....................................................................... 25
SECTION 2.15. Environmental Matters....................................................... 27
SECTION 2.16. Material Contracts.......................................................... 27
SECTION 2.17. Insurance................................................................... 30
SECTION 2.18. Board Approval.............................................................. 30
SECTION 2.19. Certain Business Practices.................................................. 30
SECTION 2.20. Interested Party Transactions............................................... 30
SECTION 2.21. Brokers..................................................................... 31
ARTICLE III
REPRESENTATIONS AND WARRANTIES REGARDING THE PRINCIPAL COMPANY
SHAREHOLDERS
SECTION 3.01. Organization; Qualification................................................. 31
SECTION 3.02. Authority Relative to This Agreement........................................ 31
SECTION 3.03. No Conflict................................................................. 31
SECTION 3.04. Title to the Shares......................................................... 32
SECTION 3.05. Investment Experience and Status............................................ 32
ARTICLE IV
REPRESENTATIONS AND WARRANTIES REGARDING THE ISSUER
SECTION 4.01. Corporate Organization...................................................... 34
SECTION 4.02. Corporate Books and Records................................................. 34
SECTION 4.03. Capitalization.............................................................. 35
SECTION 4.04. Authority Relative to This Agreement........................................ 36
SECTION 4.05. No Conflict; Required Filings and Consents.................................. 37
SECTION 4.06. Permits; Compliance......................................................... 37
SECTION 4.07. SEC Filings; Financial Statements; Nasdaq................................... 39
SECTION 4.08. Absence of Certain Changes or Events........................................ 41
SECTION 4.09. Absence of Litigation....................................................... 41
SECTION 4.10. Employee Benefit Plans...................................................... 41
SECTION 4.11. Labor and Employment Matters................................................ 43
SECTION 4.12. Property and Leases......................................................... 45
SECTION 4.13. Intellectual Property....................................................... 46
SECTION 4.14. Taxes....................................................................... 48
SECTION 4.15. Environmental Matters....................................................... 48
SECTION 4.16. Material Contracts.......................................................... 49
SECTION 4.17. Insurance................................................................... 51
SECTION 4.18. Board Approval; Vote Required............................................... 51
SECTION 4.19. Certain Business Practices.................................................. 52
SECTION 4.20. Interested Party Transactions............................................... 52
SECTION 4.21. Opinion of Financial Advisor................................................ 52
SECTION 4.22. Brokers..................................................................... 53
SECTION 4.23. Termination of Anosys Agreement............................................. 53
ARTICLE V
CONDUCT OF BUSINESS PENDING THE CLOSING
SECTION 5.01. Conduct of Business of the Company Pending the Closing...................... 53
SECTION 5.02. Conduct of Business of the Issuer Pending the Closing....................... 56
SECTION 5.03. Control of Other Party's Business........................................... 58
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ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. Proxy Statement............................................................. 58
SECTION 6.02. Issuer Stockholders' Meeting................................................ 60
SECTION 6.03. Access to Information; Confidentiality...................................... 60
SECTION 6.04. No Solicitation of Transactions............................................. 61
SECTION 6.05. Directors' and Officers' Indemnification and Insurance...................... 63
SECTION 6.06. Notification of Certain Matters............................................. 64
SECTION 6.07. Resale Registration Statement............................................... 64
SECTION 6.08. Further Action; Reasonable Best Efforts..................................... 67
SECTION 6.09. Exchange of Issuer Preferred Stock.......................................... 67
SECTION 6.10. Public Announcements........................................................ 68
SECTION 6.11. Corporate Matters........................................................... 68
SECTION 6.12. Covenants of the Principal Company Shareholders............................. 68
SECTION 6.13. Nasdaq Listing Application.................................................. 70
SECTION 6.14. Compensation Matters........................................................ 70
SECTION 6.15. Company Shareholders Agreement.............................................. 70
SECTION 6.16. Company Shareholders' Meeting............................................... 71
ARTICLE VII
CONDITIONS TO THE SHARE EXCHANGE
SECTION 7.01. Conditions to the Obligations of Each Party................................. 71
SECTION 7.02. Conditions to the Obligations of the Issuer................................. 73
SECTION 7.03. Conditions to the Obligations of the Principal Company Shareholders......... 73
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01. Termination................................................................. 74
SECTION 8.02. Effect of Termination....................................................... 76
SECTION 8.03. Fees and Expenses........................................................... 76
SECTION 8.04. Amendment................................................................... 78
SECTION 8.05. Waiver...................................................................... 78
ARTICLE IX
INDEMNIFICATION
SECTION 9.01. Survival of Representations and Warranties.................................. 78
SECTION 9.02. Indemnification by the Principal Company Shareholders....................... 78
SECTION 9.03. Notice of Loss; Third Party Claims.......................................... 79
SECTION 9.04. Shareholder Representative.................................................. 80
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ARTICLE X
GENERAL PROVISIONS
SECTION 10.01. Non-Survival of Representations, Warranties and Agreements................. 83
SECTION 10.02. Notices.................................................................... 83
SECTION 10.03. Severability............................................................... 84
SECTION 10.04. Entire Agreement; Assignment............................................... 84
SECTION 10.05. Parties in Interest........................................................ 84
SECTION 10.06. Specific Performance....................................................... 84
SECTION 10.07. Governing Law; Arbitration................................................. 85
SECTION 10.08. Construction............................................................... 85
SECTION 10.09. Waiver of Jury Trial....................................................... 85
SECTION 10.10. Headings................................................................... 86
SECTION 10.11. Counterparts............................................................... 86
SECTION 10.12. Language................................................................... 86
SECTION 10.13. Waiver of Conflicts........................................................ 86
SECTION 10.14. Effectiveness of Agreement................................................. 87
EXHIBIT A Principal Company Shareholders
EXHIBIT B Defined Terms
EXHIBIT C Form of Issuer French Stock Option Plan
EXHIBIT D-1 Individuals Entering into Employment Agreements with the Issuer
EXHIBIT D-2 Individuals Negotiating Employment Agreements with the Issuer
EXHIBIT E Form of Indemnity Escrow Agreement
EXHIBIT F Form of Expense Escrow Agreement
EXHIBIT G Form of Option Liquidity Agreement
EXHIBIT H Form of Put/Call Agreement
EXHIBIT I Form of Offer Notification
EXHIBIT J Form of Joinder Agreement
EXHIBIT K Form of Preferred Exchange Agreement
EXHIBIT L Executive Officers of the Issuer After the Closing Date
EXHIBIT M Form of Power of Attorney
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This SHARE EXCHANGE AGREEMENT (this "Agreement") is entered into as of
March 15, 2005 (the "Effective Date"), by and among EPIMMUNE INC., a Delaware
corporation (the "Issuer"), and the shareholders of IDM S.A., a societe anonyme
organized under the laws of France (the "Company"), listed on Exhibit A attached
hereto (the "Principal Company Shareholders"). Certain capitalized terms used
herein are defined on Exhibit B attached hereto.
RECITALS:
A. The Board of Directors of the Issuer (the "Issuer Board") has
determined that it is in the best interests of its stockholders for the Issuer
to acquire the Company upon the terms and subject to the conditions set forth in
this Agreement;
B. In furtherance of such acquisition, the Issuer agrees to acquire
all of the issued and outstanding class A ordinary shares, nominal value E 0.10
per share, of the Company ("Company A Shares") and all of the issued and
outstanding class B ordinary shares, nominal value E 0.10 per share, of the
Company ("Company B Shares" and, together with the Company A Shares, the
"Company Shares") in exchange for shares of common stock, par value $0.01 per
share, of the Issuer ("Issuer Common Stock"), upon the terms and subject to the
conditions of this Agreement;
C. The Issuer Board has unanimously (i) approved this Agreement and
the transactions contemplated by this Agreement and (ii) resolved to recommend
that the stockholders of the Issuer vote to approve: (A) the issuance of shares
of Issuer Common Stock to the shareholders and/or warrantholders of the Company
(1) in exchange for Company Shares in accordance with Section 1.02 or 1.09 and
(2) in exchange for Company Warrants in accordance with Section 1.08(a), in each
case, pursuant to the terms of this Agreement (the "Share Exchange"); (B) the
change of the corporate name of the Issuer in accordance with Section 6.11(c) of
this Agreement (the "Issuer Name Change"); (C) the amendment of the Amended and
Restated Certificate of Incorporation of the Issuer (the "Issuer Certificate of
Incorporation") to increase the authorized capital stock of the Issuer (the
"Issuer Capital Stock Increase") and effect a reverse split of the Issuer Common
Stock and the Issuer Preferred Stock (the "Issuer Reverse Stock Split") in
accordance with Section 6.11(d) of this Agreement; (D) the increase in the
shares available for issuance under the Issuer's 2000 Stock Plan in accordance
with Section 6.14 of this Agreement (the "Issuer Stock Option Plan Amendment");
(E) the adoption of the Epimmune Option Liquidity Plan and the issuance of
shares of Issuer Common Stock to the holders of Company Stock Options pursuant
to such Option Liquidity Plan (the "Option Liquidity Share Issuance"); (F) the
increase in the shares available for issuance under the Issuer's 2001 Employee
Stock Purchase Plan in accordance with Section 6.14 of this Agreement (the
"Issuer ESPP Amendment"); and (G) the adoption of the Issuer French Employee
Stock Option Sub Plan (the "Issuer French Stock Option Plan"), substantially in
the form of Exhibit C attached hereto, which shall be in the form of a sub plan
to the Issuer's 2000 Stock Plan (the transactions specified in clauses (A)
through (G) above are sometimes referred to herein collectively as the "Issuer
Transactions");
D. The Board of Directors of the Company (the "Company Board") has
unanimously approved the transactions contemplated by this Agreement;
E. The Principal Company Shareholders, who own, in the aggregate,
Company Shares representing at least 85% of the shares of the capital stock and
voting rights of the Company as calculated in accordance with Section 6.1 of the
Shareholders Agreement, dated as of December 20, 1996, as amended through the
date hereof (the "Company Shareholders Agreement"), among the Company and the
shareholders of the Company listed on Annex I thereto, have agreed, among other
things, (i) to exchange their Company Shares for shares of Issuer Common Stock
upon the terms and subject to the conditions of this Agreement; (ii) to appoint
the Shareholder Representative to act on behalf of such Principal Company
Shareholders for certain purposes related to this Agreement and the transactions
contemplated hereby in accordance with Section 9.04 of this Agreement; (iii) to
waive their respective rights granted pursuant to Article 4 of the Company
Shareholder Agreement in connection with the Share Exchange; and (iv) to take
any other actions reasonably requested by the Issuer to require all the Other
Shareholders to exchange such shareholder's Company Shares for shares of Issuer
Common Stock, upon the terms and subject to the conditions of this Agreement, in
accordance with Section 6 of the Company Shareholders Agreement;
F. The Issuer, the Shareholder Representative and the directors and
executive officers of the Issuer have entered into Voting Agreements, dated as
of the date hereof (the "Voting Agreements"), pursuant to which such directors
and executive officers have agreed, among other things, to vote their shares of
Issuer Common Stock in favor of the Issuer Transactions;
G. The Issuer and the individuals listed on Exhibit D-1 attached
hereto have entered into Employment Agreements, dated as of the date hereof,
with respect to the employment of such individuals with the Issuer effective
upon the completion of the transactions contemplated by this Agreement, and the
Issuer is negotiating, in good faith, with the individuals listed on Exhibit D-2
attached hereto to enter into Employment Agreements with respect to the
employment of such individuals with the Issuer effective upon the completion of
the Transaction contemplated by this Agreement (all such Employment Agreement
entered into or being negotiated with the Issuer being collectively referred to
herein as the "Employment Agreements");
I. The Company has consulted with its workers' committee (comite
d'enterprise) regarding the transactions contemplated by this Agreement; and
J. The parties intend that this Agreement shall become effective upon
the receipt of signatures of the Principal Company Shareholders owning the
requisite number of Company Shares in accordance with Section 10.14.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, the Issuer and the Principal Company Shareholders hereby agree as
follows:
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ARTICLE I
EXCHANGE OF SHARES
SECTION 1.01. Exchange of Shares. (a) Upon the terms and subject to
the conditions contained in this Agreement, except as otherwise provided in
Section 1.09, at the Closing each Principal Company Shareholder shall sell,
assign, transfer, convey and deliver to the Issuer, and the Issuer shall
purchase, acquire and accept for delivery from such Principal Company
Shareholder, the number of Company Shares set forth opposite the name of such
Principal Company Shareholders on Exhibit A attached hereto.
SECTION 1.02. Exchange Ratio. (a) Subject to Sections 1.02(d) and
1.02(e) and any adjustment made pursuant to Sections 1.02(c), 1.05 and 1.06 and
the Escrow Agreements, each Company Share shall be exchanged for the number of
shares of Issuer Common Stock equal to the Exchange Ratio (as defined below)
(such number of shares of Issuer Common Stock, or such number as adjusted
pursuant to Section 1.02(c), being the "Exchange Consideration").
(b) For purposes of this Agreement, the "Exchange Ratio" means
3.771865, subject to adjustment pursuant to Section 1.02(c).
(c) Adjustments to Capital Stock. The Exchange Ratio shall be adjusted
to reflect appropriately the effect of the Issuer Reverse Stock Split and any
other stock split, reverse stock split, stock dividend (including any dividend
or distribution of securities convertible into Issuer Common Stock or Company
Shares), extraordinary cash dividends, reorganization, recapitalization,
reclassification, combination, exchange of shares or other like change with
respect to the Issuer Common Stock or Company Shares occurring on or after the
date hereof and prior to the Closing.
(d) Fractional Shares. No certificates or scrip representing
fractional shares of Issuer Common Stock shall be issued pursuant to this
Section 1.02 and such fractional share interests will not entitle the owner
thereof to vote or to any other rights of a stockholder of Issuer. Each holder
of a fractional share interest shall be paid an amount in cash (without interest
and subject to the amount of any withholding taxes as contemplated in Section
1.02(e)) equal to the product obtained by multiplying (i) such fractional share
interest to which such holder (after taking into account all fractional share
interests then held by such holder) would otherwise be entitled by (ii) the
Average Closing Price as of the Closing Date. The Issuer shall pay the amount
due to each holder of a fractional share interest pursuant to this Section
1.02(d) (and shall be deemed to have delivered such amount due to each such
holder) by the payment, by wire transfer in immediately available funds, to
Gestor Finance of an amount in cash equal to the aggregate fractional share cash
payments due to such holders within five days following the Closing. For
purposes of this Agreement, "Average Closing Price" means, for any specified
date, the average of the per share closing (at 4:00 p.m., Eastern Time) prices
on the Nasdaq National Market ("Nasdaq") of shares of Issuer Common Stock during
the five consecutive trading days ending on (and including) the trading day
immediately preceding such specified date.
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(e) Withholding Rights. The Issuer shall be entitled to deduct and
withhold from the consideration otherwise payable pursuant to this Agreement to
any holder of Company Shares such amounts as it is required to deduct and
withhold with respect to the making of such payment under the Code (as defined
below), or any provision of state, local or foreign tax Law (as defined below).
To the extent that amounts are so withheld by the Issuer, such withheld amounts
shall be treated for all purposes of this Agreement as having been paid to the
holder of the Company Shares in respect of which such deduction and withholding
was made by the Issuer.
(f) Restricted Securities. The shares of Issuer Common Stock to be
issued pursuant to this Agreement have not been, and will not be, registered
under the U.S. Securities Act of 1933, as amended (the "Securities Act"), and
will be issued in a transaction that is exempt from the registration
requirements of the Securities Act. Such shares of Issuer Common Stock will be
"restricted securities" under the U.S. federal securities laws and cannot be
offered or resold except pursuant to registration under the Securities Act or an
available exemption from registration. All certificates representing such shares
of Issuer Common Stock shall bear, in addition to any other legends required
under applicable securities laws, the following legend:
"The shares represented by this certificate have not been registered under
the U.S. Securities Act of 1933, as amended (the "Securities Act"), and may
not be transferred except pursuant to registration under the Securities Act
or pursuant to an available exemption from registration."
SECTION 1.03. The Closing. Subject to the terms and conditions of this
Agreement, the Share Exchange contemplated by this Agreement shall take place at
a closing (the "Closing") to be held at the offices of Shearman & Sterling LLP,
000, xxxxxx xxx Xxxxxx-Xxxxxxx, 00000, Xxxxx, Xxxxxx, at 7:00 P.M., local time,
on the second Business Day following the satisfaction or waiver of all
conditions to the obligations of the parties set forth in Article VII (other
than conditions to be satisfied at the Closing), or at such other place or at
such other time or on such other date as the Company and the Issuer may mutually
agree (the day on which the Closing takes place being the "Closing Date").
SECTION 1.04. Closing Deliveries by the Principal Company
Shareholders. (a) At the Closing, the Principal Company Shareholders or the
Shareholder Representative, as appropriate, shall deliver, or cause to be
delivered to the Issuer:
(i) share transfer orders (ordres de mouvement) for all of the Company
Shares held by the Principal Company Shareholders, completed pursuant to
the terms hereof, a true and complete copy of the registre des mouvements
de titres, the comptes d'actionnaires of the Company and any other
documents necessary for the transfer of good and marketable title to the
Shares; and
(ii) the certificates and other documents required to be delivered
pursuant to Section 7.03.
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(b) At the Closing, the Shareholder Representative and the Issuer
shall cause appropriate entries to be made in the registre des mouvements de
titres and the comptes d'actionnaires of the Company to register the
consummation of the Share Exchange.
SECTION 1.05. Closing Deliveries by the Issuer At the Closing, the
Issuer shall deliver, or cause to be delivered, to the Shareholder
Representative, on behalf of the Principal Company Shareholders:
(a) stock certificates in the name of each Principal Company
Shareholder evidencing the number of shares of Issuer Common Stock equal to (i)
the whole number of shares of Issuer Common Stock (excluding any fractional
interest in shares of Issuer Common Stock) issuable to each such person in
exchange for such person's Company Shares in accordance with Section 1.02, less
(ii) the sum of (A) 10% of such number of shares (representing such person's
Indemnity Escrow Shares) and (B) 1.2% of such number of shares (representing
such person's Expense Escrow Shares) (in each case, rounded down to the nearest
whole number); and
(b) the certificates and other documents required to be delivered
pursuant to Section 7.02.
SECTION 1.06. Escrow Shares. (a) At or prior to the Closing, the
Issuer and the Shareholder Representative shall enter into an escrow agreement
(the "Indemnity Escrow Agreement") with an escrow agent reasonably acceptable to
the Issuer and the Shareholder Representative (the "Indemnity Escrow Agent"),
substantially in the form of Exhibit E attached hereto. At the Closing, the
Issuer shall issue and deliver to the Indemnity Escrow Agent to hold pursuant to
the terms of the Indemnity Escrow Agreement stock certificates issued in the
name of each Principal Company Shareholder representing the number of shares of
Issuer Common Stock (the "Indemnity Escrow Shares") otherwise issuable to such
Principal Company Shareholder in the Share Exchange, but not delivered to such
Principal Company Shareholder at the Closing pursuant to Section 1.05(a)(ii)(A).
In connection with such deposit of the Indemnity Escrow Shares with the
Indemnity Escrow Agent, each Principal Company Shareholder will be deemed to
have received and deposited with the Indemnity Escrow Agent such number of
shares of Issuer Common Stock.
(b) At or prior to the Closing, the Principal Company Shareholders and
the Shareholder Representative shall enter into an escrow agreement (the
"Expense Escrow Agreement"; and together with the Indemnity Escrow Agreement,
the "Escrow Agreements") with an escrow agent reasonably acceptable to the
Principal Company Shareholders and the Shareholder Representative (the "Expense
Escrow Agent"), substantially in the form of Exhibit F attached hereto. At the
Closing, the Issuer shall issue and deliver to the Expense Escrow Agent to hold
pursuant to the terms of the Expense Escrow Agreement stock certificates issued
in the name of each Principal Company Shareholder representing the number of
shares of Issuer Common Stock (the "Expense Escrow Shares") otherwise issuable
to such Principal Company Shareholder in the Share Exchange, but not delivered
to such Principal Company Shareholder at the Closing pursuant to Section
1.05(a)(ii)(B). In connection with such deposit of the Expense Escrow Shares
with the Expense Escrow Agent, each Principal Company Shareholder will be
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deemed to have received and deposited with the Expense Escrow Agent such number
of shares of Issuer Common Stock.
SECTION 1.07. Treatment of Company Stock Options. (a) All options to
purchase Company Shares ("Company Stock Options") outstanding on the Closing
Date, whether or not exercisable and whether or not vested, granted under the
IDM S.A. 1998 Stock Option Plan or the IDM S.A. 2000 Stock Option Plan
(collectively, the "Company Stock Option Plans"), shall remain outstanding in
accordance with their existing terms following the Closing Date, subject to the
provisions of this Section 1.07.
(b) Prior to the Closing, but subject to and effective as of the
Closing, the Issuer shall offer to each holder of a Company Stock Option
residing in France (a "French Company Optionholder") the right to enter into,
and the Issuer shall enter into with each French Company Optionholder who
accepts the Issuer's offer, an Option Liquidity Agreement, in substantially the
form of Exhibit G attached hereto (an "Option Liquidity Agreement"). Each Option
Liquidity Agreement shall provide, among other provisions, that in the event
that the French Company Optionholder exercises such holder's Company Stock
Option, such optionholder shall transfer to the Issuer, and the Issuer shall
acquire from such optionholder, each Company Share acquired by such optionholder
pursuant to the exercise of a Company Stock Option in exchange for such number
of shares of Issuer Common Stock equal to the Exchange Ratio, in accordance with
the terms and conditions set forth in the Option Liquidity Agreement. Each
Principal Company Shareholder who is also a French Company Optionholder hereby
agrees to accept the Issuer's offer made pursuant to the provisions of this
Section 1.07(b) to enter into an Option Liquidity Agreement.
(c) Prior to the Closing, but subject to and effective as of the
Closing, the Issuer shall offer to each holder of a Company Stock Option
residing outside of France (a "Non-French Company Optionholder"), the right to
waive such holder's rights in such holder's Company Stock Options in exchange
for Substitute Options issued under, and subject to, the Issuer's 2000 Stock
Plan; provided, however, that the Substitute Option shall be vested to the same
extent the Company Stock Option for which the Substitute Option was exchanged
was vested as of the date the Substitute Option is granted (without giving
effect to any acceleration of vesting or exercisability as a result of the
Transactions) and shall otherwise continue to vest in accordance with the same
vesting schedule applicable to the Company Stock Option for which the Substitute
Option was exchanged, and the Substitute Option shall have a term of
exercisability equal to the remaining period in the term of exercisability
applicable to the Company Stock Option for which the Substitute Option was
exchanged (subject to earlier termination upon cessation of service of such
holder in accordance with the applicable provisions of the Issuer's 2000 Stock
Plan). Notwithstanding the foregoing, in the event that the Issuer Stock Option
Plan Amendment is not approved by the requisite affirmative vote of the
stockholders of the Issuer, the Issuer shall not be required to offer to
exchange such Non-French Company Optionholder's waiver of rights in such
optionholder's Company Stock Options for Substitute Options, but instead the
Issuer shall offer to each Non-French Company Optionholder the right to enter
into, and the Issuer shall enter into with each Non-French Company Optionholder
who accepts the Issuer's offer, an Option Liquidity Agreement. Each option of
the Issuer granted pursuant to this Section 1.07(c) (each, a "Substitute
Option"), shall entitle its holder to acquire (i) a number of shares of Issuer
Common Stock equal to the product (rounded
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down to the nearest whole number of shares of Issuer Common Stock) of (A) the
number of Company Shares that were issuable upon exercise of the related Company
Stock Option immediately prior to the Closing multiplied by (B) the Exchange
Ratio; and (ii) the per share exercise price of each Substitute Option shall be
equal to the quotient (rounded up to the nearest cent) arrived at by dividing
(A) the per share exercise price for each related Company Stock Option (as
converted from Euros to U.S. dollars as determined by using the daily 12 noon
buying rate in New York, as certified by the New York Federal Reserve Bank for
customs purposes and published on the website
xxx.xx.xxx.xxx/xxxxxxx/xxxxxxx/xxxx.xxx, to exchange Euros for U.S. dollars on
the Closing Date) by (B) the Exchange Ratio. Each Principal Company Shareholder
who is also a Non-French Company Optionholder hereby agrees to accept the
Issuer's offer made pursuant to the provisions of this Section 1.07(a) to waive
such shareholder's rights in such shareholder's Company Stock Options in
exchange for Substitute Options or to enter into an Option Liquidity Agreement,
as the case may be.
(d) As soon as practicable after the Closing Date, the shares of
Issuer Common Stock that may be issued under the Option Liquidity Agreements
shall be registered under an effective registration statement on Form S-8 (or
any successor form) or another appropriate form, and the Issuer shall use its
reasonable best efforts to maintain the effectiveness of such registration
statement or registration statements for as long as the Option Liquidity
Agreements are in effect. In addition, the Issuer shall use its reasonable best
efforts to cause the shares of Issuer Common Stock that are issuable under the
Option Liquidity Agreements to be listed on Nasdaq.
(e) Prior to the Closing Date, the Issuer shall (to the extent it may
do so under applicable Law) take all actions reasonably necessary to cause the
transactions contemplated by this Agreement and any other acquisitions of equity
securities of the Issuer (including derivative securities) in connection with
this Agreement, the Option Liquidity Agreements or the Substitute Options by
each individual who (i) is a director or officer of the Issuer or (ii) as of the
Closing, will become a director or officer of the Issuer, to be exempt under
Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended
(the "Exchange Act").
SECTION 1.08. Treatment of Company Warrants. (a) Except with respect
to the Medarex Warrants and the Sanofi Warrants or as otherwise provided in
Section 1.09, each holder of warrants to purchase Company Shares (the "Company
Warrants") and the Issuer hereby agree that, at the Closing, (i) each Company
Warrant outstanding immediately prior to the Closing with an exercise price of
less than E 6.32 shall be exchanged for the number of shares of Issuer Common
Stock (rounded to the nearest whole number of shares of Issuer Common Stock)
equal to the product of (A) the difference between (1) the number of Company
Shares that were issuable upon exercise of the related Company Warrant
immediately prior to the Closing and (2) the result of the aggregate exercise
price that was payable upon the exercise of the related Company Warrant divided
by E 6.32 multiplied by (B) the Exchange Ratio and (ii) such holder shall
irrevocably waive all of its rights in such holder's Company Warrants
outstanding immediately prior to the Closing with an exercise price of at least
E 6.32, effective as of the Closing.
(b) Medarex, Inc., a New Jersey corporation ("Medarex") hereby agrees
to exercise in full, as of immediately prior to the Closing and subject to the
Closing, the warrants
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issued by the Company to Medarex on September 11, 2000 (the "Medarex Warrants")
to subscribe for convertible redeemable bonds (the "Convertible Redeemable
Bonds"), the terms of which are set forth in the minutes of the Company
extraordinary general shareholder meeting held on September 11, 2000 (which
references the Unit Purchase Agreement, dated as of July 21, 2000, between the
Company and Medarex), in accordance with the terms thereof, and, immediately
thereafter, to convert such Convertible Redeemable Bonds received upon exercise
of the Medarex Warrants into Company Shares in accordance with the terms of such
Convertible Redeemable Bonds, subject to the approval of the shareholders of the
Company to amend such warrants as provided in Section 6.16(a).
(c) Sanofi-Aventis S.A., a societe anonyme organized under the laws of
France ("Sanofi"), hereby agrees to exercise in full, as of immediately prior to
the Closing and subject to the Closing, the warrants to purchase Company Shares
issued by the Company to Sanofi on January 7, 2000 (the "Sanofi Warrants"),
subject to the approval of the shareholders of the Company to amend the such
warrants as provided in Section 6.16(a).
SECTION 1.09. Treatment of Company Securities Held in an Individual
Shares Savings Plan. (a) Each shareholder of the Company who holds Company
Shares in a plan d'epargne en actions (a "PEA") as of the date of this Agreement
shall have the option to either (i) exchange their Company Shares for shares of
Issuer Common Stock in accordance with the terms and subject to the conditions
of the Share Exchange at the Closing or (ii) enter into a Put/Call Agreement,
substantially in the form of Exhibit H attached hereto (the "Put/Call
Agreement"), with the Issuer, pursuant to which, among other things, such
shareholder shall have the right to require the Issuer to purchase, and the
Issuer shall have the right to require such shareholder to sell to the Issuer,
the Company Shares held in the PEA, at any time for a period of 30 days after
the closing of the First Equity Financing, for an aggregate purchase price,
payable in cash, equal to the product of (A) the product of the number of
Company Shares held in the PEA multiplied by the Exchange Ratio, multiplied by
(B) the price per share of Issuer Common Stock sold in the First Equity
Financing, less the underwriters' discounts or commissions; provided, however,
that, in the event that the First Equity Financing is not consummated within two
years after the Closing, each Company Share subject to a Put/Call Agreement
shall be exchanged for the number of shares of Issuer Common Stock equal to the
Exchange Ratio. Such shareholder shall inform the Issuer, in writing, at least
five business days prior to the Closing of the option such shareholder has
elected in accordance with this Section 1.09(a); provided, however, that, in the
event that such shareholder shall fail to inform the Issuer of its election in
accordance with this Section 1.09(a), such shareholder shall be deemed to have
elected to exchange their Company Shares for shares of Issuer Common Stock in
accordance with the terms and subject to the conditions of the Share Exchange.
"First Equity Financing" shall mean the first offering of equity securities of
the Issuer with aggregate proceeds (net of any underwriters' discounts or
commission and expenses related to the financing) of at least ten times the
aggregate U.S. dollar amount which would be payable by the Issuer for the
Company Shares held in a PEA in accordance with all of the Put/Call Agreements
entered into by the Issuer in accordance with this Section 1.09 completed by the
Issuer after the Closing, but excluding any issuance of equity securities of the
Issuer in a strategic partnering, licensing, merger or acquisition transaction.
8
(b) Each Company Warrant held in a PEA immediately prior to the
Closing and with an exercise price of less than E 6.32 immediately prior to
Closing (a "PEA Warrant") shall be exchanged, immediately after the Closing, by
the Issuer for the number of Company Shares issuable to such holder upon
exercise thereof less the result of the aggregate exercise price payable upon
the exercise of such Company Warrant divided by 6.32. Each such holder shall
have the option to either (i) exchange the Company Shares received upon exchange
for the PEA Warrants for shares of Issuer Common Stock in accordance with the
terms of the Share Exchange immediately after the Closing, or (ii) enter into a
Put/Call Agreement with the Issuer with respect to the Company Shares received
upon exchange for the PEA Warrants. Such holder shall inform the Issuer, in
writing, at least five business days prior to the Closing of the Option such
holder has elected in accordance with this Section 1.09(b); provided, however,
that, in the event that such holder shall fail to so inform the Issuer, such
holder shall be deemed to have elected to exchange its Company Shares for shares
of Issuer Common Stock in accordance with the terms of the Share Exchange.
SECTION 1.10. Notices to Other Shareholders. (a) Promptly after the
execution and delivery of this Agreement, and in any event within four days
after the execution and delivery of this Agreement, the Shareholder
Representative, on behalf of the Principal Company Shareholders, shall provide
notice (the "Offer Notification"), substantially in the form of Exhibit I
attached hereto, to the shareholders of the Company as of the date of this
Agreement other than the Principal Company Shareholders (the "Other
Shareholders") pursuant to Section 6 of the Company Shareholder Agreement,
together with the documents contemplated by such notices. Any Offer Notification
shall be made in accordance with all applicable Laws and the parties hereto
acknowledge and agree that, notwithstanding any provision to the contrary
contained herein except as provided in Section 6.12(c), the Principal Company
Shareholders shall not be prohibited from accepting a valid Counterbid (for
purposes of this Agreement, such term shall have the meaning ascribed to it in
the Company Shareholders Agreement) in accordance with the Company Shareholders
Agreement. The Shareholder Representative, on behalf of the Principal Company
Shareholders, shall take any other actions, reasonably requested by the Issuer
or reasonably deemed necessary by the Shareholder Representative, to require all
the Other Shareholders to exchange such shareholder's Company Shares for shares
of Issuer Common Stock, upon the terms and subject to the conditions of this
Agreement, in accordance with Section 6 of the Company Shareholders Agreement.
(b) After delivery of the Offer Notification in accordance with
Section 1.10(a) above, each Other Shareholder may submit to the Issuer a signed
agreement substantially in the form of Exhibit J attached hereto (a "Joinder
Agreement"). Upon execution of the Joinder Agreement by an Other Shareholder,
the parties hereto acknowledge and agree that such Other Shareholder shall
become a party to this Agreement and shall be deemed to be a "Principal Company
Shareholder" for all purposes under this Agreement, with all of the rights and
obligations of, and subject to all of the terms and conditions applicable to, a
Principal Company Shareholder. The Issuer agrees to purchase Company Shares from
each Other Shareholder who submits a signed Joinder Agreement to the Issuer on
the terms and subject to the conditions of this Agreement.
9
ARTICLE II
REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANY
Solely for purposes of Section 7.02(a) and Article IX of this
Agreement, except as set forth in the Company Disclosure Schedule that has been
delivered to the Issuer in connection with the execution and delivery of this
Agreement (the "Company Disclosure Schedule") (which Company Disclosure Schedule
shall be arranged in sections corresponding to the numbered and lettered
sections of this Article II, and any information disclosed in any such section
of the Company Disclosure Schedule shall be deemed to be disclosed only for
purposes of the corresponding section of this Article II, unless it is readily
apparent that the disclosure contained in such section of the Company Disclosure
Schedule contains enough information regarding the subject matter of other
representations and warranties contained in this Article II as to clearly
qualify or otherwise clearly apply to such other representations and
warranties):
SECTION 2.01. Corporate Organization. (a) The Company is a societe
anonyme duly organized and validly existing under the laws of France. Each
subsidiary of the Company (each, a "Company Subsidiary") is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation. Each of the Company and each Company
Subsidiary has the requisite corporate power and authority and all necessary
Governmental Authorizations to own, lease and operate its properties and to
carry on its business as it is now being conducted, except where the failure to
be so organized, existing or in good standing or to have such power, authority
and governmental approvals would not reasonably be expected, individually or in
the aggregate, to prevent or materially delay the consummation of the Share
Exchange or any of the other transactions contemplated by this Agreement
(collectively, the "Transactions") or prevent or materially delay the Company
from performing its obligations under this Agreement and would not reasonably be
expected, individually or in the aggregate, to have a Company Material Adverse
Effect. Each of the Company and each Company Subsidiary is duly qualified or
licensed as a foreign corporation to do business, and is in good standing, in
each jurisdiction where the character of the properties owned, leased or
operated by it or the nature of its business makes such qualification or
licensing necessary, except for such failures to be so qualified or licensed and
in good standing that would not reasonably be expected, individually or in the
aggregate, to prevent or materially delay the consummation of the Transactions
or otherwise prevent or materially delay the Company from performing its
obligations under this Agreement and would not reasonably be expected,
individually or in the aggregate, to have a Company Material Adverse Effect.
(b) A true and complete list of all the Company Subsidiaries, together
with the jurisdiction of incorporation of each Company Subsidiary and the
percentage of the outstanding capital stock of each Company Subsidiary owned by
the Company and each other Company Subsidiary, is set forth in Section 2.01(b)
of the Company Disclosure Schedule. Except for the Company Subsidiaries, the
Company has not owned since January 1, 2000, and does not own, directly or
indirectly, any equity or similar interest in, or any interest convertible into
or exchangeable or exercisable for any equity or similar interest in, any
corporation, partnership, joint venture or other business association or entity.
10
SECTION 2.02. Corporate Books and Records. (a) The Company has
heretofore made available to the Issuer a complete and correct copy of its
organizational documents (including bylaws, articles of association or
incorporation and any equivalent governing or charter document ("Organizational
Documents")), each as amended to date, of the Company and each Company
Subsidiary. Such Organizational Documents are in full force and effect. Neither
the Company nor any Company Subsidiary has violated, or is in violation of, any
of the provisions of its Organizational Documents, except for such violations
that are not material. No event has occurred and no condition or circumstance
exists that would reasonably be expected (with or without notice or lapse of
time) to constitute or result, directly or indirectly, in a material violation
of the provisions of the Organizational Documents of the Company or any Company
Subsidiary.
(b) The attendance register of the Company's Conseil d'Administration,
the minutes of the Conseil d'Administration and the shareholders meetings and
the share registers (the registre des mouvements de titres and the comptes
d'actionnaires) required by the French Code de Commerce are up-to-date, have
been fully maintained and contain true and accurate records in all material
respects. There have been no meetings or proceedings of the Company's Conseil
d'Administration or the shareholders of the Company, other than those reflected
in the Company's records. Complete and accurate copies of all such records and
of the stock register of the Company have been made available by the Company to
the Issuer.
SECTION 2.03. Capitalization. (a) As of the date of this Agreement,
(i) 5,951,121 Company A Shares and 9,743,325 Company B Shares are issued and
outstanding, validly issued, fully paid and not subject to calls for future
contributions, (ii) no Company A Shares or Company B Shares are held in the
treasury of the Company, or held by subsidiaries of the Company; (iii) 1,156,997
Company A Shares may be issued pursuant to outstanding Company Stock Options
granted pursuant to the Company Stock Option Plans, and (iv) 4,242,822 Company
Shares may be issued pursuant to the outstanding Company Warrants, all of which
are listed in Section 2.03(a) of the Company Disclosure Schedule. Except as set
forth in this Section 2.03, there are no options, warrants, convertible
securities or other rights, agreements, arrangements or commitments of any
character relating to the issued or unissued capital stock of the Company or any
Company Subsidiary or obligating the Company or any Company Subsidiary to issue
or sell any shares of capital stock of, or other equity interests in, the
Company or any Company Subsidiary. Section 2.03(a) of the Company Disclosure
Schedule sets forth the following information with respect to each Company Stock
Option as of the date of this Agreement, (i) the name of the Company Stock
Option recipient; (ii) the particular plan pursuant to which such Company Stock
Option was granted; (iii) the number of Company Shares subject to such Company
Stock Option; (iv) the exercise or purchase price of such Company Stock Option;
(v) the date on which such Company Stock Option was granted; (vi) the applicable
vesting schedule; (vii) the date on which such Company Stock Option expires and
(viii) whether the exercisability of or right to repurchase of such Company
Stock Option will be accelerated in any way by the transactions contemplated by
this Agreement, and indicates the extent of acceleration. The Company has made
available to the Issuer accurate and complete copies of all Company Stock Option
Plans pursuant to which the Company has granted such Company Stock Options that
are currently outstanding and the form of all stock award agreements evidencing
such Company Stock Options. All Company Shares subject to issuance as aforesaid,
upon issuance on the terms and conditions specified in the instruments pursuant
to which they are
11
issuable, will be duly authorized, validly issued, fully paid and not subject to
calls for future contributions. Except as set forth in Section 2.03(a) of the
Company Disclosure Schedule, there are no outstanding contractual obligations of
the Company or any Company Subsidiary to repurchase, redeem or otherwise acquire
any Company Shares or any capital stock of any Company Subsidiary or to provide
funds to, or make any investment (in the form of a loan, capital contribution or
otherwise) in, any Company Subsidiary or any other person. Except as set forth
in Section 2.03(a) of the Company Disclosure Schedule, there are no commitments
or agreements of any character to which the Company is bound obligating the
Company to accelerate the vesting of any Company Stock Option as a result of the
Transactions. All outstanding Company Shares, all outstanding Company Stock
Options, and all outstanding shares of capital stock of each subsidiary of the
Company have been issued and granted in compliance with (i) all applicable
securities Laws and other applicable Laws and (ii) all requirements set forth in
applicable contracts.
(b) Each outstanding share of capital stock of each Company Subsidiary
is duly authorized, validly issued, fully paid and nonassessable, and each such
share is owned by the Company or another Company Subsidiary free and clear of
all security interests, liens, claims, pledges, options, rights of first
refusal, agreements, limitations on the Company's or any Company Subsidiary's
voting rights, charges and other encumbrances of any nature whatsoever.
SECTION 2.04. Authority Relative to This Agreement. No corporate
proceedings on the part of the Company are necessary to authorize this Agreement
or to consummate the Transactions (other than the vote of the shareholders of
the Company set forth in Section 2.18(b) at the Company Shareholders' Meeting).
SECTION 2.05. No Conflict; Required Filings and Consents. (a) The
consummation of the Share Exchange and the other Transactions will not (i)
conflict with or violate the Organizational Documents of the Company or any
Company Subsidiary, (ii) assuming that all consents, approvals, authorizations
and other actions described in Section 2.05(b) have been obtained and all
filings and obligations described in Section 2.05(b) have been made, conflict
with or violate any Law applicable to the Company or any Company Subsidiary or
by which any property or asset of the Company or any Company Subsidiary is bound
or affected, (iii) cause the Company, any Company Subsidiary, the Issuer or any
of the Issuer's affiliates to become subject to, or liable for the payment of,
any Tax (except as set forth in Section 2.05(a) of the Company Disclosure
Schedule), (iv) cause any of the assets owned or used by the Company or any
Company Subsidiary to be reassessed or revalued by any taxing authority, or (v)
result in any breach of or constitute a default (or an event which, with notice
or lapse of time or both, would become a default) under, or give to others any
right of termination, amendment, acceleration or cancellation of, or result in
the creation of a lien or other encumbrance on any property or asset of the
Company or any Company Subsidiary pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which the Company or any Company Subsidiary is a
party or by which the Company or any Company Subsidiary or any of their assets
or properties is bound or affected, except, with respect to clauses (ii) and
(iii), for any such conflicts, violations, breaches, defaults or other
occurrences which would not reasonably be expected, individually or in the
aggregate, to prevent or materially delay consummation of any of the
Transactions or otherwise prevent or materially delay the Company from
performing its obligations under this Agreement
12
and would not reasonably be expected, individually or in the aggregate, to have
a Company Material Adverse Effect.
(b) The consummation of the Share Exchange will not require any
consent, approval, authorization or permit of, or filing with or notification
to, any Governmental Authority, except (i) for applicable requirements, if any,
of the Exchange Act, state securities or "blue sky" laws ("Blue Sky Laws") and
state takeover laws; (ii) the pre-merger notification and waiting period
requirements of the Xxxx-Xxxxx-Xxxxxx Improvements Act of 1976, as amended, and
the rules and regulations promulgated thereunder (the "HSR Act"), applicable
with respect to any Principal Company Shareholder that would acquire shares of
Issuer Common Stock valued (in accordance with the HSR Act) at $50 million or
more in connection with the Share Exchange; and (iii) where the failure to
obtain such consents, approvals, authorizations or permits, or to make such
filings or notifications, would not reasonably be expected, individually or in
the aggregate, to prevent or materially delay consummation of any of the
Transactions, or otherwise prevent or materially delay the Company from
performing its obligations under this Agreement, and would not reasonably be
expected, individually or in the aggregate, to have a Company Material Adverse
Effect.
SECTION 2.06. Permits; Compliance. (a) Each of the Company and the
Company Subsidiaries is in possession of all franchises, grants, authorizations,
licenses, permits, easements, variances, exceptions, consents, certificates,
approvals and orders of any Governmental Authority (other than the Drug
Regulatory Agencies (as defined below)) necessary for each of the Company or the
Company Subsidiaries to own, lease and operate its properties or to carry on its
business as it is now being conducted (the "Company Permits"), except where the
failure to have, or the suspension or cancellation of, any of the Company
Permits would not reasonably be expected, individually or in the aggregate, to
prevent or materially delay consummation of any of the Transactions or otherwise
prevent or materially delay the Company from performing its obligations under
this Agreement and would not reasonably be expected, individually or in the
aggregate, to have a Company Material Adverse Effect. Each material Company
Permit is listed in Section 2.06(a) of the Company Disclosure Schedule. The
Company has made available to the Issuer complete and accurate copies of each
Company Permit, including all amendments and renewals thereto, listed in Section
2.06(a) of the Company Disclosure Schedule. As of the date of this Agreement,
each Company Permit is valid and in full force and effect and no suspension or
cancellation of any of the Company Permits is pending or, to the Knowledge of
the Company, threatened, except where the failure to have, or the suspension or
cancellation of, any of the Company Permits would not reasonably be expected,
individually or in the aggregate, to prevent or materially delay consummation of
any of the Transactions or otherwise prevent or materially delay the Company
from performing its obligations under this Agreement and would not reasonably be
expected, individually or in the aggregate, to have a Company Material Adverse
Effect. The Company and the Company Subsidiaries are, and have at all times
been, in full compliance with all of the terms and requirements of each Company
Permit, except where the failure to be in compliance would not reasonably be
expected, individually or in the aggregate, to prevent or materially delay the
consummation of any of the Transactions or otherwise prevent or materially delay
the Company from performing its obligations under this Agreement and would not
reasonably be expected, individually or in the aggregate, to have a Company
Material Adverse Effect. No event has occurred and no condition or circumstance
exists that would reasonably be expected (with or
13
without notice or lapse of time) to constitute or result, directly or
indirectly, in a violation of or a failure to comply with any term or
requirement of any Company Permit or result, directly or indirectly, in the
revocation, withdrawal, suspension, cancellation, termination or modification of
any Company Permit, except where the violation, failure to comply, revocation,
withdrawal, suspension, cancellation, termination or modification would not
reasonably be expected, individually or in the aggregate, to prevent or
materially delay the consummation of any of the Transactions or otherwise
prevent or materially delay the Company from performing its obligations under
this Agreement and would not reasonably be expected, individually or in the
aggregate, to have a Company Material Adverse Effect. Since January 1, 2002,
neither the Company nor any of the Company Subsidiaries has received any written
communication regarding (A) any actual, alleged, possible or potential violation
of, or failure to comply with, any term or requirement of any material Company
Permit or (B) any actual, proposed, possible or potential revocation,
withdrawal, suspension, cancellation, termination or adverse modification of any
material Company Permit. All applications required to have been filed for the
renewal of each Company Permit have been duly filed on a timely basis, and each
other notice or filing required to have been given or made with respect to such
Company Permit has been duly given or made on a timely basis, except where the
failure to make such filing would not reasonably be expected, individually or in
the aggregate, to prevent or materially delay the consummation of any of the
Transactions or otherwise prevent or materially delay the Company from
performing its obligations under this Agreement and would not reasonably be
expected, individually or in the aggregate, to have a Company Material Adverse
Effect. Neither the Company nor any Company Subsidiary is in conflict with, or
in default, breach or violation of, (i) any Law applicable to the Company or any
Company Subsidiary or by which any property or asset of the Company or any
Company Subsidiary is bound or affected, or (ii) any note, bond, mortgage,
indenture, contract, agreement, lease, license, Company Permit, franchise or
other instrument or obligation to which the Company or any Company Subsidiary is
a party or by which the Company or any Company Subsidiary or any property or
asset of the Company or any Company Subsidiary is bound, except for any such
conflicts, defaults, breaches or violations that would not reasonably be
expected, individually or in the aggregate, to prevent or materially delay
consummation of any of the Transactions or otherwise prevent or materially delay
the Company from performing its obligations under this Agreement and would not
reasonably be expected, individually or in the aggregate, to have a Company
Material Adverse Effect.
(b) Each of the Company and the Company Subsidiaries holds all new
drug applications, abbreviated new drug applications, product license
applications, investigational new drug applications, product export applications
and other approvals issuable by the U.S. Food and Drug Administration (the
"FDA"), the European Agency for the Evaluation of Medical Products (the "EMEA")
or the Agence Francaise de Securite Sanitaire des Produits de Sante (the "Agence
Francaise", and together with the FDA and EMEA, the "Drug Regulatory Agencies")
(the "Company Regulatory Permits") necessary for the conduct of the business of
the Company and the Company Subsidiaries as currently conducted and the
development, clinical testing, manufacturing, sale, marketing, distribution and
importation or exportation, as currently conducted, of any of their products or
product candidates, including Mepact, Bexidem, Jenact, Uvidem, Colidem, Dc Ova
and Liposomal KSA (the "Company Product Candidates") and no such Company
Regulatory Permit has been (i) revoked, withdrawn, suspended, cancelled or
terminated or (ii) modified in any adverse manner, other than immaterial adverse
modifications. The Company is in compliance in all material respects with the
Company Regulatory Permits
14
and has not received any written notice or other written communication from any
Drug Regulatory Agency regarding (i) any actual or possible violation of or
failure to comply with any term or requirement of any Company Regulatory Permit
or (ii) any actual or possible revocation, withdrawal, suspension, cancellation,
termination or modification of any Company Regulatory Permit. Except for the
information and files identified in Section 2.06(b) of the Company Disclosure
Schedule, the Company has made available to the Issuer all information in its
possession or control relating to the Company Product Candidates and the
development, clinical testing, manufacture and sale of the Company Product
Candidates, including complete and correct copies of the following (to the
extent there are any): (i) adverse event reports; clinical study reports and
material study data; and inspection reports, notices of adverse findings,
warning letters, filings and letters and other correspondence with any Drug
Regulatory Agency; and (ii) similar reports, study data, notices, letters,
filings and correspondence with any other Governmental Authority.
(c) All clinical, pre-clinical and other studies and tests conducted
by or on behalf of, or sponsored by, the Company or in which the Company or its
current products or product candidates, including the Company Product
Candidates, have participated were and, if still pending, are being conducted in
all material respects in accordance with standard medical and scientific
research procedures and in compliance with the applicable regulations of the
Drug Regulatory Agencies and other applicable Laws. All quality control, record
keeping, notification, reporting and manufacturing systems used for the
Company's commercial products and for the manufacturing of clinical supplies
conforms to the applicable regulations of the Drug Regulatory Agencies and good
manufacturing practices.
SECTION 2.07. Financial Statements. (a) True and complete copies of
the audited consolidated balance sheet of the Company for each of the three
fiscal years ended as of December 31, 2001, 2002 and 2003, and the related
audited consolidated statements of income, retained earnings, shareholders'
equity and changes in financial position of the Company, together with all
related notes and schedules thereto, accompanied by the reports thereon of the
independent accountants of the Company (collectively, referred to herein as, the
"Company Financial Statements") and the unaudited consolidated balance sheet of
the Company as of September 30, 2004, and the related consolidated statements of
income, retained earnings, stockholders' equity and changes in financial
position of the Company, together with all related notes and schedules thereto
(collectively referred to herein as the "Company Interim Financial Statements")
have been delivered by the Company to the Issuer. The Company Financial
Statements and the Company Interim Financial Statement (i) were prepared in
accordance with the books of account and other financial records of the Company
and the Company Subsidiaries, (ii) give a true and fair view (image sincere et
fidele) of the consolidated financial condition and results of operations of the
Company and the Company Subsidiaries as of the dates thereof or for the periods
covered thereby, (iii) have been prepared in accordance with French generally
accepted accounting principles ("French GAAP") applied on a basis consistent
with the past practices of the Company and the Company Subsidiaries and (iv)
include all adjustments (consisting only of normal recurring accruals) that are
necessary for a fair presentation of the consolidated financial condition of the
Company and the Company Subsidiaries and the results of operations of the
Company and the Company Subsidiaries as of the dates thereof or for the periods
covered thereby.
15
(b) True and correct copies of a reconciliation to U.S. GAAP of the
consolidated statements of income and shareholders' equity of the Company for
the fiscal year ended December 31, 2003 and consolidated statements of income
and shareholders' equity of the Company for the nine months ended September 30,
2004 and a balance sheet as of September 30, 2004 have been delivered by the
Company to the Issuer.
(c) The books of account and other financial records of the Company
and the Company Subsidiaries: (i) reflect all items of income and expense and
all assets and Liabilities required to be reflected therein in accordance with
French GAAP applied on a basis consistent with the past practices of the Company
and the Company Subsidiaries, respectively, (ii) are in all material respects
complete and correct, and do not contain or reflect any material inaccuracies or
discrepancies and (iii) have been maintained in accordance with good business
and accounting practices.
(d) Except as and to the extent set forth on the consolidated balance
sheet of the Company and the consolidated Company Subsidiaries as at September
30, 2004, including the notes thereto, neither the Company nor any Company
Subsidiary has any liability of any nature (whether accrued, absolute,
contingent or otherwise) that would be required to be reflected on a balance
sheet prepared in accordance with French GAAP, except for Liabilities, (i)
incurred pursuant to this Agreement and the Transactions; or (ii) incurred in
the ordinary course of business consistent with past practice since September
30, 2004, which, individually or in the aggregate, would not reasonably be
expected to prevent or materially delay consummation of any of the Transactions
or otherwise prevent or materially delay the Company from performing its
obligations under this Agreement and would not reasonably be expected,
individually or in the aggregate, to have a Company Material Adverse Effect.
(e) The Company has in place internal controls over financial
reporting that are designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with French GAAP and include policies and
procedures that provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance with
French GAAP, and that receipts and expenditures of the Company are being made
only in accordance with authorization of management and the advisors of the
Company.
(f) Since January 1, 2002, there have been no formal internal
investigations regarding financial reporting or accounting policies and
practices discussed with, reviewed by or initiated at the direction of the chief
executive officer, chief financial officer or general counsel of the Company,
the Company Board or any committee thereof, other than ordinary course audits or
reviews of accounting policies and practices or internal controls required by
applicable Law.
SECTION 2.08. Absence of Certain Changes or Events. Since September
30, 2004, except as expressly contemplated by this Agreement, (a) the Company
and the Company Subsidiaries have conducted their businesses only in the
ordinary course and in a manner consistent with past practice; (b) there has not
been any Company Material Adverse Effect or any event, condition or circumstance
that would reasonably be expected to have a Company Material Adverse Effect; and
(c) none of the Company or any Company Subsidiary has taken
16
any action that, if taken after the date of this Agreement, would constitute a
breach of any of the covenants set forth in Section 5.01.
SECTION 2.09. Absence of Litigation. There is no litigation, suit,
claim, action, proceeding or investigation (an "Action") pending or, to the
Knowledge of the Company, threatened against the Company or any Company
Subsidiary, or any property or asset of the Company or any Company Subsidiary,
before any Governmental Authority that (a) individually or in the aggregate, has
had, or would reasonably be expected to have, a Company Material Adverse Effect
or (b) seeks to, directly or indirectly, delay, prevent, make illegal or
otherwise interfere with the consummation of any of the Transactions. Neither
the Company nor any Company Subsidiary nor any property or asset of the Company
or any Company Subsidiary is subject to any continuing order of, consent decree,
settlement agreement or other similar written agreement with, or, to the
Knowledge of the Company, continuing investigation by, any Governmental
Authority, or any effective or, to the Knowledge of the Company, proposed order,
writ, judgment, injunction, decree, determination or award of any Governmental
Authority, that would reasonably be expected, individually or in the aggregate,
to prevent or materially delay consummation of any of the Transactions or
otherwise prevent or materially delay the Company from performing its
obligations under this Agreement or would reasonably be expected, individually
or in the aggregate, to have a Company Material Adverse Effect.
SECTION 2.10. Employee Benefit Plans. (a) Section 2.10(a) of the
Company Disclosure Schedule lists: (i) all employee benefit plans (as defined
in, and whether or not subject to, Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) and all bonus, stock option,
stock purchase, restricted stock, incentive, deferred compensation, retiree
medical or life insurance, supplemental retirement, severance or other benefit
plans, programs or arrangements, and all employment, termination, severance or
other contracts or agreements, to which the Company or any Company Subsidiary is
a party, with respect to which the Company or any Company Subsidiary has any
obligation or which are maintained, contributed to or sponsored by the Company
or any Company Subsidiary for the benefit of any current or former employee,
officer or director of the Company or any Company Subsidiary, (ii) each employee
benefit plan for which the Company or any Company Subsidiary could incur
liability under Section 4069 of ERISA in the event such plan has been or were to
be terminated, (iii) any plan in respect of which the Company or any Company
Subsidiary could incur liability under Section 4212(c) of ERISA, and (iv) any
contracts, arrangements or understandings between the Company or any Company
Subsidiary and any employee of the Company or any Company Subsidiary including,
without limitation, any contracts, arrangements or understandings relating in
any way to a sale of the Company or any Company Subsidiary or the consummation
of any Transaction (collectively, the "Company Plans"). The Company has made
available to the Issuer a true and complete copy of (i) such Company Plans, (ii)
the most recently filed Internal Revenue Service ("IRS") Form 5500, if any,
(iii) the most recent summary plan description for each Company Plan for which a
summary plan description is required by applicable law, (iv) the most recently
received IRS determination letter, if any, issued by the IRS with respect to any
Company Plan that is intended to qualify under Section 401(a) of the Code, and
(v) the most recently prepared actuarial report or financial statement, if any,
relating to a Company Plan.
17
(b) None of the Company Plans is a multiemployer plan (within the
meaning of Section 3(37) or 4001(a)(3) of ERISA) (a "Multiemployer Plan") or a
single employer pension plan (within the meaning of Section 4001(a)(15) of
ERISA) for which the Company or any Company Subsidiary could incur liability
under Section 4063 or 4064 of ERISA (a "Multiple Employer Plan"). Except as set
forth in Section 2.10(b) of the Company Disclosure Schedule or in accordance
with applicable Law, none of the Company Plans (i) provides for the payment of
separation, severance, termination or similar-type benefits to any person, (ii)
obligates the Company or any Company Subsidiary to pay separation, severance,
termination or similar-type benefits solely or partially as a result of any
transaction contemplated by this Agreement, or (iii) obligates the Company or
any Company Subsidiary to make any payment or provide any benefit as a result of
a "change in control", within the meaning of such term under Section 280G of the
Code. Except as set forth in Section 2.10(b) of the Company Disclosure Schedule
or in accordance with applicable Law, none of the Company Plans provides for or
promises retiree medical, disability or life insurance benefits to any current
or former employee, officer or director of the Company or any Company
Subsidiary.
(c) Each Company Plan is now and always has been operated in all
material respects in accordance with its terms and the requirements of all
applicable Laws, including, without limitation, ERISA and the Code. The Company
and the Company Subsidiaries have performed all material obligations required to
be performed by them under, are not in any material respect in default under or
in violation of, and to the Knowledge of the Company, there have not been any
defaults or violations by any party to, any Company Plan. No Action is pending
or, to the Knowledge of the Company, threatened with respect to any Company Plan
(other than claims for benefits in the ordinary course) that would reasonably be
expected, individually or in the aggregate, to have a Company Material Adverse
Effect and, to the Knowledge of the Company, no fact or event exists that would
reasonably be expected to give rise to any such Action.
(d) Each Company Plan that is intended to be qualified under Section
401(a) of the Code or Section 401(k) of the Code has timely received a favorable
determination letter from the IRS covering all of the provisions applicable to
the Company Plan for which determination letters are currently available that
the Company Plan is so qualified and each trust established in connection with
any Company Plan which is intended to be exempt from federal income taxation
under Section 501(a) of the Code has received a determination letter from the
IRS that it is so exempt, and no fact or event has occurred since the date of
such determination letter or letters from the IRS to adversely affect the
qualified status of any such Company Plan or the exempt status of any such
trust.
(e) There has not been any prohibited transaction (within the meaning
of Section 406 of ERISA or Section 4975 of the Code) with respect to any Company
Plan. Neither the Company nor any Company Subsidiary has incurred any liability
under, arising out of or by operation of Title IV of ERISA (other than liability
for premiums to the Pension Benefit Guaranty Corporation arising in the ordinary
course), including, without limitation, any liability in connection with (i) the
termination or reorganization of any employee benefit plan subject to Title IV
of ERISA, or (ii) the withdrawal from any Multiemployer Plan or Multiple
Employer Plan, and no fact or event exists which would reasonably be expected to
give rise to any such liability.
18
(f) All material contributions, premiums or payments required to be
made with respect to any Company Plan have been made on or before their due
dates. All such contributions have been fully deducted for income tax purposes,
to the extent applicable, and no such deduction has been challenged or
disallowed by any Governmental Authority and no fact or event exists which would
reasonably be expected to give rise to any such challenge or disallowance.
(g) In addition to the foregoing, with respect to each Company Plan
that is not subject to United States Law (a "Non-U.S. Company Plan"):
(i) all employer and employee contributions to each Non-U.S. Company
Plan required by Law or by the terms of such Non-U.S. Company Plan have
been made, or, if applicable, accrued in accordance with normal accounting
practices, and a pro rata contribution for the period prior to and
including the date of this Agreement has been made or accrued;
(ii) the fair market value of the assets of each funded Non-U.S.
Company Plan, the liability of each insurer for any Non-U.S. Company Plan
funded through insurance or the book reserve established for any Non-U.S.
Company Plan, together with any accrued contributions, is sufficient to
procure or provide for the benefits determined on any ongoing basis (actual
or contingent) accrued to the date of this Agreement with respect to all
current and former participants under such Non-U.S. Company Plan according
to the actuarial assumptions and valuations most recently used to determine
employer contributions to such Non-U.S. Company Plan, and no Transaction
shall cause such assets or insurance obligations to be less than such
benefit obligations; and
(iii) each Non-U.S. Company Plan required to be registered has been
registered and has been maintained in good standing with applicable
regulatory authorities. Each Non-U.S. Company Plan is now and always has
been operated, in all material respects, in compliance with all applicable
non-United States Laws.
SECTION 2.11. Labor and Employment Matters. (a) Except as set forth in
Section 2.11(a) of the Company Disclosure Schedule:
(i) there are no controversies pending or, to the Knowledge of the
Company, threatened between the Company or any Company Subsidiary and any
of their respective employees;
(ii) neither the Company nor any Company Subsidiary is a party to any
collective bargaining agreement or other labor union contract applicable to
persons employed by the Company or any Company Subsidiary, nor, to the
Knowledge of the Company, are there any activities or proceedings of any
labor union to organize any such employees;
(iii) neither the Company nor any Company Subsidiary has breached or
otherwise failed to comply with any provision of any such agreement or
contract, and there are no grievances outstanding against the Company or
any Company Subsidiary under any such agreement or contract, except as
would not reasonably be expected,
19
individually or in the aggregate, to prevent or materially delay
consummation of any of the Transactions or otherwise prevent or materially
delay the Company from performing its obligations under this Agreement and
would not reasonably be expected, individually or in the aggregate, to have
a Company Material Adverse Effect;
(iv) there are no unfair labor practice complaints pending against the
Company or any Company Subsidiary before the National Labor Relations Board
or any other Governmental Authority, nor any current union representation
questions involving employees of the Company or any Company Subsidiary; and
(v) there is no strike, slowdown, work stoppage, labor dispute or
lockout, or, to the Knowledge of the Company, threat thereof, by or with
respect to any employees of the Company or any Company Subsidiary. To the
Knowledge of the Company, no event has occurred and no condition or
circumstance exists that would reasonably be expected to, directly or
indirectly, give rise to or provide a basis for the commencement of any
such strike, slowdown, work stoppage, labor dispute or lockout, except as
would not reasonably be expected, individually or in the aggregate, to
prevent or materially delay consummation of any of the Transactions or
otherwise prevent or materially delay the Company from performing its
obligations under this Agreement and would not reasonably be expected,
individually or in the aggregate, to have a Company Material Adverse
Effect.
(b) No consent is required pursuant to any collective bargaining
agreement set forth in Section 2.11(a) of the Company Disclosure Schedule to
consummate the Transactions.
(c) Except as set forth in Section 2.11(c) of the Company Disclosure
Schedule:
(i) the Company and the Company Subsidiaries are in compliance with
all applicable laws relating to the employment of labor, including those
related to wages, hours, overtime, collective bargaining and the payment
and withholding of taxes and other sums as required by the appropriate
Governmental Authority and have withheld and paid to the appropriate
Governmental Authority or are holding for payment not yet due to such
Governmental Authority all amounts required to be withheld from employees
of the Company or any Company Subsidiary and are not liable for any arrears
of wages, taxes, penalties or other sums for failure to comply with any of
the foregoing, except as would not reasonably be expected, individually or
in the aggregate, to prevent or materially delay consummation of any of the
Transactions or otherwise prevent or materially delay the Company from
performing its obligations under this Agreement and would not reasonably be
expected, individually or in the aggregate, to have a Company Material
Adverse Effect;
(ii) the Company and the Company Subsidiaries have paid in full to all
employees or adequately accrued for in accordance with French GAAP
consistently applied all wages, salaries, commissions, bonuses, benefits
and other compensation due to or on behalf of such employees and there is
no claim with respect to payment of wages, salary or overtime pay that has
been asserted or is now pending or threatened
20
before any Governmental Authority with respect to any persons currently or
formerly employed by the Company or any Company Subsidiary, except as would
not reasonably be expected, individually or in the aggregate, to prevent or
materially delay consummation of any of the Transactions or otherwise
prevent or materially delay the Company from performing its obligations
under this Agreement and would not reasonably be expected, individually or
in the aggregate, to have a Company Material Adverse Effect;
(iii) neither the Company nor any Company Subsidiary is a party to, or
otherwise bound by, any consent decree with, or citation by, any
Governmental Authority relating to employees or employment practices;
(iv) there is no charge or proceeding with respect to a violation of
any occupational safety or health standards that has been asserted or is
now pending or, to the Knowledge of the Company, threatened with respect to
the Company; and
(v) there is no charge of discrimination in employment or employment
practices, for any reason, including, without limitation, age, gender,
race, religion or other legally protected category, which has been asserted
or is now pending or, to the Knowledge of the Company, threatened before
the United States Equal Employment Opportunity Commission, or any other
Governmental Authority in any jurisdiction in which the Company or any
Company Subsidiary has employed or employ any person.
(d) All officers, management employees, and technical and professional
employees of the Company and the Company Subsidiaries are under written
obligation to the Company and the Company Subsidiaries to maintain in confidence
all confidential or proprietary information acquired by them in the course of
their employment and to assign to the Company and the Company Subsidiaries all
inventions made by them within the scope of their employment during such
employment and for a reasonable period thereafter and copies of the forms of all
such written obligations have been made available by the Company to the Issuer.
(e) Section 2.11(e) of the Company Disclosure Schedule accurately
identifies each former employee of the Company or any Company Subsidiary who is
receiving or is scheduled to receive (or whose spouse or other dependent is
receiving or it scheduled to receive) any benefits relating to such former
employee's employment with the Company or any Company Subsidiary and accurately
describes such benefits.
(f) To the Knowledge of the Company, no officer of the Company or any
Company Subsidiary: (i) intends to terminate his employment with the Company or
Company Subsidiary; or (ii) is a party to or is bound by any confidentiality
agreement, noncompetition agreement or other contract that may have an adverse
effect on: (A) the performance by such employee of any of his duties or
responsibilities as an employee of the Company or Company Subsidiary, or (B) the
Company's business or operations.
(g) Section 2.11(g) of the Company Disclosure Schedule accurately sets
forth, with respect to each person that was an independent contractor of the
Company or Company Subsidiary as of the Effective Date: (i) the name of such
independent contractor and the date as
21
of which such independent contractor was originally hired, (ii) a description of
such independent contractor duties and responsibilities, (iii) the aggregate
dollar amount of the compensation (including all payments or benefits of any
type) received by such independent contractor from the Company or any Company
Subsidiary with respect to services performed in 2004, (iv) the terms of
compensation of such independent contractor, and (v) any permit, authorization,
franchise or other right that is held by such independent contractor and that
relates to or is useful in connection with the Company's business.
(h) None of the current or former independent contractors of the
Company or any Company Subsidiary should be reclassified as an employee under
applicable Law.
SECTION 2.12. Property and Leases. (a) Section 2.12(a) of the Company
Disclosure Schedule lists each parcel of real property currently or formerly
owned by the Company or any Company Subsidiary. Each parcel of real property
owned by the Company or any Company Subsidiary (i) is owned free and clear of
all mortgages, pledges, liens, security interests, conditional and installment
sale agreements, encumbrances, charges or other claims of third parties of any
kind, including, without limitation, any easement, right of way or other
encumbrance to title, or any option, right of first refusal, or right of first
offer (collectively, "Liens"), other than Permitted Liens, and (ii) is neither
subject to any Governmental Order to be sold nor is being condemned,
expropriated or otherwise taken by any public authority with or without payment
of compensation therefor, nor, to the Knowledge of the Company, has any such
condemnation, expropriation or taking been proposed.
(b) Section 2.12(b) of the Company Disclosure Schedule lists each
parcel of real property currently leased or subleased by the Company or any
Company Subsidiary, with the name of the lessor and the date of the lease,
sublease, assignment of the lease, any guaranty given or leasing commissions
payable by the Company or any Company Subsidiary in connection therewith and
each amendment to any of the foregoing (collectively, the "Company Lease
Documents"). True, correct and complete copies of all Company Lease Documents
have been made available to the Issuer. All such current leases and subleases
are in full force and effect, are valid and effective in accordance with their
respective terms, and there is not, under any of such leases, any existing
material default or event of default (or event which, with notice or lapse of
time, or both, would constitute a default) by the Company or any Company
Subsidiary or, to the Company's Knowledge, by the other party to such lease or
sublease, or person in the chain of title to such leased premises.
(c) Except as would not reasonably be expected, individually or in the
aggregate, to prevent or materially delay consummation of any of the
Transactions or otherwise prevent or materially delay the Company from
performing its obligations under this Agreement and would not reasonably be
expected, individually or in the aggregate, to have a Company Material Adverse
Effect: (i) there are no contractual or legal restrictions that preclude or
restrict the ability to use any real property owned or leased by the Company or
any Company Subsidiary for the purposes for which it is currently being used;
and (ii) there are no material latent defects or material adverse physical
conditions affecting the real property, and improvements thereon, owned or
leased by the Company or any Company Subsidiary.
22
(d) Each of the Company and the Company Subsidiaries has good and
valid title to, or, in the case of leased properties and assets, valid leasehold
or subleasehold interests in, all of its properties and assets, tangible and
intangible, real, personal and mixed, used or held for use in its business, free
and clear of any Liens, except for such imperfections of title, if any, that do
not materially interfere with the present value of the subject property.
SECTION 2.13. Intellectual Property. (a) (i) Section 2.13(a)(i) of the
Company Disclosure Schedule lists (A) each item of Intellectual Property owned
(in whole or in part) by the Company or a Company Subsidiary and which is the
subject of a registration ("Company Registered Intellectual Property") or an
application for registration, (B) the jurisdiction(s) in which such item of
Intellectual Property has been filed or registered, if any, and the applicable
registration or serial number, and (C) any other person that has an ownership
interest in such item of Intellectual Property, and (ii) Section 2.13(a)(ii) of
the Company Disclosure Schedule lists each material item of Intellectual
Property licensed to the Company or a Company Subsidiary ("Company Licensed
Intellectual Property").
(b) Except as set forth in Section 2.13(b) of the Company Disclosure
Schedule:
(i) to the Knowledge of the Company, the conduct of the business of
the Company and the Company Subsidiaries as currently conducted does not
infringe upon or misappropriate the Intellectual Property rights of any
third party;
(ii) the Company and the Company Subsidiaries own or are licensed to
use all Intellectual Property used in or, to the Knowledge of the Company,
necessary for the conduct of their businesses as currently conducted;
(iii) there are no claims pending or, to the Knowledge of the Company,
threatened, against the Company or any Company Subsidiary (A) alleging that
the conduct of the business of the Company and the Company Subsidiaries as
currently conducted infringes upon or may infringe upon or misappropriates
the Intellectual Property rights of any third party or (B) challenging the
ownership, use, validity or enforceability of any Company Owned
Intellectual Property or Company Licensed Intellectual Property;
(iv) with respect to each item of Company Owned Intellectual Property,
the Company or a Company Subsidiary is the exclusive owner of the entire
right, title and interest in and to such Company Owned Intellectual
Property free and clear of all liens, encumbrances and other restrictions,
and is entitled to use such Company Owned Intellectual Property in the
continued operation of its respective business;
(v) there are no settlements, forbearances to xxx, consents,
judgments, orders or similar obligations that (A) restrict the business of
the Company and the Company Subsidiaries in or under any Intellectual
Property rights of any third party or (B) with respect to Company Owned
Intellectual Property that is exclusively owned by the Company or a Company
Subsidiary, permit any third party to use such Company Owned Intellectual
Property;
23
(vi) with respect to each item of Company Licensed Intellectual
Property, the Company or a Company Subsidiary has the right to use such
Company Licensed Intellectual Property in the continued operation of its
respective business in accordance with the terms of the license agreement
governing such Company Licensed Intellectual Property;
(vii) the Company Registered Intellectual Property has not been
adjudged invalid or unenforceable in whole or in part and, to the Knowledge
of the Company, is valid and enforceable. Without limiting the foregoing:
(A) each U.S. patent application and U.S. patent in which the
Company has or purports to have an ownership interest and which is
relevant to the Company Product Candidates was filed within one year
of the first printed publication, public use or offer for sale of each
invention described in such U.S. patent application or U.S. patent;
(B) each non-U.S. patent application and non-U.S. patent in which
the Company has or purports to have an ownership interest and which is
relevant to the Company Product Candidates was filed or claims
priority to a patent application filed, before the time at which each
invention described in such non-U.S. patent application or non-U.S.
patent was first made available to the public;
(C) to the Knowledge of the Company, no trademark (whether
registered or unregistered) or trade name used by the Company or any
Company Subsidiary infringes any trademark (whether registered or
unregistered) or trade name of any third party;
(D) the Company has not incurred an impairment charge to goodwill
associated with or inherent in any trademark (whether registered or
unregistered) in which the Company has or purports to have an
ownership interest; and
(E) each item of Company Registered Intellectual Property is, and
at all times has been, in compliance in all material respects with all
requirements under applicable Laws, and all filings, payments and
other actions required to be made or taken to maintain such item of
Company Registered Intellectual Property in full force and effect have
been made by the applicable deadline, except as would not have a
Company Material Adverse Effect;
(viii) the Company has made available to the Issuer complete and
accurate copies of all applications, correspondence and other material
documents related to each item of Company Registered Intellectual Property,
subject to any such applications, correspondence and other documents
withheld for reasons related to attorney-client privilege;
(ix) no interference, opposition, reissue, reexamination or other
proceeding of any nature is or has been pending or, to the Knowledge of the
Company, threatened, in which the scope, validity or enforceability of any
Company Registered Intellectual
24
Property is being, has been or could reasonably be expected to be contested
or challenged;
(x) to the Knowledge of the Company, there is no legitimate basis for
a claim that any Company Owned Intellectual Property is invalid or
unenforceable;
(xi) to the Knowledge of the Company, no person is engaging, or has
engaged, in any activity that materially infringes upon the Company Owned
Intellectual Property;
(xii) to the Knowledge of the Company, each license of the Company
Licensed Intellectual Property is valid and enforceable, is binding on all
parties to such license, and is in full force and effect;
(xiii) to the Knowledge of the Company, no party to any license of the
Company Licensed Intellectual Property is in breach thereof or default
thereunder;
(xiv) neither the execution of this Agreement nor the consummation of
any Transaction will, with or without notice or the lapse of time, result
in or give any third party the right or option to cause or declare: (A) any
loss or, or encumbrance on, any Company Owned Intellectual Property, (B)
the release, disclosure or delivery of any Company Owned Intellectual
Property by or to any escrow agent or other third party, or (C) an adverse
affect on any of the Company's material rights with respect to the Company
Owned Intellectual Property or the Company Licensed Intellectual Property;
and
(xv) the Company has made available to the Issuer an accurate copy of
each of its standard form of (A) end-user license agreement; (B) employee
or independent contract agreement containing any assignment or license of
Intellectual Property or any confidentiality provision; and (C)
confidentiality or non-disclosure agreement.
SECTION 2.14. Taxes. (a) The Company and the Company Subsidiaries
prepared in compliance with all applicable Laws and have filed all French,
federal, local and non-French Tax returns and reports required to be filed by
them and have paid and discharged all Taxes required to be paid or discharged,
other than such payments as are being contested in good faith by appropriate
proceedings and with respect to which adequate reserves for payment have been
established on the Company Interim Financial Statements. All such Tax returns
are true, accurate and complete in all material respects. No such Tax returns
have ever been examined or audited by any Governmental Authority.
(b) Neither the French nor any non-French taxing authority or agency
is now asserting or, to the Knowledge of the Company, threatening to assert,
against the Company or any Company Subsidiary any material deficiency or claim
for any Taxes or interest thereon or penalties in connection therewith. No claim
or Action is pending or, to the Knowledge of the Company, threatened against or
with respect to any of the Company or the Company Subsidiaries in respect of any
Tax.
25
(c) Neither the Company nor any Company Subsidiary has granted any
waiver of any statute of limitations with respect to, or any extension of a
period for the assessment of, any Tax.
(d) The accruals and reserves for Taxes reflected in the Company
Interim Financial Statements are adequate to cover all Taxes accruable through
September 30, 2004 (including interest and penalties, if any, thereon) in
accordance with French GAAP. On or before the Closing Date, the Company will
establish, in the ordinary course of business and consistent with past
practices, reserves adequate for the payment of all Taxes for the period from
the date of the Company Interim Financial Statements through the Closing Date.
(e) There are no Tax liens upon any property or assets of the Company
or any of the Company Subsidiaries except liens for current Taxes not yet due.
(f) There is no agreement, plan, arrangement or other contract
covering, benefiting or relating to any employee of the Company or the Company
Subsidiaries that, considered individually or considered collectively with any
other such contracts, could reasonably be expected to give rise directly or
indirectly to the payment of any amount that would not be deductible pursuant to
Section 280G or Section 162 of the Code (or any comparable provision of French
federal, local and non French Tax laws). None of the Company or the Company
Subsidiaries is, or has ever been, a party to or bound by any tax indemnity
agreement, tax sharing agreement, tax allocation agreement or similar
arrangement. None of the Company or the Company Subsidiaries is a party to any
agreement to compensate any third party for excise taxes payable pursuant to
Section 4999 of the Code.
(g) No claim has ever been made by any Governmental Authority in a
jurisdiction where the Company or a Company Subsidiary does not file a Tax
return that such Company or Company Subsidiary is or may be subject to taxation
by that jurisdiction. None of the Company or the Company Subsidiaries: (i) is
liable for Taxes of any other person, or is currently under any contractual
obligation to indemnify any person with respect to any portion of such person's
Taxes (except for customary agreements to indemnify lenders or security holders
in respect of Taxes); or (ii) is a party to or bound by any agreement or
obligation providing for payments by the Company or Company Subsidiaries with
respect to any amount of Taxes of any other person.
(h) The Company and the Company Subsidiaries will have no federal,
state, local, or foreign tax or other Liability arising out of the Transactions.
No Tax liability or restriction, reduction or limitation on or of favorable Tax
attributes (such as losses or credits, loss or credit carryovers, basis or
deduction) will arise directly or indirectly as a result of the Transactions.
Section 2.14(h) of the Company Disclosure Schedule sets forth the amount of
available net operating loss and credit carryovers to the Company (including the
Company Subsidiaries) as of December 31, 2003. Prior to the Closing Date, none
of the Company, any Company Subsidiary or any predecessor has been subject to
any provision limiting the carryover of the available net operating losses and
credit carryovers set forth in the Company Disclosure Schedule has otherwise
been restricted, reduced or limited.
26
(i) The Company has made available to Issuer accurate and complete
copies of all Tax Returns of the Company and the Company Subsidiaries.
SECTION 2.15. Environmental Matters. Except as would not reasonably be
expected, individually or in the aggregate, to prevent or materially delay
consummation of the Transactions or otherwise prevent or materially delay the
Company from performing its obligations under this Agreement and would not
reasonably be expected, individually or in the aggregate, to have a Company
Material Adverse Effect:
(i) none of the Company or any Company Subsidiary has violated or is
in violation of any Environmental Law;
(ii) none of the properties currently or formerly owned, leased or
operated by the Company or any Company Subsidiary (including, without
limitation, soils and surface and ground waters) are contaminated with any
Hazardous Substance;
(iii) none of the Company or any Company Subsidiary is actually,
potentially or allegedly liable for any off-site contamination by Hazardous
Substances;
(iv) none of the Company or any Company Subsidiary is actually,
potentially or allegedly liable under any Environmental Law;
(v) the Company and the Company Subsidiaries have all permits,
licenses and other authorizations required under any Environmental Law and
the Company and the Company Subsidiaries are in compliance in all material
respects with such permits, licenses and authorizations; and
(vi) neither the execution of this Agreement nor the consummation of
the Transactions will require any investigation, remediation or other
action with respect to Hazardous Substances, or any notice to or consent of
Governmental Authorities or third parties, pursuant to any applicable
Environmental Law.
SECTION 2.16. Material Contracts. (a) Subsections (i) through (xi) of
Section 2.16(a) of the Company Disclosure Schedule contain a list of the
following types of contracts and agreements to which the Company or any Company
Subsidiary is a party (such contracts and agreements are required to be set
forth in Section 2.16(a) of the Company Disclosure Schedule being the "Material
Company Contracts"):
(i) each contract and agreement which is likely to involve
consideration of more than $250,000, in the aggregate, over the remaining
term of such contract or agreement;
(ii) all contracts and agreements evidencing outstanding indebtedness
in a principal amount of $250,000 or more;
(iii) all leases of real property leased for the use or benefit of the
Company or any Company Subsidiary;
27
(iv) all material contracts and agreements with any Governmental
Authority to which the Company or any Company Subsidiary is a party;
(v) all contracts and agreements that limit, or purport to limit, the
ability of the Company or any Company Subsidiary to compete in any line of
business or with any person or entity or in any geographic area or during
any period of time;
(vi) all contracts and agreements providing for benefits under any
Company Plan;
(vii) all contracts for employment required to be listed in Section
2.10 of the Company Disclosure Schedule;
(viii) all contracts and agreements governing the use by the Company
(or any Company Subsidiary) of Company Licensed Intellectual Property;
(ix) all material broker, distributor, dealer, manufacturer's
representative, franchise, agency, sales promotion, market research,
marketing consulting and advertising contracts and agreements to which the
Company or any Company Subsidiary is a party;
(x) all management contracts (excluding contracts for employment) and
contracts with other consultants, including any contracts involving the
payment of royalties or other amounts calculated based upon the revenues or
income of the Company or any Company Subsidiary or income or revenues
related to any product of the Company or any Company Subsidiary to which
the Company or any Company Subsidiary is a party; and
(xi) all other contracts and agreements that are material to the
Company and the Company Subsidiaries, taken as a whole, or the absence of
which would reasonably be expected, individually or in the aggregate, to
prevent or materially delay consummation of any of the Transactions or
otherwise prevent or materially delay the Company from performing its
obligations under this Agreement or would reasonably be expected,
individually or in the aggregate, to have a Company Material Adverse
Effect.
(b) Except as set forth in Section 2.16(b) of the Company Disclosure
Schedule:
(i) each Material Company Contract is a legal, valid and binding
agreement, except as would not reasonably be expected, individually or in
the aggregate, to prevent or materially delay consummation of any of the
Transactions or otherwise prevent or materially delay the Company from
performing its obligations under this Agreement and would not reasonably be
expected, individually or in the aggregate, to have a Company Material
Adverse Effect;
(ii) none of the Company or any Company Subsidiary has received any
claim of default under any Material Company Contract and none of the
Company or any
28
Company Subsidiary is in breach or violation of, or default under, any
Material Company Contract;
(iii) no event has occurred and no condition or circumstance exists
that would reasonably be expected (with or without notice or lapse of
time): (A) result in a violation or breach of any of the provisions of any
Material Company Contract, (B) give any third party the right to declare a
default or exercise a remedy under any Material Company Contract, (C) give
any third party the right to accelerate the maturity or performance of any
Material Company Contract, or (D) give any person the right to terminate,
cancel or modify any Material Company Contract, except as would not
reasonably be expected, individually or in the aggregate, to prevent or
materially delay consummation of any of the Transactions or otherwise
prevent or materially delay the Company from performing its obligations
under this Agreement and would not reasonably be expected, individually or
in the aggregate, to have a Company Material Adverse Effect;
(iv) to the Knowledge of the Company, no other party is in breach or
violation of, or default under, any Material Company Contract;
(v) the Company has not explicitly waived any of its rights under any
Material Company Contract, except as would not reasonably be expected,
individually or in the aggregate, to prevent or materially delay
consummation of any of the Transactions or otherwise prevent or materially
delay the Company from performing its obligations under this Agreement and
would not reasonably be expected, individually or in the aggregate, to have
a Company Material Adverse Effect; and
(vi) neither the execution of this Agreement nor the consummation of
any Transaction shall constitute a default under, give rise to cancellation
rights under, or otherwise adversely affect any of the material rights of
the Company or any Company Subsidiary under any Material Company Contract.
The Company has furnished or made available to the Issuer true and complete
copies of all Material Company Contracts, including any amendments thereto.
(c) Except as set forth in Section 2.16(c) of the Company Disclosure
Schedule:
(i) none of the Company or any Company Subsidiary is a party to any
agreement pursuant to which the Company or any Company Subsidiary
guarantees or otherwise has agreed to cause, insure or become liable for,
or pledged any of its assets to secure, the performance or payment of any
Liability of any third party;
(ii) none of the Company or any Company Subsidiary is a party to or
bound by (A) any joint venture agreement, partnership, partnership
agreement, profit sharing agreement, cost sharing agreement, loss sharing
agreement or similar contract, or (B) any contract that creates or grants
to any third party, or provides for the creation or grant of, any stock
appreciation right, phantom stock right or similar right or interest;
29
(iii) the performance of the Material Company Contracts will not
result in any violation of or failure to comply with any Law; and
(iv) no third party is renegotiating any material amount paid or
payable to the Company or any Company Subsidiary under any term or
provision of a Material Company Contract.
SECTION 2.17. Insurance. The Company and the Company Subsidiaries
maintain insurance coverage with reputable insurers in such amounts and covering
such risks as are in accordance with normal industry practice for companies
engaged in businesses similar to that of the Company and the Company
Subsidiaries (taking into account the cost and availability of such insurance).
Since January 1, 2000, none of the Company or any Company Subsidiary has
received any notice or other written communication from any of its insurance
carriers regarding any actual or threatened cancellation or invalidation of, or
any actual or threatened denial of coverage or rejection of any claim under, any
such insurance policy of the Company.
SECTION 2.18. Board Approval. (a) The Company Board, by resolutions
duly adopted by unanimous vote of those voting at a meeting duly called and held
and not subsequently rescinded or modified in any way, has approved the
Transactions and resolved to recommend that the holders of Company Shares enter
into this Agreement and approve the Warrant Amendments.
(b) The only vote of the holders of any class or series of capital
stock of the Company necessary in connection with the Transactions to which the
Company is a party is (i) with respect to the approval of the 2004 Company
Financial Statements, the approval thereof by the holders of a majority of the
Company Shares, present or represented at the Company Shareholders' Meeting,
voting as a single class at the Company Shareholders' Meeting and (ii) with
respect to the approval of each Warrant Amendment, the approval thereof by the
holders of two-thirds of the Company Shares, present or represented at the
Company Shareholders' Meeting, voting as a single class at the Company
Shareholders' Meeting.
SECTION 2.19. Certain Business Practices. None of the Company, any
Company Subsidiary or, to the Knowledge of the Company, any directors or
officers, agents or employees of the Company or any Company Subsidiary, has (i)
used any funds for unlawful contributions, gifts, entertainment or other
unlawful expenses related to political activity; (ii) made any unlawful payment
to foreign or domestic government officials or employees or to foreign or
domestic political parties or campaigns or violated any provision of the Foreign
Corrupt Practices Act of 1977, as amended; or (iii) made any payment in the
nature of criminal bribery.
SECTION 2.20. Interested Party Transactions. No director, Company
Executive Officer or other affiliate of the Company or any Company Subsidiary
has or has had, directly or indirectly, (i) an economic interest in any person
that has furnished or sold, or furnishes or sells, services or products that the
Company or any Company Subsidiary furnishes or sells, or proposes to furnish or
sell; (ii) an economic interest in any person that purchases from or sells or
furnishes to, the Company or any Company Subsidiary, any goods or services;
(iii) a beneficial interest in any contract or agreement disclosed in Section
2.16 of the Company Disclosure Schedule; or (iv)
30
any contractual or other arrangement with the Company or any Company Subsidiary;
provided, however, that ownership of no more than one percent (1%) of the
outstanding voting stock of a publicly traded corporation shall not be deemed an
"economic interest in any person" for purposes of this Section 2.20. The
Company, since January 1, 2002, has not, directly or indirectly, including
through a Company Subsidiary (i) extended or maintained credit, arranged for the
extension of credit or renewed an extension of credit in the form of a personal
loan to or for any director or executive officer (or equivalent thereof) of the
Company, or (ii) materially modified any term of any such extension or
maintenance of credit.
SECTION 2.21. Brokers. No broker, finder or investment banker (other
than UBS Securities LLC) is entitled to any brokerage, finder's or other fee or
commission in connection with the Transactions based upon arrangements made by
or on behalf of the Company. The Company has heretofore furnished to the Issuer
a complete and correct copy of all agreements between the Company and UBS
Securities LLC pursuant to which such firm would be entitled to any payment
relating to the Transactions.
ARTICLE III
REPRESENTATIONS AND WARRANTIES REGARDING THE PRINCIPAL COMPANY SHAREHOLDERS
Except as set forth in the Company Disclosure Schedule, each Principal
Company Shareholder hereby represents and warrants to the Issuer that:
SECTION 3.01. Organization; Qualification. (a) Such Principal Company
Shareholder, if it is an individual, has all legal capacity to enter into this
Agreement and to carry out his or her obligations hereunder and to consummate
the transactions contemplated hereby.
(b) Such Principal Company Shareholder, if it is a corporation or
other legal entity, is duly organized, validly existing and, if applicable, in
good standing under the Laws of the jurisdiction of its incorporation or
formation.
SECTION 3.02. Authority Relative to This Agreement. Such Principal
Company Shareholder has all necessary power and authority to execute and deliver
this Agreement, to perform its obligations hereunder and to consummate the
Transactions. This Agreement has been duly and validly executed and delivered by
such Principal Company Shareholder and, assuming the due authorization,
execution and delivery by the Issuer, constitutes a legal, valid and binding
obligation of such Principal Company Shareholder, enforceable against such
Principal Company Shareholder in accordance with its terms, subject to the
effect of any applicable bankruptcy, insolvency (including, without limitation,
all laws relating to fraudulent transfers), reorganization, moratorium or
similar laws affecting creditors' rights generally and subject to the effect of
general principles of equity (regardless of whether considered in a proceeding
at law or in equity).
SECTION 3.03. No Conflict. (a) The execution and delivery of this
Agreement by such Principal Company Shareholder do not, and the performance of
this Agreement by such Principal Company Shareholder will not, (i) conflict with
or violate the Organizational
31
Documents of such Principal Company Shareholder (if such Principal Company
Shareholder is a corporation or other legal entity), (ii) assuming that all
consents, approvals, authorizations and other actions described in Section
2.05(b) have been obtained and all filings and obligations described in Section
2.05(b) have been made, conflict with or violate any Law applicable to such
Principal Company Shareholder or by which the Company Shares owned by such
Principal Company Shareholder are bound or affected or (iii) result in any
breach of, or constitute a default (or an event which, with notice or lapse of
time or both, would become a default) under, or give to others any right of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or encumbrance on any of the Company Shares owned by such
Principal Company Shareholder pursuant to, any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which such Principal Company Shareholder is a party or by which
such Principal Company Shareholder or the Company Shares owned by such Principal
Company Shareholder are bound or affected, except for any such conflicts,
violations, breaches, defaults or other occurrences which would not reasonably
be expected, individually or in the aggregate, to prevent or materially delay
consummation of any of the Transactions or otherwise prevent or materially delay
such Principal Company Shareholder from performing its obligations under this
Agreement.
(b) The execution and delivery of this Agreement by such Principal
Company Shareholder do not, and the performance of this Agreement by such
Principal Company Shareholder will not, require any consent, approval,
authorization or permit of, or filing with or notification to, any Governmental
Authority on the part of such Principal Company Shareholder, except (i) for
applicable requirements, if any, of the Exchange Act, Blue Sky Laws and state
takeover Laws; (ii) the pre-merger notification and waiting period requirements
of the HSR Act applicable with respect to any Principal Company Shareholder that
would acquire shares of Issuer Common Stock valued (in accordance with the HSR
Act) at $50 million or more in connection with the Share Exchange; and (iii)
where the failure to obtain such consents, approvals, authorizations or permits,
or to make such filings or notifications, would not reasonably be expected,
individually or in the aggregate, to prevent or materially delay consummation of
any of the Transactions or otherwise prevent such Principal Company Shareholder
from performing its obligations under this Agreement.
SECTION 3.04. Title to the Shares. As of the date hereof, such
Principal Company Shareholder is the record and beneficial owner of the number
of Company Shares, Company Stock Options and Company Warrants set forth opposite
such Principal Company Shareholder's name in Exhibit A attached hereto. Except
as set forth on Exhibit A, such Company Shares are all the securities of the
Company owned, now and, at all times during the term hereof will be, either of
record or beneficially, by such Principal Company Shareholder. The Company
Shares owned by such Principal Company Shareholder are now and, at all times
prior to the Closing will be, owned free and clear of all Liens, other than any
Liens created by this Agreement.
SECTION 3.05. Investment Experience and Status. (a) Such Principal
Company Shareholder has such knowledge and experience in financial and business
matters that such Principal Company Shareholder is capable of evaluating the
merits and risks of such Principal Company Shareholder's investment in shares of
Issuer Common Stock pursuant to this Agreement, such Principal Company
Shareholder is experienced in evaluating and investing in
32
companies and such Principal Company Shareholder can bear the economic risk of
its investment in shares of Issuer Common Stock pursuant to this Agreement for
an indefinite period of time.
(b) Either: (i) such Principal Company Shareholder is outside the
United States as of the date of this Agreement, such Principal Company
Shareholder does not reside in the United States and such Principal Company
Shareholder is not a corporation, partnership, trust or other entity organized
or incorporated under the laws of the United States; or (b) such Principal
Company Shareholder is an "accredited investor", as that term is defined in Rule
501 of Regulation D promulgated under the Securities Act, which means, among
other things, that he, she, or it is a person, corporation or other entity with
a substantial net worth and significant experience with similar investments.
(c) Such Principal Company Shareholder is acquiring its shares of
Issuer Common Stock pursuant to this Agreement as an investment for such
person's own account, not as a nominee or agent, and not with a view to the
resale or distribution of any part thereof, and such Principal Company
Shareholder has no present intention of selling, granting any participation in,
or otherwise distributing its shares of Issuer Common Stock to be acquired
pursuant to this Agreement. Such Principal Company Shareholder does not have any
contract, undertaking, agreement or arrangement with any person to sell,
transfer or grant participations to such person or to any third person, with
respect to any of its shares of Issuer Common Stock to be acquired pursuant to
this Agreement.
(d) Such Principal Company Shareholder understands that neither the
shares of Issuer Common Stock to be issued pursuant to this Agreement nor the
issuance and exchange of shares of Issuer Common Stock pursuant to this
Agreement have been registered under the Securities Act and that the shares of
Issuer Common Stock to be issued pursuant to this Agreement may not be sold,
transferred, or otherwise disposed of without registration under the Securities
Act or an exemption from the registration requirements of the Securities Act,
and that in the absence of an effective registration statement covering such
shares of Issuer Common Stock or an available exemption from registration under
the Securities Act, such shares of Issuer Common Stock must be held
indefinitely. Such Principal Company Shareholder understands that neither the
shares of Issuer Common Stock to be issued pursuant to this Agreement nor the
issuance and exchange of shares of Issuer Common Stock pursuant to this
Agreement are being registered under the Securities Act on the ground that the
sale provided for in this Agreement and the issuance of shares hereunder is
exempt from registration under the Securities Act pursuant to Regulation S under
the Section Act or Section 4(2) of the Securities Act or another exemption under
the Securities Act, and that the Issuer's reliance on such exemption is
predicated on the representations of such Principal Company Shareholder set
forth in this Section 3.05.
(e) Such Principal Company Shareholder believes that it has received
all the information such person considers necessary or appropriate for deciding
whether to agree to acquire shares of Issuer Common Stock pursuant to this
Agreement. Such Principal Company Shareholder has had an opportunity to ask
questions and receive answers from the Issuer regarding the terms and conditions
of the issuance and exchange of shares of Issuer Common Stock pursuant to this
Agreement and the business, properties, prospects, and financial condition of
the Issuer.
33
ARTICLE IV
REPRESENTATIONS AND WARRANTIES REGARDING THE ISSUER
Solely for purposes of Section 7.03(a) and Article IX of this
Agreement, except as set forth in the Issuer Disclosure Schedule that has been
delivered to the Company and the Shareholder Representative in connection with
the execution and delivery of this Agreement (the "Issuer Disclosure Schedule")
(which Issuer Disclosure Schedule shall be arranged in sections corresponding to
the numbered and lettered sections of this Article IV, and any information
disclosed in any such section of the Issuer Disclosure Schedule shall be deemed
to be disclosed only for purposes of the corresponding section of this Article
IV, unless it is readily apparent that the disclosure contained in such section
of the Issuer Disclosure Schedule contains enough information regarding the
subject matter of other representations and warranties contained in this Article
IV as to clearly qualify or otherwise clearly apply to such other
representations and warranties):
SECTION 4.01. Corporate Organization. (a) The Issuer is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has the requisite corporate power and authority and all
necessary Governmental Authorizations to own, lease and operate its properties
and to carry on its business as it is now being conducted, except where the
failure to be so organized, existing or in good standing or to have such power,
authority and governmental approvals would not reasonably be expected,
individually or in the aggregate, to prevent or materially delay consummation of
any of the Transactions or otherwise prevent or materially delay the Issuer from
performing its obligations under this Agreement and would not reasonably be
expected, individually or in the aggregate, to have an Issuer Material Adverse
Effect. The Issuer is duly qualified or licensed as a foreign corporation to do
business, and is in good standing, in each jurisdiction where the character of
the properties owned, leased or operated by it or the nature of its business
makes such qualification or licensing necessary, except for such failures to be
so qualified or licensed and in good standing that would not reasonably be
expected, individually or in the aggregate, to prevent or materially delay
consummation of any of the Transactions or otherwise prevent or materially delay
the Issuer from performing its obligations under this Agreement and would not
reasonably be expected, individually or in the aggregate, to have an Issuer
Material Adverse Effect.
(b) The Issuer has not had since January 1, 2000, and does not have,
any subsidiaries and has not owned since January 1, 2000, and does not own,
directly or indirectly, any equity or similar interest in, or any interest
convertible into or exchangeable or exercisable for any equity or similar
interest in, any corporation, partnership, joint venture or other business
association or entity.
SECTION 4.02. Corporate Books and Records. (a) The Issuer has
heretofore made available to the Company a complete and correct copy of the
Certificate of Incorporation and the Bylaws or equivalent Organizational
Documents, each as amended to date, of the Issuer. Such Certificates of
Incorporation, Bylaws or equivalent Organizational Documents are in full force
and effect. The Issuer has not violated, or is not in violation of, any of the
provisions of its Certificate of Incorporation, Bylaws or equivalent
Organizational Documents, except for such violations that are not material. No
event has occurred and no condition or circumstance exists
34
that would reasonably be expected (with or without notice or lapse of time) to
constitute or result, directly or indirectly, in a material violation of the
provisions of the Organizational Documents of the Issuer.
(b) The minute books of the Issuer contain accurate records of all
meetings and accurately reflect all other actions taken by the stockholders, the
Issuer Board, and all the committees of the Issuer Board. There have been no
meetings or proceedings of the Issuer Board (or any committee thereof) or the
stockholders of the Issuer, other than those reflected in the Issuer's records.
Complete and accurate copies of all such minute books and of the stock register
of the Issuer have been made available by the Issuer to the Company.
SECTION 4.03. Capitalization. (a) The authorized capital stock of the
Issuer consists of (i) 40,000,000 shares of Issuer Common Stock and (ii)
10,000,000 shares of preferred stock, par value $0.01 per share ("Issuer
Preferred Stock"), of which 859,666 shares have been designated Series S
Preferred Stock (the "Series S Preferred Stock") and 549,622 shares have been
designated Series S-1 Preferred Stock (the "Series S-1 Preferred Stock"). As of
the date of this Agreement, (i) 16,014,569 shares of Issuer Common Stock are
issued and outstanding, all of which are validly issued, fully paid and
non-assessable, (ii) 859,666 shares of Series S Preferred Stock and 549,622
shares of Series S-1 Preferred Stock are issued and outstanding, all of which
are validly issued, fully paid and non-assessable, (iii) no shares of Issuer
Common Stock are held in the treasury of the Issuer, (iv) 505,665 shares of
Issuer Common Stock are reserved for future issuance pursuant to future grants
of Issuer Stock Awards under the Issuer's 2000 Stock Plan, (v) 139,101 shares of
Issuer Common Stock are reserved for future issuance pursuant to the Issuer's
2001 Employee Stock Purchase Plan, (vi) 2,410,533 shares of Issuer Common Stock
are reserved for future issuance pursuant to outstanding employee stock options
("Issuer Stock Options") and other purchase rights (together with Issuer Stock
Options, the "Issuer Stock Awards") granted pursuant to the Issuer's 2000 Stock
Plan, 1997 Stock Plan, 1994 Non-Employee Directors Stock Option Plan and 1989
Stock Plan (the "Issuer Stock Option Plans") and (vii) 2,275,426 shares of
Issuer Common Stock are reserved for issuance pursuant to outstanding warrant or
other rights to purchase shares of Issuer Common Stock. Except as set forth in
this Section 4.03 or the Voting Agreements, there are no options, warrants,
convertible securities or other rights, agreements, arrangements or commitments
of any character relating to the issued or unissued capital stock of the Issuer
or obligating the Issuer to issue or sell any shares of capital stock of, or
other equity interests in, the Issuer. Section 4.03(a) of the Issuer Disclosure
Schedule sets forth the following information with respect to each Issuer Stock
Award outstanding as of the date of this Agreement: (i) the name of the Issuer
Stock Award recipient; (ii) the particular plan pursuant to which such Issuer
Stock Award was granted; (iii) the number of shares of Issuer Common Stock
subject to such Issuer Stock Award; (iv) the exercise or purchase price of such
Issuer Stock Award; (v) the date on which such Issuer Stock Award was granted;
(vi) the applicable vesting schedule; (vii) the date on which such Issuer Stock
Award expires; and (viii) whether the exercisability or right of repurchase of
such Issuer Stock Award will be accelerated in any way by the transactions
contemplated by this Agreement, and indicates the extent of acceleration. The
Issuer has made available to the Company accurate and complete copies of all
Issuer Stock Option Plans pursuant to which the Issuer has granted such Issuer
Stock Awards that are currently outstanding and the form of all stock award
agreements evidencing such Issuer Stock Awards. All shares of Issuer Common
Stock subject to issuance as aforesaid, upon issuance on the terms and
conditions specified in the instruments pursuant to
35
which they are issuable, will be duly authorized, validly issued, fully paid and
non-assessable. There are no outstanding contractual obligations of the Issuer
to repurchase, redeem or otherwise acquire any shares of Issuer Common Stock or
to provide funds to, or make any investment (in the form of a loan, capital
contribution or otherwise) in, any person. There are no commitments or
agreements of any character to which the Issuer is bound obligating the Issuer
to accelerate the vesting of any Issuer Stock Option as a result of the Share
Exchange or any of the Transactions. All outstanding shares of Issuer Common
Stock and all outstanding Issuer Stock Options have been issued and granted in
compliance with (i) all applicable securities Laws and other applicable Laws and
(ii) all requirements set forth in applicable contracts.
(b) Section 4.03(b) of the Issuer Disclosure Schedule specifies the
currently applicable conversion price for each of the Series S Preferred Stock
and the Series S-1 Preferred Stock. Except as set forth in Section 4.03(b) of
the Issuer Disclosure Schedule, the conversion prices applicable to the Series S
Preferred Stock and the Series S-1 Preferred Stock will not be subject to
adjustment as a result of the Transactions.
(c) The shares of Issuer Common Stock to be issued in the Share
Exchange in accordance with Section 1.02, 1.08(a) or 1.09 will be duly
authorized, validly issued, fully paid and non-assessable and not subject to
preemptive rights created by statute, the Issuer's Certificate of Incorporation
or Bylaws or any agreement to which the Issuer is a party or is bound and (ii)
will, when issued and assuming the accuracy of the representations and
warranties of the Principal Company Shareholders set forth in Section 3.05, be
exempt from the registration requirements under the Securities Act and Exchange
Act, and registered or exempt from registration under applicable Blue Sky Laws.
(d) The Rights Agreement, dated as of March 19, 1999, and as amended
on June 29, 1999, February 15, 2000, July 9, 2001 and December 18, 2001 (the
"Issuer Rights Agreement"), between the Issuer and the American Stock Transfer &
Trust Company, has expired in accordance with its terms and the Issuer has not
adopted and is not a party to any other shareholder rights agreement or similar
agreement.
SECTION 4.04. Authority Relative to This Agreement. The Issuer has all
necessary corporate power and authority to execute and deliver this Agreement,
to perform its obligations hereunder and to consummate the Transactions. The
execution and delivery of this Agreement by the Issuer and the consummation by
the Issuer of the Transactions have been duly and validly authorized by all
necessary corporate action, and no other corporate proceedings on the part of
the Issuer is necessary to authorize this Agreement or to consummate the
Transactions (other than the vote of the stockholders of the Issuer set forth in
Section 4.18(b) at the Issuer Stockholders' Meeting). This Agreement has been
duly and validly executed and delivered by the Issuer and, assuming due
authorization, execution and delivery by the Principal Company Shareholders,
constitutes a legal, valid and binding obligation of the Issuer, enforceable
against the Issuer in accordance with its terms, subject to the effect of any
applicable bankruptcy, insolvency (including, without limitation, all laws
relating to fraudulent transfers), reorganization, moratorium or similar laws
affecting creditors' rights generally and subject to the effect of general
principles of equity (regardless of whether considered in a proceeding at law or
in equity).
36
SECTION 4.05. No Conflict; Required Filings and Consents. (a) The
execution and delivery of this Agreement by the Issuer does not, and the
performance of this Agreement by the Issuer will not, (i) conflict with or
violate the Certificate of Incorporation or Bylaws or other Organizational
Documents of the Issuer, (ii) assuming that all consents, approvals,
authorizations and other actions described in Section 4.05(b) have been obtained
and all filings and obligations described in Section 4.05(b) have been made,
conflict with or violate any Law applicable to the Issuer or by which any
property or asset of the Issuer is bound or affected, (iii) cause the Company,
any Company Subsidiary, the Issuer or any of Issuer's affiliates to become
subject to, or liable for the payment of, any Tax, (iv) cause any of the assets
owned or used by the Issuer to be reassessed or revalued by any taxing
authority, or (v) result in any breach of, or constitute a default (or an event
which, with notice or lapse of time or both, would become a default) under, or
give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or other encumbrance on any
property or asset of the Issuer pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which the Issuer is a party or by which the Issuer
or any of its properties or assets is bound or affected, except, with respect to
clauses (ii) and (iii), for any such conflicts, violations, breaches, defaults
or other occurrences which would not reasonably be expected, individually or in
the aggregate, to prevent or materially delay consummation of any of the
Transactions or otherwise prevent or materially delay the Issuer from performing
its obligations under this Agreement and would not reasonably be expected,
individually or in the aggregate, to have an Issuer Material Adverse Effect.
(b) The execution and delivery of this Agreement by the Issuer does
not, and the performance of this Agreement by the Issuer will not, require any
consent, approval, authorization or permit of, or filing with or notification
to, any Governmental Authority, except (i) for applicable requirements, if any,
of the Exchange Act, Blue Sky Laws and state takeover laws; (ii) the pre-merger
notification and waiting period requirements of the HSR Act applicable with
respect to any Principal Company Shareholder that would acquire shares of Issuer
Common Stock valued (in accordance with the HSR Act) at $50 million or more in
connection with the Share Exchange; and (iii) where the failure to obtain such
consents, approvals, authorizations or permits, or to make such filings or
notifications, would not reasonably be expected, individually or in the
aggregate, to prevent or materially delay consummation of any of the
Transactions, or otherwise prevent the Issuer from performing its obligations
under this Agreement and would not reasonably be expected, individually or in
the aggregate, to have an Issuer Material Adverse Effect.
SECTION 4.06. Permits; Compliance. (a) The Issuer is in possession of
all franchises, grants, authorizations, licenses, permits, easements, variances,
exceptions, consents, certificates, approvals and orders of any Governmental
Authority (other than the Drug Regulatory Agencies) necessary for the Issuer to
own, lease and operate its properties or to carry on its business as it is now
being conducted (the "Issuer Permits"), except where the failure to have, or the
suspension or cancellation of, any of the Issuer Permits would not reasonably be
expected, individually or in the aggregate, to prevent or materially delay
consummation of any of the Transactions or otherwise prevent or materially delay
the Issuer from performing its obligations under this Agreement and would not
reasonably be expected, individually or in the aggregate, to have an Issuer
Material Adverse Effect. Each material Issuer Permit is listed in Section
4.06(a) of the Issuer Disclosure Schedule. The Issuer has made available to the
37
Company complete and accurate copies of each Issuer Permit, including all
amendments and renewals thereto, listed in Section 4.06(a) of the Issuer
Disclosure Schedule. As of the date of this Agreement, each Issuer Permit is
valid and in full force and effect and no suspension or cancellation of any of
the Issuer Permits is pending or, to the Knowledge of the Issuer, threatened,
except where the failure to have, or the suspension or cancellation of, any of
the Issuer Permits would not reasonably be expected, individually or in the
aggregate, to prevent or materially delay the consummation of any of the
Transactions or otherwise prevent or materially delay the Issuer from performing
its obligations under this Agreement and would not reasonably be expected,
individually or in the aggregate, to have an Issuer Material Adverse Effect. The
Issuer is, and has at all times been, in full compliance with all of the terms
and requirements of each Issuer Permit, except where the failure to be in
compliance would not reasonably be expected, individually or in the aggregate,
to prevent or materially delay the consummation of any of the Transactions or
otherwise prevent or materially delay the Issuer from performing its obligations
under this Agreement and would not reasonably be expected, individually or in
the aggregate, to have an Issuer Material Adverse Effect. No event has occurred
and no condition or circumstance exists that would reasonably be expected (with
or without notice or lapse of time) to constitute or result, directly or
indirectly, in a violation of or a failure to comply with any term or
requirement of any Issuer Permit or result, directly or indirectly, in the
revocation, withdrawal, suspension, cancellation, termination or modification of
any Issuer Permit, except where the violation, failure to comply, revocation,
withdrawal, suspension, cancellation, termination or modification would not
reasonably be expected, individually or in the aggregate, to prevent or
materially delay the consummation of any of the Transactions or otherwise
prevent or materially delay the Issuer from performing its obligations under
this Agreement and would not reasonably be expected, individually or in the
aggregate, to have an Issuer Material Adverse Effect. Since January 1, 2002, the
Issuer has not received any written communication regarding (A) any actual,
alleged, possible or potential violation of, or failure to comply with, any term
or requirement of any material Issuer Permit or (B) any actual, proposed,
possible or potential revocation, withdrawal, suspension, cancellation,
termination or adverse modification of any material Issuer Permit. All
applications required to have been filed for the renewal of each Issuer Permit
have been duly filed on a timely basis, and each other notice or filing required
to have been given or made with respect to such Issuer Permit has been duly
given or made on a timely basis, except where the failure to make such filing
would not reasonably be expected, individually or in the aggregate, to prevent
or materially delay the consummation of any of the Transactions or otherwise
prevent or materially delay the Issuer from performing its obligations under
this Agreement and would not reasonably be expected, individually or in the
aggregate, to have an Issuer Material Adverse Effect. The Issuer is not in
conflict with, or in default, breach or violation of, (a) any Law applicable to
the Issuer or by which any property or asset of the Issuer is bound or affected,
or (b) any note, bond, mortgage, indenture, contract, agreement, lease, license,
Issuer Permit, franchise or other instrument or obligation to which the Issuer
is a party or by which the Issuer or any property or asset of the Issuer is
bound, except for any such conflicts, defaults, breaches or violations that
would not reasonably be expected, individually or in the aggregate, to prevent
or materially delay consummation of any of the Transactions or otherwise prevent
or materially delay the Issuer from performing its obligations under this
Agreement and would not reasonably be expected, individually or in the
aggregate, to have an Issuer Material Adverse Effect.
38
(b) The Issuer holds all new drug applications, abbreviated new drug
applications, product license applications, investigational new drug
applications, product export applications and other approvals issuable by the
Drug Regulatory Agencies (the "Issuer Regulatory Permits") necessary for the
conduct of the business of the Issuer as currently conducted and development,
clinical testing, manufacturing, sale, marketing, distribution and importation
or exportation, as currently conducted, of any of its products or product
candidates, including EP HIV-1090, EP-1010, EP-1043, EP-1233, EP-2101, and
MVA-BN32 (the "Issuer Product Candidates") and no such Issuer Regulatory Permit
has been (i) revoked, withdrawn, suspended, cancelled or terminated or (ii)
modified in any adverse manner, other than immaterial adverse modifications. The
Issuer is in compliance in all material respects with the Issuer Regulatory
Permits and has not received any written notice or other written communication
from any Drug Regulatory Agency regarding (i) any actual or possible violation
of or failure to comply with any term or requirement of any Issuer Regulatory
Permit or (ii) any actual or possible revocation, withdrawal, suspension,
cancellation, termination or modification of any Issuer Regulatory Permit.
Except for the information and files identified in Section 4.06(b) of the Issuer
Disclosure Schedule, the Issuer has made available to the Company all
information in its possession or control relating to the Issuer Product
Candidates and the development, manufacture and sale of the Issuer Product
Candidates, including without limitation, complete and correct copies of the
following (to the extent there are any): (i) adverse event reports; clinical
study reports and material study data; and inspection reports, notices of
adverse findings, warning letters, filings and letters and other correspondence
with any Drug Regulatory Agency; and (ii) similar reports, study data, notices,
letters, filings and correspondence with any other Governmental Authority.
(c) All clinical, pre-clinical and other studies and tests conducted
by or on behalf of, or sponsored by, the Issuer or in which the Issuer or its
current products or product candidates, including the Issuer Product Candidates,
have participated were and, if still pending, are being conducted in all
material respects in accordance with standard medical and scientific research
procedures and in compliance with the applicable regulations of the Drug
Regulatory Agencies and other applicable Laws. All quality control, record
keeping, notification, reporting and manufacturing systems used for the Issuer's
commercial products and for the manufacturing of clinical supplies conforms to
the applicable regulations of the Drug Regulatory Agencies and good
manufacturing practices.
SECTION 4.07. SEC Filings; Financial Statements; Nasdaq. (a) The
Issuer has filed all forms, reports and documents required to be filed by it
with the U.S. Securities and Exchange Commission (the "SEC") since January 1,
2002 (collectively, the "Issuer SEC Reports"). The Issuer SEC Reports (i) were
prepared in all material respects in accordance with either the requirements of
the Securities Act or the Exchange Act, as the case may be, and the rules and
regulations promulgated thereunder, and (ii) did not, at the time they were
filed, or, if amended or supplemented, as of the date of the last such amendment
or supplement, contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary in order to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading.
(b) Each of the financial statements (including, in each case, any
notes thereto) contained in the Issuer SEC Reports was prepared in accordance
with U.S. generally
39
accepted accounting principles ("U.S. GAAP") applied on a consistent basis
throughout the periods indicated (except as may be indicated in the notes
thereto or, in the case of unaudited statements, as permitted by Form 10-Q of
the SEC) and each fairly presents, in all material respects, the financial
position, results of operations and cash flows of the Issuer as at the
respective dates thereof and for the respective periods indicated therein,
except as otherwise noted therein (subject, in the case of unaudited statements,
to normal and recurring year-end adjustments which, individually or in the
aggregate, have not had, and would not reasonably be expected to have an Issuer
Material Adverse Effect).
(c) Except as and to the extent set forth on the balance sheet of the
Issuer as at September 30, 2004, including the notes thereto, the Issuer does
not have any Liability of any nature (whether accrued, absolute, contingent or
otherwise) that would be required to be reflected on a balance sheet prepared in
accordance with U.S. GAAP, except for Liabilities: (i) incurred pursuant to this
Agreement and the Transactions; or (ii) incurred in the ordinary course of
business consistent with past practice since September 30, 2004, which,
individually or in the aggregate, would not reasonably be expected to prevent or
materially delay consummation of the Transactions or otherwise prevent or
materially delay the Issuer from performing its obligations under this Agreement
and would not reasonably be expected, individually or in the aggregate, to have
an Issuer Material Adverse Effect.
(d) From January 1, 2002 through the date hereof, the Issuer has not
received any comment letter from the SEC or the staff thereof. The Issuer has
made available to the Company or its counsel all comment letters and other
correspondence from or to Nasdaq dated on or after January 1, 2002 relating to
the delisting or maintenance of listing of the Issuer Common Stock on the
Nasdaq.
(e) The Issuer has timely filed all certifications and statements
required by (x) Rule 13a-14 or Rule 15d-14 under the Exchange Act or (y) 18
U.S.C. Section 1350 (Section 906 of the Xxxxxxxx-Xxxxx Act of 2002) with respect
to any Issuer SEC Report. The Issuer maintains disclosure controls and
procedures required by Rule 13a-15 or Rule 15d-15 under the Exchange Act; such
controls and procedures are designed to ensure that material information
concerning the Issuer is made known on a timely basis to the individuals
responsible for the preparation of the Issuer's SEC filings and other public
disclosure documents.
(f) The Issuer has in place internal controls over financial reporting
that are designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with U.S. GAAP and include policies and procedures that:
(i) pertain to the maintenance of records that in reasonable detail accurately
and fairly reflect the transactions and dispositions of the assets of the
Issuer; (ii) provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance with U.S.
GAAP, and that receipts and expenditures of the Issuer are being made only in
accordance with authorization of management and the advisors of the Issuer; and
(iii) provide reasonable assurance regarding prevention or timely detection of
the unauthorized acquisition, use or disposition of the assets of the Issuer
that could have a material effect on the financial statements.
40
(g) Since January 1, 2002, there have been no formal internal
investigations regarding financial reporting or accounting policies and
practices discussed with, reviewed by or initiated at the direction of the chief
executive officer, chief financial officer or general counsel of the Issuer, the
Issuer Board or any committee thereof, other than ordinary course audits or
reviews of accounting policies and practices or internal controls required by
the Xxxxxxxx-Xxxxx Act of 2002.
SECTION 4.08. Absence of Certain Changes or Events. Since September
30, 2004, except as expressly contemplated by this Agreement, (a) the Issuer has
conducted its business only in the ordinary course and in a manner consistent
with past practice; (b) there has not been any Issuer Material Adverse Effect or
any event, condition or circumstance that would reasonably be expected to have
an Issuer Material Adverse Effect; and (c) the Issuer has not taken any action
that, if taken after the date of this Agreement, would constitute a breach of
any of the covenants set forth in Section 5.02.
SECTION 4.09. Absence of Litigation. There is no Action pending or, to
the Knowledge of the Issuer, threatened against the Issuer or any property or
asset of the Issuer before any Governmental Authority that (a) individually or
in the aggregate, has had, or would reasonably be expected to have an Issuer
Material Adverse Effect or (b) seeks to, directly or indirectly, delay, prevent,
make illegal or otherwise interfere with the consummation of any of the
Transactions. Neither the Issuer nor any property or asset of the Issuer is
subject to any continuing order of, consent decree, settlement agreement or
other similar written agreement with, or, to the Knowledge of the Issuer,
continuing investigation by, any Governmental Authority, or any effective or, to
the Knowledge of the Issuer, proposed, order, writ, judgment, injunction,
decree, determination or award of Governmental Authority, that would reasonably
be expected, individually or in the aggregate, to prevent or materially delay
consummation of any of the Transactions or otherwise prevent or materially delay
the Issuer from performing its obligations under this Agreement or would not
reasonably be expected, individually or in the aggregate, to have an Issuer
Material Adverse Effect.
SECTION 4.10. Employee Benefit Plans. (a) Section 4.10(a) of the
Issuer Disclosure Schedule lists: (i) all employee benefit plans (as defined in,
and whether or not subject to, Section 3(3) of ERISA) and all bonus, stock
option, stock purchase, restricted stock, incentive, deferred compensation,
retiree medical or life insurance, supplemental retirement, severance or other
benefit plans, programs or arrangements, and all employment, termination,
severance or other contracts or agreements, to which the Issuer is a party, with
respect to which the Issuer has any obligation or which are maintained,
contributed to or sponsored by the Issuer for the benefit of any current or
former employee, officer or director of the Issuer, (ii) each employee benefit
plan for which the Issuer could incur liability under Section 4069 of ERISA in
the event such plan has been or were to be terminated, (iii) any plan in respect
of which the Issuer could incur liability under Section 4212(c) of ERISA, and
(iv) any contracts, arrangements or understandings between the Issuer and any
employee of the Issuer including, without limitation, any contracts,
arrangements or understandings relating in any way to a sale of the Issuer or
the consummation of any Transaction (collectively, the "Issuer Plans"). The
Issuer has made available to the Company a true and complete copy of (i) such
Issuer Plans, (ii) the most recently filed IRS Form 5500, if any, (iii) the most
recent summary plan description for each Issuer Plan for which a summary plan
description is required by applicable law, (iv) the most
41
recently received IRS determination letter, if any, issued by the IRS with
respect to any Issuer Plan that is intended to qualify under Section 401(a) of
the Code, and (v) the most recently prepared actuarial report or financial
statement, if any, relating to an Issuer Plan.
(b) None of the Issuer Plans is a Multiemployer Plan or a Multiple
Employer Plan. None of the Issuer Plans (i) provides for the payment of
separation, severance, termination or similar-type benefits to any person, (ii)
obligates the Issuer to pay separation, severance, termination or similar-type
benefits solely or partially as a result of any transaction contemplated by this
Agreement, or (iii) obligates the Issuer to make any payment or provide any
benefit as a result of a "change in control", within the meaning of such term
under Section 280G of the Code. None of the Issuer Plans provides for or
promises retiree medical, disability or life insurance benefits to any current
or former employee, officer or director of the Issuer. Each of the Issuer Plans
is subject only to the Laws of the United States or a political subdivision
thereof.
(c) Each Issuer Plan is now and always has been operated in all
material respects in accordance with its terms and the requirements of all
applicable Laws, including, without limitation, ERISA and the Code. The Issuer
has performed all material obligations required to be performed by them under,
are not in any material respect in default under or in violation of, and, to the
Knowledge of the Issuer, there have not been any defaults or violations by any
party to, any Issuer Plan. No Action is pending or, to the Knowledge of the
Issuer, threatened with respect to any Issuer Plan (other than claims for
benefits in the ordinary course) that would reasonably be expected, individually
or in the aggregate, to have an Issuer Material Adverse Effect and, to the
Knowledge of the Issuer, no fact or event exists that would reasonably be
expected to give rise to any such Action.
(d) Each Issuer Plan that is intended to be qualified under Section
401(a) of the Code or Section 401(k) of the Code has timely received a favorable
determination letter from the IRS covering all of the provisions applicable to
the Issuer Plan for which determination letters are currently available that the
Issuer Plan is so qualified and each trust established in connection with any
Issuer Plan which is intended to be exempt from federal income taxation under
Section 501(a) of the Code has received a determination letter from the IRS that
it is so exempt, and no fact or event has occurred since the date of such
determination letter or letters from the IRS to adversely affect the qualified
status of any such Issuer Plan or the exempt status of any such trust.
(e) There has not been any prohibited transaction (within the meaning
of Section 406 of ERISA or Section 4975 of the Code) with respect to any Issuer
Plan. The Issuer has not incurred any liability under, arising out of or by
operation of Title IV of ERISA (other than liability for premiums to the Pension
Benefit Guaranty Corporation arising in the ordinary course), including, without
limitation, any liability in connection with (i) the termination or
reorganization of any employee benefit plan subject to Title IV of ERISA, or
(ii) the withdrawal from any Multiemployer Plan or Multiple Employer Plan, and
no fact or event exists which would reasonably be expected to give rise to any
such liability.
(f) All material contributions, premiums or payments required to be
made with respect to any Issuer Plan have been made on or before their due
dates. All such contributions have been fully deducted for income tax purposes,
to the extent applicable, and no
42
such deduction has been challenged or disallowed by any Governmental Authority
and no fact or event exists which would reasonably be expected to give rise to
any such challenge or disallowance.
SECTION 4.11. Labor and Employment Matters. (a) Except as set forth in
Section 4.11(a) of the Issuer Disclosure Schedule:
(i) there are no controversies pending or, to the Knowledge of the
Issuer, threatened between the Issuer and any of its employees;
(ii) the Issuer is not a party to any collective bargaining agreement
or other labor union contract applicable to persons employed by the Issuer,
nor, to the Knowledge of the Issuer, are there any activities or
proceedings of any labor union to organize any such employees;
(iii) the Issuer has not breached or otherwise failed to comply with
any provision of any such agreement or contract, and there are no
grievances outstanding against the Issuer under any such agreement or
contract, except as would not reasonably be expected, individually or in
the aggregate, to prevent or materially delay consummation of any of the
Transactions or otherwise prevent or materially delay the Issuer from
performing its obligations under this Agreement and would not reasonably be
expected, individually or in the aggregate, to have an Issuer Material
Adverse Effect;
(iv) there are no unfair labor practice complaints pending against the
Issuer before the National Labor Relations Board or any other Governmental
Authority, nor any current union representation questions involving
employees of the Issuer; and
(v) there is no strike, slowdown, work stoppage, labor dispute or
lockout, or, to the Knowledge of the Issuer, threat thereof, by or with
respect to any employees of the Issuer. To the Knowledge of the Issuer, no
event has occurred and no condition or circumstance exists that would
reasonably be expected to, directly or indirectly, give rise to or provide
a basis for the commencement of any such strike, slowdown, work stoppage,
labor dispute or lockout, except as would not reasonably be expected,
individually or in the aggregate, to prevent or materially delay
consummation of any of the Transactions or otherwise prevent or materially
delay the Issuer from performing its obligations under this Agreement and
would not reasonably be expected, individually or in the aggregate, to have
an Issuer Material Adverse Effect.
(b) Except as set forth in Section 4.11(b) of the Issuer Disclosure
Schedule:
(i) the Issuer is in compliance with all applicable laws relating to
the employment of labor, including those related to wages, hours, overtime,
collective bargaining and the payment and withholding of taxes and other
sums as required by the appropriate Governmental Authority and have
withheld and paid to the appropriate Governmental Authority or are holding
for payment not yet due to such Governmental Authority all amounts required
to be withheld from employees of the Issuer and are not liable for any
arrears of wages, taxes, penalties or other sums for failure to comply with
any of the foregoing, except as would not reasonably be expected,
individually or in the
43
aggregate, to prevent or materially delay consummation of any of the
Transactions or otherwise prevent or materially delay the Issuer from
performing its obligations under this Agreement and would not reasonably be
expected, individually or in the aggregate, to have an Issuer Material
Adverse Effect;
(ii) the Issuer has paid in full to all employees or adequately
accrued for in accordance with U.S. GAAP consistently applied all wages,
salaries, commissions, bonuses, benefits and other compensation due to or
on behalf of such employees and there is no claim with respect to payment
of wages, salary or overtime pay that has been asserted or is now pending
or threatened before any Governmental Authority with respect to any persons
currently or formerly employed by the Issuer, except as would not
reasonably be expected, individually or in the aggregate, to prevent or
materially delay consummation of any of the Transactions or otherwise
prevent or materially delay the Issuer from performing its obligations
under this Agreement and would not reasonably be expected, individually or
in the aggregate, to have an Issuer Material Adverse Effect;
(iii) the Issuer is not a party to, or otherwise bound by, any consent
decree with, or citation by, any Governmental Authority relating to
employees or employment practices;
(iv) there is no charge or proceeding with respect to a violation of
any occupational safety or health standards that has been asserted or is
now pending or, to the Knowledge of the Issuer, threatened with respect to
the Issuer; and
(v) there is no charge of discrimination in employment or employment
practices, for any reason, including, without limitation, age, gender,
race, religion or other legally protected category, which has been asserted
or is now pending or, to the Knowledge of the Issuer, threatened before the
United States Equal Employment Opportunity Commission, or any other
Governmental Authority in any jurisdiction in which the Issuer has employed
or employs any person.
(c) All officers, management employees, and technical and professional
employees of the Issuer are under written obligation to the Issuer to maintain
in confidence all confidential or proprietary information acquired by them in
the course of their employment and to assign to the Issuer all inventions made
by them within the scope of their employment during such employment and for a
reasonable period thereafter and copies of the forms of all such written
obligations have been made available by the Issuer to the Company.
(d) Section 4.11(d) of the Issuer Disclosure Schedule accurately
identifies each former employee of the Issuer who is receiving or is scheduled
to receive (or whose spouse or other dependent is receiving or is scheduled to
receive) any benefits relating to such former employee's employment with the
Issuer and accurately describes such benefits.
(e) To the Knowledge of the Issuer, no officer of the Issuer: (i)
intends to terminate his employment with the Issuer; or (ii) is a party to or is
bound by any confidentiality agreement, noncompetition agreement or other
contract that may have an adverse effect on: (A)
44
the performance by such employee of any of his duties or responsibilities as an
employee of the Issuer, or (B) the Issuer's business or operations.
(f) Section 4.11(f) of the Issuer Disclosure Schedule accurately sets
forth, with respect to each person that was an independent contractor of the
Issuer as of the Effective Date: (i) the name of such independent contractor and
the date as of which such independent contractor was originally hired, (ii) a
description of such independent contractor duties and responsibilities, (iii)
the aggregate dollar amount of the compensation (including all payments or
benefits of any type) received by such independent contractor from the Issuer
with respect to services performed in 2004, (iv) the terms of compensation of
such independent contractor, and (v) any permit, authorization, franchise or
other right that is held by such independent contractor and that relates to or
is useful in connection with the Issuer's business.
(g) None of the current or former independent contractors of the
Issuer should be reclassified as an employee under applicable Law.
SECTION 4.12. Property and Leases. (a) Section 4.12(a) of the Issuer
Disclosure Schedule lists each parcel of real property currently or formerly
owned by the Issuer or any subsidiary of the Issuer. Each parcel of real
property owned by the Issuer (i) is owned free and clear of all Liens, other
than Permitted Liens, and (ii) is neither subject to any Governmental Order to
be sold nor is being condemned, expropriated or otherwise taken by any public
authority with or without payment of compensation therefor, nor, to the
Knowledge of the Issuer, has any such condemnation, expropriation or taking been
proposed.
(b) Section 4.12(b) of the Issuer Disclosure Schedule lists each
parcel of real property currently leased or subleased by the Issuer, with the
name of the lessor and the date of the lease, sublease, assignment of the lease,
any guaranty given or leasing commissions payable by the Issuer in connection
therewith and each amendment to any of the foregoing (collectively, the "Issuer
Lease Documents"). True, correct and complete copies of all Issuer Lease
Documents have been made available to the Company. All such current leases and
subleases are in full force and effect, are valid and effective in accordance
with their respective terms, and there is not, under any of such leases, any
existing material default or event of default (or event which, with notice or
lapse of time, or both, would constitute a default) by the Issuer or, to the
Issuer's Knowledge, by the other party to such lease or sublease, or person in
the chain of title to such leased premises.
(c) Except as would not reasonably be expected, individually or in the
aggregate, to prevent or materially delay consummation of any of the
Transactions or otherwise prevent or materially delay the Issuer from performing
its obligations under this Agreement and would not reasonably be expected,
individually or in the aggregate, to have an Issuer Material Adverse Effect: (i)
there are no contractual or legal restrictions that preclude or restrict the
ability to use any real property owned or leased by the Issuer for the purposes
for which it is currently being used; and (ii) there are no material latent
defects or material adverse physical conditions affecting the real property, and
improvements thereon, owned or leased by the Issuer.
(d) The Issuer has good and valid title to, or, in the case of leased
properties and assets, valid leasehold or subleasehold interests in, all of its
properties and assets, tangible
45
and intangible, real, personal and mixed, used or held for use in its business,
free and clear of any Liens, except for such imperfections of title, if any,
that do not materially interfere with the present value of the subject property.
SECTION 4.13. Intellectual Property. (a) (i) Section 4.13(a)(i) of the
Issuer Disclosure Schedule lists (A) each item of Intellectual Property owned
(in whole or in part) by the Issuer and which is the subject of a registration
("Issuer Registered Intellectual Property") or an application for registration,
(B) the jurisdiction(s) in which any such item of Intellectual Property has been
filed or registered, if any, and the applicable registration or serial number,
and (C) any other person that has an ownership interest in such item of
Intellectual Property, and (ii) Section 4.13(a)(ii) of the Issuer Disclosure
Schedule lists each material item of Intellectual Property licensed to the
Issuer ("Issuer Licensed Intellectual Property").
(b) Except as set forth in Section 4.13 of the Issuer Disclosure
Schedule:
(i) to the Knowledge of the Issuer, the conduct of the business of the
Issuer as currently conducted does not infringe upon or misappropriate the
Intellectual Property rights of any third party;
(ii) the Issuer owns or is licensed to use all Intellectual Property
used in or, to the Knowledge of the Issuer, necessary for the conduct of
its business as currently conducted;
(iii) there are no claims pending or, to the Knowledge of the Issuer,
threatened, against the Issuer (A) alleging that the conduct of the
business of the Issuer as currently conducted infringes upon or may
infringe upon or misappropriates the Intellectual Property rights of any
third party or (B) challenging the ownership, use, validity or
enforceability of any Issuer Owned Intellectual Property or any Issuer
Licensed Intellectual Property;
(iv) with respect to each item of Issuer Owned Intellectual Property,
the Issuer is the owner of the entire right, title and interest in and to
such the Issuer Owned Intellectual Property free and clear of all liens,
encumbrances and other restrictions, and is entitled to use such the Issuer
Owned Intellectual Property in the continued operation of its respective
business;
(v) there are no settlements, forbearances to xxx, consents,
judgments, orders or similar obligations that (A) restrict the business of
the Issuer in or under any Intellectual Property rights of any third party
or (B) with respect to Issuer Owned Intellectual Property that is
exclusively owned by the Issuer, permit any third party to use any Issuer
Owned Intellectual Property;
(vi) with respect to each item of Issuer Licensed Intellectual
Property, the Issuer has the right to use such Issuer Licensed Intellectual
Property in the continued operation of its respective business in
accordance with the terms of the license agreement governing such the
Issuer Licensed Intellectual Property;
46
(vii) the Issuer Registered Intellectual Property has not been
adjudged invalid or unenforceable in whole or in part and, to the Knowledge
of the Issuer, is valid and enforceable. Without limiting the foregoing:
(A) each U.S. patent application and U.S. patent in which the
Issuer has or purports to have an ownership interest and which is
relevant to the Issuer Product Candidates or PADRE was filed within
one year of the first printed publication, public use or offer for
sale of each invention described in such U.S. patent application or
U.S. patent;
(B) each non-U.S. patent application and non-U.S. patent in which
the Issuer has or purports to have an ownership interest and which is
relevant to the Issuer Product Candidates or PADRE was filed or claims
priority to a patent application filed, before the time at which each
invention described in such non-U.S. patent application or non-U.S.
patent was first made available to the public;
(C) to the Knowledge of the Issuer, no trademark (whether
registered or unregistered) or trade name used by the Issuer infringes
any trademark (whether registered or unregistered) or trade name of
any third party;
(D) the Issuer has not incurred an impairment charge to goodwill
associated with or inherent in any trademark (whether registered or
unregistered) in which the Issuer has or purports to have an ownership
interest; and
(E) each item of Issuer Registered Intellectual Property is and
at all times has been in compliance in all material respects with all
requirements under applicable Laws, and all filings, payments and
other actions required to be made or taken to maintain such item of
Issuer Registered Intellectual Property in full force and effect have
been made by the applicable deadline, except as would not have an
Issuer Material Adverse Effect;
(viii) the Issuer has made available to the Company complete and
accurate copies of all applications, correspondence and other material
documents related to each item of Issuer Registered Intellectual Property,
subject to any such applications, correspondence and other documents
withheld for reasons related to attorney-client privilege;
(ix) no interference, opposition, reissue, reexamination or other
proceeding of any nature is or has been pending or, to the Knowledge of the
Issuer, threatened, in which the scope, validity or enforceability of any
Issuer Registered Intellectual Property is being, has been or could
reasonably be expected to be contested or challenged;
(x) to the Knowledge of the Issuer, there is no legitimate basis for a
claim that any Issuer Owned Intellectual Property is invalid or
unenforceable;
(xi) to the Knowledge of the Issuer, no person is engaging or has
engaged, in any activity that materially infringes upon the Issuer Owned
Intellectual Property;
47
(xii) to the Knowledge of the Issuer, each license of the Issuer
Licensed Intellectual Property is valid and enforceable, is binding on all
parties to such license, and is in full force and effect;
(xiii) to the Knowledge of the Issuer, no party to any license of the
Issuer Licensed Intellectual Property is in breach thereof or default
thereunder;
(xiv) neither the execution of this Agreement nor the consummation of
any Transaction will, with or without notice or the lapse of time, result
in or give any third party the right or option to cause or declare: (A) any
loss or, or encumbrance on, any Issuer Owned Intellectual Property, (B) the
release, disclosure or delivery of any Issuer Owned Intellectual Property
by or to any escrow agent or other third party, or (C) an adverse affect on
any of the Issuer's material rights with respect to the Issuer Owned
Intellectual Property or the Issuer Licensed Intellectual Property; and
(xv) the Issuer has made available to the Company an accurate copy of
each standard form (A) end-user license agreement; (B) employee or
independent contractor agreements containing any assignment or license or
Intellectual Property or any confidentiality provision; and (C)
confidentiality or nondisclosure agreements.
SECTION 4.14. Taxes. The Issuer has filed all United States federal,
state, local and non-United States Tax returns and reports required to be filed
by them and have paid and discharged all Taxes required to be paid or
discharged, other than such payments as are being contested in good faith by
appropriate proceedings. All such Tax returns are true, accurate and complete in
all material respects. Neither the IRS nor any other United States or non-United
States taxing authority or agency is now asserting or, to the Knowledge of the
Issuer, threatening to assert, against the Issuer any material deficiency or
claim for any Taxes or interest thereon or penalties in connection therewith.
The Issuer has not granted any waiver of any statute of limitations with respect
to, or any extension of a period for the assessment of, any Tax. The accruals
and reserves for Taxes reflected in the consolidated balance sheet of the Issuer
and the consolidated Issuer Subsidiaries as at September 30, 2004 are adequate
to cover all Taxes accruable through such date (including interest and
penalties, if any, thereon) in accordance with U.S. GAAP. There are no Tax liens
upon any property or assets of the Issuer except liens for current Taxes not yet
due. The Issuer has not been required to include in income any adjustment
pursuant to Section 481 of the Code by reason of a voluntary change in
accounting method initiated by the Issuer, and the IRS has not initiated or
proposed any such adjustment or change in accounting method, in either case
which adjustment or change would reasonably be expected, individually or in the
aggregate, to have an Issuer Material Adverse Effect. The Issuer has not been a
"distributing corporation" or a "controlled corporation" within the meaning of
Section 355(a)(1)(A) of the Code in a distribution intended to qualify under
Section 355(e) of the Code within the past five years.
SECTION 4.15. Environmental Matters. Except as would not reasonably be
expected, individually or in the aggregate, to prevent or materially delay
consummation of any of the Transactions or otherwise prevent or materially delay
the Issuer from performing its obligations under this Agreement and would not
reasonably be expected, individually or in the aggregate, to have an Issuer
Material Adverse Effect:
48
(i) the Issuer has not violated and is not in violation of any
Environmental Law;
(ii) none of the properties currently or formerly owned, leased or
operated by the Issuer or any subsidiary of the Issuer (including, without
limitation, soils and surface and ground waters) are contaminated with any
Hazardous Substance;
(iii) the Issuer is not actually, potentially or allegedly liable for
any off-site contamination by Hazardous Substances;
(iv) the Issuer is not actually, potentially or allegedly liable under
any Environmental Law;
(v) the Issuer has all permits, licenses and other authorizations
required under any Environmental Law and the Issuer is in compliance in all
material respects with such permits, licenses and other authorizations; and
(vi) neither the execution of this Agreement nor the consummation of
the Transactions will require any investigation, remediation or other
action with respect to Hazardous Substances, or any notice to or consent of
Governmental Authorities or third parties, pursuant to any applicable
Environmental Law.
SECTION 4.16. Material Contracts. (a) Subsections (i) through (xii) of
Section 4.16(a) of the Issuer Disclosure Schedule contain a list of the
following types of contracts and agreements to which the Issuer is a party (such
contracts and agreements as are required to be set forth in Section 4.16(a) of
the Issuer Disclosure Schedule being "Material Issuer Contracts"):
(i) each "material contract" (as such term is defined in Item
610(b)(10) of Regulation S-K of the SEC) with respect to the Issuer;
(ii) each contract and agreement which is likely to involve
consideration of more than $250,000, in the aggregate, over the remaining
term of such contract or agreement;
(iii) all contracts and agreements evidencing outstanding indebtedness
in a principal amount of $250,000 or more;
(iv) all leases of real property leased for the use or benefit of the
Issuer;
(v) all material contracts and agreements with any Governmental
Authority to which the Issuer is a party;
(vi) all contracts and agreements that limit, or purport to limit, the
ability of the Issuer to compete in any line of business or with any person
or entity or in any geographic area or during any period of time;
(vii) all contracts and agreements providing for benefits under any
Issuer Plan;
49
(viii) all contracts and agreements governing the use by the Issuer of
Issuer Licensed Intellectual Property;
(ix) all contracts for employment required to be listed in Section
4.10 of the Issuer Disclosure Schedule;
(x) all material broker, distributor, dealer, manufacturer's
representative, franchise, agency, sales promotion, market research,
marketing consulting and advertising contracts and agreements to which the
Issuer is a party;
(xi) all management contracts (excluding contracts for employment) and
contracts with other consultants, including any contracts involving the
payment of royalties or other amounts calculated based upon the revenues or
income of the Issuer or income or revenues related to any product of the
Issuer to which the Issuer is a party; and
(xii) all other contracts and agreements that are material to the
Issuer or the absence of which would reasonably be expected to prevent or
materially delay consummation of any of the Transactions or otherwise
prevent or materially delay the Issuer from performing its obligations
under this Agreement or would reasonably be expected, individually or in
the aggregate, to have an Issuer Material Adverse Effect.
(b) Except as set forth in Section 4.16(b) of the Issuer Disclosure
Schedule:
(i) each Material Issuer Contract is a legal, valid and binding
agreement, except would not reasonably be expected, individually or in the
aggregate, to prevent or materially delay consummation of any of the
Transactions or otherwise prevent or materially delay the Issuer from
performing its obligations under this Agreement and would not reasonably be
expected, individually or in the aggregate, to have an Issuer Material
Adverse Effect;
(ii) the Issuer has not received any claim of default under any
Material Issuer Contract and the Issuer is not in breach or violation of,
or default under, any Material Issuer Contract;
(iii) no event has occurred and no condition or circumstance exists
that could reasonably be expected (with or without notice or lapse of
time): (A) result in a violation or breach of any of the provisions of any
Material Issuer Contract, (B) give any third party the right to declare a
default or exercise a remedy under any Material Issuer Contract, or (C)
give any third party the right to accelerate the maturity or performance of
any Material Issuer Contract, except as would not reasonably be expected,
individually or in the aggregate, to prevent or materially delay
consummation of any of the Transactions or otherwise prevent or materially
delay the Issuer from performing its obligations under this Agreement and
would not reasonably be expected, individually or in the aggregate, to have
an Issuer Material Adverse Effect;
(iv) to the Knowledge of the Issuer, no other party is in breach or
violation of, or default under, any Material Issuer Contract;
50
(v) the Issuer has not waived any of its rights under any Material
Issuer Contract, except as would not reasonably be expected, individually
or in the aggregate, to prevent or materially delay consummation of any of
the Transactions or otherwise prevent or materially delay the Issuer from
performing its obligations under this Agreement and would not reasonably be
expected, individually or in the aggregate, to have an Issuer Material
Adverse Effect; and
(vi) neither the execution of this Agreement nor the consummation of
any Transaction shall constitute a default under, give rise to cancellation
rights under, or otherwise adversely affect any of the material rights of
the Issuer under any Material Issuer Contract.
The Issuer has furnished or made available to the Company true and complete
copies of all Material Issuer Contracts, including any amendments thereto.
(c) Except as set forth in Section 4.16(c) of the Issuer Disclosure
Schedule:
(i) the Issuer is not a party to any agreement pursuant to which the
Issuer guarantees or otherwise has agreed to cause, insure or become liable
for, or pledged any of its assets to secure, the performance or payment of
any Liability of any third party;
(ii) the Issuer is not a party to or bound by (A) any joint venture
agreement, partnership agreement, profit sharing agreement, cost sharing
agreement, loss sharing agreement or similar contract, or (B) any contract
that creates or grants to any third party, or provides for the creation or
grant of, any stock appreciation right, phantom stock right or similar
right or interest;
(iii) the performance of the Material Issuer Contracts will not result
in any violation of or failure to comply with any Law; and
(iv) no third party is renegotiating any material amount paid or
payable to the Issuer under any term or provision of a Material Issuer
Contract.
SECTION 4.17. Insurance. The Issuer maintains insurance coverage with
reputable insurers in such amounts and covering such risks as are in accordance
with normal industry practice for companies engaged in businesses similar to
that of the Issuer (taking into account the cost and availability of such
insurance). Since January 1, 2000, the Issuer has not received any notice or
other written communication from any of its insurance carriers regarding any
actual or threatened cancellation or invalidation of, or any actual or
threatened denial of coverage or rejection of any claim under, any such
insurance policy of the Issuer.
SECTION 4.18. Board Approval; Vote Required. (a) The Issuer Board, by
resolutions duly adopted by unanimous vote of those voting at a meeting duly
called and held and not subsequently rescinded or modified in any way, has duly
(i) determined that this Agreement, the Voting Agreements, the Issuer
Transactions and the other Transactions are fair to, and in the best interest
of, the Issuer and the stockholders of the Issuer, (ii) approved, adopted and
declared advisable this Agreement, the Voting Agreements and the Transactions
and (iii) resolved to recommend that the stockholders of the Issuer approve the
Issuer Transactions and
51
directed that the Issuer Transactions be submitted for consideration by the
Issuer's stockholders at the Issuer Stockholders' Meeting.
(b) The only vote of the holders of any class or series of capital
stock of the Issuer necessary to approve this Agreement, any of the Issuer
Transactions or any other Transaction to which the Issuer is a party is (i) with
respect to the Share Exchange, the Issuer Stock Option Plan Amendment, the
Option Liquidity Share Issuance, the Issuer ESPP Amendment, the adoption of the
Issuer French Stock Option Plan and the adoption of the Issuer French ESPP (as
defined below), the approval of each such transaction by the affirmative vote of
the holders of a majority of the then outstanding shares of Issuer Common Stock
and Issuer Preferred Stock (on an as-converted basis and voting as a single
class with the Issuer Common Stock) present in person or represented by proxy
and entitled to vote at the Issuer Stockholders' Meeting, and, with respect to
the Issuer Name Change, the Issuer Capital Stock Increase and the Issuer Reverse
Stock Split, the approval of each such transaction by the affirmative vote of
the holders of a majority of the then outstanding shares of Issuer Common Stock
and Issuer Preferred Stock (on an as-converted basis and voting as a single
class with the Issuer Common Stock) entitled to vote at the Issuer Stockholders'
Meeting.
SECTION 4.19. Certain Business Practices. None of the Issuer or, to
the Knowledge of the Issuer, any directors or officers, agents or employees of
the Issuer, has (i) used any funds for unlawful contributions, gifts,
entertainment or other unlawful expenses related to political activity; (ii)
made any unlawful payment to foreign or domestic government officials or
employees or to foreign or domestic political parties or campaigns or violated
any provision of the Foreign Corrupt Practices Act of 1977, as amended; or (iii)
made any payment in the nature of criminal bribery.
SECTION 4.20. Interested Party Transactions. No director, Issuer
Executive Officer or other affiliate of the Issuer has or has had, directly or
indirectly, (i) an economic interest in any person that has furnished or sold,
or furnishes or sells, services or products that the Issuer furnishes or sells,
or proposes to furnish or sell; (ii) an economic interest in any person that
purchases from or sells or furnishes to the Issuer any goods or services; (iii)
a beneficial interest in any contract or agreement disclosed in Section 4.16 of
the Issuer Disclosure Schedule; or (iv) any contractual or other arrangement
with the Issuer; provided, however, that ownership of no more than one percent
(1%) of the outstanding voting stock of a publicly traded corporation shall not
be deemed an "economic interest in any person" for purposes of this Section
4.20. The Issuer has not, since January 1, 2002, directly or indirectly, (i)
extended or maintained credit, arranged for the extension of credit or renewed
an extension of credit in the form of a personal loan to or for any director or
executive officer (or equivalent thereof) of the Issuer, or (ii) materially
modified any term of any such extension or maintenance of credit.
SECTION 4.21. Opinion of Financial Advisor. The Issuer has received
the written opinion of Jefferies & Company, dated on or about the date of this
Agreement, to the effect that, as of the date of this Agreement, the Exchange
Ratio is fair, from a financial point of view, to the Issuer, a copy of which
opinion will be delivered to the Issuer promptly after the date of this
Agreement.
52
SECTION 4.22. Brokers. No broker, finder or investment banker (other
than Jefferies & Company) is entitled to any brokerage, finder's or other fee or
commission in connection with the Transactions based upon arrangements made by
or on behalf of the Issuer. The Issuer has heretofore furnished to the Company a
complete and correct copy of all agreements between the Issuer and Jefferies &
Company pursuant to which such firm would be entitled to any payment relating to
the Transactions.
SECTION 4.23. Termination of Anosys Agreement. The agreement and plan
of merger, dated as of May 9, 2003 (the "Anosys Agreement"), between the Issuer
and Anosys, Inc., a California corporation, was terminated in accordance with
its terms and the Company does not have any continuing obligations thereunder.
The execution and delivery of this Agreement by the Issuer does not, and the
performance of this Agreement by the Issuer will not, (i) cause the Company, any
Company Subsidiary, the Issuer or any affiliate of the Issuer to become subject
to, or liable for, the payment of any amounts to any party pursuant to the terms
of the Anosys Agreement and (ii) result in any breach of, or constitute a
default (or an event which, with notice or lapse of time or both, would become a
default under), or give to others any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of a lien or other
encumbrance on any property or asset of the Company, any Company Subsidiary or
the Issuer.
ARTICLE V
CONDUCT OF BUSINESS PENDING THE CLOSING
SECTION 5.01. Conduct of Business of the Company Pending the Closing.
(a) Solely for purposes of Sections 2.08 and 7.02(b) of this Agreement, it is
agreed that between the date of this Agreement and the Closing (the "Pre-Closing
Period"), except as set forth in Section 5.01 of the Company Disclosure Schedule
or as expressly contemplated by any other provision of this Agreement, unless
the Issuer shall otherwise consent in writing (which consent shall not be
unreasonably withheld or delayed):
(i) the businesses of the Company and the Company Subsidiaries shall
be conducted only in, and the Company and the Company Subsidiaries shall
not take any action except in, the ordinary course of business and in a
manner consistent with past practice and the Company's 2005 budget, a copy
of which has been delivered to the Issuer; and
(ii) the Company shall use its reasonable best efforts to preserve
substantially intact the business organization of the Company and the
Company Subsidiaries, to keep available the services of the current
officers, employees and consultants of the Company and the Company
Subsidiaries and to preserve the current relationships of the Company and
the Company Subsidiaries with customers, suppliers and other persons with
which the Company or any Company Subsidiary has significant business
relations.
(b) Solely for purposes of Sections 2.08 and 7.02(b) of this
Agreement, by way of amplification and without limiting the provisions in
Section 5.01(a), except as expressly contemplated by any other provision of this
Agreement or as set forth in Section 5.01 of the
53
Company Disclosure Schedule, during the Pre-Closing Period it is agreed that
neither the Company nor any Company Subsidiary shall, between the date of this
Agreement and the Closing, directly or indirectly, do, or propose to do, any of
the following without the prior written consent of the Issuer (which consent
shall not be unreasonably withheld or delayed):
(i) amend, otherwise change or propose to amend or otherwise change
its Organizational Documents;
(ii) issue, sell, pledge, dispose of, grant or encumber, or authorize
the issuance, sale, pledge, disposition, grant or encumbrance of, (A) any
shares of any class of capital stock of the Company or any Company
Subsidiary, or any options, warrants, convertible securities or other
rights of any kind to acquire any shares of such capital stock, or any
other ownership interest (including, without limitation, any phantom
interest), of the Company or any Company Subsidiary (except for (1) the
issuance of Company Shares issuable pursuant to Company Stock Options or
Company Warrants outstanding on the date hereof and (2) the issuance of
employee stock options to purchase up to 100,000 Company Shares to
directors, employees and consultants of the Company or any Company
Subsidiary, in the ordinary course of business and consistent with past
practice) or (B) any assets of the Company or any Company Subsidiary,
except in the ordinary course of business and in a manner consistent with
past practice;
(iii) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with respect
to any of its capital stock, except for dividends by any direct or indirect
wholly owned Company Subsidiary;
(iv) reclassify, combine, split, subdivide or redeem, or purchase or
otherwise acquire, directly or indirectly, any of its capital stock;
(v) (A) acquire (including, without limitation, by merger,
consolidation, or acquisition of stock or assets or any other business
combination) any corporation, partnership, other business organization or
any division thereof or any material amount of assets; (B) except for
borrowings under existing credit facilities not to exceed $100,000, incur
any indebtedness for borrowed money or issue any debt securities or assume,
guarantee or endorse, or otherwise become responsible for, the obligations
of any person, or make any loans or advances, or grant any security
interest in any of its assets except in the ordinary course of business and
consistent with past practice; (C) enter into any contract or agreement
other than in the ordinary course of business and consistent with past
practice; (D) authorize, or make any commitment with respect to, any single
capital expenditure which is in excess of $100,000 or capital expenditures
which are, in the aggregate, in excess of $500,000 for the Company and the
Company Subsidiaries taken as a whole; or (E) enter into or amend any
contract, agreement, commitment or arrangement with respect to any matter
set forth in this Section 5.01(b)(v);
(vi) hire any additional employees or increase the compensation
payable or to become payable or the benefits provided to its directors,
officers or employees, except for increases in the ordinary course of
business and consistent with past practice in salaries or wages of
employees of the Company or any Company Subsidiary who are not directors
54
or officers of the Company or any Company Subsidiary, or grant any
severance or termination pay to, or enter into any employment or severance
agreement with, any director, officer or other employee of the Company or
of any Company Subsidiary, or establish, adopt, enter into or amend any
collective bargaining, bonus, profit-sharing, thrift, compensation, stock
option, restricted stock, pension, retirement, deferred compensation,
employment, termination, severance or other plan, agreement, trust, fund,
policy or arrangement for the benefit of any director, officer or employee;
(vii) exercise its discretion with respect to or otherwise voluntarily
accelerate the vesting of any Company Stock Option as a result of any
Transaction, any other change of control of the Company (as defined in the
Company Stock Option Plans) or otherwise;
(viii) change any accounting principles used by it, unless required by
French GAAP or applicable Law;
(ix) make any tax election or settle or compromise any material French
or U.S. federal, state, local or non-French tax liability;
(x) pay, discharge or satisfy any claim, Liability or obligation
(absolute, accrued, asserted or unasserted, contingent or otherwise), other
than the payment, discharge or satisfaction, in the ordinary course of
business and consistent with past practice, of liabilities reflected or
reserved against in the consolidated balance sheet of the Company and the
consolidated Company Subsidiaries as at September 30, 2004, or subsequently
incurred in the ordinary course of business and consistent with past
practice;
(xi) amend, modify or consent to the termination of any Material
Company Contract, or amend, waive, modify or consent to the termination of
the Company's or any Company Subsidiary's material rights thereunder;
(xii) commence or settle any Action;
(xiii) permit any item of Company Owned Intellectual Property
(including Company Registered Intellectual Property) to lapse or to be
abandoned, dedicated or disclaimed, by failing to perform or make any
applicable filings, recordings or other similar actions or filings, or by
failing to pay all required fees and taxes required or advisable to
maintain and protect its interest in each and every item of Company Owned
Intellectual Property, except where the failure to make such filings and
payments results from the exercise of reasonable business judgment;
(xiv) sell, assign or license any of the Company Owned Intellectual
Property, except for licensing of Company Owned Intellectual Property in
the ordinary course of business consistent with past practice; or
(xv) announce an intention, enter into any formal or informal
agreement or otherwise make a commitment, to do any of the foregoing.
55
SECTION 5.02. Conduct of Business of the Issuer Pending the Closing.
(a) Solely for purposes of Sections 4.08 and 7.03(b) of this Agreement, it is
agreed that during the Pre-Closing Period, except as set forth in Section
5.02(a) of the Issuer Disclosure Schedule or as expressly contemplated by any
other provision of this Agreement, unless the Company shall otherwise consent in
writing (which consent shall not be unreasonably withheld or delayed):
(i) the businesses of the Issuer and the Issuer Subsidiaries shall be
conducted only in, and the Issuer and the Issuer Subsidiaries shall not
take any action except in, the ordinary course of business and in a manner
consistent with past practice and the Issuer's 2005 budget, a copy of which
has been delivered to the Company; and
(ii) the Issuer shall use its reasonable best efforts to preserve
substantially intact the business organization of the Issuer and the Issuer
Subsidiaries, to keep available the services of the current officers,
employees and consultants of the Issuer and the Issuer Subsidiaries and to
preserve the current relationships of the Issuer and the Issuer
Subsidiaries with customers, suppliers and other persons with which the
Issuer or any Subsidiary has significant business relations.
(b) Solely for purposes of Sections 4.08 and 7.03(b) of this
Agreement, by way of amplification and without limiting the provisions in
Section 5.02(c), except as expressly contemplated by any other provision of this
Agreement or as set forth in Section 5.02 of the Issuer Disclosure Schedule,
during the Pre-Closing Period it is agreed that the Issuer shall not, between
the date of this Agreement and the Closing, directly or indirectly, do, or
propose to do, any of the following without the prior written consent of the
Company (which consent shall not be unreasonably withheld or delayed):
(i) amend, otherwise change or propose to amend or otherwise change
its Certificate of Incorporation or Bylaws or equivalent Organizational
Documents;
(ii) issue, sell, pledge, dispose of, grant or encumber, or authorize
the issuance, sale, pledge, disposition, grant or encumbrance of, (A) any
shares of any class of capital stock of the Issuer, or any options,
warrants, convertible securities or other rights of any kind to acquire any
shares of such capital stock, or any other ownership interest (including,
without limitation, any phantom interest), of the Issuer (except for (1)
the issuance of shares of Issuer Common Stock issuable pursuant to employee
stock options and other Issuer convertible securities outstanding on the
date hereof and (2) the issuance of employee stock options to purchase up
to 100,000 shares of Issuer Common Stock to directors, employees and
consultants of the Issuer in the ordinary course of business and consistent
with past practice) or (B) any assets of the Issuer, except in the ordinary
course of business and in a manner consistent with past practice;
(iii) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with respect
to any of its capital stock;
(iv) reclassify, combine, split, subdivide or redeem, or purchase or
otherwise acquire, directly or indirectly, any of its capital stock;
56
(v) (A) acquire (including, without limitation, by merger,
consolidation, or acquisition of stock or assets or any other business
combination) any corporation, partnership, other business organization or
any division thereof or any material amount of assets; (B) except for
borrowings under existing credit facilities not to exceed $100,000, incur
any indebtedness for borrowed money or issue any debt securities or assume,
guarantee or endorse, or otherwise become responsible for, the obligations
of any person, or make any loans or advances, or grant any security
interest in any of its assets except in the ordinary course of business and
consistent with past practice; (C) enter into any contract or agreement
other than in the ordinary course of business and consistent with past
practice; (D) authorize, or make any commitment with respect to, any single
capital expenditure which is in excess of $100,000 or capital expenditures
which are, in the aggregate, in excess of $500,000; or (E) enter into or
amend any contract, agreement, commitment or arrangement with respect to
any matter set forth in this Section 5.02(b)(v);
(vi) hire any additional employees or increase the compensation
payable or to become payable or the benefits provided to its directors,
officers or employees, except for increases in the ordinary course of
business and consistent with past practice in salaries or wages of
employees of the Issuer who are not directors or officers of the Issuer, or
grant any severance or termination pay to, or enter into any employment or
severance agreement with, any director, officer or other employee of the
Issuer, or establish, adopt, enter into or amend any collective bargaining,
bonus, profit-sharing, thrift, compensation, stock option, restricted
stock, pension, retirement, deferred compensation, employment, termination,
severance or other plan, agreement, trust, fund, policy or arrangement for
the benefit of any director, officer or employee;
(vii) exercise its discretion with respect to or otherwise voluntarily
accelerate the vesting of any Issuer Stock Award as a result of any
Transaction, any other change of control of the Issuer (as defined in the
Issuer Stock Option Plans) or otherwise;
(viii) change any accounting principles used by it, unless required by
U.S. GAAP or applicable Law;
(ix) make any tax election or settle or compromise any material U.S.
or French federal, state, local or non-U.S. income tax liability;
(x) pay, discharge or satisfy any claim, Liability or obligation
(absolute, accrued, asserted or unasserted, contingent or otherwise), other
than the payment, discharge or satisfaction, in the ordinary course of
business and consistent with past practice, of Liabilities reflected or
reserved against in the consolidated balance sheet of the Issuer as at
September 30, 2004 or subsequently incurred in the ordinary course of
business and consistent with past practice;
(xi) amend, modify or consent to the termination of any Material
Issuer Contract, or amend, waive, modify or consent to the termination of
the Issuer's material rights thereunder;
57
(xii) commence or settle any Action;
(xiii) permit any item of Issuer Owned Intellectual Property
(including Issuer Registered Intellectual Property) to lapse or to be
abandoned, dedicated or disclaimed, by failing to perform or make any
applicable filings, recordings or other similar actions or filings, or by
failing to pay all required fees and taxes required or advisable to
maintain and protect its interest in each and every item of Issuer Owned
Intellectual Property, except where the failure to make such filings and
payments results from the exercise of reasonable business judgment;
(xiv) sell, assign or license any of the Issuer Owned Intellectual
Property, except for licensing of Issuer Owned Intellectual Property in the
ordinary course of business consistent with past practice;
(xv) fail to make in a timely manner any filings with the SEC required
under the Securities Act or the Exchange Act or the rules and regulations
promulgated thereunder; or
(xvi) announce an intention, enter into any formal or informal
agreement or otherwise make a commitment, to do any of the foregoing.
SECTION 5.03. Control of Other Party's Business. Nothing contained in
this Agreement shall give the Company or the Principal Company Shareholders,
directly or indirectly, the right to control or direct the Issuer's operations
prior to the Closing Date. Nothing contained in this Agreement shall give the
Issuer or the Principal Company Shareholders, directly or indirectly, the right
to control or direct the Company's operations prior to the Closing Date. Prior
to the Closing Date, each of the Company and the Issuer shall exercise,
consistent with the terms and conditions of this Agreement, control and
supervision over their respective operations.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. Proxy Statement. (a) As promptly as practicable after
the execution of this Agreement, the Issuer, with the timely cooperation and
assistance of the Company, shall prepare and file with the SEC the proxy
statement to be sent to the stockholders of the Issuer relating to the meeting
of the Issuer's stockholders (the "Issuer Stockholders' Meeting") to be held to
consider approval of the Issuer Transactions or any information statement to be
sent to such stockholders, as appropriate (such proxy statement or information
statement, as amended or supplemented, being referred to herein as the "Proxy
Statement"). The Principal Company Shareholders shall use their reasonable best
efforts to cause the Company to provide financial statements and other
information regarding the Company as may reasonably be required for inclusion in
the Proxy Statement. As promptly as practicable after the definitive Proxy
Statement shall have been filed with and approved by the SEC, the Issuer shall
mail the Proxy Statement to its stockholders. The Issuer shall also prepare an
information statement in connection with the Share Exchange to be delivered to
shareholders of the Company who are not
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accredited investors (as such term is defined in Rule 501 of Regulation D
promulgated under the Securities Act)
(b) If, at any time prior to the Issuer Stockholders' Meeting, any
event or circumstance relating to the Issuer, the Company or its respective
affiliates, stockholders, officers or directors should be discovered by the
Issuer, the Company or the Shareholder Representative, as the case may be, which
should be set forth in an amendment or supplement to the Proxy Statement so that
the Proxy Statement would not include any untrue statement of a material fact or
fail to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading, the Issuer or the Shareholder Representative, as
the case may be, shall promptly inform the other parties. Subject to Section
6.01(d), as promptly as practicable after discovering such event or circumstance
or being so informed, the Issuer, with the timely cooperation and assistance of
the Company, shall prepare and file with the SEC an amendment or supplement to
the Proxy Statement containing a description of such event or circumstance and
disseminate such amendment or supplement to the Proxy Statement to the
stockholders of the Issuer.
(c) The Issuer covenants that none of the Issuer Board or any
committee thereof shall withdraw or modify, or propose to withdraw or modify, in
a manner adverse to the Principal Company Shareholders, the approval or
recommendation by the Issuer Board or any committee thereof of this Agreement,
any Issuer Transaction or any other Transaction and the Proxy Statement shall
include the recommendation of the Issuer Board to the stockholders of the Issuer
to approve each of the Issuer Transactions; provided, however, that the Issuer
Board may, at any time prior to the Closing, withdraw or modify any such
recommendation to the extent that the Issuer Board determines, in its good faith
judgment after consultation with outside legal counsel, that the failure to so
withdraw or modify its recommendation would cause the Issuer Board to breach its
fiduciary duties to the Issuer and its stockholders under applicable Law.
(d) The Issuer covenants that no amendment or supplement to the Proxy
Statement will be made by the Issuer without the approval of the Shareholder
Representative (such approval not to be unreasonably withheld or delayed). The
Issuer will advise the Shareholder Representative, as promptly as practicable
after it receives notice thereof, of any request by the SEC for amendment of the
Proxy Statement or comments thereon and responses thereto or requests by the SEC
for additional information.
(e) The information supplied by the Issuer for inclusion in the Proxy
Statement shall not, at (i) the time the Proxy Statement (or any amendment
thereof or supplement thereto) is first mailed to the stockholders of the
Issuer, (ii) the time of the Issuer Stockholders' Meeting and (iii) the Closing,
contain any untrue statement of a material fact or fail to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. All documents that the Issuer is responsible for filing with the SEC
in connection with the Issuer Stockholders' Meeting, the Share Exchange or the
other Transactions will comply as to form and substance in all material aspects
with the applicable requirements of the Securities Act and the rules and
regulations thereunder and the Exchange Act and the rules and regulations
thereunder.
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(f) The information supplied by the Company or the Principal Company
Shareholders for inclusion in the Proxy Statement shall not, at (i) the time the
Proxy Statement (or any amendment thereof or supplement thereto) is first mailed
to the stockholders of the Issuer, (ii) the time of the Issuer Stockholders'
Meeting and (iii) the Closing, contain any untrue statement of a material fact
or fail to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading.
SECTION 6.02. Issuer Stockholders' Meeting. The Issuer shall call and
hold the Issuer Stockholders' Meeting as promptly as practicable for the purpose
of voting upon the approval of each of the Issuer Transactions. The Issuer shall
use its reasonable best efforts to hold the Issuer Stockholders' Meeting as soon
as practicable after the date on which the Proxy Statement is mailed to the
stockholders of the Issuer. The Issuer shall use its reasonable best efforts to
solicit from its stockholders proxies in favor of the approval of each of the
Issuer Transactions, and shall use its reasonable best efforts to secure the
required vote or consent of its stockholders, except in the event and to the
extent that the Issuer Board, in accordance with Section 6.01(c), withdraws or
modifies its recommendations to its stockholders in favor of the approval of the
Issuer Transactions, in which event the Issuer shall not be obligated to comply
with this Section 6.02.
SECTION 6.03. Access to Information; Confidentiality. (a) Except as
required pursuant to any confidentiality agreement or similar agreement or
arrangement to which the Issuer is a party or pursuant to applicable Law, during
the Pre-Closing Period, the Issuer shall: (i) provide to the Company (and the
Company's officers, directors, employees, accountants, consultants, legal
counsel, agents and other representatives, collectively, "Representatives")
access at reasonable times during normal business hours upon prior notice to the
officers, employees, agents, properties, offices and other facilities of such
party and its subsidiaries and to the books and records thereof; and (ii)
furnish promptly to the Company such information concerning the business,
properties, contracts, assets, liabilities, personnel and other aspects of the
Issuer as the Company or its Representatives may reasonably request.
(b) Except as required pursuant to any confidentiality agreement or
similar agreement or arrangement to which a Principal Company Shareholder is a
party or pursuant to applicable Law, during the Pre-Closing Period, the
Principal Company Shareholders shall use their reasonable best efforts to cause
the Company to: (i) provide to the Issuer and its Representatives access at
reasonable times during normal business hours upon prior notice to the officers,
employees, agents, properties, offices and other facilities of the Company and
the Company Subsidiaries and to the books and records thereof; and (ii) furnish
promptly to the Issuer such information concerning the business, properties,
contracts, assets, liabilities, personnel and other aspects of the Company and
the Company Subsidiaries as the Issuer or its Representatives may reasonably
request.
(c) All information obtained by the parties pursuant to this Section
6.03 shall be kept confidential in accordance with the Mutual Nondisclosure
Agreement, dated as of September 28, 2004 (the "Confidentiality Agreement"),
between the Issuer and the Company.
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(d) No investigation pursuant to this Section 6.03 or made prior to
the signing of this Agreement shall affect any representation or warranty in
this Agreement of any party hereto or any condition to the obligations of the
parties hereto.
SECTION 6.04. No Solicitation of Transactions. (a) Each of the Issuer,
on the one hand, and the Principal Company Shareholders, on the other hand,
agrees that neither it nor any of its directors, officers or employees will, and
that it will not authorize or permit any of its agents, advisors or other
representatives (including, without limitation, any investment banker, financial
advisor, attorney or accountant retained by it or any of its subsidiaries) or,
in the case of the Principal Company Shareholders, it will not authorize and
will use its reasonable best efforts not to permit any of the Company or its
directors, officers, employees, agents, advisors or other representatives
(including, without limitation, any investment banker, financial advisor,
attorney or accountant retained by the Company), to, directly or indirectly, (i)
solicit, initiate or knowingly facilitate or encourage (including by way of
furnishing nonpublic information), or take any other action knowingly to
facilitate, any inquiries or the making of any proposal or offer (including,
without limitation, any proposal or offer to its stockholders) that constitutes,
or may reasonably be expected to lead to, any Competing Transaction (as defined
below), (ii) other than informing persons of the existence of the provisions
contained in this Section 6.04, enter into or maintain or continue discussions
or negotiations with any person or entity in furtherance of such inquiries or to
obtain a Competing Transaction, or (iii) agree to, approve, endorse or recommend
any Competing Transaction or enter into any letter of intent or other contract,
agreement or commitment contemplating or otherwise relating to any Competing
Transaction; provided, however, that, notwithstanding anything to the contrary
contained in this Section 6.04, the Principal Company Shareholders may take all
such actions necessary to comply with the provisions of Section 6 of the Company
Shareholder Agreement, including providing the Offer Notification to the Other
Shareholders. Each of the Issuer, on the one hand, and the Shareholder
Representative on behalf of the Principal Company Shareholders, on the other
hand, shall notify the other party as promptly as practicable (and in any event
within 48 hours after such party attains knowledge thereof), orally and in
writing, if any proposal or offer, or any inquiry or contact with any person
with respect thereto, regarding a Competing Transaction is made, specifying the
material terms and conditions thereof and the identity of the party making such
proposal or offer or inquiry or contact (including material amendments or
proposed material amendments). Each of the Issuer, on the one hand, and the
Principal Company Shareholders, on the other hand, shall provide the other party
with 48 hours prior notice (or such lesser prior notice as is provided to the
members of the Board of Directors of such party) of any meeting of the Board of
Directors of such party at which such Board of Directors is reasonably expected
to consider any Competing Transaction. Each of the Issuer, on the one hand, and
the Principal Company Shareholders, on the other hand, immediately shall cease
and cause to be terminated all existing discussions or negotiations with any
parties conducted heretofore with respect to a Competing Transaction. Each of
the Issuer, on the one hand, and the Principal Company Shareholders, on the
other hand, shall not release any third party from, or waive any provision of,
any confidentiality or standstill agreement to which it is a party and each such
party also agrees to promptly request each person that has heretofore executed a
confidentiality agreement in connection with its consideration of acquiring
(whether by merger, acquisition of stock or assets or otherwise) such party or
any of its subsidiaries, if any, to return (or if permitted by the applicable
confidentiality agreement, destroy) all confidential information heretofore
furnished
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to such person by or on behalf of such party and, if requested by the other
party, to enforce such person's obligation to do so.
(b) Notwithstanding anything to the contrary in this Section 6.04, the
Issuer Board may furnish information to, and enter into discussions with, a
person who has made an unsolicited, written, bona fide proposal or offer
regarding a Competing Transaction, and such Issuer Board has (i) determined, in
its good faith judgment (after having received the advice of its current
financial advisor (or other financial advisor of internationally recognized
reputation) and its outside counsel), that such proposal or offer constitutes,
or would reasonably be expected to lead to, a Superior Proposal (as defined
below), (ii) determined, in its good faith judgment after consultation with its
outside counsel, that, in light of such Superior Proposal, failing to furnish
such information or entering into discussions would reasonably be expected to
result in a breach by the Issuer Board of its fiduciary duties to the Issuer's
stockholders under applicable Law, (iii) provided written notice to the Company
and the Shareholder Representative of its intent to furnish information or enter
into discussions with such person at least three business days prior to taking
any such action, and (iv) obtained from such person an executed confidentiality
agreement on terms no less favorable to the other party than those contained in
the Confidentiality Agreement (it being understood that such confidentiality
agreement and any related agreements shall not include any provision calling for
any exclusive right to negotiate with such party or having the effect of
prohibiting such party from satisfying its obligations under this Agreement).
(c) A "Competing Transaction" means any of the following (other than
the Transactions): (i) any merger, consolidation, share exchange, business
combination, recapitalization, liquidation, dissolution or other similar
transaction involving the Company or the Issuer, as the case may be; (ii) any
sale, lease, exchange, transfer or other disposition of all or a substantial
part of the assets of the Company or of the Issuer, as the case may be; (iii)
any sale, exchange, transfer or other disposition of securities of the Company
representing 15% or more of the voting power of or equity interest in the
Company or of the Issuer, as the case may be; (iv) any tender offer or exchange
offer that, if consummated, would result in any person beneficially owning
securities of the Company representing 15% or more of the voting power of or
equity interest in the Company or of the Issuer, as the case may be; (v) in the
case of the Issuer, any solicitation in opposition to approval of any of the
Issuer Transactions by the Issuer's stockholders; or (vi) any other transaction
the consummation of which would reasonably be expected to impede, interfere
with, prevent or materially delay any of the Transactions.
(d) A "Superior Proposal" means an unsolicited written bona fide offer
made by a third party to consummate any of the following transactions: (i) a
merger, consolidation, share exchange, business combination or other similar
transaction involving the Issuer pursuant to which the stockholders of such
party immediately preceding such transaction would hold less than 50% of the
equity interest in the surviving or resulting entity of such transaction or (ii)
the acquisition by any person or group (including by means of a tender offer or
an exchange offer or a two-step transaction involving a tender offer followed
with reasonable promptness by a cash-out merger involving the Issuer), directly
or indirectly, of ownership of 100% of the then outstanding shares of stock of
the Issuer, on terms (including conditions to consummation of the contemplated
transaction) that the Issuer Board determines, in its good faith judgment (after
having received the advice of its current financial advisor (or other financial
advisor of
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internationally recognized reputation) and its outside counsel) after taking
into account, among other things, the terms and conditions of the offer and this
Agreement (as may be proposed to be amended by the Shareholder Representative),
including price, form of consideration, value of any non-cash consideration,
closing conditions, the ability to fully finance the transaction and such other
aspects of the offer as the Issuer Board in good xxxxx xxxxx relevant, to be
more favorable, from a financial point of view, to the stockholders of the
Issuer than the Share Exchange and is reasonably likely to be completed on the
terms proposed.
SECTION 6.05. Directors' and Officers' Indemnification and Insurance.
(a) The provisions contained in the Organizational Documents of the Company
relating to indemnification of the directors and officers of the Company shall
not be amended, repealed or otherwise modified for a period of six years from
the Closing in any manner that would affect adversely the rights thereunder of
individuals who, at or prior to the Closing, were directors, officers,
employees, fiduciaries or agents of the Company, unless such modification shall
be required by Law.
(b) The provisions contained in the Organizational Documents of the
Issuer relating to indemnification of the directors and officers of the Issuer
shall not be amended, repealed or otherwise modified for a period of six years
from the Closing in any manner that would affect adversely the rights thereunder
of individuals who, at or prior to the Closing, were directors, officers,
employees, fiduciaries or agents of the Issuer, unless such modification shall
be required by Law.
(c) The Issuer shall purchase an insurance policy, with an effective
date as of the Closing, which maintains in effect for six years from the Closing
the current directors' and officers' liability insurance policies maintained by
the Company (provided that the Issuer may substitute therefor policies of at
least the same coverage containing terms and conditions that are not materially
less favorable) with respect to matters occurring prior to the Closing;
provided, however, that in no event shall the Issuer be required to expend
pursuant to this Section 6.05(c) more than an amount equal to 200% of current
annual premiums paid by the Company for such insurance.
(d) The Issuer shall purchase an insurance policy, with an effective
date as of the Closing, which maintains in effect for six years from the Closing
the current directors' and officers' liability insurance policies maintained by
the Issuer (provided that the Issuer may substitute therefor policies of at
least the same coverage containing terms and conditions that are not materially
less favorable) with respect to matters occurring prior to the Closing;
provided, however, that in no event shall the Issuer be required to expend
pursuant to this Section 6.05(d) more than an amount equal to 200% of current
annual premiums paid by the Issuer for such insurance.
(e) The Issuer shall purchase directors' and officers' liability
insurance policies, with an effective date as of the Closing, on commercially
available terms and conditions and with coverage limits customary for U.S.
public companies similarly situated to the Issuer.
(f) In the event the Issuer or any of its respective successors or
assigns (i) consolidates with or merges into any other person and shall not be
the continuing or surviving
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corporation or entity of such consolidation or merger or (ii) transfers all or
substantially all of its properties and assets to any person, then, and in each
such case, proper provision shall be made so that the successors and assigns of
the Issuer, shall assume the obligations set forth in this Section 6.05.
SECTION 6.06. Notification of Certain Matters. The Shareholder
Representative shall give prompt notice to the Issuer, and the Issuer shall give
prompt notice to the Shareholder Representative, of (a) the occurrence, or
non-occurrence, of any event the occurrence, or non-occurrence, of which would
reasonably be expected to cause any representation or warranty of such party
contained in this Agreement to be untrue or inaccurate in any material respect
and (b) any failure of the Principal Company Shareholders or the Issuer, as the
case may be, to comply with or satisfy any covenant or agreement to be complied
with or satisfied by it hereunder; provided, however, that the delivery of any
notice pursuant to this Section 6.06 shall not limit or otherwise affect the
remedies available hereunder to the party receiving such notice.
SECTION 6.07. Resale Registration Statement. (a) As promptly as
practicable after the Closing, and in any event within 60 days after the
Closing, the Issuer shall prepare and file with the SEC a registration statement
(including the prospectus contained therein and any amendments and supplements,
including post-effective supplements, to such registration statement, the
"Resale Registration Statement") providing for an offering to be made on a
continuous basis pursuant to Rule 415 of the Securities Act covering all of the
shares of Issuer Common Stock issued pursuant to this Agreement. After such
Resale Registration Statement is filed with the SEC, the Issuer shall use its
best efforts to cause the Resale Registration Statement to be declared effective
as soon as practicable and to keep the Resale Registration Statement
continuously effective under the Securities Act until the date which is one year
after the date the Resale Registration Statement becomes effective, or such
earlier date when all shares of Issuer Common Stock covered by the Resale
Registration Statement have been sold.
(b) Notwithstanding the provisions of paragraph (a) of this Section
6.07, the Issuer shall be entitled to postpone or suspend, for a reasonable
period of time (a "Blackout Period"), the filing, effectiveness or use of the
Resale Registration Statement if the Issuer shall determine that any such filing
or the offering of any shares of Issuer Common Stock would:
(i) in the good faith judgment of the Issuer Board, materially impede,
delay or interfere with any material pending or proposed financing,
acquisition, corporate reorganization or other similar transaction
involving the Issuer for which the Issuer Board has authorized
negotiations;
(ii) based upon advice from Issuer's investment banker, materially
adversely impair the ability to consummate any pending or proposed material
offering or sale of any class of securities by the Issuer; or
(iii) in the good faith judgment of the Issuer Board, require
disclosure of material nonpublic information which, if disclosed at such
time, would be seriously detrimental to the interests of the Issuer and its
stockholders;
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provided, however, that the Issuer may not exercise its rights under this
Section 6.07(b) to the extent that the aggregate duration of all Blackout
Periods during any 12-month period would exceed 60 days. The Issuer shall use
its reasonable best efforts to minimize the duration of any Blackout Period and
the Issuer shall make appropriate public disclosure as soon as practicable
consistent with the foregoing. Each Blackout Period shall terminate upon the
earliest of completion or abandonment of the applicable transaction, public
disclosure of the proposal to enter into such merger, acquisition or financing
when public disclosure would no longer be seriously detrimental to the Issuer,
and the 60th day of the aggregate Blackout Periods in any 12 month period. At
the expiration of any Blackout Period and without any further request from the
Principal Company Shareholders, the Issuer shall effect its obligations pursuant
to Section 6.07(a).
(c) In connection with the Resale Registration Statement, the Issuer
shall, as soon as reasonably practicable (and, in any event, subject to the
terms of this Agreement, at or before the time required by applicable laws and
regulations), subject to any Blackout Period:
(i) promptly prepare and file with the SEC such amendments and
supplements to the Resale Registration Statement and the prospectus used in
connection therewith as may be necessary to comply with the provisions of
the Securities Act with respect to the disposition of all securities
covered by the Resale Registration Statement;
(ii) furnish to each Principal Company Shareholder such numbers of
copies of the Resale Registration Statement and the prospectus included
therein (including each preliminary prospectus and any amendments or
supplements thereto), in conformity with the requirements of the Securities
Act and such other documents and information as it may reasonably request;
(iii) use its reasonable best efforts to register or qualify the
securities covered by the Resale Registration Statement under such other
securities or blue sky laws of such jurisdiction within the United States
as shall be reasonably appropriate for the distribution of the securities
covered by the Resale Registration Statement; provided, however, that the
Issuer shall not be required in connection therewith or as a condition
thereto to qualify to do business in or to file a general consent to
service of process in any jurisdiction wherein it would not but for the
requirements of this paragraph (iii) be obligated to do so; and provided
further that the Issuer shall not be required to qualify such securities in
any jurisdiction in which the securities regulatory authority requires that
a Principal Company Shareholder submit any of its securities to the terms,
provisions and restrictions of any escrow, lockup or similar agreement(s)
for consent to sell securities in such jurisdiction unless such Principal
Company Shareholder agrees to do so;
(iv) promptly notify each Principal Company Shareholder, at any time
when a prospectus relating to the securities covered by the Resale
Registration Statement is required to be delivered under the Securities
Act, of the happening of any event as a result of which the prospectus
included in the Resale Registration Statement, as then in effect, includes
an untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein
not misleading in
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light of the circumstances under which they were made, and at the request
of a Principal Company Shareholder promptly prepare and furnish (subject to
the Issuer's rights in connection with a Blackout Period) to each Principal
Company Shareholder a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such securities, such prospectus shall not
include an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances under which they were
made; and
(v) take such other actions as are reasonably required in order to
expedite or facilitate the disposition of the securities included in the
Resale Registration Statement (subject to Section 6.12 of this Agreement).
(d) All expenses incurred in connection with the Resale Registration
Statement, excluding underwriters' discounts and commissions and any stamp or
transfer tax or duty, including without limitation, all registration, filing and
qualification fees, word processing, duplicating, printers' and accounting fees
(including the expenses of any special audits or "cold comfort" letters required
by or incident to such performance and compliance), fees of the National
Association of Securities Dealers, Inc. or listing fees, messenger and delivery
expenses, all fees and expenses of complying with state securities or blue sky
laws, fees and disbursements of one counsel chosen by the Shareholder
Representative on behalf of the Principal Company Shareholders (up to a maximum
of $15,000) and fees and disbursements of counsel for the Issuer incurred in
connection with the Resale Registration Statement shall be paid by the Issuer.
Each Principal Company Shareholder shall bear and pay the underwriting
commissions and discounts and any stamp or transfer tax or duty and the fees and
disbursements of such counsel for the Principal Company Shareholders other than
the one counsel referred to above incurred in connection with the Resale
Registration Statement.
(e) In connection with the Resale Registration Statement, the Issuer
shall, and hereby agrees to, indemnify and hold harmless each Principal Company
Shareholder and such Principal Company Shareholder's affiliates against any Loss
to which such Principal Company Shareholder or such Principal Company
Shareholder's affiliates may become subject under the Securities Act or
otherwise, insofar as such Loss arises out of or is based upon an untrue
statement or alleged untrue statement or a material fact contained in the Resale
Registration Statement filed by the Issuer, or any omission or alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, and the Issuer shall, and it hereby
agrees to, reimburse such Principal Company Shareholder or such Principal
Company Shareholder's affiliates for any legal or other out-of-pocket expenses
reasonably incurred by them in connection with investigating or defending any
such action, proceeding or claim; provided, however, that the Issuer shall not
be liable to any person in any case to the extent that any such Loss or expense
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in such Resale Registration Statement
contained therein, in reliance upon information furnished to the Issuer by the
Company or any of the Principal Company Shareholders or any such other parties
acting for the Principal Company Shareholders for use therein. The Issuer shall
have the right to assume the defense of any action or claim for which the
Principal Company Shareholders seek
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indemnification pursuant to this Section 6.07(e), including the employment of
counsel reasonably satisfactory to the Shareholder Representative.
(f) Each Principal Company Shareholder shall, severally but not
jointly, indemnify and hold harmless the Issuer and each of its affiliates
against any Loss to which the Issuer may become subject under the Securities Act
or otherwise, insofar as such Loss arises out of or is based upon the omission
or alleged omission to state therein a required material fact in each case to
the extent, but only to the extent, that such untrue statement or alleged untrue
statement was made in reliance upon and in conformity with information furnished
by or on behalf of such Principal Company Shareholder or by a failure to furnish
the Issuer, upon written request specifically identifying the information
sought, with the information that is the subject of the untrue statement or
omission. Each Principal Company Shareholder shall reimburse any legal or other
expenses reasonably incurred by the Issuer or its affiliate in connection with
investigating or defending any such Loss or Action. The Principal Company
Shareholders shall have the right to assume the defense of any action or claim
for which the Issuer seeks indemnification pursuant to this Section 6.07(f),
including the employment of counsel reasonably satisfactory to the Issuer.
SECTION 6.08. Further Action; Reasonable Best Efforts. Upon the terms
and subject to the conditions of this Agreement, each of the Issuer, on the one
hand, and the Principal Company Shareholders, on the other hand, shall (i) make
(or cause to be made) promptly its respective filings, and thereafter make any
other required submissions, under applicable antitrust, competition or fair
trade Laws with respect to the Transactions and (ii) use its reasonable best
efforts to take, or cause to be taken, all appropriate action, and to do, or
cause to be done, all things necessary, proper or advisable under applicable
Laws or otherwise to consummate and make effective the Transactions, including
using its reasonable best efforts to obtain all permits, consents, approvals,
authorizations, qualifications and orders of Governmental Authorities and
parties to contracts with the Company, the Issuer or their respective
subsidiaries as are necessary for the consummation of the Transactions to
fulfill the conditions to the Share Exchange; provided that none of the Issuer,
the Principal Company Shareholders or the Company will be required by this
Section 6.08 to take any action, including entering into any consent decree,
hold separate orders or other arrangements, that (A) requires, before or after
the Closing, the divestiture of any of its material assets or of any of the
material assets of any of its subsidiaries or (B) limits, before or after the
Closing, its freedom of action with respect to, or its ability to retain, any of
its assets or businesses or any of the assets or businesses of its subsidiaries.
In case, at any time after the Closing, any further action is necessary or
desirable to carry out the purposes of this Agreement, the proper officers and
directors of each party to this Agreement shall use their reasonable best
efforts to take all such action.
SECTION 6.09. Exchange of Issuer Preferred Stock. Concurrently with
the execution of this Agreement, the Issuer shall enter into an agreement, in
the form of Exhibit K attached hereto (the "Preferred Exchange Agreement"), with
the holder (the "Preferred Holder") of all of the outstanding shares of Series S
Preferred Stock and Series S-1 Preferred Stock pursuant to which the Preferred
Holder agrees to exchange all of the outstanding shares of Series S Preferred
Stock and Series S-1 Preferred Stock into no more than 1,949,278 shares of
Issuer Common Stock, subject to the terms and conditions of the Preferred
Exchange Agreement, immediately prior to the Closing.
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SECTION 6.10. Public Announcements. The initial press release relating
to this Agreement shall be a joint press release the text of which has been
agreed to by each of the Issuer, the Company and the Shareholder Representative.
Thereafter, unless otherwise required by applicable Law or the requirements of
the Nasdaq, each of the Issuer, the Company and the Shareholder Representative
shall use its reasonable best efforts to consult with the others before issuing
any press release or otherwise making any public statements with respect to this
Agreement, the Share Exchange or any of the other Transactions.
SECTION 6.11. Corporate Matters. (a) The Issuer shall take all such
action as may be necessary (i) to cause the number of directors comprising the
Issuer Board as of the Closing to be increased to nine, (ii) to cause Xxxxxx X.
Xxxxxx, Xx., Xxxxxxx X. Xxxxx and Xxxxxxx Xxxxx to resign as members of the
Issuer Board as of the Closing, (iii) to cause Xxxx-Loup Romet-Lemonne, Xxxxxx
Xxxxxxxx, Xxxxx Xxxxxxxxx, Xxxx Xxxxxxx, Xxxxxx Xxxxxxxx and Xxxxxx Xxxx
(collectively, the "Company Designated Directors") to be appointed to the Issuer
Board as of the Closing to serve until the next annual election of directors of
the Issuer, and (iv) to cause Xxxx-Loup Romet-Lemonne to be appointed the
Chairman of the Issuer Board as of the Closing Date, to serve as Chairman until
the next annual election of directors of the Issuer.
(b) The corporate headquarters of the Issuer, effective as of the
Closing, will be the Issuer's current corporate headquarters in San Diego,
California.
(c) Subject to the receipt of the requisite stockholder approval at
the Issuer Stockholders' Meeting, the Issuer shall take all action as may be
necessary to cause the corporate name of the Issuer to be renamed, effective as
of the Closing, to "IDM, Inc.", or such other name as the Issuer and the Company
may agree prior to the mailing of the Proxy Statement, subject to receipt of the
requisite approval of the stockholders of the Issuer at the Issuer Stockholders'
Meeting.
(d) Subject to the receipt of the requisite stockholder approval at
the Issuer Stockholders' Meeting, the Issuer shall take all action as may be
necessary immediately prior to the Closing to (i) effect a reverse stock split
of the Issuer Common Stock and the Issuer Preferred Stock pursuant to which four
shares of Issuer Common Stock will be consolidated into one share of Issuer
Common Stock and four shares of Issuer Preferred Stock will be consolidated into
one share of Issuer Preferred Stock and (ii) cause the authorized capital stock
of the Issuer after giving effect to the reverse stock split prescribed in
clause (i) above to be increased to a total of 65,000,000 shares, consisting of
55,000,000 shares of Issuer Common Stock and 10,000,000 shares of Issuer
Preferred Stock.
(e) The Issuer shall take all such action as may be necessary to cause
each person specified on Exhibit L attached hereto to be appointed as an
executive officer of the Issuer effective as of, and contingent upon, the
Closing with the title listed opposite the name of such person on Exhibit L
attached hereto in accordance with the terms of such person's Employment
Agreement.
SECTION 6.12. Covenants of the Principal Company Shareholders. (a) No
Disposition of Company Shares Prior to the Closing. Each Principal Company
Shareholder hereby agrees that, except as contemplated by this Agreement, such
Principal Company
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Shareholder shall not sell, transfer, tender, assign, pledge, encumber,
contribute to the capital of any entity, hypothecate, give or otherwise dispose
of, grant a proxy or power of attorney with respect to, deposit into any voting
trust or enter into a voting arrangement or agreement, or create or permit to
exist any Liens of any nature whatsoever (a "Transfer") with respect to any of
such person's Company Shares (or agree or consent to, or offer to do, any of the
foregoing); provided, however, that the restrictions set forth in this Section
6.12(a) shall not prohibit or restrict Transfers of Company Shares to family
members or affiliates of such Principal Company Shareholder (or to entities or
trusts formed by or for the benefit of such Principal Company Shareholder or
family members or affiliates of such Principal Company Shareholder) if the
transferee agrees in writing to be bound by this Agreement.
(b) Restrictions on Sales of Issuer Common Stock after the Closing.
Each Principal Company Shareholder and its permitted assigns pursuant to Section
6.12(a) hereby agree that (i) during the period between the Closing and the date
six months after the Closing, such Principal Company Shareholder (and any
permitted assigns) shall not Transfer any of the shares of Issuer Common Stock
received by such person pursuant to this Agreement and (ii) during the period
between the date six months after the Closing and the date one year after the
Closing, (A) such Principal Company Shareholder (and any permitted assigns)
shall not Transfer, in the aggregate, more than fifty percent (50%) of the
shares of Issuer Common Stock received by such person pursuant to this Agreement
and (B) such Principal Company Shareholder agrees not to sell during any single
trading day more than the number of shares of Issuer Common Stock equal to
fifteen percent (15%) of the average daily trading volume of shares of Issuer
Common Stock, as reported by Nasdaq, during the five trading days prior to such
date; provided, however, that the restrictions set forth in this Section 6.12(b)
shall not prohibit or restrict Transfers of shares of Issuer Common Stock to
family members or affiliates of such Principal Company Shareholder (or to
entities or trusts formed by or for the benefit of such Principal Company
Shareholder or family members or affiliates of such Principal Company
Shareholder) that are not made in open market transactions, if the transferee
agrees in writing to be bound by the restrictions of this Section 6.12(b) or if
the Issuer consents to such Transfer. Notwithstanding the foregoing, if the
Principal Company Shareholder is an employee of the Issuer or the Company upon
the consummation of the Transactions, and (i) such Principal Company Shareholder
is or will be a party to an Employment Agreement, upon the subsequent
termination of such Principal Company Shareholder's employment by the Issuer or
the Company, as the case may be, without cause, such Principal Company
Shareholder's resignation for good reason (as "cause" and "good reason" are
defined in such Principal Company Shareholder's Employment Agreement) or the
death of such Principal Company Shareholder, or (ii) such Principal Company
Shareholder is not a party to an Employment Agreement, upon the subsequent
termination of such Principal Company Shareholder's employment by the Issuer or
the Company, such Principal Company Shareholder's resignation from such
employment or the death of such Principal Company Shareholder, in either such
case, the provisions of this Section 6.12(b) shall cease to apply to such
Principal Company Shareholder effective as of the date of such Principal Company
Shareholder's employment termination, resignation or death, as applicable.
(c) Agreement Regarding Counterbid. Each Principal Company Shareholder
hereby agrees that it will not vote in favor of or accept a Counterbid unless
the Principal Company Shareholder determines, in its good faith judgment after
taking into account, among
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other things, the terms and conditions of the Counterbid and this Agreement (as
may be amended in accordance with its terms prior to the time of such
determination), including price, form of consideration, value of any non-cash
consideration, closing conditions, the ability to fully finance the transaction
and such aspects of the Counterbid as such Principal Company Shareholder in good
xxxxx xxxxx relevant, that the Counterbid is more favorable to such Principal
Company Shareholder than the Share Exchange.
SECTION 6.13. Nasdaq Listing Application. As promptly as practicable
after the date of this Agreement, the Issuer shall prepare and submit to the
Nasdaq a listing application covering the shares of the Issuer Common Stock to
be issued pursuant to this Agreement, and shall use its reasonable efforts to
obtain, prior to the Closing, approval for the quotation of such shares of
Issuer Common Stock.
SECTION 6.14. Compensation Matters. (a) The Issuer shall take all
actions necessary, including, without limitation, seeking stockholder approval
for such actions at the Issuer Stockholders' Meeting, (i) to increase the number
of shares of Issuer Common Stock reserved for issuance under the Issuer's 2000
Stock Plan (including the Issuer French Stock Option Plan) by 8,800,000 shares
of Issuer Common Stock, (ii) to increase the number of shares of Issuer Common
Stock reserved for issuance under the Issuer's 2001 Employee Stock Purchase
Plan, (iii) to adopt the Issuer French Stock Option Plan, and (iv) to adopt the
Issuer French Employee Stock Purchase Plan (the "Issuer French ESPP"), which
shall be based on the Issuer's 2001 Employee Stock Purchase Plan, with such
amendments as may be reasonably necessary or desirable under French law, and
shall be in form and substance reasonably satisfactory to the Company and the
Issuer, and reserve for issuance thereunder 215,000 shares of Issuer Common
Stock.
(b) As soon as practicable after the receipt of the requisite approval
of the stockholders of the Company of the Issuer Stock Option Plan Amendment and
of the adoption of the Issuer French ESPP, the Issuer shall cause the additional
shares of Issuer Common Stock reserved for issuance under the Issuer's 2000
Stock Plan and the shares of Issuer Common Stock reserved for issuance under the
Issuer French ESPP to be registered under an effective registration on Form S-8
(or any successor form) or another appropriate form, and the Issuer shall use
its reasonable best efforts to maintain the effectiveness of such registration
statement or registration statements for as long as shares of Issuer Common
Stock remain outstanding under such plans. In addition, the Issuer shall use its
reasonable best efforts to cause the shares of Issuer Common Stock that are
issuable under such plans to be listed on Nasdaq.
SECTION 6.15. Company Shareholders Agreement. (a) Each of the
Principal Company Shareholders hereby (i) agrees that, notwithstanding anything
to the contrary contained in Section 6.2 of the Company Shareholders Agreement,
such Principal Company Shareholder shall not require that (A) the Share Exchange
remains valid for a period of 70 days after the delivery of the Offer
Notification or (B) any other Principal Company Shareholder not commit to accept
the Share Exchange for a period of 60 days after the date hereof and (ii) waives
its rights under Article 4 and the first sentence of Section 6.5 of the Company
Shareholders Agreement in connection with this Agreement and the Transactions.
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(b) Effective as of the Closing, each Principal Company Shareholder
hereby agrees not to enforce the terms of the Company Shareholders Agreement
against any other Principal Company Shareholder. Each Principal Company
Shareholder agrees that, effective immediately upon the later of the Closing and
the acquisition of all of the capital stock of the Company (including all
securities convertible into, and all other rights to acquire, capital stock of
the Company, but excluding Company Stock Options) held by parties to the Company
Shareholders Agreement that are not Principal Company Shareholders by the
Issuer, the Company Shareholders Agreement shall be terminated and shall have no
further force or effect.
SECTION 6.16. Company Shareholders' Meeting. (a) The Principal Company
Shareholders shall cause Company to call and hold a meeting of the shareholders
of the Company (the "Company Shareholders' Meeting") as promptly as practicable
for the purpose of voting upon the approval of each of (i) the audited
consolidated accounts of the Company for the fiscal year ended December 31, 2004
(the "2004 Company Financial Statements"); (ii) the amendment of the Medarex
Warrants (the "Medarex Amendment") to provide that, effective immediately prior
to the Closing and subject to the Closing, the Medarex Warrants shall be
immediately exercisable for Convertible Redeemable Bonds and that such
Convertible Redeemable Bonds shall be immediately convertible into Company
Shares; and (iii) the amendment of the Sanofi Warrants (the "Sanofi Amendment",
and together with the Medarex Amendment, the "Warrant Amendments") to provide
that, effective immediately prior to the Closing and subject to the Closing, the
Sanofi Warrants shall be immediately exercisable for Company Shares. The
Principal Company Shareholders shall cause the Company to take all actions
reasonably necessary or advisable to secure the required vote of its
shareholders.
(b) Medarex and Sanofi each hereby agrees to and approves the Medarex
Amendment and the Sanofi Amendment, respectively, and shall take any action
reasonably requested by the Issuer to approve such Medarex Amendment and Sanofi
Amendment, respectively.
(c) Each Principal Company Shareholder hereby agrees that, at every
meeting of the shareholders of the Company, including the Company Shareholders'
Meeting and at every adjournment thereof, each Principal Company Shareholder
shall vote such shareholders' Company Shares in favor of the Warrant Amendments.
The provisions of this Section 6.16(b) shall not limit or otherwise restrict any
Principal Company Shareholder with respect to any act or omission that such
shareholder may undertake or authorize in such shareholder's capacity as a
director or officer of the Company.
ARTICLE VII
CONDITIONS TO THE SHARE EXCHANGE
SECTION 7.01. Conditions to the Obligations of Each Party. The
obligations of the Principal Company Shareholders and the Issuer to consummate
the Share Exchange are subject to the satisfaction or waiver (where permissible)
of the following conditions:
(a) Issuer Stockholder Approval. Each of the Share Exchange, the
Issuer Capital Stock Increase, the Issuer Reverse Stock Split and the
Option Liquidity Share
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Issuance shall have been approved by the requisite affirmative vote of the
stockholders of the Issuer in accordance with the rules and regulations of
Nasdaq, the DGCL (as defined below) and the Issuer Certificate of
Incorporation.
(b) No Order. No Governmental Authority shall have enacted, issued,
promulgated, enforced or entered any law, rule, regulation, judgment,
decree, executive order or award (an "Order") which is then in effect and
has the effect of making the Share Exchange illegal or otherwise
prohibiting consummation of the Share Exchange.
(c) Required Regulatory Approvals. Any waiting period (and any
extension thereof) applicable to the consummation of the Share Exchange
under applicable antitrust, competition or fair trade laws shall have
expired or been terminated and all approvals of Governmental Authorities
required in respect of the transactions contemplated by this Agreement
under applicable antitrust, competition or fair trade laws shall have been
obtained.
(d) Nasdaq Approval. Nasdaq shall have approved for quotation on the
Nasdaq National Market the shares of Issuer Common Stock to be issued in
the Share Exchange, subject to notice of issuance.
(e) Exchange of Issuer Preferred Stock. All of the outstanding shares
of Series S Preferred Stock and Series S-1 Preferred Stock shall have been
exchanged for shares of Issuer Common Stock in accordance with the terms of
the Preferred Exchange Agreement.
(f) Company Shareholder Agreement. Either (i) all of the Other
Shareholders shall have waived their rights under Section 6 of the Company
Shareholders Agreement or (ii) the Principal Company Shareholders shall
have complied with the requirements of Section 6 of the Company
Shareholders Agreement and shall be permitted thereunder to require the
Other Shareholders who have not executed a Joinder Agreement to exchange
their Company Shares for shares of Issuer Common Stock upon the terms and
subject to the conditions of this Agreement.
(g) Completion of Issuer Capital Stock Increase and Issuer Reverse
Stock Split. The Issuer Capital Stock Increase and the Issuer Reverse Stock
Split shall have been completed in accordance with this Agreement.
(h) Ownership of Company Shares. The Principal Company Shareholders
(including any Other Shareholder who became a Principal Company Shareholder
upon executing a Joinder Agreement pursuant to Section 1.09(b)), in the
aggregate, shall own, of record and beneficially, the number of Company
Shares representing at least 95% of the outstanding Company Shares as of
the Closing (and including the Company Shares issuable upon exercise of the
Company Warrants outstanding as of the Closing) and no Other Shareholder
(or group (as such term is defined for purposes of Section 13(d) of the
Exchange Act) of Other Shareholders) who has not signed a Joinder Agreement
shall own, of record or beneficially, the number of Company Shares
representing 5% or more of the outstanding Company Shares as of the
Closing.
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SECTION 7.02. Conditions to the Obligations of the Issuer. The
obligations of the Issuer to consummate the Share Exchange are subject to the
satisfaction or waiver (where permissible) of the following additional
conditions:
(a) Representations and Warranties. The representations and warranties
regarding the Company contained in Article II of this Agreement and the
representations and warranties of the Principal Company Shareholders
contained in Article III of this Agreement shall be true and correct
(without giving effect to any limitation as to materiality or Company
Material Adverse Effect set forth therein) as of the Closing, as though
made on and as of the Closing (except to the extent expressly made as of an
earlier date, in which case as of such earlier date), except where the
failure of such representations regarding the Company or the Principal
Company Shareholders to be so true and correct (without giving effect to
any limitation as to materiality or Company Material Adverse Effect set
forth therein) would not, individually or in the aggregate, have a Company
Material Adverse Effect.
(b) Agreements and Covenants. The Principal Company Shareholders shall
have performed or complied in all material respects with all agreements and
covenants required by this Agreement to be performed or complied with by
them on or prior to the Closing and the Company shall not have taken
action, or failed to take any action, which constitutes a breach of Section
5.01 of this Agreement.
(c) Officer Certificate. The Shareholder Representative shall have
delivered to the Issuer a certificate, dated the date of the Closing,
signed by the President or any Vice President of the Company, certifying as
to the satisfaction of the conditions specified in Sections 7.02(a) and
7.02(b).
(d) Consents. The consents, approvals or authorizations listed on
Section 7.02(d) of the Company Disclosure Schedule shall have been
obtained.
(e) Material Adverse Effect. No Company Material Adverse Effect shall
have occurred since the date of this Agreement.
(f) Indemnity Escrow Agreement. The Shareholder Representative shall
have entered into the Indemnity Escrow Agreement and the Indemnity Escrow
Agreement shall be in full force and effect at the Closing.
SECTION 7.03. Conditions to the Obligations of the Principal Company
Shareholders. The obligations of the Principal Company Shareholders to
consummate the Share Exchange are subject to the satisfaction or waiver (where
permissible) of the following additional conditions:
(a) Representations and Warranties. The representations and warranties
regarding the Issuer contained in Article IV of this Agreement shall be
true and correct (without giving effect to any limitation as to materiality
or Issuer Material Adverse Effect set forth therein) as of the Closing, as
though made on and as of the Closing (except to the extent expressly made
as of an earlier date, in which case as of such earlier date), except where
the failure of such representations to be so true and correct (without
giving
73
effect to any limitation as to materiality or Issuer Material Adverse
Effect set forth therein) would not, individually or in the aggregate, have
an Issuer Material Adverse Effect.
(b) Agreements and Covenants. The Issuer shall have performed or
complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by it on or
prior to the Closing and the Issuer shall not have taken any action, or
failed to take any action, which constitutes a breach of Section 5.02 of
this Agreement.
(c) Officer Certificate. The Issuer shall have delivered to the
Shareholder Representative a certificate, dated the date of the Closing,
signed by the President or any Vice President of the Issuer, certifying as
to the satisfaction of the conditions specified in Sections 7.03(a) and
7.03(b).
(d) Consents. The consents, approvals or authorizations listed on
Section 7.03(d) of the Issuer Disclosure Schedule shall have been obtained.
(e) Material Adverse Effect. No Issuer Material Adverse Effect shall
have occurred since the date of this Agreement.
(f) Indemnity Escrow Agreement. The Issuer shall have entered into the
Indemnity Escrow Agreement and the Indemnity Escrow Agreement shall be in
full force and effect at the Closing.
(g) Option Liquidity Agreements. The Issuer shall have complied with
its obligations under Section 1.07 of this Agreement and shall have entered
into Option Liquidity Agreements with each holder of Company Stock Options
who has tendered a signed Option Liquidity Agreement to the Issuer.
(h) Put/Call Agreements. The Issuer shall have complied with its
obligations under Section 1.09 of this Agreement and shall have entered
into Put/Call Agreements with each holder of Company Shares in a PEA who
has tendered a signed Put/Call Agreement to the Issuer.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01. Termination. This Agreement may be terminated and the
Share Exchange and the other Transactions may be abandoned at any time prior to
the Closing, notwithstanding any requisite approval and adoption of this
Agreement and the Transactions by the stockholders of the Issuer, as follows:
(a) by mutual written consent of the Issuer and the Shareholder
Representative on behalf of the Principal Company Shareholders;
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(b) by either the Issuer or the Shareholder Representative on behalf
of the Principal Company Shareholders if the Closing shall not have
occurred on or before June 30, 2005 (the "End Date"); provided, however,
that the End Date shall be July 31, 2005 in the event that the Issuer or
its counsel shall receive a comment letter on the Proxy Statement from the
SEC; and provided further that the right to terminate this Agreement under
this Section 8.01(b) shall not be available to any party whose failure to
fulfill any obligation under this Agreement has been the cause of, or
resulted in, the failure of the Closing to occur on or before such date;
(c) by either the Issuer or the Shareholder Representative on behalf
of the Principal Company Shareholders if any Governmental Authority shall
have enacted, issued, promulgated, enforced or entered any injunction,
order, decree or ruling (whether temporary, preliminary or permanent) which
has become final and nonappealable and has the effect of making
consummation of the Share Exchange illegal or otherwise preventing or
prohibiting consummation of the Share Exchange;
(d) by the Shareholder Representative on behalf of Principal Company
Shareholders (at any time prior to the approval of the Issuer Transactions
by the required vote of the stockholders of the Issuer) if a Triggering
Event with respect to the Issuer shall have occurred;
(e) by either the Issuer or the Shareholder Representative on behalf
of the Principal Company Shareholders if any of the Share Exchange, the
Issuer Capital Stock Increase, the Issuer Reverse Stock Split or the Option
Liquidity Share Issuance shall fail to receive the requisite vote for
approval at the Issuer Stockholders' Meeting;
(f) by the Issuer upon a breach of any representation, warranty,
covenant or agreement regarding or on the part of the Company or the
Principal Company Shareholders set forth in this Agreement, or if any
representation or warranty regarding or on the part of the Company or the
Principal Company Shareholders shall have become untrue, in either case
such that the conditions set forth in Sections 7.02(a) and 7.02(b) would
not be satisfied ("Terminating Company Breach"); provided, however, that,
if such Terminating Company Breach is curable by the Company or the
Principal Company Shareholders, the Issuer may not terminate this Agreement
under this Section 8.01(f) for so long as the Company or the Principal
Company Shareholders continue to exercise their reasonable best efforts to
cure such breach, unless such breach is not cured within 30 days after
notice of such breach is provided by the Issuer to the Shareholder
Representative;
(g) by the Shareholder Representative on behalf of the Principal
Company Shareholder upon a breach of any representation, warranty, covenant
or agreement regarding or on the part of the Issuer set forth in this
Agreement, or if any representation or warranty regarding or on the part of
the Issuer shall have become untrue, in either case such that the
conditions set forth in Sections 7.03(a) and 7.03(b) would not be satisfied
("Terminating Issuer Breach"); provided, however, that, if such Terminating
Issuer Breach is curable by the Issuer, the Shareholder Representative may
not terminate this Agreement under this Section 8.01(g) for so long as the
Issuer continues to exercise its
75
reasonable best efforts to cure such breach, unless such breach is not
cured within 30 days after notice of such breach is provided by the
Shareholder Representative to the Issuer; or
(h) by the Issuer, if, prior to the receipt of the requisite vote for
approval at the Issuer Stockholders' Meeting of the Share Exchange, the
Issuer Capital Stock Increase, the Issuer Reverse Stock Split and the
Option Liquidity Share Issuance, the Issuer receives a Superior Proposal,
the Issuer Board resolves to accept such Superior Proposal (after it has
determined that such acceptance is required to comply with its fiduciary
duties to the Issuer's stockholders under applicable Law) and the Issuer
shall have given the Shareholder Representative four business days prior
written notice of its intention to terminate this Agreement pursuant to
this Section 8.01(h); provided, however, that the Issuer may not terminate
this Agreement under this Section 8.01(h) if it has breached, directly or
indirectly, any of its obligations set forth in Section 6.04.
For purposes of this Agreement, a "Triggering Event" with respect to the Issuer
hereto shall be deemed to have occurred if: (i) the Issuer Board or any
committee thereof withdraws, modifies or changes its recommendation of this
Agreement, the Share Exchange, the Issuer Capital Stock Increase, the Issuer
Reverse Stock Split or the Option Liquidity Share Issuance in a manner adverse
to the Principal Company Shareholders or shall have resolved to do so; (ii) the
Issuer Board shall have recommended to the stockholders of Issuer a Competing
Transaction or shall have resolved to do so or shall have entered into any
letter of intent or similar document or any agreement, contract or commitment
accepting any Competing Transaction; (iii) the Issuer shall have failed to
include in the Proxy Statement the recommendation of the Issuer Board to approve
all of the Issuer Transactions; or (iv) a tender offer or exchange offer for 15%
or more of the outstanding shares of capital stock of the Issuer is commenced,
and the Issuer Board recommends in favor of such tender offer or exchange offer,
consents to the acquisition of shares of Issuer Common Stock pursuant to such
tender offer or exchange offer or otherwise effectively waives Section 203 of
the DGCL with respect to such tender offer or exchange offer.
SECTION 8.02. Effect of Termination. In the event of the termination
of this Agreement pursuant to Section 8.01, this Agreement shall forthwith
become void, and there shall be no liability under this Agreement on the part of
any party hereto, except (a) as set forth in Section 8.03 and (b) that nothing
herein shall relieve any party from liability for any breach of any of its
representations, warranties, covenants or agreements set forth in this Agreement
prior to such termination; provided, however, that the Confidentiality Agreement
shall survive any termination of this Agreement.
SECTION 8.03. Fees and Expenses. (a) All Expenses (as defined below)
incurred in connection with this Agreement and the transactions contemplated by
this Agreement shall be paid by the party incurring such expenses, whether or
not the Share Exchange or any other transaction is consummated. "Expenses", as
used in this Agreement, shall include all reasonable out-of-pocket expenses
(including, without limitation, all fees and expenses of counsel, accountants,
investment bankers, experts and consultants to a party hereto and its
affiliates) incurred by a party or on its behalf in connection with or related
to the authorization, preparation (including the conduct of due diligence),
negotiation, execution and performance of this Agreement, the preparation,
printing, filing and mailing of the Proxy Statement, the
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solicitation of stockholder approvals, the filing of any required notices under
applicable antitrust, competition or fair trade laws or other similar
regulations and all other matters related to the closing of the Share Exchange
and the other transactions contemplated by this Agreement.
(b) The Issuer agrees that:
(i) if the Shareholder Representative shall terminate this Agreement
pursuant to Section 8.01(d);
(ii) if (A) the Issuer or the Shareholder Representative shall
terminate this Agreement pursuant to Section 8.01(b) or 8.01(e), (B) prior
to the time of such termination a Competing Transaction shall have been
publicly announced with respect to the Issuer, and (C) the Issuer enters
into an agreement providing for a Third Party Acquisition (as defined
below) within nine months after the date of such termination or a Third
Party Acquisition is consummated within nine months after the date of such
termination; or
(iii) if the Issuer shall terminate this Agreement pursuant to Section
8.01(h); then the Issuer shall pay to the Company promptly (but in any
event no later than one business day after the first of such events shall
have occurred) a fee of $1,334,600 (the "Fee"), which amount shall be
payable in immediately available funds.
(c) Each of the Issuer and the Principal Company Shareholders
acknowledges that the agreements contained in this Section 8.03 are an integral
part of the transactions contemplated by this Agreement. In the event that the
Issuer shall fail to pay the Fee when due, the Issuer shall also pay the costs
and expenses actually incurred or accrued by the Company (including, without
limitation, fees and expenses of counsel) in connection with the collection
under and enforcement of this Section 8.03, together with interest on such
unpaid Fee, commencing on the date that the Fee became due, at a rate equal to
the rate of interest publicly announced by Citibank, N.A., from time to time, in
The City of New York, as such bank's Prime Rate plus 1.00%. Payment of the fees
and expenses described in this Section 8.03 shall not be in lieu of any damages
incurred in the event of willful or intentional breach of this Agreement.
(d) "Third Party Acquisition" means any of the following transactions
(other than the transactions contemplated by this Agreement): (i) a merger,
consolidation, business combination, recapitalization, liquidation, dissolution
or similar transaction involving the Issuer pursuant to which the stockholders
of such party immediately preceding such transaction hold less than fifty
percent (50%) of the aggregate equity interests in the surviving or resulting
entity of such transaction or of any direct or indirect parent thereof; (ii) a
sale or other disposition by the Issuer of assets representing in excess of
fifty percent (50%) of the aggregate fair market value of the business of such
party immediately prior to such sale or other disposition; (iii) an acquisition
by any person or group (including by way of a tender offer or an exchange offer)
or an issuance of capital stock by the Issuer, directly or indirectly, of
beneficial ownership of fifty percent (50%) or more of the voting power of the
then outstanding shares of capital stock of the Issuer; (iv) the adoption by the
Issuer of a plan of liquidation or the declaration or payment of an
77
extraordinary dividend; or (v) the repurchase by the Issuer or any of its
subsidiaries of 50% or more of the outstanding shares of capital stock of such
party.
SECTION 8.04. Amendment. This Agreement may be amended only by mutual
agreement of the Issuer and the holders of a majority of the outstanding Company
Shares held by the Principal Company Shareholders as of the Effective Date.
SECTION 8.05. Waiver. At any time prior to the Closing, the
Shareholder Representative on behalf of the Principal Company Shareholders, on
the one hand, or the Issuer, on the other hand, may (a) extend the time for the
performance of any obligation or other act of the other party hereto, (b) waive
any inaccuracy in the representations and warranties of the other party
contained herein or in any document delivered pursuant hereto and (c) waive
compliance with any agreement of the other party or any condition to its own
obligations contained herein. Any such extension or waiver shall be valid if set
forth in an instrument in writing signed by the party or parties to be bound
thereby.
ARTICLE IX
INDEMNIFICATION
SECTION 9.01. Survival of Representations and Warranties. The
statements regarding the Company contained in Article II of this Agreement and
the representations and warranties of the Principal Company Shareholders
contained in Article III of this Agreement shall survive the Closing until 11:59
p.m. California Time, six months following the Closing. If written notice of a
claim has been given prior to the expiration of the applicable representations
and warranties by a party hereto to another party hereto, then the relevant
representations and warranties shall survive as to such claim until such claim
has been finally resolved. The representations and warranties of the Issuer
contained in Article IV of the Agreement shall not survive the Closing.
SECTION 9.02. Indemnification by the Principal Company Shareholders.
(a)Subject to Section 9.02(b) below, from and after the Closing, the Principal
Company Shareholders, severally and not jointly in the case of Losses arising
out of or resulting from the matters set forth in clause (i)(y) below, and,
jointly and severally in the case of Losses arising out of or resulting from the
other matters set forth below, shall indemnify and hold harmless the Issuer and
its affiliates, officers, directors, employees, agents, successors and assigns
(each an "Issuer Indemnified Party") from and against any and all Liabilities,
losses, damages, injury, claims, costs and expenses, interest, awards,
judgments, fine and penalties (including reasonable attorneys' fees and
expenses, external costs of investigation, expert fees, accounting fees and
advisory fees) actually suffered or incurred by any of them (including any
Action brought or otherwise initiated by any of them or by a third party)
(hereinafter a "Loss") (provided that, solely for purposes of determining the
amount of any Loss, but not whether there has been a breach of any
representation, warranty or covenant, any materiality or Material Adverse Effect
qualifier to any representation or warranty shall be ignored), arising out of or
resulting from:
78
(i) (x) the breach of any statement regarding the Company contained in
Article II of this Agreement or (y) the breach of any representation or
warranty made by such Principal Company Shareholder contained in Article
III of this Agreement; and
(ii) the breach of any covenant or agreement regarding the Company or
by the Principal Company Shareholders contained in Article V or Article VI
of this Agreement.
(b) Notwithstanding anything to the contrary contained in this
Agreement:
(i) the Indemnity Escrow Shares shall be the sole and exclusive remedy
for any Losses arising out of any and all claims relating to the subject
matter of this Agreement, and the maximum amount that may be recovered from
any Principal Company Shareholder shall be limited to such person's pro
rata share of the Indemnity Escrow Shares;
(ii) no Issuer Indemnified Party shall be held harmless pursuant to
Section 9.02 unless and until the aggregate amount of such party's Losses
equals or exceeds $500,000, after which the Principal Company Shareholders
shall be liable only for those Losses in excess of $500,000;
(iii) in no event may the Issuer or any other party seek recourse
against the Company, either before or after the Closing, for any breach of
any representation, warranty, covenant or other agreement of or regarding
the Company or the Principal Company Shareholders contained in this
Agreement or any other matter related to this Agreement; and
(iv) in no event shall any Principal Company Shareholder be liable to
indemnify or hold harmless any Issuer Indemnified Party pursuant to this
Section 9.02 for any Losses to the extent arising out of or resulting from
a breach of a representation or warranty made by any other Principal
Company Shareholder contained in Article III of this Agreement.
(c) The indemnification liability of the Principal Company
Shareholders with respect to the representations, warranties, covenants and
obligations of the Principal Company Shareholders or the representations and
warranties regarding the Company set forth in Article II shall not be reduced by
any investigation made by the Issuer or any Representative of the Issuer.
SECTION 9.03. Notice of Loss; Third Party Claims. (a) For purposes of
this Section 9.03, a party against which an indemnification claim may be sought
is referred to as the "Indemnifying Party" and the party that may be entitled to
be indemnified is referred to as the "Indemnified Party". For purposes of the
procedures in Sections 9.03(b) and (c), Indemnifying Party shall mean the
Shareholder Representative if an indemnification claim is sought pursuant to
Section 9.02.
(b) An Indemnified Party shall give the Indemnifying Party notice of
any matter which an Indemnified Party has determined has given or could give
rise to a right of indemnification or to be held harmless under this Agreement,
within 60 days of such determination, stating the amount of the Loss, if known,
and method of computation thereof and
79
containing a reference to the provisions of this Agreement in respect of which
such right of indemnification or to be held harmless is claimed or arises.
(c) If an Indemnified Party shall receive notice of any Action, audit,
demand or assessment (each, a "Third Party Claim") against it or which may give
rise to a claim for Loss under this Article IX, within 30 days of the receipt of
such notice, the Indemnified Party shall give the Indemnifying Party notice of
such Third Party Claim; provided, however, that the failure to provide such
notice shall not release the Principal Company Shareholders, except to the
extent that the Principal Company Shareholders are materially prejudiced by such
failure and shall not relieve the Principal Company Shareholders, from any other
obligation or Liability that it may have to any Indemnified Party otherwise than
under this Article IX. The Indemnifying Party shall be entitled to assume and
control the defense of such Third Party Claim at the expense of the Principal
Company Shareholders, and through counsel of its choice if it gives notice of
its intention to do so to the Indemnified Party within five days of the receipt
of such notice from the Indemnified Party; provided, however, that, if there
exists or is reasonably likely to exist a conflict of interest that would make
it inappropriate in the reasonable judgment of the Indemnified Party for the
same counsel to represent both the Indemnified Party and the Indemnifying Party,
then the Indemnified Party shall be entitled to retain its own counsel in each
jurisdiction for which the Indemnified Party reasonably determines counsel is
required, at the expense of the Principal Company Shareholders. In the event
that the Indemnifying Party exercises the right to undertake any such defense
against any such Third Party Claim as provided above, the Indemnified Party
shall cooperate with the Indemnifying Party in such defense and make available
to the Indemnifying Party, at the expense of the Principal Company Shareholders,
all witnesses, pertinent records, materials and information relating thereto in
the possession of or under the Indemnified Party's control as is reasonably
required by the Indemnifying Party. Similarly, in the event the Indemnified
Party is, directly or indirectly, conducting the defense against any such Third
Party Claim, the Principal Company Shareholders shall cooperate with the
Indemnified Party in such defense and make available to the Indemnified Party,
at the expense of the Principal Company Shareholders, all such witnesses,
records, materials and information relating thereto in the possession of or
under the control of the Principal Company Shareholders, as is reasonably
required by the Indemnified Party. No such Third Party Claim may be settled by
the Indemnifying Party without the prior written consent of the Indemnified
Party, which shall not be unreasonably withheld.
SECTION 9.04. Shareholder Representative. (a) Xxxxxx Xxxxx (such
person and any successor or successors being the "Shareholder Representative")
shall act as the representative of the Principal Company Shareholders, and shall
be authorized to act on behalf of the Principal Company Shareholders and to take
any and all actions required or permitted to be taken by the Shareholder
Representative under this Agreement or the Indemnity Escrow Agreement, with
respect to any claims (including the settlement thereof) made by an Issuer
Indemnified Party for indemnification or to be held harmless pursuant to this
Article IX of the Agreement and with respect to any actions to be taken by the
Shareholder Representative pursuant to the terms of the Indemnity Escrow
Agreement. The Principal Company Shareholders shall be bound by all actions
taken by the Shareholder Representative in its capacity thereof.
80
(b) The Shareholder Representative shall at all times act in his or
her capacity as Shareholder Representative in a manner that the Shareholder
Representative believes in good faith to be in the best interest of the
Principal Company Shareholders. Neither the Shareholder Representative nor any
of its directors, officers, agents or employees shall be liable to any person
for any error of judgment, or any action taken, suffered or omitted to be taken,
under this Agreement or the Indemnity Escrow Agreement, except in the case of
its gross negligence, bad faith or willful misconduct. The Shareholder
Representative may consult with legal counsel, independent public accountants
and other experts selected by it and shall not be liable for any action taken or
omitted to be taken in good faith by it in accordance with the advice of such
counsel, accountants or experts. The Shareholder Representative shall not have
any duty to ascertain or to inquire as to the performance or observance of any
of the terms, covenants or conditions of this Agreement or the Indemnity Escrow
Agreement. As to any matters not expressly provided for in this Agreement or the
Indemnity Escrow Agreement, the Shareholder Representative shall not be required
to exercise any discretion or take any action.
(c) Each Principal Company Shareholder severally shall indemnify and
hold harmless and reimburse the Shareholder Representative from and against such
Principal Company Shareholder's ratable share of any and all Losses suffered or
incurred by the Shareholder Representative arising out of or resulting from any
action taken or omitted to be taken by the Shareholder Representative under this
Agreement or the Indemnity Escrow Agreement, other than such Losses arising out
of or resulting from the Shareholder Representative's gross negligence, bad
faith or willful misconduct. Each Principal Company Shareholder agrees that the
Shareholder Representative may make claims first, against the Expense Escrow
Shares, and second, against the Indemnity Escrow Shares, but solely to the
extent any Indemnity Escrow Shares are available for transfer to the Shareholder
Representative pursuant to Section 1.07(g) or (i) of the Indemnity Escrow
Agreement, for any and all Losses against which the Shareholder Representative
is to be indemnified, held harmless and reimbursed pursuant to this Section
9.04(c). In the event that the Expense Escrow Shares and, if available pursuant
to Section 1.07(g) or (i) of the Indemnity Escrow Agreement, the Indemnity
Escrow Shares are not, or the Shareholder Representative reasonably believes
will not be, sufficient to indemnify, hold harmless and reimburse the
Shareholder Representative pursuant to this Section 9.04(c), the Shareholder
Representative may request (an "Additional Funding Request") that additional
funds (the "Additional Funds") be deposited by the Principal Company
Shareholders with the Expense Escrow Agent to be held pursuant to the terms of
the Expense Escrow Agreement by delivery to the Principal Company Shareholders
of a written notice (a "Funding Request Notice") making an Additional Funding
Request. Each Funding Request Notice shall:
(i) state the amount of Additional Funds required, or estimated in the
good faith judgment of the Shareholder Representative to be required, to
hold harmless the Shareholder Representative pursuant to this Section
9.04(c) and/or to reimburse the Shareholder Representative for any expenses
incurred in connection with the performance of its duties pursuant to
Section 9.04;
(ii) state the pro rata share (which will be based on each Principal
Company Shareholder's initial interest in the fund established pursuant to
the Expense Escrow Agreement (the "Expense Escrow Fund")) of the Additional
Funds (the "Pro Rata Amount") that each Principal Company Shareholder shall
be required to deliver to the
81
Expense Escrow Agent in the event that the Additional Fund Request is
approved by the Principal Company Shareholders in accordance with this
Section 9.04(c); and
(iii) specify in reasonable detail the nature and amount of the Losses
incurred prior to the date of the Funding Request Notice and the intended
use of the Additional Funds.
In the event that the holders of a majority of the outstanding Company Shares
held by the Principal Company Shareholders as of the Effective Date agree to the
Additional Funding Request, all of the Principal Company Shareholders shall be
deemed to have agreed to the Additional Funding Request and shall deliver to the
Expense Escrow Agent for deposit into the Expense Escrow Fund either (i) cash in
an amount equal to such Principal Company Shareholder's Pro Rata Amount or (ii)
the number of shares of Issuer Common Stock equal to such Principal Company
Shareholder's Pro Rata Amount divided by the Average Closing Price as of the
earlier of (i) the date of such delivery to the Expense Escrow Agent and (ii)
the date such Principal Company Shareholder mails or instructs its broker to
deliver, to the Expense Escrow Agent such shares of Issuer Common Stock.
Notwithstanding anything to the contrary contained herein, the Shareholder
Representative shall not be liable to any Principal Company Shareholder for
taking or omitting to take any action in the event that funds are not, or the
Shareholder Representative reasonably believes that funds will not be, available
to indemnify, hold harmless or reimburse the Shareholder Representative in
accordance with this Section 9.04(c).
(d) Notwithstanding anything to the contrary herein or in the
Indemnity Escrow Agreement, the Shareholder Representative shall not in any
manner exercise, or seek to exercise, any voting power whatsoever with respect
to shares of capital stock of the Company or the Issuer now or hereafter owned
of record or beneficially by any Principal Company Shareholder unless the
Shareholder Representative is expressly authorized to do so in a writing signed
by such Principal Company Shareholder. In all matters relating to this Article
IX, the Shareholder Representative shall be the only party entitled to assert
the rights of the Principal Company Shareholders, and the Shareholder
Representative shall perform all of the obligations of the Principal Company
Shareholders hereunder. The Issuer shall be entitled to rely on all statements,
representations and decisions of the Shareholder Representative.
(e) Each Principal Company Shareholder shall deliver to the
Shareholder Representative a power of attorney, substantially in the form of
Exhibit M attached hereto, to appoint the Shareholder Representative as such
Principal Company Shareholder's attorney in fact to perform any act required
under this Agreement and the Indemnity Escrow Agreement, subject to the terms
hereof and thereof. Each Principal Company Shareholder hereby acknowledges and
agrees that the Shareholder Representative may execute and deliver on such
Principal Company Shareholder's behalf the Expense Escrow Agreement and, upon
such execution and delivery, the Expense Escrow Agreement shall be a binding
obligation on such Principal Company Shareholder.
82
ARTICLE X
GENERAL PROVISIONS
SECTION 10.01. Non-Survival of Representations, Warranties and
Agreements. The representations, warranties and agreements in this Agreement
shall terminate upon the termination of this Agreement pursuant to Section 8.01.
The agreements contained in this Agreement shall terminate at the Closing,
except that the agreements set forth in Articles I and IX and Sections 6.05,
6.07, 6.12(b) and 8.03 and this Article X shall survive the Closing.
SECTION 10.02. Notices. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be given (and shall
be deemed to have been duly given upon receipt) by delivery in person, by
telecopy or email or by registered or certified mail (postage prepaid, return
receipt requested) to the respective parties at the following addresses (or at
such other address for a party as shall be specified in a notice given in
accordance with this Section 10.02):
if to the Issuer:
Epimmune Inc.
0000 Xxxxx Xxxxx Xxxxx
Xxx Xxxxx, XX 00000
Facsimile: (000) 000-0000
Attention: Chief Financial Office
Email: xxxxxxxx@xxxxxxxx.xxx
with a copy to:
Cooley Godward LLP
0000 Xxxxxxxx Xxxx
Xxx Xxxxx, XX 00000
Facsimile: (000) 000-0000
Attention: Xxx Xxxxxxxx
Email: xxxxxxxxx@xxxxxx.xxx
if to the Shareholder Representative or the Company:
Xxxxxx Xxxxx
00 Xxxxxxxxx Xxxxx
00000 Xxxxx
Xxxxxx
Facsimile: x00-0-00-00-0000
Email: xxxxxx@xxxxxx-xxxxxxxxxx.xxx
and
IDM S.A.
000 Xxx xx Xxxxxxxx
00
00000 Xxxxx
Cedex 11 France
Facsimile: x00-0-00-00-0000
Attention: Chief Financial Officer
Email: xxx@xxx-xxxxxxx.xxx
with a copy to:
Shearman & Sterling LLP
000, xxxxxx xxx Xxxxxx-Xxxxxxx
00000 Xxxxx
Xxxxxx
Facsimile: x00-0-00-00-0000
Attention: Xxxxxx X. Xxxxxxx
Email: xxxxxxxx@xxxxxxxx.xxx
SECTION 10.03. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of Law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the Transactions is not affected in any manner materially adverse
to any party. Upon such determination that any term or other provision is
invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in a mutually acceptable manner in
order that the Transactions be consummated as originally contemplated to the
fullest extent possible.
SECTION 10.04. Entire Agreement; Assignment. This Agreement and the
Voting Agreements constitute the entire agreement among the parties with respect
to the subject matter hereof and supersedes, except as set forth in Section
6.03(c), all prior agreements and undertakings, both written and oral, among the
parties, or any of them, with respect to the subject matter hereof. This
Agreement shall not be assigned (whether pursuant to a merger, by operation of
Law or otherwise); provided, however, that, after the Closing, the Issuer may
assign this Agreement, without the consent of the other parties hereto, in
connection with a consolidation or merger of the Issuer or the Company with
another corporation, or the sale of all or substantially all of the assets or
stock of the Issuer or the Company to any other person.
SECTION 10.05. Parties in Interest. This Agreement shall be binding
upon and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
person any right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement, other than the provisions of Sections 1.09, 6.05, 8.03(b) and
9.02(c) (which are intended to be for the benefit of the persons covered thereby
and may be enforced by such persons).
SECTION 10.06. Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement were
not performed in
84
accordance with the terms hereof and that the parties shall be entitled to
specific performance of the terms hereof in addition to any other remedy at law
or equity.
SECTION 10.07. Governing Law; Arbitration. (a) This Agreement shall be
governed by, and construed in accordance with, the laws of the State of Delaware
applicable to contracts executed in and to be performed in that jurisdiction
(other than those provisions set forth herein that are required to be governed
by the laws of the Republic of France), excluding (to the greatest extent a
Delaware court would permit) any rule of law that would cause the application of
the laws of any jurisdiction other than the State of Delaware.
(b) The parties irrevocably agree that any dispute, controversy or
claim arising out of or relating to this Agreement or the transactions
contemplated thereby, or the breach, termination or invalidity thereof, shall be
settled by arbitration in accordance with the Rules of Conciliation and
Arbitration of the International Chamber of Commerce as at present in force. The
place of arbitration shall be Orange County, California and the number of
arbitrators shall be three. Each of (i) the Shareholder Representative, on
behalf of the Principal Company Shareholders, on the one hand, and (ii) the
Issuer, on the other hand, shall designate one arbitrator and the two so
designated arbitrators shall jointly designate the third arbitrator. If such
designation is not made within fifteen (15) days of the designation of the
second party designated arbitrator, the Secretary General of the International
Court of Arbitration of the International Chamber of Commerce shall designate
the third arbitrator. The language of the arbitral proceedings shall be English,
but all submissions and written evidence may be in French or English.
SECTION 10.08. Construction. (a) For purposes of this Agreement,
whenever the context requires: the singular number shall include the plural, and
vice versa; the masculine gender shall include the feminine and neuter genders;
the feminine gender shall include the masculine and neuter genders; and the
neuter gender shall include the masculine and feminine genders.
(b) The parties hereto agree that any rule of construction to the
effect that ambiguities are to be resolved against the drafting party shall not
be applied in the construction or interpretation of this Agreement.
(c) As used in this Agreement, the words "include" and "including",
and variations thereof, shall not be deemed to be terms of limitation, but
rather shall be deemed to be followed by the words "without limitation".
(d) Except as otherwise indicated, all references in this Agreement to
"Sections" and "Exhibits" are intended to refer to Sections of this Agreement
and Exhibits to this Agreement.
SECTION 10.09. Waiver of Jury Trial. Each of the parties hereto hereby
waives to the fullest extent permitted by applicable law any right it may have
to a trial by jury with respect to any litigation directly or indirectly arising
out of, under or in connection with this Agreement or the Transactions. Each of
the parties hereto (a) certifies that no representative, agent or attorney of
any other party has represented, expressly or otherwise, that such other party
85
would not, in the event of litigation, seek to enforce that foregoing waiver and
(b) acknowledges that it and the other parties hereto have been induced to enter
into this Agreement and the Transactions, as applicable, by, among other things,
the mutual waivers and certifications in this Section 10.09.
SECTION 10.10. Headings. The descriptive headings contained in this
Agreement are included for convenience of reference only and shall not affect in
any way the meaning or interpretation of this Agreement.
SECTION 10.11. Counterparts. This Agreement may be executed and
delivered (including by facsimile transmission) in one or more counterparts, and
by the different parties hereto in separate counterparts, each of which when
executed shall be deemed to be an original but all of which taken together shall
constitute one and the same agreement.
SECTION 10.12. Language. The parties hereto confirm that it is their
wish that this Agreement, as well as all other documents related hereto,
including legal notices, have been and shall be drawn up in the English language
only and that such documents will be construed only in the English language. Les
parties confirment leur xxxxx que cet accord ainsi que tous les documents, y
compris toutes les notifications qui s'y rattachent, soient rediges en langue
anglaise.
SECTION 10.13. Waiver of Conflicts. (a) Each party to this Agreement
acknowledges that Xxxxxx Godward LLP ("Xxxxxx Godward"), outside general counsel
to the Issuer, has in the past performed and is or may now or in the future
represent one or more Principal Company Shareholders or their affiliates in
matters unrelated to the Transactions. The applicable rules of professional
conduct require that Xxxxxx Godward inform the parties hereunder of this
representation and obtain their consent. Cooley Godward has served as outside
general counsel to the Issuer and has negotiated the terms of the Transactions
solely on behalf of the Issuer. The Issuer and each Principal Company
Shareholder hereby (i) acknowledge that they have had an opportunity to ask for
and have obtained information relevant to such representation, including
disclosure of the reasonably foreseeable adverse consequences of such
representation; (ii) acknowledge that with respect to the Transactions, Cooley
Godward has represented solely the Issuer, and not any Principal Company
Shareholder or Other Shareholder or any stockholder, director or employee of the
Company or any Principal Company Shareholder or Other Shareholder; and (iii)
gives its informed consent to Cooley Godward's representation of the Issuer in
the Transactions.
(b) Each party to this Agreement acknowledges that Shearman & Sterling
LLP ("Shearman & Sterling"), outside general counsel to the Company, has in the
past performed and is or may now or in the future represent one or more
Principal Company Shareholders or their affiliates in matters unrelated to the
Transactions. The applicable rules of professional conduct require that Shearman
& Sterling inform the parties hereunder of this representation and obtain their
consent. Shearman & Sterling has served as outside general counsel to the
Company and has negotiated the terms of the Transactions solely on behalf of the
Company. The Issuer and each Principal Company Shareholder hereby (i)
acknowledge that they have had an opportunity to ask for and have obtained
information relevant to such representation, including disclosure of the
reasonably foreseeable adverse consequences of such
86
representation; (ii) acknowledge that with respect to the Transactions, Shearman
& Sterling has represented solely the Company, and not the Issuer, any Principal
Company Shareholder, any Other Shareholder or any stockholder, director or
employee of the Company, the Issuer, any Principal Company Shareholder or any
Other Shareholder; and (iii) gives its informed consent to Shearman & Sterling's
representation of the Company in the Transactions.
SECTION 10.14. Effectiveness of Agreement. This Agreement shall become
effective only upon the execution hereof by Principal Company Shareholders who
own, of record and beneficially, in the aggregate, the number of Company Shares
representing at least 85% of the shares of the capital stock and voting rights
of the Company as calculated in accordance with Section 6.1 of the Company
Shareholders Agreement as of the Effective Date.
87
IN WITNESS WHEREOF, the parties hereto have executed, or have caused
to be executed by their respective officers thereunto duly authorized, this
Agreement as of the date first written above.
EPIMMUNE INC.
By: /s/ Xxxxx Xxxxx
----------------------------------------
Name: Xxxxx Xxxxx
Title: President and Chief Executive Officer
PRINCIPAL COMPANY SHAREHOLDERS :
AA INNOVATION 2002
By: XAnge Private Equity
By: /s/ Xxxxx Xxxxxxxx
----------------------------------------
Name: Xxxxx Xxxxxxxx
Title: Chief Executive Officer
ALTA BIOPHARMA PARTNERS, L.P.
By: Alta BioPharma Management, LLC
By: /s/ Xxxx Xxxxxxx
----------------------------------------
Name: Xxxx Xxxxxxx
Title: Managing Director
ALTA EMBARCADERO BIOPHARMA PARTNERS, LLC
By: /s/ Xxxxxx Xxxxxx
----------------------------------------
Name: Xxxxxx Xxxxxx, Attorney-in-Fact
ALTAMIR & CO.
By: Apax Partners
By: /s/ Xxxxxxx Xxxxx
----------------------------------------
Name: Xxxxxxx Xxxxx
Title: Partner
APAX FRANCE IV
By: Apax Partners
By: /s/ Xxxxxxx Xxxxx
----------------------------------------
Name: Xxxxxxx Xxxxx
Title: Partner
APAX PARTNERS CLUB
By: Apax Partners
By: /s/ Xxxxxxx Xxxxx
----------------------------------------
Name: Xxxxxxx Xxxxx
Title: Partner
ATLAS VENTURE ENTREPRENEURS' FUND III, L.P.
By: Atlas Venture Associates III, L.P.
By: /s/ Xxxxxx Xxxxxx Xxxxx
----------------------------------------
Name: Xxxxxx Xxxxxx Xxxxx
Title: Vice President
ATLAS VENTURE FUND III, L.P.
By: Atlas Venture Associates III, L.P.
By: /s/ Xxxxxx Xxxxxx Xxxxx
----------------------------------------
Name: Xxxxxx Xxxxxx Xxxxx
Title: Vice President
BANEXI S.C.R.
By: /s/ Xxxxxx Xxxxx
----------------------------------------
Name: Xxxxxx Xxxxx
Title: President Directeur General
BIOTECH TURNAROUND FUND B.V.
By: /s/ Jan Mellegers
----------------------------------------
Name: Jan Mellegers
Title: Chief Executive Officer
BIOTEK PARTENAIRES S.A.
By: /s/ Xxxxxx Xxxxxx
----------------------------------------
Name: Xxxxxx Xxxxxx
Title: President
BNP PARIBAS LONDON BRANCH
By: /s/ Pierre-Xxxxx Xxxxxxxx
----------------------------------------
Name: Pierre-Xxxxx Xxxxxxxx,
Authorized Signatory
By: /s/ Anthony Don
----------------------------------------
Name: Anthony Don, Authorized Signatory
CDC INNOVATION 1996 FCPR
By: /s/ Chantal Parpex
----------------------------------------
Name: Chantal Parpex
Title: President
CERN PENSION FUND
By: /s/ Xxxxxxxxx Xxxxxxx
----------------------------------------
Name: Xxxxxxxxx Xxxxxxx
Title: Administrator
CLAL BIOTECHNOLOGY INDUSTRIES
By: /s/ Xxxx Xxxxxxxx
----------------------------------------
Name: Xxxx Xxxxxxxx
Title: Executive Director
By: /s/ Xxxxx Xxxxx
----------------------------------------
Name: Xxxxx Xxxxx
Title: Chief Technology Officer
COMPAGNIE LEBON
By: /s/ Xxxx-Xxxxx Paluel-Xxxxxx
----------------------------------------
Name: Xxxx-Xxxxx Paluel-Xxxxxx
Title: President - Directeur General
CREDIT LYONNAIS FONDS SECONDAIRE 1
By: Credit Agricole Private Equity
By: /s/ Xxxxxx Xxxxxxx
----------------------------------------
Name: Xxxxxx Xxxxxxx
Title: Head of Secondary Market Activity
CROISSANCE DISCOVERY FCPR
By: Xxxxxx xx Xxxxxxxxxx Investment Partners
By: /s/ Xxxxxxx Xxxxxxxxxx
----------------------------------------
Name: Xxxxxxx Xxxxxxxxxx
Title: Investment Manager
FIN LLC
By: /s/ Xxxxx X. Xxxxxx
----------------------------------------
Name: Xxxxx X. Xxxxxx
Title: Managing Director
FRANCE INNOVATION 4
By: XAnge Private Equity
By: /s/ Xxxxx Xxxxxxxx
----------------------------------------
Name: Xxxxx Xxxxxxxx
Title: Chief Executive Officer
XXX XXXXXXX
By: /s/ Xxx Xxxxxxx
----------------------------------------
Name: Xxx Xxxxxxx
XXXXX XXXXXXXX XX XXXXXXX
By: /s/ Xxxxx Xxxxxxxx xx Xxxxxxx
----------------------------------------
Name: Xxxxx Xxxxxxxx xx Xxxxxxx
IDM CHASE PARTNERS (ALTA BIO), LLC
By: Alta/Chase BioPharma Management, LLC
By: /s/ Xxxx Xxxxxxx
----------------------------------------
Name: Xxxx Xxxxxxx
Title: Member
IMH HANNOVER VENTURE CAPITAL GMBH & CO KG
By: /s/ Xxxxxxx xxx Xxxxxx
----------------------------------------
Name: Xxxxxxx xxx Xxxxxx
Title: Managing Director
INVESTISSEMENT INNOVATION 2002
By: XAnge Private Equity
By: /s/ Xxxxx Xxxxxxxx
----------------------------------------
Name: Xxxxx Xxxxxxxx
Title: Chief Executive Officer
XXXX-LOUP ROMET-LEMONNE
By: /s/ Xxxx-Loup Romet-Lemonne
----------------------------------------
Name: Xxxx-Loup Romet-Lemonne
MEDAREX, INC.
By: /s/ Xxxxxxxxx X. Xxxxxx
----------------------------------------
Name: Xxxxxxxxx X. Xxxxxx
Title: Chief Financial Officer
MERCURE DISCOVERY II FCPR
By: Xxxxxx xx Xxxxxxxxxx Investment Partners
By: /s/ Xxxxxxx Xxxxxxxxxx
----------------------------------------
Name: Xxxxxxx Xxxxxxxxxx
Title: Investment Manager
PECHEL INDUSTRIES
By: /s/ Xxxxxx Xxxxx
----------------------------------------
Name: Xxxxxx Xxxxx
Title: Chairman
PRIVATE EQUITY CO-FINANCE
By: /s/ Xxxx Xxxxxx
----------------------------------------
Name: Xxxx Xxxxxx
Title: Director
By: /s/ Xxxx XxXxxxxxxx
----------------------------------------
Name: Xxxx XxXxxxxxxx
Title: Director
SANOFI-AVENTIS
By: /s/ Xxxx-Xxxxxx Xxxxx
----------------------------------------
Name: Xxxx-Xxxxxx Xxxxx
Title: Chief Financial Officer
By: /s/ Xxxxxxxx Xxxxxx
----------------------------------------
Name: Xxxxxxxx Xxxxxx
Title: Legal Counsel
SHEARMAN & STERLING LLP
By: /s/ Xxxxxx Xxxxxxx
----------------------------------------
Name: Xxxxxx Xxxxxxx
Title: Partner
SOCIETE BEARNAISE DE PARTICIPATIONS
By: /s/ Xxxxxx Xxxxx
----------------------------------------
Name: Xxxxxx Xxxxx
Title: Corporate Secretary
SOFINNOVA CAPITAL II FCPR
By: /s/ Xxxxx Xxxxxxx
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Name: Xxxxx Xxxxxxx
Title: Partner
EXHIBIT B
DEFINED TERMS
(a) For purposes of this Agreement (including this Exhibit B):
"affiliate" of a specified person means a person who, directly or
indirectly through one or more intermediaries, controls, is controlled by, or is
under common control with such specified person.
"beneficial owner", with respect to any Shares, has the meaning ascribed
to such term under Rule 13d-3(a) of the Exchange Act.
"business day" means any day on which the principal offices of the SEC in
Washington, D.C. are open to accept filings, or, in the case of determining a
date when any payment is due, any day on which banks are not required or
authorized to close in Paris, France or San Diego, California.
"Code" means the United States Internal Revenue Code of 1986, as amended.
"Company Executive Officer" means each of Xxxx-Loup Romet-Lemonne, Xxxxx
Xxxxxxxx xx Xxxxxxx, Xxx-Xxxxxxx Fanneau de xx Xxxxx, Xxxx-Xxxxxx Xxxxxxxx and
Xxxxxx Xxxxx.
"Company Material Adverse Effect" means any event, circumstance, change or
effect that, individually or in the aggregate with all other events,
circumstances, changes and effects, (i) is or would reasonably be likely to be
materially adverse to the business, condition (financial or otherwise), assets,
liabilities or results of operations of the Company and its subsidiaries taken
as a whole or (ii) results in the receipt by the Company of notice from any Drug
Regulatory Agency, whether in writing or based on minutes of a call or meeting
with such Drug Regulatory Agency, which is or would be likely to be materially
adverse to the manufacturing, sale, marketing and distribution of Mepact;
provided, however, that none of the foregoing shall include any event,
circumstance, change or effect resulting from (w) changes in general economic
conditions in the United States or the European Union or changes in U.S.
securities markets in general, (x) general changes in the industry in which the
Company and its subsidiaries operate, except those events, circumstances,
changes or effects that adversely affect the Company and its subsidiaries to a
materially greater extent than they affect other entities operating in such
industry, (y) the public announcement or pendency of the transactions
contemplated hereby, or (z) changes in accounting requirements or applicable
Laws, rules or regulations after the date of this Agreement.
"Company Owned Intellectual Property" means all material Intellectual
Property owned (in whole or in part) by the Company or a Company Subsidiary.
"Company Shareholder Agreement" means the IDM Shareholders Agreement,
dated as of December 20, 1996, by and among shareholders of the Company, as
modified by the August 31, 1998 First Supplemental Shareholders Agreement, the
October 29,
1998 Second Supplemental Shareholders Agreement, the January 7, 2000
Third and Fourth Supplemental Agreements, the October 6, 2000 Fifth Supplemental
Agreement, the November 22, 2000 Sixth Supplemental Agreement, the January 10,
2003 Seventh Supplemental Agreement and the April 7, 2003 Eighth Supplemental
Agreement.
"control" (including the terms "controlled by" and "under common control
with") means the possession, directly or indirectly, or as trustee or executor,
of the power to direct or cause the direction of the management and policies of
a person, whether through the ownership of voting securities, as trustee or
executor, by contract or credit arrangement or otherwise.
"DGCL" means the General Corporation Law of the State of Delaware.
"Environmental Laws" means any United States federal, state or local or
non-United States laws relating to: (i) releases or threatened releases of
Hazardous Substances or materials containing Hazardous Substances; (ii) the
manufacture, handling, transport, use, treatment, storage or disposal of
Hazardous Substances or materials containing Hazardous Substances; or (iii)
pollution or protection of the environment, health, safety or natural resources.
"Governmental Authority" means any United States, French or other federal,
state, county or local government, governmental, regulatory or administrative
authority, agency, instrumentality or commission or any court, tribunal, or
judicial or arbitral body.
"Governmental Authorization" shall mean any permit, license, certificate,
franchise, concession, approval, consent, ratification, permission, clearance,
confirmation, endorsement, waiver, certification, designation, rating,
registration, qualification or authorization that is or has been issued,
granted, given or otherwise made available by or under the authority of any
Governmental Authority or pursuant to any applicable Law.
"Governmental Order" means any order, writ, judgment, injunction, decree,
stipulation, determination or award entered by or with any Governmental
Authority.
"Hazardous Substances" means: (i) those substances defined in or regulated
under the following United States federal statutes and their state counterparts,
as each may be amended from time to time, and all regulations thereunder: the
Hazardous Materials Transportation Act, the Resource Conservation and Recovery
Act, the Comprehensive Environmental Response, Compensation and Liability Act,
the Clean Water Act, the Safe Drinking Water Act, the Atomic Energy Act, the
Federal Insecticide, Fungicide, and Rodenticide Act and the Clean Air Act; (ii)
petroleum and petroleum products, including crude oil and any fractions thereof;
(iii) natural gas, synthetic gas, and any mixtures thereof; (iv) polychlorinated
biphenyls, asbestos and radon; (v) any other contaminant; and (vi) any
substance, material or waste regulated by any Governmental Authority pursuant to
any Environmental Law.
"Intellectual Property" means: (i) United States, non-United States and
international patents, patent applications and statutory invention
registrations; (ii)
trademarks, service marks, trade dress, logos, trade names, corporate names and
other source identifiers, and registrations and applications for registration
thereof; (iii) copyrightable works, copyrights, and registrations and
applications for registration thereof; and (iv) confidential and proprietary
information, including trade secrets and know-how.
"Issuer Executive Officer" means each of Emile Xxxxx, Xxxxxx De Vaere and
Xxxx Xxxxxx.
"Issuer Material Adverse Effect" means any event, circumstance, change or
effect that, individually or in the aggregate with all other events,
circumstances, changes and effects, is or would reasonably be likely to be
materially adverse to the business, condition (financial or otherwise), assets,
liabilities or results of operations of the Issuer and its subsidiaries taken as
a whole; provided, however, that the foregoing shall include any event,
circumstance, change or effect resulting from (i) changes in general economic
conditions in the United States or European Union or changes in U.S. securities
markets in general, (ii) general changes in the industry in which the Issuer and
its subsidiaries operate, except those events, circumstances, changes or effects
that adversely affect the Issuer and its subsidiaries to a materially greater
extent than they affect other entities operating in such industry, (iii) the
public announcement or pendency of the transactions contemplated hereby, or (iv)
changes in accounting requirements or applicable Laws, rules or regulations
after the date of this Agreement.
"Issuer Owned Intellectual Property" means all material Intellectual
Property owned (in whole or in part) by the Issuer.
"Knowledge of the Company" means the knowledge of Xxxx-Loup Romet-Lemonne,
Xxxxx Xxxxxxxx xx Xxxxxxx, Xxx-Xxxxxxx Fanneau de xx Xxxxx, Xxxx-Xxxxxx
Xxxxxxxx, Xxxxxx Xxxxx and Xxxxxxx Bartholeyns, after a reasonable
investigation.
"Knowledge of the Issuer" means the knowledge of Emile Xxxxx, Xxxxxx De
Vaere, Xxxx Xxxxxx and Xxxxxx Xxxxxx, after a reasonable investigation.
"Law" means any United States, French or other statue, law, ordinance,
regulation, rule, code, executive order, injunction, decree or other order.
"Liabilities" means any and all debts, liabilities and obligations,
whether accrued or fixed, absolute or contingent, matured or unmatured or
determined or determinable, including those arising under any Law (including any
Environmental Law), Action or Governmental Order and those arising under any
contract, agreement, arrangement, commitment or undertaking.
"Permitted Liens" means: (i) Liens for current taxes and assessments not
yet past due; (ii) inchoate mechanics' and materialmen's Liens for construction
in progress; (iii) workmen's, repairmen's, warehousemen's and carriers' Liens
arising in the ordinary course of business consistent with past practice; and
(iv) all matters of record, Liens and other imperfections of title and
encumbrances that, individually or in the aggregate,
would not, individually or in the aggregate, have a Company Material Adverse
Effect or an Issuer Material Adverse Effect, as the case may be.
"person" means an individual, corporation, partnership, limited
partnership, limited liability company, syndicate, person (including, without
limitation, a "person" as defined in Section 13(d)(3) of the Exchange Act),
trust, association or entity or government, political subdivision, agency or
instrumentality of a government.
"subsidiary" or "subsidiaries" of the Company, the Issuer or any other
person means an affiliate controlled by such person, directly or indirectly,
through one or more intermediaries.
"Taxes" shall mean any and all taxes, fees, levies, duties, tariffs,
imposts and other charges of any kind (together with any and all interest,
penalties, additions to tax and additional amounts imposed with respect thereto)
imposed by any Governmental Authority or taxing authority, including, without
limitation: taxes or other charges on or with respect to income, franchise,
windfall or other profits, gross receipts, property, sales, use, capital stock,
payroll, employment, social security, workers' compensation, unemployment
compensation or net worth; taxes or other charges in the nature of excise,
withholding, ad valorem, stamp, transfer, value-added or gains taxes; license,
registration and documentation fees; and customers' duties, tariffs and similar
charges.
(b) For purposes of this Agreement (including this Exhibit B), the
following terms have the meaning set forth in the Sections set forth below:
Defined Term Location of Definition
------------ ----------------------
2004 Company Financial Statements......... Section 6.16(a)
Action.................................... Section 2.09
Additional Funding Request................ Section 9.04(c)
Additional Funds.......................... Section 9.04(c)
Agence Francaise.......................... Section 2.06(b)
Agreement................................. Preamble
Anosys Agreement.......................... Section 4.23
Average Closing Price..................... Section 1.02(d)
Blackout Period........................... Section 6.07(b)
Blue Sky Laws............................. Section 2.05(b)
Closing................................... Section 1.03
Closing Date.............................. Section 1.03
Company................................... Preamble
Company A Shares.......................... Recitals
Company B Shares.......................... Recitals
Company Board............................. Recitals
Company Designated Directors.............. Section 6.11(a)
Company Disclosure Schedule............... Article II
Company Financial Statements.............. Section 2.07(a)
Company Interim Financial Statements...... Section 2.07(a)
Company Lease Documents................... Section 2.12(b)
Company Licensed Intellectual Property.... Section 2.13(a)
Company Permits........................... Section 2.06(a)
Company Plans............................. Section 2.10(a)
Company Product Candidates................ Section 2.06(b)
Company Registered Intellectual Property.. Section 2.13(a)
Company Regulatory Permits................ Section 2.06(b)
Company Shareholders Agreement............ Recitals
Company Shareholders' Meeting............. Section 6.16(a)
Company Shares............................ Recitals
Company Stock Option Plans................ Section 1.07(a)
Company Stock Options..................... Section 1.07(a)
Company Subsidiary........................ Section 2.01(a)
Company Warrants.......................... Section 1.08(a)
Competing Transaction..................... Section 6.04(c)
Confidentiality Agreement................. Section 6.03(c)
Convertible Redeemable Bonds.............. Section1.08(b)
Xxxxxx Godward............................ Section 10.13(a)
Counterbid................................ Section 1.10(a)
Drug Regulatory Agencies.................. Section 2.06(b)
Effective Date............................ Preamble
EMEA...................................... Section 2.06(b)
Employment Agreements..................... Recitals
End Date.................................. Section 8.01(b)
ERISA..................................... Section 2.10(a)
Escrow Agreements......................... Section 1.06(b)
Exchange Act.............................. Section 1.07(e)
Exchange Consideration.................... Section 1.02(a)
Exchange Ratio............................ Section 1.02(b)
Expenses.................................. Section 8.03(a)
Expense Escrow Agent...................... Section 1.06(b)
Expense Escrow Agreement.................. Section 1.06(b)
Expense Escrow Fund....................... Section 9.04(c)
Expense Escrow Shares..................... Section 1.06(b)
FDA....................................... Section 2.06(b)
Fee....................................... Section 8.03(b)
First Equity Financing.................... Section 1.09(a)
French GAAP............................... Section 2.07(a)
French Company Optionholders.............. Section 1.07(b)
Funding Request Notice.................... Section 9.04(c)
HSR Act................................... Section 2.05(b)
IRS....................................... Section 2.10(a)
Indemnified Party......................... Section 9.03(a)
Indemnifying Party........................ Section 9.03(a)
Indemnity Escrow Agent.................... Section 1.06(a)
Indemnity Escrow Agreement................ Section 1.06(a)
Indemnity Escrow Shares................... Section 1.06(a)
Issuer.................................... Preamble
Issuer Board.............................. Recitals
Issuer Capital Stock Increase............. Recitals
Issuer Certificate of Incorporation....... Recitals
Issuer Common Stock....................... Recitals
Issuer Disclosure Schedule................ Article IV
Issuer ESPP Amendment..................... Recitals
Issuer French ESPP........................ Section 6.14(a)
Issuer French Stock Option Plan........... Recitals
Issuer Indemnified Party.................. Section 9.02(a)
Issuer Lease Documents.................... Section 4.12(b)
Issuer Licensed Intellectual Property..... Section 4.13(a)
Issuer Name Change........................ Recitals
Issuer Permits............................ Section 4.06(a)
Issuer Plans.............................. Section 4.10(a)
Issuer Preferred Stock.................... Section 4.03(a)
Issuer Product Candidates................. Section 4.06(b)
Issuer Registered Intellectual Property... Section 4.13(a)
Issuer Regulatory Permits................. Section 4.06(b)
Issuer Reverse Stock Split................ Recitals
Issuer Rights Agreement................... Section 4.03(d)
Issuer SEC Reports........................ Section 4.07(a)
Issuer Stock Awards....................... Section 4.03(a)
Issuer Stock Option Plan Amendment........ Recitals
Issuer Stock Option Plans................. Section 4.03(a)
Issuer Stock Options...................... Section 4.03(a)
Issuer Stockholders' Meeting.............. Section 6.01(a)
Issuer Transactions....................... Recitals
Joinder Agreement......................... Section 1.10(b)
Liens..................................... Section 2.12(a)
Loss...................................... Section 9.02(a)
Material Company Contracts................ Section 2.16(a)
Material Issuer Contracts................. Section 4.16(a)
Medarex................................... Section 1.08(b)
Medarex Amendment......................... Section 6.16(a)
Medarex Warrants.......................... Section 1.08(b)
Multiemployer Plan........................ Section 2.10(b)
Multiple Employer Plan.................... Section 2.10(b)
Nasdaq.................................... Section 1.02(d)
Non-French Company Optionholder........... Section 1.07(c)
Non-U.S. Company Plan..................... Section 2.10(g)
Offer Notification........................ Section 1.10(a)
Option Liquidity Agreement................ Section 1.07(b)
Option Liquidity Share Issuance........... Recitals
Order..................................... Section 7.01(b)
Organizational Documents.................. Section 2.02(a)
Other Shareholders........................ Section 1.10(a)
PEA....................................... Section 1.09(a)
PEA Warrant............................... Section 1.09(b)
Pre-Closing Period........................ Section 5.01(a)
Preferred Exchange Agreement.............. Section 6.09(a)
Preferred Holder.......................... Section 6.09(a)
Principal Company Shareholders............ Preamble
Pro Rata Amount........................... Section 9.04(c)
Proxy Statement........................... Section 6.01(a)
Put/Call Agreement........................ Section 1.09(a)
Representatives........................... Section 6.03(a)
Resale Registration Statement............. Section 6.07(a)
Sanofi.................................... Section 1.08(c)
Sanofi Amendment.......................... Section 6.16(a)
Sanofi Warrants........................... Section 1.08(c)
SEC....................................... Section 4.07(a)
Securities Act............................ Section 1.02(f)
Series S Preferred Stock.................. Section 4.03(a)
Series S-1 Preferred Stock................ Section 4.03(a)
Share Exchange............................ Recitals
Shareholder Representative................ Section 9.04(a)
Shearman & Sterling....................... Section 10.13(b)
Superior Proposal......................... Section 6.04(d)
Substitute Option......................... Section 1.07(c)
Terminating Company Breach................ Section 8.01(f)
Terminating Issuer Breach................. Section 8.01(g)
Transactions.............................. Section 2.01(a)
Transfer.................................. Section 6.12(a)
Third Party Acquisition................... Section 8.03(d)
Third Party Claim......................... Section 9.03(c)
Triggering Event.......................... Section 8.01
U.S. GAAP................................. Section 4.07(b)
Voting Agreements......................... Recitals
Warrant Amendments........................ Section 6.16(a)
