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Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
AMONG
ANTIGENICS INC., NASA MERGER CORP.,
AND ARONEX PHARMACEUTICALS, INC.
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Dated as of April 23, 2001
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") dated as of April
23, 2001 is among Antigenics Inc. ("Parent"), a Delaware corporation, Nasa
Merger Corp. ("Merger Sub"), a Delaware corporation and Aronex Pharmaceuticals,
Inc. (the "Company"), a Delaware corporation. The parties wish to effect the
acquisition of the Company by Parent through a merger (the "Merger") of Merger
Sub with and into the Company on the terms and conditions set forth herein.
R E C I T A L S
A. For United States Federal income tax purposes, it is intended that
the Merger will qualify as a reorganization under the provisions of Section
368(a) of the Internal Revenue Code of 1986, as amended (the "Code"), and that
this Agreement constitutes a plan of reorganization within the meaning of
Section 1.368-2(g) of the income tax regulations promulgated under the Code. For
financial accounting purposes, it is intended that the Merger will be accounted
for using the purchase method of accounting.
B. As a condition to, and concurrently with the execution of, this
Agreement, Essex Woodlands Health Ventures IV, L.L.C., executive officers, and
directors have executed and delivered to Parent an irrevocable agreement to vote
all shares of voting stock held by them in favor of adoption of this Agreement.
In consideration of the mutual representations, warranties and
covenants contained herein, the parties hereto agree as follows:
SECTION 1 - THE MERGER
1.1 The Merger.
(a) Upon the terms and subject to the conditions hereof, and
in accordance with the General Corporation Law of the State of Delaware (the
"DGCL"), Merger Sub shall be merged with and into the Company. The Merger shall
occur at the Effective Time (as defined herein). Following the Merger, the
Company shall continue as the surviving corporation (sometimes referred herein
as the "Surviving Corporation") and the separate corporate existence of Merger
Sub shall cease.
(b) The name of the Surviving Corporation shall be Aronex
Pharmaceuticals, Inc.
1.2 Effective Time. As soon as practicable after satisfaction or waiver
of all conditions to the Merger, the parties shall cause a certificate of merger
(the "Certificate of Merger") with respect to the Merger to be filed and
recorded in accordance with the DGCL and shall take all such further actions as
may be required by law to make the Merger effective. The Merger shall be
effective at such time as the Certificate of Merger is duly filed with the
Secretary of State of Delaware in accordance with the DGCL or at such later time
as is specified in the Certificate of Merger (the "Effective Time"). Immediately
prior to the filing of the Certificate of
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Merger, a closing (the "Closing") will be held at the offices of Palmer & Dodge
LLP, One Beacon Street, Boston, Massachusetts (or such other place as the
parties may agree) for the purpose of confirming the foregoing. The date on
which the Closing occurs is referred to herein as the "Closing Date," and,
unless the parties otherwise agree, shall be no later than the fifth business
day after the satisfaction or waiver of the conditions set forth in Sections 5,
6 and 7 (other than delivery of items to be delivered at the Closing).
1.3 Effects of the Merger. The Merger shall have the effects set forth
in Sections 259, 260 and 261 of the DGCL.
1.4 Certificate of Incorporation and By-Laws. The Certificate of
Incorporation and By-Laws of Merger Sub, in each case as in effect immediately
prior to the Effective Time, shall be the Certificate of Incorporation and
By-Laws of the Surviving Corporation until thereafter changed as provided
therein or by applicable law.
1.5 Directors and Officers. The directors and officers of Merger Sub
immediately prior to the Effective Time shall be the directors and officers of
the Surviving Corporation, in each case, until the earlier of his or her
resignation or removal or otherwise ceasing to be a director or officer, as the
case may be, or until his or her respective successor is duly elected and
qualified. Each current director of the Company shall submit his or her
resignation at the Closing to be effective at the Effective Time.
1.6 Conversion of Common Stock
(a) At the Effective Time, by virtue of the Merger and without
any action on the part of Parent or the Company:
(i) Subject to payment of cash in lieu of fractional
shares as provided in Section 1.6(a)(ii), each share of Company common stock,
$0.001 par value per share (together with the associated Rights, as defined in
Section 2.20(c), the "Company Common Stock"), outstanding immediately prior to
the Effective Time, other than shares held by the Company as treasury stock or
shares held by any Company Subsidiary (as defined in Section 2.4(a)), shall be
cancelled and extinguished and automatically converted into and become the right
to receive (a) a fraction of a share of Parent common stock, $0.01 par value per
share ("Parent Common Stock") equal to the Exchange Ratio and (b) one contingent
value right (a "Contingent Value Right") to be issued pursuant to the Contingent
Value Rights Agreement (the "CVR Agreement") in the form of Exhibit A hereto
entered into between Parent and a bank or financial or similar institution. The
Exchange Ratio shall equal $1.10 divided by the Closing Parent Price, provided,
however, in no event shall the Exchange Ratio exceed .0917 or be less than
.0550. The "Closing Parent Price" shall equal the average of the per share
closing prices of Parent Common Stock as reported by the Nasdaq National Market
for the ten trading days ending two trading days prior to the Closing Date,
rounded to the fourth decimal place. Notwithstanding the foregoing, if prior to
the Effective Time there is a change in the number of issued and outstanding
shares of Parent Common Stock as the result of reclassification, subdivision,
recapitalization, stock split (including reverse stock split) or stock dividend,
the number of shares of Parent Common Stock issued in the Merger shall be
equitably adjusted to give effect to such event. The shares of Parent Common
Stock payable pursuant to this Section 1.6(a)(i), together
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with cash payments in lieu of fractional shares pursuant to Section 1.6(a)(ii)
and any cash paid or additional shares of Parent Common Stock issued in
connection with the Contingent Value Rights, are referred to collectively as the
"Merger Consideration."
(ii) No fractional shares of Parent Common Stock
shall be issued pursuant to this Agreement. In lieu of fractional shares, each
stockholder who would otherwise have been entitled to a fraction of a share of
Parent Common Stock hereunder (after aggregating all fractional shares to be
received by such stockholder), shall receive, without interest, an amount in
cash (rounded to the nearest whole cent) determined by multiplying such fraction
by the per share closing price of Parent Common Stock as reported by the Nasdaq
on the trading day on which the Effective Time occurs (or, if the Effective Time
occurs on a date that is not a trading day, on the immediately preceding trading
day).
(b) All shares of Company Common Stock held at the Effective
Time by the Company as treasury stock or by a Company Subsidiary shall be
cancelled and extinguished and no payment shall be made with respect thereto.
(c) Each issued and outstanding share of the capital stock of
Merger Sub shall be converted into and become one fully paid and nonassessable
share of common stock, par value $0.01 per share, of the Surviving Corporation.
1.7 Company Options, Warrants, Convertible Note, and Purchase Rights
(a) At the Effective Time, each outstanding option to purchase
shares of Company Common Stock (the "Company Options") under the Company's
Amended and Restated 1989 Stock Option Plan, the Company's Amended and Restated
1998 Stock Option Plan, and the Company's Amended and Restated 1993 Non-Employee
Director Stock Option Plan, as amended (the "Company Stock Option Plans"),
whether or not then exercisable, shall be assumed by Parent. Each Company Option
so assumed by Parent under this Agreement shall continue to have, and be subject
to, the same terms and conditions set forth in the applicable Company Stock
Option Plan immediately prior to the Effective Time (including, without
limitation, any repurchase rights), except that (i) each Company Option shall be
exercisable (or shall become exercisable in accordance with its terms) for (a)
that number of shares of Parent Common Stock equal to the product of the number
of shares of Company Common Stock that were issuable upon exercise of such
Company Option immediately prior to the Effective Time multiplied by the
Exchange Ratio, rounded down to the nearest whole number of shares of Parent
Common Stock, and (b) either (A) if the Company Option is exercised prior to the
Milestone Date as such term is defined in the CVR Agreement, that number of
Contingent Value Rights equal to the number of shares of Company Common Stock
subject to such Company Option immediately prior to the Effective Time (the
"Option Contingent Value Rights"), or (B) if the Company Option is exercised
after the Milestone Date as such term is defined in the CVR Agreement, that
number of shares of Parent Common Stock that would have been issued, if any, had
the holder of the Company Option held such Option Contingent Value Rights on the
Milestone Date; and (ii) the per share exercise price for the shares of Parent
Common Stock issuable upon exercise of such assumed Company Option shall be
equal to the quotient determined by dividing the exercise price per share of
Company Common Stock at which such Company Option was exercisable immediately
prior to the Effective Time by the Exchange
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Ratio, rounded up to the nearest whole cent. After the Effective Time, Parent
shall issue to each holder of an outstanding Company Option a notice describing
the foregoing assumption of such Company Options by Parent. The adjustments
provided herein with respect to any Company Options that are "incentive stock
options" as defined in Section 422 of the Code shall be and are intended to be
effected in a manner which is consistent with Section 424(a) of the Code so as
to preserve the benefits of such "incentive stock options."
(b) At the Effective Time, each outstanding warrant to
purchase shares of Company Common Stock (the "Company Warrants"), whether or not
then exercisable, shall be assumed by Parent. Each Company Warrant so assumed by
Parent under this Agreement shall continue to have, and be subject to, the same
terms and conditions set forth in the applicable warrant immediately prior to
the Effective Time (including, without limitation, any repurchase rights),
except that (i) each Company Warrant shall be exercisable (or shall become
exercisable in accordance with its terms) for (a) that number of shares of
Parent Common Stock equal to the product of the number of shares of Company
Common Stock that were issuable upon exercise of such Company Warrant
immediately prior to the Effective Time multiplied by the Exchange Ratio,
rounded to the nearest whole number of shares of Parent Common Stock, and (b)
either (A) if the Company Warrant is exercised prior to the Milestone Date as
such date is defined in the CVR Agreement, that number of Contingent Value
Rights equal to the number of shares of Company Common Stock subject to such
Company Warrant immediately prior to the Effective Time (the "Warrant Contingent
Value Rights"), or (B) if the Company Warrant is exercised after the Milestone
Date as such term is defined in the CVR Agreement, that number of shares of
Parent Common Stock that would have been issued, if any, had the holder of the
Company Warrant held such Warrant Contingent Value Rights on the Milestone Date;
and (ii) the per share exercise price for the shares of Parent Common Stock
issuable upon exercise of such assumed Company Warrant shall be equal to the
quotient determined by dividing the exercise price per share of Company Common
Stock at which such Company Warrant was exercisable immediately prior to the
Effective Time by the Exchange Ratio, rounded to the nearest whole cent. After
the Effective Time, Parent shall issue to each holder of an outstanding Company
Warrant a notice describing the foregoing assumption of such Company Warrants by
Parent.
(c) At the Effective Time, the Surviving Corporation shall
assume all obligations and duties of the Company under its outstanding $2.5
million 10% Convertible Note dated May 21, 1999 (the "Convertible Note") and the
Convertible Note shall continue to have, and be subject to, the same terms and
conditions set forth in the Convertible Note immediately prior to the Effective
Time, except that the Convertible Note shall be convertible into whole shares of
Parent Common Stock and cash in lieu of fractional shares calculated as follows:
(A) the Conversion Price (as defined in the Convertible Note), immediately after
the Effective Time, shall equal the (x) the Conversion Price in effect
immediately prior to the Effective Time divided by (y) the Exchange Ratio, (B)
cash in lieu of fractional shares shall be paid, immediately after the Effective
Time, based upon the Conversion Price in effect immediately after the Effective
Time, and (C) either (i) if the Convertible Note is converted prior to the
Milestone Date as such term is defined in the CVR Agreement, that number of
Contingent Value Rights equal to the number of shares of Company Common Stock
issuable upon conversion of the Convertible Note immediately prior to the
Effective Time (the "Note Contingent Value Rights"), or (ii) if the Convertible
Note is converted after the Milestone Date as such term is defined in the CVR
Agreement, that number of shares of Parent Common Stock that would have
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been issued, if any, had the holder of the Convertible Note held such Note
Contingent Value Rights on the Milestone Date.
(d) The Company shall amend its 1997 Employee Stock Purchase
Plan (the "Company Purchase Plan") so that as of the Effective Time (i) the
Company Purchase Plan is terminated and (ii) there are no outstanding rights of
participants under the Company Purchase Plan. Prior to the Effective Time, the
Company shall take all actions (including, if appropriate, amending the terms of
the Company Purchase Plan) that are necessary to give effect to this Section
1.7(d).
1.8 Closing of Company Transfer Books. At the Effective Time, the stock
transfer books of the Company shall be closed and no further registration of
transfers of shares of Company Common Stock shall thereafter be made. On or
after the Effective Time, any Certificates presented to the Exchange Agent (as
defined in Section 1.9) or Parent for any reason shall be converted into the
right to receive the Merger Consideration with respect to the shares of Company
Common Stock formerly represented thereby and any dividends or other
distributions to which the holders thereof are entitled pursuant to Section
1.13. For purposes of this Agreement, a "Certificate" is a stock certificate
that immediately prior to the Effective Time represented outstanding shares of
Company Common Stock that were converted into the right to receive the Merger
Consideration.
1.9 Exchange of Certificates. Parent shall authorize one or more
persons to act as Exchange Agent hereunder (the "Exchange Agent"). As soon as
practicable after the Effective Time, Parent shall cause the Exchange Agent to
mail, to all former holders of record of shares of Company Common Stock that
were converted into the right to receive Merger Consideration, instructions for
surrendering their Certificates in exchange for a certificate representing
shares of Parent Common Stock and cash in lieu of fractional shares. Upon
surrender of Certificates for cancellation to the Exchange Agent, together with
a letter of transmittal (which shall specify that delivery shall be effected,
and risk of loss of, and title to, the Certificates shall pass, only upon
delivery of the Certificates to the Exchange Agent) and other requested
documents and in accordance with the instructions thereon, the holder of such
Certificates shall be entitled to receive in exchange therefor (a) a certificate
representing that number of whole shares of Parent Common Stock into which the
shares of Company Common Stock theretofore represented by the Certificates so
surrendered shall have been converted pursuant to the provisions of this
Agreement, (b) a certificate representing that number of Contingent Value Rights
to which the holder is entitled under this Agreement, and (c) a check in the
amount of any cash due pursuant to Section 1.6(a)(ii) or Section 1.13. No
interest shall be paid or shall accrue on any such amounts. Until surrendered in
accordance with the provisions of this Section 1.9, each Certificate shall
represent for all purposes only the right to receive Merger Consideration and,
if applicable, amounts under Section 1.13. Shares of Parent Common Stock into
which shares of Company Common Stock shall be converted in the Merger at the
Effective Time shall be deemed to have been issued at the Effective Time. If any
certificates representing shares of Parent Common Stock are to be issued in a
name other than that in which the Certificate surrendered is registered, it
shall be a condition of such exchange that the person requesting such exchange
shall deliver to the Exchange Agent all documents necessary to evidence and
effect such transfer and shall pay to the Exchange Agent any transfer or other
taxes required by reason of the issuance of a certificate representing shares of
Parent Common Stock in a name other than
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that of the registered holder of the Certificate surrendered, or establish to
the satisfaction of the Exchange Agent that such tax has been paid or is not
applicable. Beginning the date which is six months following the Closing Date,
Parent shall act as the Exchange Agent and thereafter any holder of an
unsurrendered Certificate shall look solely to Parent for any amounts to which
such holder may be due, subject to applicable law. Notwithstanding any other
provisions of this Agreement, any portion of the Merger Consideration remaining
unclaimed five years after the Effective Time (or such earlier date immediately
prior to such time as such amounts would otherwise escheat to, or become
property of, any governmental entity) shall, to the extent permitted by law,
become the property of Parent free and clear of any claims or interest of any
person previously entitled thereto.
1.10 No Liability. None of Parent, the Surviving Corporation or the
Exchange Agent shall be liable to any person in respect of any shares (or
dividends or distributions with respect thereto) or cash payments delivered to a
public official pursuant to any applicable escheat, abandoned property or
similar law.
1.11 Lost Certificates. If any Certificate shall have been lost, stolen
or destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen or destroyed and, if required by
Parent, the posting by such person of a bond in such reasonable amount as Parent
may direct as indemnity against any claim that may be made against it with
respect to such Certificate, the Exchange Agent shall deliver in exchange for
such lost, stolen or destroyed Certificate, applicable certificates representing
shares of Parent Common Stock, certificates representing Contingent Value
Rights, cash in lieu of fractional shares and any amounts due pursuant to
Section 1.13.
1.12 Withholding Rights. Parent shall be entitled to deduct and
withhold from the consideration otherwise payable pursuant to this Agreement to
any holder of shares of Company Common Stock such amounts as it is required to
deduct and withhold with respect to the making of such payment under the Code,
or any provision of state, local or foreign tax law. To the extent that amounts
are so withheld by Parent, such withheld amounts shall be treated for all
purposes of this Agreement as having been paid to the holder of the shares of
Company Common Stock in respect of which such deduction and withholding was
made.
1.13 Distributions with Respect to Unexchanged Shares. No dividend or
other distribution declared with respect to Parent Common Stock with a record
date after the Effective Time shall be paid to holders of unsurrendered
Certificates until such holders surrender such Certificates. Upon the surrender
of such Certificates in accordance with Section 1.9, there shall be paid to such
holders, promptly after such surrender, the amount of dividends or other
distributions, without interest, declared with a record date after the Effective
Time and not paid because of the failure to surrender such Certificates for
exchange.
1.14 Further Assurances. At and after the Effective Time, the officers
and directors of the Surviving Corporation shall be authorized to execute and
deliver, in the name and on behalf of the Company, any deeds, bills of sale,
assignments or assurances and to take and do, in the name and on behalf of the
Company, any other actions and things to vest, perfect or confirm of record or
otherwise in the Surviving Corporation any and all right, title and interest in,
to and
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under any of the rights, properties or assets acquired or to be acquired by the
Surviving Corporation as a result of, or in connection with, the Merger.
SECTION 2 - REPRESENTATIONS AND WARRANTIES OF COMPANY
Except as set forth on the disclosure schedule delivered by the Company
to Parent on the date hereof (the "Company Disclosure Schedule"), the section
numbers of which are numbered to correspond to the section numbers of this
Agreement to which they refer, the Company hereby makes the following
representations and warranties to Parent and Merger Sub:
2.1 Organization and Qualification.
(a) Each of Company, each Company Subsidiary (as defined in
Section 2.4(a)) and each Company Joint Venture (as defined in Section 2.4(c)) is
a corporation or other legal entity duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization and has corporate or
similar power and authority to own, lease and operate its assets and to carry on
its business as now being and as heretofore conducted. Each of Company, each
Company Subsidiary and each Company Joint Venture is qualified or otherwise
authorized to transact business as a foreign corporation or other organization
in all jurisdictions in which such qualification or authorization is required by
law, except for jurisdictions in which the failure to be so qualified or
authorized could not reasonably be expected to have a material adverse effect on
the assets, properties, business, results of operations or financial condition
of the Company and the Company Subsidiaries, taken as a whole (a "Company
Material Adverse Effect").
(b) The Company has previously provided to Parent true and
complete copies of the charter and bylaws or other organizational documents of
the Company, each Company Subsidiary and each Company Joint Venture as presently
in effect, and none of Company, any Company Subsidiary, or any Company Joint
Venture is in default in the performance, observation or fulfillment of such
documents, except, in the case of Company Subsidiaries and Company Joint
Ventures, such defaults that, in the aggregate, could not reasonably be expected
to have a Company Material Adverse Effect.
2.2 Authority to Execute and Perform Agreements. The Company has the
corporate power and authority to enter into, execute and deliver this Agreement
and, in the case of consummation of the Merger, subject to the adoption of this
Agreement by the holders of Company Common Stock, to perform fully its
obligations hereunder. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by the Board of Directors of the Company. No other action on the part of the
Company is necessary to consummate the transactions contemplated hereby (other
than adoption of this Agreement by the holders of Company Common Stock). This
Agreement has been duly executed and delivered by the Company and constitutes a
valid and binding obligation of the Company, enforceable in accordance with its
terms. The only vote of Company stockholders required in connection with this
Agreement is the affirmative vote of a majority of the outstanding shares to
adopt this Agreement.
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2.3 Capitalization and Title to Shares
(a) The Company is authorized to issue 40,000,000 shares of
Company Common Stock, of which 26,020,191 shares were issued and outstanding as
of April 20, 2001. All of the issued and outstanding shares of Company's Common
Stock are duly authorized, validly issued, fully paid, nonassessable and free of
pre-emptive rights.
(b) The Company has reserved 4,726,108 shares of Company
Common Stock for issuance pursuant to all of the Company Options. Company
Options to purchase 3,032,114 shares of Company Common Stock were outstanding as
of April 20, 2001. Section 2.3(b) of the Company Disclosure Schedule includes a
true and complete list of all Company Options with vesting schedules and
exercise prices. True and complete copies of all instruments (or the forms of
such instruments) referred to in this section have been furnished previously to
Parent. Except as indicated in Section 2.3(b) of the Company Disclosure
Schedule, the Company is not obligated to accelerate the vesting of any Company
Options as a result of the Merger.
(c) The Company has reserved 1,762,175 shares of Company
Common Stock for issuance pursuant to all of the Company Warrants. Company
Warrants to purchase 1,762,175 shares of Company Common Stock were outstanding
as of April 20, 2001. Section 2.3(c) of the Company Disclosure Schedule includes
a true and complete list of all outstanding warrants with vesting schedules and
exercise prices. True and complete copies of all instruments (or the forms of
such instruments) referred to in this section have been furnished previously to
Parent.
(d) The Company has reserved 574,713 shares of Company Common
Stock for issuance upon conversion of the Convertible Note. A true and complete
copy of the Convertible Note has been furnished previously to Parent.
(e) The Company has reserved 76,900 shares of Company Common
Stock for future issuance under the Company Purchase Plan through December 31,
2001.
(f) The Company is authorized to issue 5,000,000 shares of
Preferred Stock ("Company Preferred Stock"), of which 750,000 shares are
currently designated Series One Junior Participating Preferred Stock, none of
which are issued and outstanding.
(g) Except for (i) shares indicated as issued and outstanding
on April 20, 2001 in Section 2.3(a), and (ii) shares issued after April 20,
2001, upon (A) the exercise of outstanding Company Options listed in Section
2.3(b) of the Company Disclosure Schedule, (B) the exercise of outstanding
Company Warrants listed in Section 2.3(c) of the Company Disclosure Schedule,
(C) conversion of the Convertible Note or (D) the exercise of purchase rights in
accordance with the Company Purchase Plan and in an amount not in excess of the
number indicated as reserved for such purpose in Section 2.3(e), there are not
as of the date hereof, and at the Effective Time, except as set forth in Section
2.3(g) of the Company Disclosure Schedule, there will not be, any shares of
Company Common Stock issued and outstanding.
(h) The Company's authorized capital stock consists solely of
the Company Common Stock described in Section 2.3(a) and the Company Preferred
Stock described in Section 2.3(f). Except as set forth in Section 2.3(h) of the
Company Disclosure Schedule, there
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are not as of the date hereof, and at the Effective Time there will not be,
authorized or outstanding any subscriptions, options, conversion or exchange
rights, warrants, repurchase or redemption agreements, or other agreements,
claims or commitments of any nature whatsoever obligating the Company to issue,
transfer, deliver or sell, or cause to be issued, transferred, delivered, sold,
repurchased or redeemed, additional shares of the capital stock or other
securities of the Company or obligating the Company to grant, extend or enter
into any such agreement, other than Company Options listed in Section 2.3(b) of
the Company Disclosure Schedule, Company Warrants listed in Section 2.3(c) of
the Company Disclosure Schedule, the Convertible Note and rights to purchase
shares of Company Common Stock pursuant to the Company Purchase Plan. Except as
set forth in Section 2.3(h) of the Company Disclosure Schedule, to the knowledge
of the Company, there are no stockholder agreements, voting trusts, proxies or
other agreements, instruments or understandings with respect to the voting of
the capital stock of the Company.
(i) Neither the Company nor any Company Subsidiary
beneficially owns any shares of capital stock of Parent.
(j) The Company has no outstanding bonds, debentures, notes or
other indebtedness which have the right to vote on any matters on which
stockholders may vote.
2.4 Company Subsidiaries and Company Joint Ventures.
(a) Section 2.4(a) of the Company Disclosure Schedule sets
forth all of the Company Subsidiaries and the jurisdiction in which each is
incorporated or organized, and each jurisdiction in which it is qualified to do
business. All issued and outstanding shares or other equity interests of each
Company Subsidiary are owned directly by the Company free and clear of any
charges, liens, encumbrances, security interests or adverse claims. Section
2.4(a) of the Company Disclosure Schedule also sets forth for each Company
Subsidiary the individuals who comprise the board of directors or comparable
body for each such entity. The Company agrees to take, or cause to be taken, the
actions necessary so that those individuals will resign and be replaced by
individuals specified by Parent effective as of the Effective Time. As used in
this Agreement, "Company Subsidiary" means any corporation, partnership or other
organization, whether incorporated or unincorporated, (i) of which the Company
or any Company Subsidiary is a general partner or (ii) at least 50% of the
securities or other interests having voting power to elect a majority of the
board of directors or others performing similar functions with respect to such
corporation, partnership or other organization are directly or indirectly owned
or controlled by the Company or by any Company Subsidiary, or by the Company and
one or more Company Subsidiaries.
(b) There are not as of the date hereof, and at the Effective
Time there will not be, any subscriptions, options, conversion or exchange
rights, warrants, repurchase or redemption agreements, or other agreements,
claims or commitments of any nature whatsoever obligating any Company Subsidiary
to issue, transfer, deliver or sell, or cause to be issued, transferred,
delivered, sold, repurchased or redeemed, shares of the capital stock or other
securities of the Company or any Company Subsidiary or obligating the Company or
any Company Subsidiary to grant, extend or enter into any such agreement. To the
knowledge of the Company, there are no stockholder agreements, voting trusts,
proxies or other agreements,
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instruments or understandings with respect to the voting of the capital stock of
any Company Subsidiary.
(c) Section 2.4(c) of the Company Disclosure Schedule sets
forth, for each Company Joint Venture, the interest held by the Company and the
jurisdiction in which such Company Joint Venture is organized. Interests in
Company Joint Ventures held by the Company are held directly by the Company,
free and clear of any charges, liens, encumbrances, security interest or adverse
claims. The term "Company Joint Venture" means any corporation or other entity
(including partnerships, limited liability companies and other business
associations) that is not a Company Subsidiary and in which the Company or one
or more Company Subsidiaries owns an equity interest (other than equity
interests held for passive investment purposes which are less than 10% of any
class of the outstanding voting securities or other equity of any such entity).
2.5 SEC Reports. The Company previously has delivered to Parent its (i)
Annual Report on Form 10-K for the year ended December 31, 2000 (the "Company
10-K"), as amended and as filed with the Securities and Exchange Commission (the
"SEC"), (ii) all proxy statements relating to the Company's meetings of
stockholders held or to be held after December 31, 2000, if any, and (iii) all
other documents filed by the Company with the SEC under the Securities Exchange
Act of 1934, as amended (the "Exchange Act") since March 1, 1998. As of their
respective dates, such documents complied, and all documents filed by the
Company with the SEC under the Exchange Act between the date of this Agreement
and the Closing Date will comply, in all material respects, with applicable SEC
requirements and did not, or in the case of documents filed on or after the date
hereof will not, contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. Since March 1, 1998, the Company has filed, and since May 1,
1999 the Company has timely filed, and between the date of this Agreement and
the Closing Date will timely file, with the SEC all reports required to be filed
by it under the Exchange Act. No Company Subsidiary is required to file any
form, report or other document with the SEC.
2.6 Financial Statements. The consolidated financial statements
contained in the Company 10-K have been prepared from, and are in accordance
with, the books and records of the Company and present fairly, in all material
respects, the consolidated financial condition and results of operations of the
Company and the Company Subsidiaries as of and for the periods presented
therein, all in conformity with generally accepted accounting principles applied
on a consistent basis, except as otherwise indicated therein.
2.7 Absence of Undisclosed Liabilities. As of December 31, 2000, the
Company and the Company Subsidiaries had no material liabilities of any nature,
whether accrued, absolute, contingent or otherwise (including without
limitation, liabilities as guarantor or otherwise with respect to obligations of
others or liabilities for taxes due or then accrued or to become due), required
to be reflected or disclosed in the balance sheet dated December 31, 2000 (or
the notes thereto) included in the Company 10-K (the "Company Balance Sheet")
that were not adequately reflected or reserved against on the Company Balance
Sheet. The Company has no material liabilities of any nature, whether accrued,
absolute, contingent or otherwise, other than liabilities (i) adequately
reflected or reserved against on the Company Balance Sheet, (ii) included in
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Section 2.7 of the Company Disclosure Schedule or (iii) incurred since December
31, 2000 in the ordinary course of business consistent with past practice.
2.8 Absence of Adverse Changes.
(a) Since December 31, 2000, except as disclosed in the
Company 10-K, there has not been any change, event or circumstance that has had,
or is reasonably likely to have, a Company Material Adverse Effect.
(b) Except as set forth in Section 2.8 of the Company
Disclosure Schedule, there has not been any action taken by the Company or any
Company Subsidiary during the period after December 31, 2000 through the date of
this Agreement that, if taken during the period from the date of this Agreement
through the Effective Time, would constitute a breach of Section 4.1.
2.9 Compliance with Laws.
(a) The Company and the Company Subsidiaries have all
licenses, permits, franchises, orders or approvals of any federal, state, local
or foreign governmental or regulatory body material to the conduct of their
businesses as presently being conducted (collectively, "Permits"); such Permits
are in full force and effect; and no proceeding is pending or, to the knowledge
of the Company, threatened to revoke or limit any Permit.
(b) The Company and the Company Subsidiaries are not in
violation of and have no liabilities, whether accrued, absolute, contingent or
otherwise, under any federal, state, local or foreign law, ordinance or
regulation or any order, judgment, injunction, decree or other requirement of
any court, arbitrator or governmental or regulatory body, relating to the
operation of clinical testing laboratories, labor and employment practices,
health and safety, zoning, pollution or protection of the environment, except
for violations of or liabilities under any of the foregoing which could not, in
the aggregate, reasonably be expected to have a Company Material Adverse Effect.
(c) To the Company's knowledge and except as set forth in
Section 2.9 of the Company Disclosure Schedule, each product or product
candidate subject to the United States Food and Drug Administration (the "FDA")
jurisdiction under the Federal Food, Drug and Cosmetic Act ("FDCA") that is
manufactured, tested, distributed, held, and/or marketed by the Company or any
Company Subsidiary is being manufactured, tested, distributed, held and marketed
in compliance with all applicable requirements under the FDCA including, but not
limited to, those relating to investigational use, premarket clearance, good
manufacturing practices, labeling, advertising, record keeping, filing of
reports and security.
(d) To the Company's knowledge, the Company has, prior to the
execution of this Agreement, provided to Parent copies of or access to all
documents in its or any Company Subsidiary's possession material to assessing
compliance with the FDCA and its implementing regulations, including, but not
limited to, copies of (i) all warning letters, notices of adverse findings and
similar correspondence received in the last three years, (ii) all audit reports
performed during the last three years, and (iii) any document concerning any
significant oral or written communication received from the FDA in the last
three years.
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(e) Neither the Company nor any Company Subsidiary nor, to the
Company's knowledge, any director, officer, agent, employee or other person
acting on behalf of the Company, or any Company Subsidiary, has used any
corporate or other funds for unlawful contributions, payments, gifts, or
entertainment, or made any unlawful expenditures relating to political activity
to government officials or others, or established or maintained any unlawful or
unrecorded funds in violation of the Foreign Corrupt Practices Act of 1977, as
amended, or any other domestic or foreign law. Neither the Company nor any
Company Subsidiary nor, to the Company's knowledge, any director, officer,
agent, employee or other person acting on behalf of the Company or any Company
Subsidiary, has accepted or received any unlawful contributions, payments, gifts
or expenditures.
2.10 Actions and Proceedings. There are no outstanding orders,
judgments, injunctions, decrees or other requirements of any court, arbitrator
or governmental or regulatory body against the Company, any Company Subsidiary,
any Company Joint Venture or any of their assets or properties. Except as set
forth in Section 2.10 of the Company Disclosure Schedule, there are no actions,
suits or claims or legal, administrative or arbitration proceedings pending or,
to the knowledge of the Company, threatened against the Company, any Company
Subsidiary, any Company Joint Venture or any of their securities, assets or
properties. To the knowledge of the Company, there is no fact, event or
circumstance now in existence that reasonably could be expected to give rise to
any action, suit, claim, proceeding or investigation that, individually or in
the aggregate, could be reasonably expected to have a Company Material Adverse
Effect or materially interfere with the Company's ability to consummate the
transactions contemplated hereby.
2.11 Contracts and Other Agreements.
(a) Neither the Company nor any Company Subsidiary is a party
to or bound by, and neither they nor their properties are subject to, any
contract or other agreement required to be disclosed in a Form 10-K, Form 10-Q
or Form 8-K of the SEC which is not disclosed in the Company 10-K. All of such
contracts and other agreements and all of the contracts required to be set forth
in Section 2.11 of the Company Disclosure Schedule are valid, subsisting, in
full force and effect, binding upon the Company or the applicable Company
Subsidiary, and, to the knowledge of the Company, binding upon the other parties
thereto in accordance with their terms, and the Company and the Company
Subsidiaries have paid in full or accrued all amounts now due from them
thereunder, and have satisfied in full or provided for all of their liabilities
and obligations thereunder which are presently required to be satisfied or
provided for and are not in default under any of them, nor, to the knowledge of
the Company, is any other party to any such contract or other agreement in
default thereunder, nor does any condition exist that with notice or lapse of
time or both would constitute a default thereunder. True and complete copies of
all of the contracts and other agreements referred to in this Section 2.11 have
been provided previously to Parent.
(b) Section 2.11 of the Company Disclosure Schedule sets forth
a list of the following contracts and other agreements to which the Company or
any Company Subsidiary is a party or by or to which they or their assets or
properties are bound or subject:
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(i) any agreement (A) involving research, development
or the license of Proprietary Rights (as defined in Section 2.12), (B) granting
a right of first refusal, or right of first offer or comparable right with
respect to Proprietary Rights, (C) relating to a joint venture, partnership or
other arrangement involving a sharing of profits, losses, costs or liabilities
with another person or entity, (D) providing for the payment or receipt by the
Company or a Company Subsidiary of milestone payments or royalties, or (E) that
individually requires aggregate expenditures by the Company and/or any Company
Subsidiary in any one year of more than $50,000;
(ii) any indenture, trust agreement, loan agreement
or note that involves or evidences outstanding indebtedness, obligations or
liabilities for borrowed money in excess of $50,000;
(iii) any agreement of surety, guarantee or
indemnification that involves potential obligations in excess of $50,000;
(iv) any agreement that limits or restricts the
Company, any Company Subsidiary or any of their affiliates or successors in
competing or engaging in any line of business, in any therapeutic area, in any
geographic area or with any person;
(v) any interest rate, equity or other swap or
derivative instrument; or
(vi) any agreement obligating the Company to register
securities under the Securities Act of 1933, as amended (the "Securities Act");
(c) No executive officer or director of the Company has
(whether directly or indirectly through another entity in which such person has
a material interest, other than as the holder of less than 2% of a class of
securities of a publicly traded company) any material interest in any property
or assets of the Company (except as a stockholder) or a Company Subsidiary, any
competitor, customer, supplier or agent of the Company or a Company Subsidiary
or any person that is currently a party to any material contract or agreement
with the Company or a Company Subsidiary.
(d) The Company and the Company Subsidiaries own no real
property.
2.12 Intellectual Property. Except as disclosed in the Company 10-K,
the Company, the Company Subsidiaries and the Company Joint Ventures own, or are
licensed to use, or otherwise have the full right to use all patents,
trademarks, service marks, trade names, trade secrets, franchises, inventions,
copyrights, and all other technology and intellectual property (including,
without limitation, biological materials), all registrations of any of the
foregoing, or applications therefor, and all grants and licenses or other rights
running to or from the Company, a Company Subsidiary or a Company Joint Venture
relating to any of the foregoing that are material to their businesses as
presently conducted or as contemplated to be conducted (collectively, the
"Proprietary Rights"). A list of all registered copyrights and trademarks,
service marks, trade names, patents and patent applications, computer programs
(except off-the-shelf office software for word processing, spreadsheet or
similar applications), databases and biological materials held by or licensed to
the Company or a Company Subsidiary has been delivered previously to Parent and
is included in Section 2.12 of the Company Disclosure
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Schedule. All patents, registered trademarks and copyrights set forth on the
list referred to above are valid and subsisting and are not subject to any
taxes, maintenance fees or actions falling due within 90 days of the Closing
Date, except as described in Section 2.12 of the Company Disclosure Schedule.
The Company is not aware of any basis for any claim by any third party that the
businesses of the Company, the Company Subsidiaries or the Company Joint
Ventures infringe upon the proprietary rights of others, nor has the Company,
any Company Subsidiary or, to the knowledge of the Company, any Company Joint
Venture received any notice or claim of infringement from any third party. The
Company is not aware of any existing or threatened infringement by any third
party on, or any competing claim of right to use or own any of, the Proprietary
Rights. Except as disclosed in Section 2.12 of the Company Disclosure Schedule,
the Company and the Company Subsidiaries have the unencumbered right to sell
their products and services (whether now offered for sale or under development)
free from any royalty or other obligations to third parties. To the knowledge of
the Company, none of the activities of the employees of the Company or any
Company Subsidiary on behalf of such entity violates any agreement or
arrangement which any such employees have with former employers. The policies
and procedures of the Company and the Company Subsidiaries designed to establish
and protect the Proprietary Rights are described in Section 2.12 of the Company
Disclosure Schedule. All employees and consultants who contributed to the
discovery or development of any of the Proprietary Rights (other than
Proprietary Rights licensed to the Company or a Company Subsidiary by any party
other than a consultant to the Company or Company Subsidiary) did so either (a)
within the scope of his or her employment such that, in accordance with
applicable law, all Proprietary Rights arising therefrom became the exclusive
property of the Company or the Company Subsidiary or (b) pursuant to written
agreements assigning or licensing all Proprietary Rights arising therefrom to
the Company or the Company Subsidiary.
2.13 Insurance. Section 2.13 of the Company Disclosure Schedule sets
forth a true and complete list of all policies or binders of fire, liability,
product liability, workmen's compensation, vehicular, directors' and officers'
and other insurance held by or on behalf of the Company and the Company
Subsidiaries. Such policies and binders are in full force and effect, are
reasonably believed to be adequate for the businesses engaged in by the Company
and the Company Subsidiaries and are in conformity with the requirements of all
leases or other agreements to which the Company or the relevant Company
Subsidiary is a party and, to the knowledge of the Company, are valid and
enforceable in accordance with their terms. Neither the Company nor any Company
Subsidiary is in default with respect to any provision contained in such policy
or binder nor has any of the Company or a Company Subsidiary failed to give any
notice or present any claim under any such policy or binder in due and timely
fashion. There are no outstanding unpaid claims under any such policy or binder.
Neither the Company nor any Company Subsidiary has received notice of
cancellation or non-renewal of any such policy or binder.
2.14 Commercial Relationships. The relationships of the Company, the
Company Subsidiaries and the Company Joint Ventures with their suppliers,
collaborators, licensors and licensees are generally good commercial working
relationships. No such entity has canceled or otherwise terminated its
relationship with the Company, a Company Subsidiary or a Company Joint Venture
or has, during the last twelve months, materially altered its relationship with
the Company, a Company Subsidiary or a Company Joint Venture. The Company does
not know of any plan or intention of any such entity, and has not received any
written threat or notice from
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any such entity, to terminate, cancel or otherwise materially and adversely
modify its relationship with the Company, a Company Subsidiary or a Company
Joint Venture.
2.15 Tax Matters
(a) For purposes of this Agreement, the term "Tax" (and, with
correlative meaning, "Taxes" and "Taxable") means all United States federal,
state, and local, and all foreign, income, profits, franchise, gross receipts,
payroll, transfer, sales, employment, use, property, excise, value added, ad
valorem, estimated, stamp, alternative or add-on minimum, recapture,
environmental, withholding and any other taxes, charges, duties, impositions or
assessments, together with all interest, penalties, and additions imposed on or
with respect to such amounts, including any liability for taxes of a predecessor
entity. "Tax Return" means any return, declaration, report, claim for refund, or
information return or statement filed or required to be filed with any taxing
authority in connection with the determination, assessment, collection or
imposition of any Taxes.
(b) All Tax Returns required to be filed on or before the date
hereof by or with respect to the Company and the Company Subsidiaries have been
filed within the time and in the manner prescribed by law. All such Tax Returns
are true, correct and complete in all material respects, and all Taxes owed by
the Company or the Company Subsidiaries, whether or not shown on any Tax Return,
have been paid. The Company and the Company Subsidiaries file Tax Returns in all
jurisdictions where they are required to so file, and no claim has ever been
made by any taxing authority in any other jurisdiction that the Company or the
Company Subsidiaries are or may be subject to taxation by that jurisdiction.
(c) There are no liens or other encumbrances with respect to
Taxes upon any of the assets or properties of the Company or the Company
Subsidiaries, other than with respect to Taxes not yet due and payable.
(d) No audit is currently pending with respect to any Tax
Return of the Company or the Company Subsidiaries, nor is the Company or its
officers or directors aware of any information which has caused or should cause
them to believe that an audit by any tax authority may be forthcoming. No
deficiency for any Taxes has been proposed in writing against the Company or the
Company Subsidiaries, which deficiency has not been paid in full. No issue
relating to the Company or the Company Subsidiaries or involving any Tax for
which the Company or the Company Subsidiaries might be liable has been resolved
in favor of any taxing authority in any audit or examination which, by
application of the same principles, could reasonably be expected to result in a
deficiency for Taxes of the Company or the Company Subsidiaries for any
subsequent period, and neither the Company nor its officers or directors knows
of any other basis for the assertion of such a deficiency.
(e) There are no outstanding agreements, waivers or
arrangements extending the statutory period of limitation applicable to any
claim for, or the period for the collection or assessment of, Taxes due from or
with respect to the Company or the Company Subsidiaries for any taxable period,
no power of attorney granted by or with respect to the Company or the Company
Subsidiaries relating to Taxes is currently in force, and no extension of time
for filing any Tax Return required to be filed by or on behalf of the Company or
any Company Subsidiary
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is in force. The Company has delivered to Parent complete and correct copies of
all income Tax Returns, audit reports and statements of deficiencies for each of
the last three taxable years filed by or issued to or with respect to the
Company or the Company Subsidiaries.
(f) With respect to any period for which Tax Returns have not
yet been filed, or for which Taxes are not yet due or owing, the Company has, in
accordance with generally accepted accounting principles, made due and
sufficient accruals for such Taxes in the Company's books and records.
(g) No consent to the application of Section 341(f)(2) of the
Code (or any predecessor provision) has been made or filed by or with respect to
the Company or any Company Subsidiary or any of their assets or properties.
(h) The Company and the Company Subsidiaries have not been and
are not currently in violation (or, with or without notice or lapse of time or
both, would be in violation) of any applicable law or regulation relating to the
payment or withholding of Taxes, and all withholding and payroll Tax
requirements required to be complied with by the Company and the Company
Subsidiaries up to and including the date hereof have been satisfied.
(i) Except as set forth in Section 2.15 of the Company
Disclosure Schedule, the Company and the Company Subsidiaries are not and have
never been a party to or bound by, nor do they have or have they ever had any
obligation under, any Tax sharing agreement or similar contract or arrangement.
Neither the Company nor any Company Subsidiary has any liability for the Taxes
of any other person under Treasury Regulation 1.1502-6 (or any similar provision
of state, local or foreign law), as a transferee or successor, by contract, or
otherwise.
(j) There is no contract or agreement, plan or arrangement
obligating the Company or the Company Subsidiaries to make any payment that
would not be deductible by reason of Section 162(m) or 280G of the Code. Neither
the Company nor any Company Subsidiary has agreed to, or is required to, make
any adjustments under Section 481(a) of the Code by reason of a change in
accounting method or otherwise.
(k) Neither the Company nor the Company Subsidiaries are, or
were during the applicable period specified in Section 897(c)(1)(A)(ii) of the
Code, a United States real property holding corporation within the meaning of
Section 897(c)(2) of the Code.
2.16 Employee Benefit Plans.
(a) Section 2.16 of the Company Disclosure Schedule sets forth
a complete list of all pension, savings, profit sharing, retirement, deferred
compensation, employment, welfare, fringe benefit, insurance, short and long
term disability, incentive, bonus, stock, vacation pay, severance pay and
similar plans, programs or arrangements (the "Plans"), including without
limitation all employee benefit plans as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") maintained by the
Company or the Company Subsidiaries or to which the Company or any of the
Company Subsidiaries are parties or required to contribute.
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(b) The Company has delivered or made available to Parent
current, accurate and complete copies of (i) each Plan that has been reduced to
writing and all amendments thereto, (ii) a summary of the material terms of each
Plan that has not been reduced to writing, including all amendments thereto,
(iii) the summary plan description for each Plan subject to Title I of ERISA,
and in the case of each other Plan, any similar employee summary (including but
not limited to any employee handbook description), (iv) for each Plan intended
to be qualified under Section 401(a) or Section 501(c)(9) of the Code, the most
recent determination letter or exemption determination issued by the Internal
Revenue Service ("IRS"), (v) for each Plan with respect to which a Form 5500
series annual report/return is required to be filed, the most recently filed
such annual report/return and annual report/return for the two preceding years,
together with all schedules and exhibits, (vi) all insurance contracts,
administrative services contracts, trust agreements, investment management
agreements or similar agreements maintained in connections with any Plan, (vii)
copies of any correspondence from the IRS, Department of Labor ("DOL") or other
U.S. government agency or department relating to an audit or an asserted or
assessed penalty with respect to a Plan or relating to requested relief from any
liability or penalty (including, but not limited to, any correspondence relating
to the IRS's EPCRS, APRSC, VCR, CAP or Walk-in Cap programs or the DOL's amnesty
programs for late filers and non-filers), (viii) for each Plan that is a defined
benefit pension plan, copies of the most recent actuarial valuation report and
actuarial valuation report for the two preceding years, (ix) for each Plan that
is intended to be qualified under Code Section 401(a), copies of compliance
testing results (nondiscrimination testing (401(a)(4), ADP, ACP, multiple use),
402(g), 415 and top-heavy tests) for the most recent plan year and three
preceding plan years, and (x) copies of COBRA and HIPAA forms and notices used
for each Plan that is a group health plan. No employee benefit handbook or
similar employee communication relating to any Plan nor any written
communication of benefits under such Plan describes the Plan in a manner
materially inconsistent with the documents and summary plan descriptions
relating to such Plan that have been delivered pursuant to the preceding
sentence.
(c) There is no entity (other than the Company or any Company
Subsidiary) that together with the Company or any Company Subsidiary would be
treated as a single-employer within the meaning of Section 414(b), (c), (m) or
(o) of the Code or Section 4001(b) of ERISA. Neither the Company nor any Company
Subsidiary has ever maintained, contributed to or incurred any liability under
any "multiemployer plan" as defined in Section 4001(a)(3) of ERISA or a
"multiple employer plan" as defined in Section 413(c) of the Code. Neither the
Company nor any Company Subsidiary has incurred any liability under Sections
4062, 4063 or 4201 of ERISA.
(d) Each Plan maintained by the Company or a Company
Subsidiary which is intended to be qualified under either Section 401(a) or
501(c)(9) of the Code ("Qualified Plans") has been determined to be so qualified
by the Internal Revenue Service, and no circumstances exist that could
reasonably be expected to cause the Qualified Plans to lose such qualified
status. Each Plan has been administered in all material respects in accordance
with the terms of such Plan and the provisions of any and all statutes, orders
or governmental rules or regulations, including without limitation ERISA and the
Code, and to the knowledge of the Company, nothing has been done or not done
with respect to any Plan that could result in any liability on the part of the
Company or any Company Subsidiary with respect to a violation of any requirement
of Title I of ERISA or Chapter 43 of the Code. All reports, forms and notices
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required to be filed with respect to each Plan, including without limitation
Form 5500 series annual reports/returns and PBGC Form 1s, have been timely
filed. All contributions, premiums and other amounts due to or in connection
with each Plan under the terms of the Plan or applicable law have been timely
made, and provision has been made on the balance sheet included in the Company
10-K for such contributions, premiums and other amounts that were due as of the
date of the balance sheet but were attributable to service before such date.
(e) No "reportable event" as defined in Section 4043 of ERISA
has occurred with respect to any Plan subject to Title IV of ERISA. With respect
to each Plan subject to Title IV of ERISA, such Plan has no unfunded benefit
liabilities and such Plan could be terminated in a "standard termination" under
Section 4041(b) of ERISA on or before the Effective Time without any additional
contribution from any contributing employer (but disregarding any other
prerequisites for terminating such Plan). With respect to each Plan subject to
Section 412 of the Code, there is no accumulated funding deficiency (whether or
not waived) under such Plan.
(f) All claims for benefits incurred by employees on or before
the Closing Date are or will be fully covered by third-party insurance policies
or programs. Except for continuation of health coverage to the extent required
under Section 4980B of the Code or Section 601 et seq. of ERISA, other
applicable law or as otherwise set forth in this Agreement, there are no
obligations under any Plan providing benefits after termination of employment.
(g) Except as disclosed in Section 2.16 of the Company
Disclosure Schedule, neither the Company nor any Company Subsidiary has
contracted with any "leased employee" within the meaning of Section 414 of the
Code or any "independent contractor".
(h) Except for individual employment agreements, each Plan can
be amended, modified or terminated without advanced notice to or consent by any
employee, former employee or beneficiary, except as required by law.
2.17 Employee Relations.
(a) The Company and the Company Subsidiaries, collectively,
have approximately 26 full-time equivalent employees and generally enjoy good
employer-employee relations. Neither the Company nor any Company Subsidiary is
delinquent in payments to any of its employees or consultants for any wages,
salaries, commissions, bonuses or other direct compensation for any services
performed by them or amounts required to be reimbursed to such employees. Except
as disclosed in Section 2.17 of the Company Disclosure Schedule, upon
termination of the employment of any employees, none of the Company, the Company
Subsidiaries nor Parent shall be liable, by reason of the Merger or anything
done prior to the Effective Time, to any of such employees for severance pay or
any other payments (other than accrued salary, vacation or sick pay in
accordance with normal policies). True and complete information as to all
current directors, officers, employees or consultants of the Company and the
Company Subsidiaries including, in each case, name, current job title and annual
rate of compensation has been made available previously to Parent.
(b) The Company and each Company Subsidiary (i) is in
compliance in all material respects with all applicable foreign, federal, state
and local laws, rules and regulations
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respecting employment, employment practices, terms and conditions of employment
and wages and hours, in each case, with respect to employees, (ii) has withheld
all amounts required by law or by agreement to be withheld from the wages,
salaries and other payments to employees, (iii) is not liable for any arrears of
wages or any taxes or any penalty for failure to comply with any of the
foregoing, and (iv) is not liable for any payment to any trust or other fund or
to any governmental entity, with respect to unemployment compensation benefits,
social security or other benefits or obligations for employees (other than
routine payments to be made in the ordinary course of business and consistent
with past practice).
(c) No work stoppage or labor strike against the Company or
any Company Subsidiary is pending or threatened. Neither the Company nor any
Company Subsidiary is involved in or, to the knowledge of the Company,
threatened with, any labor dispute, grievance, or litigation relating to labor,
safety or discrimination matters involving any employee, including without
limitation charges of unfair labor practices or discrimination complaints, that,
if adversely determined, would result in material liability to the Company.
Neither the Company nor any Company Subsidiary has engaged in any unfair labor
practices within the meaning of the National Labor Relations Act that would,
directly or indirectly result in material liability to the Company. Neither the
Company nor any Company Subsidiary is presently, nor has it been in the past, a
party to or bound by any collective bargaining agreement or union contract with
respect to employees other than as set forth in Section 2.17 of the Company
Disclosure Schedule and no collective bargaining agreement is being negotiated
by the Company or any Company Subsidiary. No union organizing campaign or
activity with respect to non-union employees of the Company or any Company
Subsidiary is ongoing, pending or, to the knowledge of the Company, threatened.
2.18 Environmental Matters.
(a) Neither the Company nor any of the Company Subsidiaries
has violated, is in violation of, or has been notified that it is in violation
of, Environmental Laws, and except in full compliance with Environmental Laws,
neither the Company nor any of the Company Subsidiaries has generated, used,
handled, transported or stored any Hazardous Materials or shipped any Hazardous
Materials for treatment, storage or disposal at any other site or facility.
There has been no generation, use, handling, storage or disposal of any
Hazardous Materials in violation of any Environmental Laws at any site owned or
operated by, or premises leased by, the Company or any of the Company
Subsidiaries during the period of the Company's or such Company Subsidiary's
ownership, operation or lease or, to the Company's knowledge, prior thereto, nor
has there been or is there threatened any Release of any Environmental
Contaminants into, on, at or from any such site or premises, including without
limitation into the ambient air, groundwater, surface water, soils or subsurface
strata, during such period or, to the Company's knowledge, prior thereto in
violation of any Environmental Laws or which created or will create an
obligation to report or respond in any way to such Release. There is no
underground storage tank or other container at any site owned or operated by, or
premises leased by the Company or any Company Subsidiary or, to the Company's
knowledge, on any site formerly owned or operated by, or premises formerly
leased by, the Company or any Company Subsidiary.
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(b) Neither the Company nor any Company Subsidiary has
received notification in any form that, and the Company has no knowledge that,
any site currently or formerly owned or operated by, or premises currently or
formerly leased by, the Company or any Company Subsidiary is the subject of any
federal, state or local civil, criminal or administrative investigation
evaluating whether, or alleging that, any action is necessary to respond to a
Release or a threatened Release of any Environmental Contaminant. No such site
or premises is listed, or to the Company's knowledge, proposed for listing, on
the National Priorities List or the Comprehensive Environmental Response,
Compensation, and Liability Information System, both as provided under the
federal Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA"), or any comparable state or local governmental lists. Neither the
Company nor any Company Subsidiary has received written notification of, and the
Company has no knowledge of, any potential responsibility of the Company or any
Company Subsidiary pursuant to the provisions of (i) CERCLA, (ii) any similar
federal, state, local or other Environmental Laws, or (iii) any order issued
pursuant to the provisions of any such Environmental Laws with respect to any
Environmental Contaminant used, manufactured, generated, stored, or treated at,
transported from, or disposed of on, any site currently or formerly owned or
operated by, or premises currently or formerly leased by, the Company or any
Company Subsidiary.
(c) The Company and the Company Subsidiaries have obtained all
permits required by Environmental Laws necessary to enable them to conduct their
respective businesses and are in compliance with all material aspects of said
permits.
(d) There is no environmental or health and safety matter that
reasonably could be expected to have a Company Material Adverse Effect. The
Company previously has furnished to Parent copies of any and all environmental
audits or risk assessments, site assessments, documentation regarding off-site
disposal of Hazardous Materials or Release of Environmental Contaminant, spill
control plans and all other material correspondence, documents or communications
with any governmental agency or other entity regarding the foregoing.
(e) For purposes of this Agreement:
(i) "Environmental Laws" means any Federal, state,
local or foreign laws (including common law), regulations, codes, rules, orders,
ordinances, permits, requirements and final governmental determinations
pertaining to the environment, pollution or protection of human health, safety
or the environment, as adopted or in effect in the jurisdictions in which the
applicable site or premises are located, including without limitation, the
Comprehensive Environmental Response Compensation and Liability Act of 1980, as
amended by the Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C.
Section 9601 et seq.; the Emergency Planning and Community Right-to-Know Act, 42
U.S.C. Section 11001 et seq.; the Resource Conservation and Recovery Act, 42
U.S.C. Section 6901 et seq.; the Federal Water Pollution Control Act, 33 U.S.C.
Section 1251 et seq.; the Federal Insecticide, Fungicide and Rodenticide Act, 7
U.S.C. Section 136 et seq.; the Toxic Substance Control Act, 15 U.S.C. Section
2601 et seq.; the Oil Pollution Act of 1990, 33 U.S.C. Section 1001 et seq.; the
Hazardous Materials Transportation Act, as amended, 49 U.S.C. Section 1801 et
seq.; the Atomic Energy Act, as amended 42 U.S.C. Section 2011 et seq.; the
Occupational Safety and Health Act, as amended, 29 U.S.C. Section 651 et seq.;
the Federal
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Food, Drug and Cosmetic Act, as amended 21 U.S.C. Section 301 et seq. (insofar
as it regulates employee exposure to Hazardous Materials), and any state or
local statute of similar effect; and including without limitation any laws
relating to protection of safety, health or the environment which regulate the
use of biological agents or substances including medical or infectious wastes as
any such laws have been amended;
(ii) "Environmental Contaminant" means Hazardous
Materials, or any other pollutants, contaminants, toxic or constituent
substances or waste radioactive substances, materials or special wastes,
petroleum or petroleum products, polychlorinated biphenyls, asbestos containing
materials, or any other substance or material, in each case regulated by
applicable Environmental Laws;
(iii) "Hazardous Materials" means (A) any chemicals,
materials or substances defined as or included in the definition of "hazardous
substances," "hazardous wastes," "hazardous materials," "extremely hazardous
wastes," "restricted hazardous wastes," "toxic substances," "toxic pollutants,"
"hazardous air pollutants," "contaminants," "toxic chemicals," "toxics,"
"hazardous chemicals," "extremely hazardous substances," "pesticides," "oil" or
related materials as defined in any applicable Environmental Law, or (B) any
petroleum or petroleum products, oil, natural or synthetic gas, radioactive
materials, asbestos-containing materials, urea formaldehyde foam insulation,
radon, and any other substance defined or designated as hazardous, toxic or
harmful to human health, safety or the environment under any Environmental Law;
and
(iv) "Release" has the meaning specified in CERCLA.
2.19 No Breach. Except for (a) filings with the SEC under the Exchange
Act, (b) filings with the Secretary of State of Delaware, (c) any filing of a
Notification and Report Form under the Hart-Scott-Rodino Antitrust Improvements
Act, as amended (the "HSR Act") and (d) matters listed in Section 2.19 of the
Company Disclosure Schedule, the execution, delivery and performance of this
Agreement by the Company and the consummation by the Company of the transactions
contemplated hereby will not (i) violate any provision of the Certificate of
Incorporation or By-Laws of the Company, (ii) violate, conflict with or result
in the breach of any of the terms or conditions of, result in modification of,
or otherwise give any other contracting party the right to terminate, accelerate
obligations under or receive payment under or constitute (or with notice or
lapse of time or both constitute) a default under, any instrument, contract or
other agreement to which the Company, any Company Subsidiary or any Company
Joint Venture is a party or to which any of them or any of their assets or
properties is bound or subject, (iii) violate any law, ordinance or regulation
or any order, judgment, injunction, decree or other requirement of any court,
arbitrator or governmental or regulatory body applicable to the Company or the
Company Subsidiaries or by which any of the Company's or the Company
Subsidiaries' assets or properties is bound, (iv) violate any Permit, (v)
require any filing with, notice to, or permit, consent or approval of, any
governmental or regulatory body, (vi) result in the creation of any lien or
other encumbrance on the assets or properties of the Company or a Company
Subsidiary, or (vii) cause any of the assets owned by the Company or any Company
Subsidiary to be reassessed or revalued by any taxing authority or other
governmental entity, excluding from the foregoing clauses (ii), (iii), (iv),
(v), (vi) and (vii) violations, breaches and defaults which, and filings,
notices, permits, consents and approvals the absence of which, in the
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aggregate, could not reasonably be expected to have a Company Material Adverse
Effect or materially interfere with the ability of the Company to consummate the
transactions contemplated hereby.
2.20 Board Approvals.
(a) The Board of Directors of the Company, as of the date of
this Agreement, has determined (i) that the Merger is fair to, and in the best
interests of, the Company and its stockholders, (ii) to propose this Agreement
for adoption by the Company's stockholders and to declare the advisability of
this Agreement, and (iii) to recommend that the stockholders of the Company
adopt this Agreement.
(b) The Company has taken all action necessary such that no
"fair price," "control share acquisition," "business combination" or similar
statute (including Section 203 of the DGCL) will apply to the execution,
delivery or performance of this Agreement.
(c) The Board of Directors has approved an amendment (the
"Rights Amendment") to the Shareholder Rights Agreement dated as of October 6,
1999 between the Company and American Stock Transfer & Trust Company (the
"Company Rights Plan") so as to provide that (i) Parent will not become an
"Acquiring Person," (ii) no "Stock Acquisition Date" or "Distribution Date" (as
such terms are defined in the Company Rights Plan) will occur as a result of the
approval, execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby and thereby, and (iii) the Rights (as defined
in the Company Rights Plan) will terminate immediately prior to the Effective
Time. Promptly following the execution and delivery of this Agreement, the
Company shall take all action necessary to make the Rights Amendment effective.
2.21 Financial Advisor.
(a) The Company has received the opinion of Robertson
Stephens, Inc., dated on or about the date of this Agreement, to the effect
that, as of such date, the Merger Consideration is fair, from a financial point
of view, to the holders of Company Common Stock, a copy of which opinion has
been made available to Parent.
(b) Other than Robertson Stephens, Inc., no broker, finder,
agent or similar intermediary has acted on behalf of the Company in connection
with this Agreement or the transactions contemplated hereby, and, other than the
fee payable to Robertson Stephens, Inc., there are no brokerage commissions,
finders' fees or similar fees or commissions payable in connection herewith
based on any agreement, arrangement or understanding with the Company, or any
action taken by the Company. The Company previously has provided Parent with a
copy of Robertson Stephens, Inc.'s engagement letter.
2.22 Proxy Statement and Registration Statement. None of the
information supplied or to be supplied by the Company for inclusion or
incorporation by reference in the registration statement on Form S-4 to be filed
with the SEC in connection with the issuance of shares of Parent Common Stock in
the Merger (the "Registration Statement") will, at the time it becomes effective
under the Securities Act, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein not
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misleading. None of the information supplied or to be supplied by the Company
for inclusion or incorporation by reference in the proxy statement/prospectus
included in the Registration Statement (the "Proxy Statement/Prospectus") or
delivered together with the Proxy Statement/Prospectus, on the date the Proxy
Statement/Prospectus is first mailed to holders of Company Common Stock or at
the time of the Company Stockholders Meeting (as defined in Section 4.6(b)),
will contain any untrue statement of a material fact or omit 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 Proxy Statement/Prospectus will comply as to form in all
material respects with the requirements of the Exchange Act and the Securities
Act and the rules and regulations of the SEC thereunder.
SECTION 3 - REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Except as set forth on the disclosure schedule delivered by Parent to
the Company on the date hereof (the "Parent Disclosure Schedule"), the section
numbers of which are numbered to correspond to the section numbers of this
Agreement to which they refer, Parent and Merger Sub hereby make the following
representations and warranties to the Company:
3.1 Organization and Qualification. Both Parent and Merger Sub are
corporations duly organized, validly existing and in good standing under the
laws of the State of Delaware and have corporate or similar power and authority
to own, lease and operate their assets and to carry on their business as now
being and as heretofore conducted. Parent is qualified or otherwise authorized
to transact business as a foreign corporation or other organization in all
jurisdictions in which such qualification or authorization is required by law,
except for jurisdictions in which the failure to be so qualified or authorized
could not reasonably be expected to have a material adverse effect on the
assets, properties, business, results of operations or financial condition of
Parent (a "Parent Material Adverse Effect").
3.2 Authority to Execute and Perform Agreement. Each of Parent and
Merger Sub has the corporate power and authority to enter into, execute and
deliver this Agreement and to perform fully its obligations hereunder. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Parent and Merger Sub. This Agreement has been
duly executed and delivered by each of Parent and Merger Sub and constitutes
their valid and binding obligations, enforceable against each of them in
accordance with its terms.
3.3 Capitalization. The authorized capital stock of Parent consists of
100,000,000 shares of common stock, $0.01 par value per share, and 1,000,000
shares of preferred stock, $0.01 par value per share ("Parent Preferred Stock").
As of March 19, 2001, 27,448,353 shares of Parent Common Stock were issued and
outstanding. As of the date of this Agreement, no shares of Parent Preferred
Stock are outstanding. The authorized capital stock of Merger Sub consists of
1,000 shares of Common Stock, $0.01 par value per share, all of which, as of the
date hereof, are issued and outstanding and are held by Parent. All issued and
outstanding shares of Parent Common Stock are validly issued, fully paid,
non-assessable and free of any preemptive rights.
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3.4 SEC Reports. Parent previously has delivered to the Company (i)
Parent's Annual Report on Form 10-K for the year ended December 31, 2000 (the
"Parent 10-K"), (ii) all proxy statements relating to Parent's meetings of
stockholders held since December 31, 2000 and (iii) all other periodic reports
filed by Parent with the SEC under the Exchange Act since December 31, 2000
(collectively with clauses (i), (ii) and (iii) hereunder and the periodic
reports filed by Parent with the SEC under the Exchange Act prior to the
Effective Time, the "Parent SEC Reports"). As of their respective dates, such
periodic reports complied, and all periodic reports filed by Parent with the SEC
under the Exchange Act between the date of this Agreement and the Closing Date
will comply, in all material respects with applicable SEC requirements and did
not, and in the case of periodic reports filed on or after the date hereof will
not, contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading. Since
March 1, 2000, Parent has timely filed, and between the date of this Agreement
and the Closing Date will timely file, with the SEC all periodic reports
required to be filed under the Exchange Act.
3.5 Financial Statements. The consolidated financial statements
contained in the Parent 10-K have been prepared from, and are in accordance
with, the books and records of Parent and fairly present the consolidated
financial condition, results of operations and cash flows of Parent and its
consolidated subsidiaries as of and for the periods presented therein, all in
accordance with generally accepted accounting principles applied on a consistent
basis, except as otherwise indicated therein.
3.6 Absence of Undisclosed Liabilities. As of December 31, 2000, Parent
had no material liabilities of any nature, whether accrued, absolute,
contingent, or otherwise (including, without limitation, liabilities as
guarantor or otherwise with respect to obligations of others or liabilities for
taxes due or then accrued or to become due), required to be reflected or
disclosed in the balance sheet dated December 31, 2000 (or the notes thereto),
that were not adequately reflected or reserved against on such balance sheet.
Except as disclosed in the Parent SEC Reports, Parent has no such liabilities,
other than liabilities (i) adequately reflected or reserved against on such
balance sheet, (ii) incurred since December 31, 2000, in the ordinary course of
business, or (iii) that would not, in the aggregate, have a Parent Material
Adverse Effect.
3.7 Absence of Adverse Changes. Since December 31, 2000, except as
disclosed in the Parent SEC Reports, there has not been any event, change or
circumstance which has had a Parent Material Adverse Effect.
3.8 Actions and Proceedings. Except as set forth in the Parent SEC
Reports, there are no actions, suits or claims or legal, administrative or
arbitration proceedings pending or, to the knowledge of Parent, threatened
against Parent that individually or in the aggregate could reasonably be
expected to have a Parent Material Adverse Effect or materially interfere with
Parent's ability to consummate the transactions contemplated hereby. To the
knowledge of Parent, except as disclosed in the Parent SEC Reports, there is no
fact, event or circumstance now in existence that reasonably could be expected
to give rise to any suit, action, claim, investigation or proceeding that,
individually or in the aggregate, could reasonably be expected to have a Parent
Material Adverse Effect or materially interfere with Parent's ability to
consummate the transactions contemplated hereby.
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3.9 No Breach. Except for (a) filings under the Securities Act, (b)
filings under the Exchange Act, (c) filings with the Secretary of State of
Delaware, and (d) any required filing of a Notification and Report form under
the HSR Act, the delivery and performance of this Agreement by Parent and Merger
Sub and consummation by each of them of the transactions contemplated hereby
will not (i) violate any provision of the charter or by-laws of Parent or Merger
Sub, (ii) violate, conflict with or result in the breach of any of the terms or
conditions of, result in modification of the effect of, or otherwise give any
other contracting party the right to terminate or accelerate obligations under,
or constitute (or with notice or lapse of time or both constitute) a default
under, any material instrument, contract or other agreement to which Parent or
Merger Sub is party or to which either of them or any of their assets or
properties is bound or subject, (iii) violate any law, ordinance or regulation
or any order, judgment, injunction, decree or requirement of any court,
arbitrator or governmental or regulatory body applicable to Parent or Merger Sub
or by which any of their assets or properties is bound, (iv) require any filing
with, notice to, or permit, consent or approval of, any governmental or
regulatory body or (v) result in the creation of any lien or other encumbrance
on the assets or properties of Parent or Merger Sub, excluding from the
foregoing clauses (ii), (iii), (iv) and (v) violations, breaches and defaults
which, and filings, notices, permits, consents and approvals the absence of
which, in the aggregate, will not have a Parent Material Adverse Effect or
materially interfere with Parent's ability to consummate the transactions
contemplated hereby.
3.10 Compliance with Laws. Except as disclosed in the Parent SEC
Reports, to Parent's knowledge:
(a) Parent has all Permits material to the conduct of its
business as presently conducted; such Permits are in full force and effect; and
no proceeding is pending or threatened to revoke or limit any Permit.
(b) Parent is not in violation of and has no liabilities,
whether accrued, absolute, contingent, or otherwise, under any federal, state,
local, or foreign law, ordinance, or regulation or any order, judgment,
injunction, decree, or other requirement of any court, arbitrator, or
governmental or regulatory body, relating to the operation of clinical testing
laboratories, labor and employment practices, health and safety, zoning,
pollution, or protection of the environment, except for violations of or
liabilities under any of the foregoing which could not, in the aggregate,
reasonably be expected to have a Parent Material Adverse Effect.
(c) Each product or product candidate subject to the FDA's
jurisdiction under the FDCA that is manufactured, tested, distributed, held,
and/or marketed by Parent is being manufactured, tested, distributed, held, and
marketed in compliance with all applicable requirements under the FDCA
including, but not limited to, those relating to investigational use, premarket
clearance, good manufacturing practices, labeling, advertising, record keeping,
filing of reports, and security.
3.11 Intellectual Property. Except as disclosed in the Parent SEC
Reports, Parent owns, or is licensed to use, or otherwise has the full right to
use all Proprietary Rights that are material to its business; all patents listed
on Section 3.11 of the Parent Disclosure Schedule are valid and subsisting;
Parent is not aware of any basis for any claim by any third party that the
business of Parent infringes upon the proprietary rights of others, nor has
Parent received any
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notice or claim of infringement from any third party; and Parent is not aware of
any existing or threatened infringement from any third party on, or any
competing claim of right to use or own any of, its Proprietary Rights.
3.12 Commercial Relationships. The relationships of Parent with its
suppliers, collaborators, licensors, and licensees are generally good commercial
working relationships. No such entity has cancelled or otherwise terminated its
relationship with Parent, or has, during the last twelve months, materially
altered its relationship with Parent.
3.13 Proxy Statement and Registration Statement. None of the
information supplied or to be supplied by Parent for inclusion in the
Registration Statement will, at the time it becomes effective under the
Securities Act, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading. None of the information supplied or to be
supplied by Parent for inclusion or incorporation by reference in the Proxy
Statement/Prospectus will, at the date it is first mailed to holders of Company
Common Stock or at the time of the Company Stockholders Meeting, contain any
untrue statement of a material fact or omit 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.
3.14 Interim Operations of Merger Sub. Merger Sub was formed solely for
the purpose of engaging in the transactions contemplated by this Agreement, has
engaged in no other business activities and has conducted its operations only as
contemplated by this Agreement.
SECTION 4 - COVENANTS AND AGREEMENTS
4.1 Conduct of Business. Except with the prior written consent of
Parent and except as otherwise contemplated herein or referred to in Section 4.1
of the Company Disclosure Schedule, during the period from the date hereof to
the Closing Date, the Company shall observe the following covenants:
(a) Affirmative Covenants Pending Closing. The Company shall:
(i) Preservation of Personnel. Use reasonable
commercial efforts to preserve intact and keep available the services of present
employees of the Company and the Company Subsidiaries;
(ii) Insurance. Use reasonable commercial efforts to
keep in effect casualty, public liability, worker's compensation and other
insurance policies in coverage amounts not less than those in effect at the date
of this Agreement;
(iii) Preservation of the Business; Maintenance of
Properties, Contracts. Use reasonable commercial efforts to preserve the
business of the Company, advertise, promote and market the Company's business
activities in accordance with past practices over the last twelve months, keep
the Company's properties intact, preserve its goodwill and business, maintain
all physical properties in such operating condition as will permit
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the conduct of the Company's business on a basis consistent with past practice,
and perform and comply in all material respects with the terms of the contracts
referred to in Section 2.11.
(iv) Intellectual Property Rights. Use best efforts
to preserve and protect the Proprietary Rights;
(v) Ordinary Course of Business. Operate the
Company's business solely in the ordinary course consistent with past practices;
(vi) Company Options, Warrants and Convertible Note.
Take all actions necessary with respect to Company Options, Company Warrants and
the Convertible Note to effectuate the terms of this Agreement, provided,
however, that Parent shall have the right to approve any agreements to modify
terms of the underlying instruments; and, to the extent permitted by the
applicable stock option plans and agreements, suspend exercise of Company
Options during the three trading days prior to the Closing Date; and
(vii) FDA Matters. Notify and consult with Parent
immediately (A) after receipt of any material communication from the FDA and
before giving any material submission to the FDA, and (B) prior to making any
material change to a study protocol, the addition of new trials, or a material
change to the development timeline for any its product candidates or programs.
(b) Negative Covenants Pending Closing. The Company shall not:
(i) Disposition of Assets. Sell or transfer, or
mortgage, pledge, lease or otherwise encumber any of its assets, including its
Proprietary Rights, other than sales or transfers in the ordinary course of
business and in amounts not exceeding $50,000;
(ii) Liabilities. Incur any indebtedness for borrowed
money, obligation or liability or enter into any contracts or commitments
involving potential payments to or by the Company or any Company Subsidiary of
$50,000 or more;
(iii) Compensation. Except as required or permitted
by this Agreement, change the compensation payable to any officer, director,
employee, agent or consultant; or enter into any employment, severance or other
agreement with any officer, director, employee, agent or consultant of the
Company or a Company Subsidiary; or adopt, or increase the benefits under, any
employee benefit plan, except as required by law;
(iv) Capital Stock. Make any change in the number of
shares of its capital stock authorized, issued or outstanding or grant or
accelerate the exercisability of, any option, warrant or other right to
purchase, or convert any obligation into, shares of its capital stock, or
declare or pay any dividend or other distribution with respect to any shares of
its capital stock, or sell or transfer any shares of its capital stock, or
redeem or otherwise repurchase any shares of its capital stock, except upon the
exercise of convertible securities outstanding on the date of this Agreement and
disclosed herein;
(v) Charter and By-Laws. Cause, permit or propose any
amendments to the Certificate of Incorporation or By-laws of the Company;
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(vi) Acquisitions. Make, or permit to be made, any
material acquisition of property or assets outside the ordinary course of
business;
(vii) Capital Expenditures. Authorize any single
capital expenditure in excess of $50,000 or capital expenditures which in the
aggregate exceed $100,000;
(viii) Accounting Policies. Except as may be required
as a result of a change in law or in generally accepted accounting principles,
change any of the accounting practices or principles used by it or restate, or
become obligated to restate, the financial statements included in the Company
10-K;
(ix) Tax Treatment. Take, or permit any of the
Company Subsidiaries to take, any action that would prevent the Merger from
qualifying as a reorganization within the meaning of Section 368(a) of the Code.
(x) Taxes. Make any Tax election or settle or
compromise any material federal, state, local or foreign Tax liability, change
its annual tax accounting period, change any method of Tax accounting, enter
into any closing agreement relating to any Tax, surrender any right to claim a
Tax refund, or consent to any extension or waiver of the limitations period
applicable to any Tax claim or assessment;
(xi) Legal. Settle or compromise any pending or
threatened suit, action or claim which is material or which relates to the
transactions contemplated hereby;
(xii) Extraordinary Transactions. Adopt a plan of
complete or partial liquidation, dissolution, merger, consolidation,
restructuring, recapitalization or other reorganization of the Company or any of
the Company Subsidiaries (other than the Merger);
(xiii) Payment of Indebtedness. Pay, discharge or
satisfy any claims, liabilities or obligations (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 Company Balance
Sheet or incurred in the ordinary course of business after December 31, 2000;
(xiv) Rights Plan. Amend, modify or waive any
provisions of the Company Rights Plan, or take any action to redeem the Rights
or render the Rights inapplicable to any transaction other than the Merger;
(xv) New Agreements/Amendments. Enter into or modify,
or permit a Company Subsidiary to enter into or modify, any license,
development, research or collaboration agreement with any other person or
entity;
(xvi) Confidentiality Agreements. Modify, amend or
terminate, or waive, release or assign any material rights or claims with
respect to any confidentiality agreement to which the Company is a party; or
(xvii) Obligations. Obligate itself to do any of the
foregoing.
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(c) Control of the Company's Business. Nothing contained in
this Agreement shall give Parent, directly or indirectly, the right to control
or direct the Company's operations prior to the Effective Time. Prior to the
Effective Time, the Company shall exercise, consistent with the terms and
conditions of this Agreement, complete control and supervision over its
operations.
4.2 Corporate Examinations and Investigations. Prior to the Effective
Time, Parent shall be entitled, through its employees and representatives, to
have such access to the assets, properties, business and operations of the
Company, as is reasonably necessary or appropriate in connection with Parent's
investigation of the Company with respect to the transactions contemplated
hereby. Any such investigation and examination shall be conducted at reasonable
times and under reasonable circumstances so as to minimize any disruption to or
impairment of the Company's business and the Company shall cooperate fully
therein. No investigation by Parent shall diminish or obviate any of the
representations, warranties, covenants or agreements of the Company contained in
this Agreement. In order that Parent may have full opportunity to make such
investigation, the Company shall furnish the representatives of Parent during
such period with all such information and copies of such documents concerning
the affairs of the Company as such representatives may reasonably request and
cause its officers, employees, consultants, agents, accountants and attorneys to
cooperate fully with such representatives in connection with such investigation.
4.3 Expenses. Except as otherwise provided in Section 8, the Company
and Parent shall bear their respective expenses incurred in connection with the
preparation, execution and performance of this Agreement and the transactions
contemplated hereby, including without limitation, all fees and expenses of
agents, representatives, counsel and accountants, except that each of Parent and
the Company shall bear and pay one-half of the costs and expenses incurred in
connection with the filing, printing and mailing of the Registration Statement
and the Prospectus/Proxy Statement.
4.4 Authorization from Others. Prior to the Closing Date, the parties
shall use reasonable commercial efforts to obtain all authorizations, consents
and Permits of others, necessary or desirable to permit the consummation of the
Merger on the terms contemplated by this Agreement.
4.5 Further Assurances. Each of the parties shall execute such
documents, further instruments of transfer and assignment and other papers and
take such further actions as may be reasonably required or desirable to carry
out the provisions hereof and the transactions contemplated hereby, including
delivering customary representation letters contemplated by Sections 6.5 and
7.2. Without limiting the generality of the foregoing, the Company agrees to
duly execute and deliver, and to use commercially reasonable efforts to cause
any individual or entity listed as a co-owner of, or who otherwise has any power
of attorney or other rights with respect to, any of the Proprietary Rights of
the Company, to duly execute and deliver such further instruments and do and
cause to be done such further actions and things, including, without limitation,
the execution of such additional assignments, agreements, documents and
instruments, that Parent may at any time and from time to time reasonably
request to more effectively transfer ownership, control and/or administration of
such Proprietary Rights to the Surviving Corporation. Each party shall use its
respective reasonable commercial efforts to take
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other such actions to ensure that, to the extent within its control or capable
of influence by it, the transactions contemplated by this Agreement shall be
fully carried out in a timely fashion. Nothing in this Agreement shall require
Parent or Merger Sub to sell, hold separate, license or otherwise dispose of or
conduct their business in a specified manner, or agree to sell, hold separate,
license or otherwise dispose of or conduct their business in a specified manner,
or permit the sale, holding separate, licensing or other disposition of, any
assets of Parent or Merger Sub, whether as a condition to obtaining any approval
from a governmental entity or any other person or for any other reason.
4.6 Preparation of Disclosure Documents
(a) As soon as practicable following the date of this
Agreement, the Company and Parent shall prepare the Proxy Statement/Prospectus.
The Company shall, in cooperation with Parent, file the Proxy
Statement/Prospectus with the SEC as its preliminary proxy statement and Parent
shall, in cooperation with the Company, prepare and file with the SEC the
Registration Statement, in which the Proxy Statement/Prospectus will be
included. Each of Company and Parent shall use reasonable commercial efforts to
have the Registration Statement declared effective under the Securities Act as
promptly as practicable after such filing and to keep the Registration Statement
effective as long as is necessary to consummate the Merger. The Company shall
mail the Proxy Statement/Prospectus to its stockholders as promptly as
practicable after the Registration Statement is declared effective under the
Securities Act and, if necessary, after the Proxy Statement/Prospectus shall
have been so mailed, promptly circulate supplemental or amended proxy material,
and, if required in connection therewith, resolicit proxies.
(b) (i) The Company shall, as soon as practicable following
the date of this Agreement and the effectiveness of the Registration Statement,
duly call, give notice of, convene and hold a meeting of its stockholders (the
"Company Stockholders Meeting") for the purpose of obtaining the required
stockholder votes with respect to this Agreement, (ii) the Board of Directors of
the Company, unless otherwise required pursuant to the applicable fiduciary
duties of the Board of Directors of the Company to the stockholders of the
Company (as determined in good faith by the Board of Directors of the Company
after consulting with outside counsel), shall give its unqualified
recommendation that its stockholders adopt this Agreement and (iii) the Company
shall take all lawful action to solicit such adoption. No withdrawal,
modification, change or qualification in the recommendation of the Board of
Directors of the Company shall change the approval of the Board of Directors of
the Company for purposes of causing any state takeover statute or other state
law to be inapplicable to the transactions contemplated hereby, or change the
obligation of the Company to present the Merger Agreement for adoption at a the
Company Stockholders Meeting. The Company agrees to give Parent written notice
at least three business days prior to publicly indicating any withdrawal,
modification, change or qualification in the recommendation of the Board of
Directors of the Company.
(c) Except as required by law, no amendment or supplement to
the Proxy Statement/Prospectus or the Registration Statement shall be made by
Parent or the Company without the approval of the other party (which shall not
be unreasonably withheld or delayed).
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(d) The Company shall use reasonable efforts to cause to be
delivered to Parent a letter from the Company's independent public accountants,
dated the date on which the Registration Statement shall become effective,
addressed to the Company and Parent, in form and substance reasonably
satisfactory to Parent and customary in scope and substance for comfort letters
delivered by independent public accountants in connection with registration
statements similar to the Registration Statement.
4.7 Public Announcements. The Company shall consult with Parent to get
Parent's approval (which will not be unreasonably withheld), before issuing any
press release or otherwise making any public statement with respect to the
Merger or this Agreement and shall not issue any such press release or make any
such public statement prior to such consultation and approval, except as may be
required by law or by regulatory bodies.
4.8 Affiliate Letters. Prior to the Closing Date, the Company shall
identify to Parent all persons who, at the time of the Company Stockholders
Meeting, the Company believes may be "affiliates" of the Company within the
meaning of Rule 145 under the Securities Act. The Company shall use its best
efforts to provide Parent with such information as Parent shall reasonably
request for purposes of making its own determination of persons who may be
deemed to be affiliates of the Company. The Company shall use its best efforts
to deliver to Parent prior to the Closing Date a letter from each of such
affiliates identified by the Company and Parent in substantially the form
attached hereto as Exhibit B (the "Affiliate Letters").
4.9 Nasdaq Listings. Prior to the Closing Date, Parent shall file with
Nasdaq a Notification for Listing of Additional Shares covering the shares of
Parent Common Stock to be issued in the Merger, including the shares of Parent
Common Stock issuable upon exercise of the Company Options and Company Warrants
and upon conversion of the Convertible Note. Prior to the Closing Date, the
Company shall take such actions as are necessary so that trading of Company
Common Stock on the Nasdaq National Market ceases immediately prior to the
Effective Time.
4.10 No Solicitation. The Company shall not, and shall cause each
Company Subsidiary and each director, officer, employee, agent or other
representative (including each financial advisor and attorney) of the Company
and each Company Subsidiary not to, (a) solicit, initiate, facilitate, assist or
encourage action by, or discussions with, any person, other than Parent,
relating to the possible acquisition of the Company or any Company Subsidiary or
of all or a material portion of the assets or capital stock of the Company or
any Company Subsidiary or any merger, reorganization, consolidation, business
combination, share exchange, tender offer, recapitalization, dissolution,
liquidation or similar transaction involving the Company or any Company
Subsidiary (an "Alternative Transaction"), (b) participate in any negotiations
regarding, or furnish information with respect to, any effort or attempt by any
person to do or to seek any Alternative Transaction or (c) grant any waiver or
release under any standstill or similar agreement. Notwithstanding the
foregoing, the Company and the Board of Directors of the Company shall be
permitted (i) to comply with Rule 14e-2(a) under the Exchange Act with regard to
an Alternative Transaction (to the extent applicable) and (ii) prior to the date
on which the stockholders of the Company adopt the Merger Agreement, to engage
in discussions or negotiations with, or provide information to, a person who
makes an unsolicited bona fide written proposal for an Alternative Transaction
if (and only if) (A) the Company is not in breach
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of its obligations under this Section 4.10, (B) the Board of Directors of the
Company concludes in good faith (after consultation with its financial advisor)
that the proposal is reasonably likely to lead to an Alternative Transaction
more favorable for the Company's stockholders than the Merger (including
adjustment to the terms and conditions proposed by Parent in response to the
proposal for the Alternative Transaction), (C) the Board of Directors of the
Company concludes in good faith (after consultation with its outside legal
counsel) that the engaging in such negotiations or discussions or the provision
of such information is required by the directors' fiduciary duties under
Delaware law and (D) prior to providing any information or data, the recipient
delivers to the Company an executed confidentiality agreement with terms
substantially similar to those contained in the confidentiality agreements (the
"Confidentiality Agreements") dated July 24, 2000 and April 18, 2001,
respectively, between Parent and the Company. The Company shall notify Parent
promptly (and, in any case, within 24 hours) of any inquiries, proposals or
offers received by, any information requested from, or any discussions or
negotiations sought to be initiated or continued with, it, any Company
Subsidiary or any of their directors, officers, employees, agents or other
representatives concerning an Alternative Transaction, indicating, in connection
with such notice, the names of the parties and the material terms and conditions
of any proposals or offers and, in the case of written materials, providing
copies of such materials. The Company agrees that it will keep Parent informed,
on a prompt basis (and, in any case, within 24 hours of any significant
development), of the status and terms of any such proposals or offers and the
status of any such discussions or negotiations. The Company agrees that it will
immediately cease and cause to be terminated any existing activities,
discussions or negotiations with respect to any potential Alternative
Transaction or similar transaction or arrangement and request the return or
destruction of all confidential information regarding the Company previously
provided in connection with such activities, discussions or negotiations. The
Company agrees that it will take the necessary steps to promptly inform the
individuals or entities referred to in the first sentence of this Section 4.10
of the obligations undertaken in this Section 4.10.
4.11 Regulatory Filings. As soon as is reasonably practicable, if
required, the Company and Parent each shall file with the United States Federal
Trade Commission (the "FTC") and the Antitrust Division of the United States
Department of Justice ("DOJ") any Notification and Report Forms relating to the
Merger required by the HSR Act, as well as comparable pre-merger notification
forms required by the merger notification and control laws and regulations of
any other applicable jurisdiction, as agreed to by the parties. The Company and
Parent each shall promptly (a) supply the other with any information which may
be required in order to make such filings and (b) supply any additional
information which may be requested by the FTC, the DOJ or the competition or
merger control authorities of any other jurisdiction and which the parties
reasonably deem appropriate.
4.12 Termination of 401(k) Plan. The Company agrees to terminate its
401(k) Plan immediately prior to the Closing, unless the Parent, in its sole and
absolute discretion, agrees to sponsor and maintain such policy by providing the
Company with written notice of its election at least three (3) days prior to the
Closing Date.
4.13 Termination of Severance and Salary Continuation Plans. The
Company agrees to terminate, to the extent applicable, any and all group
severance, separation or salary
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continuation plans, programs or arrangements that may be covered under ERISA
immediately prior to the Closing.
4.14 Notification of Certain Matters. Between the date hereof and the
Closing Date, the Company shall give prompt notice to Parent, and Parent and
Merger Sub shall give prompt notice to the Company, of (a) the occurrence or
non-occurrence of any event or circumstance the occurrence or non-occurrence of
which would be likely to cause any representation or warranty contained in this
Agreement to be untrue or inaccurate if made at such time and (b) any failure of
the Company, Parent and Merger Sub, as the case may be, to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it hereunder.
4.15 Registration of Certain Shares. Promptly after the Effective Time
but not later than 60 days following the Closing, Parent shall file registration
statements on Form S-3 and Form S-8 (or any successors or other appropriate
forms), with respect to the shares of Parent Common Stock subject to (i) Company
Options or purchase rights under the Company Purchase Plan, (ii) Company
Warrants, and (iii) the Convertible Note, to the extent required under the
particular instrument governing such securities, and shall use commercially
reasonable efforts to maintain the effectiveness of such registration statement
for so long as such options, purchase rights, warrants, and note remain
outstanding. With respect to the Form S-3 or successor form, Parent shall use
commercially reasonable efforts to obtain its effectiveness within 180 days
following the Closing Date.
4.16 Employee Matters.
(a) Parent shall give individuals who are employed by the
Company immediately prior to the Effective Time and remain as employees of the
Surviving Corporation or Parent ("Affected Employees") full credit for purposes
of eligibility, vesting, benefit accrual (except for purposes of benefit accrual
under any defined benefit pension plans and except as would result in
duplication of benefits) and determination of the level of benefits under any
employee benefit plans or arrangements maintained by Parent for such Affected
Employees' service with the Company to the same extent recognized by the Company
immediately prior to the Effective Time.
(b) Parent shall waive all limitations as to preexisting
conditions exclusions and waiting periods with respect to participation and
coverage requirements applicable to the Affected Employees under any medical or
dental benefit plans that such employees may be eligible to participate in after
the Effective Time, other than limitations or waiting periods that are already
in effect with respect to such employees and that have not been satisfied as of
the Effective Time under any plan maintained for the Affected Employees
immediately prior to the Effective Time.
(c) As of the Effective Time, Parent shall assume and honor in
accordance with their terms all employment, severance, and other compensation
agreements and arrangements existing prior to the execution of this Agreement
which are between Company and any director, officer, or employee thereof, each
as described in Section 2.17 of the Company Disclosure Schedule, except as
otherwise expressly agreed between Parent and such person.
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4.17 Indemnification
(a) From and after the Effective Time, Parent shall cause the
Surviving Corporation to fulfill and honor in all respects the obligations, to
the extent legally permissible, of the Company pursuant to the indemnification
agreements between the Company and certain of its directors and officers (the
"Indemnified Parties") that are listed in Section 4.17 of the Company Disclosure
Schedule and any indemnification provisions under the Company's Certificate of
Incorporation or By-laws as in effect on the date hereof.
(b) In the event the Surviving Corporation or any of its
successors or assigns (i) consolidates with or merges with any other person and
shall not be the continuing or surviving corporation or entity of such
consolidation or merger or (ii) transfers substantially all of its assets to any
person in a single transaction or a series of transactions, then, and in each
such case, Parent shall either guarantee the indemnification obligations
referred to in this Section 4.17 or will make or cause to be made proper
provision so that the successors and assigns of the Surviving Corporation assume
the indemnification obligations described herein for the benefit of the
Indemnified Parties.
(c) Parent understands and agrees that, prior to the Effective
Time, the Company intends to obtain a six-year "tail" insurance policy that
provides coverages substantially similar to the coverage provided under the
Company's directors and officers insurance policy in effect on the date of this
Agreement for the individuals who are directors and officers of the Company on
the date of this Agreement for events occurring prior to the Effective Time;
provided, however, without Parent's prior written consent, the Company shall not
pay more than $250,000 to purchase such policy.
4.18 Participation in Certain Actions and Proceedings. Until this
Agreement is terminated in accordance with Section 8.1, Parent shall have the
right to participate in the defense of any action, suit or proceeding instituted
against the Company (or any of its directors or officers) before any court or
governmental or regulatory body or threatened by any governmental or regulatory
body, to restrain, modify or prevent the consummation of the transactions
contemplated by this Agreement, or to seek damages or a discovery order in
connection with such transactions.
SECTION 5 - CONDITIONS PRECEDENT TO THE OBLIGATIONS
OF EACH PARTY TO CONSUMMATE THE MERGER
The respective obligations of each party to consummate the Merger shall
be subject to the satisfaction or waiver by mutual consent of the other party,
at or before the Effective Time, of each of the following conditions:
5.1 Stockholder Approval. The Company shall have obtained the vote of
holders of Company Common Stock necessary to adopt this Agreement.
5.2 Registration Statement. The Registration Statement shall have been
declared effective and shall remain effective and shall not be subject to a stop
order at the Effective Time.
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5.3 Absence of Order. No temporary restraining order, preliminary or
permanent injunction or other order issued by a court or other governmental
entity of competent jurisdiction shall be in effect and have the effect of
making the Merger illegal or otherwise prohibiting consummation of the Merger.
5.4 Regulatory Approvals. All approvals from governmental entities shall
have been obtained; provided, however, that the conditions of this Section 5.4
shall not apply to any party whose failure to fulfill its obligations under this
Agreement shall have been the cause of, or shall have resulted in, such failure
to obtain such approval.
5.5 HSR Act. Any waiting period (and any extension thereof) applicable to
the Merger under the HSR Act shall have been terminated or shall have expired.
SECTION 6 - CONDITIONS PRECEDENT TO THE OBLIGATIONS OF
PARENT AND MERGER SUB TO CONSUMMATE THE MERGER
The obligations of Parent and Merger Sub to consummate the Merger are
subject, to the fulfillment of the following conditions, any one or more of
which may be waived by Parent:
6.1 Representations, Warranties and Covenants. The representations and
warranties made by the Company in this Agreement shall have been accurate as of
the date of this Agreement and (without giving effect to any materiality
qualifiers) shall be accurate as of the Closing Date as if made on and as of the
Closing Date except (other than representations and warranties set forth in
Section 2.3) to the extent failure to be accurate, in the aggregate, could not
reasonably be expected to have a Company Material Adverse Effect. The
representation and warranties set forth in Section 2.3 shall be true and correct
in all respects (other than de minimis variations) as of the Closing Date as if
made on and as of the Closing Date. The Company shall have performed and
complied in all material respects with all covenants and agreements required by
this Agreement to be performed or complied with by it on or prior to the
Effective Time. The Company shall have delivered to Parent a certificate from
its chief executive officer, dated the Closing Date, to the foregoing effect.
6.2 Corporate Certificates. The Company shall have delivered a copy of the
Certificate of Incorporation of the Company, as in effect immediately prior to
the Closing Date, certified by the Delaware Secretary of State and a
certificate, as of the most recent practicable date, of the Delaware Secretary
of State as to the Company's corporate good standing.
6.3 Secretary's Certificate. The Company shall have delivered a
certificate of the Secretary of the Company, dated as of the Closing Date,
certifying as to (a) the incumbency of officers of the Company executing
documents executed and delivered in connection herewith, (b) a copy of the
By-Laws of the Company, as in effect from the date this Agreement was approved
by the Board of Directors of the Company until the Closing Date, (c) a copy of
the resolutions of the Board of Directors of the Company authorizing and
approving the applicable matters contemplated hereunder and (iv) a copy of the
resolutions of the stockholders of the Company adopting this Agreement.
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6.4 Affiliate Letters. Parent shall have received the Affiliate Letters
referred to in Section 4.8.
6.5 Tax Opinion. Parent shall have received the opinion of Palmer & Dodge
LLP, dated on or prior to the effective date of the Registration Statement, to
the effect that (i) the Merger will constitute a reorganization under Section
368(a) of the Code, and (ii) Parent, the Company and Merger Sub will each be a
party to that reorganization. In rendering such opinion, counsel shall be
entitled to rely on customary representation letters of Parent, the Company and
Merger Sub and others, in form and substance reasonably satisfactory to such
counsel; provided, however, if Palmer & Dodge LLP was unwilling to deliver such
opinion, this condition shall be deemed satisfied if Andrews & Kurth L.L.P.
delivered such opinion.
6.6 Consents. The Company shall have obtained waivers or consents, which
shall remain in full force and effect, with respect to each agreement required
to be disclosed in Section 2.19 of the Company Disclosure Schedule such that
this Agreement and the consummation of the transactions contemplated hereby do
not result in any material modification or termination of, or a payment or
default under, any such agreement.
SECTION 7 - CONDITIONS PRECEDENT TO THE OBLIGATION OF
COMPANY TO CONSUMMATE THE MERGER
The obligation of the Company to consummate the Merger is subject to the
fulfillment of the following conditions, any one or more of which may be waived
by it:
7.1 Representations, Warranties and Covenants. The representations and
warranties made by Parent and Merger Sub in this Agreement shall have been
accurate as of the date of this Agreement and (without giving effect to any
materiality qualifiers) shall be accurate as of the Closing Date as if made on
and as of the Closing Date except to the extent failure to be accurate, in the
aggregate, could not reasonably be expected to have a Parent Material Adverse
Effect. Parent and Merger Sub shall have performed and complied in all material
respects with all covenants and agreements required by this Agreement to be
performed or complied with by it on or prior to the Effective Time. Parent and
Merger Sub shall have delivered to the Company a certificate from an executive
officer, dated the Closing Date, to the foregoing effect.
7.2 Tax Opinion. The Company shall have received the opinion of Andrews &
Kurth L.L.P., dated on or prior to the effective date of the Registration
Statement, to the effect that (i) the Merger will constitute a reorganization
under Section 368(a) of the Code, and (ii) Parent, the Company and Merger Sub
will each be a party to that reorganization. In rendering such opinion, counsel
shall be entitled to rely on customary representation letters of Parent, the
Company and Merger Sub and others, in form and substance reasonably satisfactory
to such counsel; provided, however, if Andrews & Kurth L.L.P. was unwilling to
deliver such opinion, this condition shall be deemed satisfied if Palmer & Dodge
LLP delivered such opinion.
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SECTION 8 - TERMINATION, AMENDMENT AND WAIVER
8.1 Termination. This Agreement may be terminated at any time prior to the
Effective Time, whether prior to or after the stockholders of the Company adopt
this Agreement:
(a) by either Company or Parent, by written notice to the other, if
the Effective Time shall not have occurred on or before September 30, 2001;
provided, however, that the right to terminate this Agreement under this Section
8.1(a) shall not be available to any party whose breach of a representation or
warranty or failure to fulfill any covenant or other agreement under this
Agreement has been the cause of, or resulted in the failure of, the Merger to
occur on or before such date;
(b) by the Company (provided that the Company is not then in
material breach of any representation, warranty, covenant or other agreement
contained herein), by written notice to Parent, if a circumstance exists or
circumstances exist such that it is reasonably certain that the conditions to
the Company's obligation to close that are set forth in Section 7.1 will not be
satisfied; provided, however, the Company shall not have a right to terminate
this Agreement pursuant to this Section 8.1(b), (i) if the circumstance is or
the circumstances are susceptible to change through action or inaction by Parent
and (ii) within 20 days after written notice from the Company, Parent effects a
change in the circumstance or circumstances such that it ceases to be reasonably
certain that the conditions to the Company's obligation to close that are set
forth in Section 7.1 will not be satisfied;
(c) by Parent (provided that Parent is not then in material breach
of any representation, warranty, covenant or other agreement contained herein),
by written notice to the Company, if a circumstance exists or circumstances
exist such that it is reasonably certain that the conditions to Parent's
obligation to close that are set forth in Section 6.1 will not be satisfied;
provided, however, Parent shall not have a right to terminate this Agreement
pursuant to this Section 8.1(c), (i) if the circumstance is or the circumstances
are susceptible to change through action or inaction by the Company and (ii)
within 20 days after written notice from Parent, the Company effects a change in
the circumstance or circumstances such that it ceases to be reasonably certain
that the conditions to the Company's obligation to close that are set forth in
Section 6.1 will not be satisfied;
(d) by either Parent or the Company, by written notice to the other,
if any governmental entity shall have issued any injunction or taken any other
action permanently restraining, enjoining or otherwise prohibiting the
consummation of the Merger and such injunction or other action shall have become
final and non-appealable;
(e) by either Parent or the Company, by written notice to the other,
if the stockholders of the Company shall not have adopted this Agreement within
sixty (60) days after the later of (i) the date the Company mails the Proxy
Statement/Prospectus to the Company stockholders or (ii) the date of the most
recent supplemental proxy materials that the Company is legally required to
distribute to its stockholders; provided, however, that the right to terminate
this Agreement under this Section 8.1(e) shall not be available to any party
whose breach of a representations or warranty or failure to fulfill any covenant
or agreement under this Agreement
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has been the cause of or resulted in the failure to receive such stockholder
votes on or before such date;
(f) by Parent, by written notice to the Company, if the Board of
Directors of the Company (i) fails to include in the Proxy Statement/Prospectus
its recommendation that the Company's stockholders vote to adopt this Agreement,
(ii) withdraws, modifies or qualifies its approval of, or its recommendation
that its stockholders vote in favor of, such actions or takes any action or
makes any statement inconsistent with such approval or recommendation, (iii)
adopts resolutions approving or otherwise authorizes or recommends an
Alternative Transaction or (iv) fails to recommend against, or takes a neutral
position with respect to, a tender or exchange offer in any position taken
pursuant to Rules 14d-9 and 14e-2(a) under the Exchange Act;
(g) by Parent in the event that the Company or any of its directors
or representatives takes any of the actions described in clause (ii) of the
second sentence of Section 4.10 in response to a proposal for an Alternative
Transaction;
(h) by Parent, if any person or group (as defined in Section
13(d)(3) of the Exchange Act), other than Parent or any of its affiliates, shall
have become the beneficial owner (as defined in Rule 13d-3 under the Exchange
Act) of at least 15% of the outstanding shares of Company Common Stock; or
(i) at any time with the written consent of Parent and the Company.
8.2 Effect of Termination. If this Agreement is terminated as provided in
Section 8.1, this Agreement shall forthwith become void and have no effect,
without liability on the part of Parent, Merger Sub and the Company and their
respective directors, officers or stockholders, except that (a) the provisions
of this Section 8, Section 9, Section 4.3 relating to expenses, and Section 4.7
relating to publicity shall survive, and (b) no such termination shall relieve
any party from liability by reason of any willful breach by such party of any of
its representations, warranties, covenants or other agreements contained in this
Agreement.
8.3 Termination Fee
(a) Fee. If this Agreement is terminated by the Company pursuant to
Section 8.1(e), or by Parent (i) pursuant to Section 8.1(e) or (f) or (ii)
pursuant to Section 8.1(c), then the Company shall pay to Parent in cash $1.2
million (the "Fee"); provided, however, that the Fee shall not be owed if this
Agreement is terminated by either party pursuant to 8.1(e) unless at the time of
termination an Alternative Transaction shall have been announced or the Company
has or the Company's stockholders shall have received a proposal for an
Alternative Transaction. The Company shall pay the Fee to Parent concurrently
with the Company terminating this Agreement and within one business day of
Parent terminating this Agreement. In the event that the Company complies with
all of the requirements set forth in Sections 5 and 6 of this Agreement and is
otherwise not in breach of any other provisions of this Agreement, and the
Company terminates this Agreement pursuant to Section 8.1(b), then Parent shall
pay to the Company in cash the Fee; provided however, that the Fee shall not be
owed by Parent if an Alternative Transaction shall have been announced or the
Company has or the Company's stockholders shall
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have received a proposal for an Alternative Transaction. The payment of the Fee
shall be the Company's sole and exclusive remedy for any breach of Parent's
obligations under the Agreement. Parent shall pay the Fee to the Company within
one business day after the Termination Date.
(b) Expense Reimbursement. If this Agreement is terminated by Parent
pursuant to Section 8.1(g), then the Company shall pay to Parent an amount equal
to the reasonable out-of-pocket fees and reasonable expenses incurred by Parent
in connection with this Agreement and the transactions contemplated hereby. Such
expense reimbursement, whether pursuant to Section 8.1(a) or (b) shall be due
one business day after receipt of an invoice indicating the amount of the fees
and expenses.
(c) Payments. Any payments required by either party under this
Section 8.3 shall be payable by wire transfer of immediately available funds to
an account designated by the other party. If such party fails to promptly make
any payment required under this Section 8.3 and the other party commences a suit
to collect such payment, the party required to make such payment shall indemnify
the other party for its fees and expenses (including attorneys fees and
expenses) incurred in connection with such suit and shall pay the other party
interest on the amount of the payment at the prime rate of Fleet National Bank
(or its successors or assigns) in effect on the date the payment was payable
pursuant to this Section 8.3.
8.4 Amendment. This Agreement may not be amended except by an instrument
signed by each of the parties hereto; provided, however, that after adoption of
this Agreement by the stockholders of the Company, without the further approval
of the stockholders of the Company, no amendment may be made that (a) alters or
changes the amount or kind of consideration to be received as provided in
Section 1.6, (b) alters or changes any term of the Certificate of Incorporation
of the Surviving Corporation or (c) alters or changes any of the terms and
conditions of this Agreement if such alteration or change would adversely affect
the stockholders of the Company.
8.5 Waiver. At any time prior to the Effective Time, either party hereto
may (a) extend the time for the performance of any of the obligations or other
acts of the other party hereto or (b) waive compliance with any of the
agreements of the other party or any conditions to its own obligations, in each
case only to the extent such obligations, agreements and conditions are intended
for its benefit; provided that any such extension or waiver shall be binding
upon a party only if such extension or waiver is set forth in a writing executed
by such party.
SECTION 9 - MISCELLANEOUS
9.1 No Survival. None of the representations and warranties of the
Company, Parent or Merger Sub contained herein shall survive the Effective Time,
and only those covenants and agreements contained herein that by their terms are
to be performed after the Effective Time shall survive the Effective Time.
9.2 Notices. Any notice or other communication required or permitted
hereunder shall be in writing and shall be deemed given when so delivered in
person, by overnight courier, by facsimile transmission (with receipt confirmed
by telephone or by automatic transmission
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report) or two business days after being sent by registered or certified mail
(postage prepaid, return receipt requested), as follows:
(a) if to Parent or Merger Sub, to:
Antigenics Inc.
630 Fifth Avenue, Suite 1200
New York, New York 10111
Attn: Garo H. Armen, Ph.D.
Telephone: (212) 332-4774
Facsimile: (212) 332-4778
with a copy to:
Palmer & Dodge LLP
One Beacon Street
Boston, Massachusetts 02108
Attn: Paul M. Kinsella
Telephone: (617) 573-0100
Facsimile: (617) 227-4420
(b) if to the Company, to:
Aronex Pharmaceuticals, Inc.
8707 Technology Forest Place
The Woodlands, TX 77381-1191
Attn: Geoffrey Cox
Telephone: (281) 367-1666
Facsimile: (281) 367-1676
with a copy to:
Andrews & Kurth L.L.P.
2170 Buckthorne Place, Suite 150
The Woodlands, Texas 77380
Attn: Jeffrey R. Harder
Telephone: (713) 220-4312
Facsimile: (713) 220-4815
Any party may by notice given in accordance with this Section 9.2 to the other
parties designate another address or person for receipt of notices hereunder.
9.3 Entire Agreement. This Agreement contains the entire agreement between
the parties with respect to the Merger and supersedes all prior agreements,
written or oral, between the parties with respect thereto, other than the
Confidentiality Agreements between Parent and the Company, which shall survive
execution of this Agreement and any termination of this Agreement.
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9.4 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware without regard to conflict of
laws provisions.
9.5 Binding Effect; No Assignment; No Third-Party Beneficiaries.
(a) This Agreement shall be binding upon and inure to the benefit of
the parties and their respective successors and permitted assigns. This
Agreement is not assignable without the prior written consent of the other
parties hereto.
(b) Nothing in this Agreement, express or implied, is intended to or
shall confer upon any person other than Parent, Merger Sub and the Company and
their respective successors and permitted assigns and right, benefit or remedy
of any nature whatsoever under or by reason of this Agreement.
9.6 Section Headings, Construction. The headings of Sections in this
Agreement are provided for convenience only and will not affect its construction
or interpretation. All references to "Section" or "Sections" refer to the
corresponding Section or Sections of this Agreement. All words used in this
Agreement will be construed to be of such gender or number as the circumstances
require. Unless otherwise expressly provided, the word "including" does not
limit the preceding words or terms.
9.7 Counterparts. This Agreement may be executed in two counterparts, each
of which shall be deemed an original, and both of which together shall
constitute one and the same instrument.
9.8 Severability. If any provision of this Agreement is held invalid or
unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement shall remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable. The
parties further agree to replace such invalid or unenforceable provision of this
Agreement with a valid and enforceable provision that will achieve, to the
extent possible, the economic, business and other purposes of such invalid or
unenforceable provision.
9.9 Submission to Jurisdiction; Waiver. Each of Company, Parent and Merger
Sub irrevocably agrees that any legal action or proceeding with respect to this
Agreement or for recognition and enforcement of any judgment in respect hereof
brought by the other party hereto or its successors or assigns may be brought
and determined in the courts of the Commonwealth of Massachusetts and each of
the Company, Parent and Merger Sub hereby irrevocably submits with regard to any
action or proceeding for itself and in respect to its property, generally and
unconditionally, to the nonexclusive jurisdiction of the aforesaid courts. Each
of Company, Parent and Merger Sub hereby irrevocably waives, and agrees not to
assert, by way of motion, as a defense, counterclaim or otherwise, in any action
or proceeding with respect to this Agreement, (a) any claim that it is not
personally subject to the jurisdiction of the above-named courts for any reason
other than the failure to lawfully serve process, (b) that it or its property is
exempt or immune from jurisdiction of any such court or from any legal process
commenced in such courts (whether through service of notice, attachment prior to
judgment, attachment in aid of execution of judgment, execution of judgment or
otherwise), and (c) to the fullest extent permitted
41
43
by applicable law, that (i) the suit, action or proceeding in any such court is
brought in an inconvenient forum, (ii) the venue of such suit, action or
proceeding is improper and (iii) this Agreement, or the subject matter hereof,
may not be enforced in or by such courts.
9.10 Enforcement. The parties recognize and agree that if for any reason
any of the provisions of this Agreement are not performed in accordance with
their specific terms or are otherwise breached, immediate and irreparable harm
or injury would be caused for which money damages would not be an adequate
remedy. Accordingly, each party agrees that in addition to other remedies the
other party shall be entitled to an injunction restraining any violation or
threatened violation of the provisions of this Agreement. In the event that any
action shall be brought in equity to enforce the provisions of the Agreement,
neither party will allege, and each party hereby waives the defense, that there
is an adequate remedy at law.
9.11 Rules of Construction.
(a) The parties hereto agree that they have been represented by
counsel during the negotiation and execution of this Agreement and, therefore,
waive the application of any law, regulation, holding or ruling of construction
providing that ambiguities in an agreement or other document will be construed
against the party drafting such agreement or document.
(b) The phrase "to Company's knowledge" and similar qualifiers shall
mean and be limited to the actual knowledge of the persons identified in Section
9.11 of the Company Disclosure Schedule after due inquiry of officers and other
employees who may reasonably be expected to have knowledge of such matters.
9.12 Waiver of Jury Trial. EACH OF PARENT, MERGER SUB AND COMPANY HEREBY
IRREVOCABLY WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM (WHETHER BASED IN CONTRACT, TORT OR OTHERWISE) ARISING OUT OF,
UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER RELATED DOCUMENT, OR ANY
COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENT OR ACTION RELATED HERETO OR
THERETO.
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IN WITNESS WHEREOF, the parties have executed this Agreement and Plan of
Merger as of the date first stated above.
ANTIGENICS INC.
By /s/ Garo Armen
----------------------------------
Name: Garo Armen
Title: Chairman and Chief Executive Officer
NASA MERGER CORP.
By /s/ Garo Armen
----------------------------------
Name: Garo Armen
Title: President
ARONEX PHARMACEUTICALS, INC.
By /s/ Geoffrey Cox
----------------------------------------
Name: Geoffrey Cox
Title: President and Chief Executive Officer
[Signature Page to Agreement and Plan of Merger]
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TABLE OF CONTENTS
PAGE
SECTION 1 - THE MERGER............................................... 1
1.1 The Merger...................................................... 1
1.2 Effective Time.................................................. 1
1.3 Effects of the Merger........................................... 2
1.4 Certificate of Incorporation and By-Laws........................ 2
1.5 Directors and Officers.......................................... 2
1.6 Conversion of Common Stock...................................... 2
1.7 Company Options, Warrants, Convertible Note, and Purchase Rights 3
1.8 Closing of Company Transfer Books............................... 5
1.9 Exchange of Certificates........................................ 5
1.10 No Liability.................................................... 6
1.11 Lost Certificates............................................... 6
1.12 Withholding Rights.............................................. 6
1.13 Distributions with Respect to Unexchanged Shares................ 6
1.14 Further Assurances.............................................. 6
SECTION 2 - REPRESENTATIONS AND WARRANTIES OF COMPANY................ 7
2.1 Organization and Qualification.................................. 7
2.2 Authority to Execute and Perform Agreements..................... 7
2.3 Capitalization and Title to Shares.............................. 8
2.4 Company Subsidiaries and Company Joint Ventures................. 9
2.5 SEC Reports..................................................... 10
2.6 Financial Statements............................................ 10
2.7 Absence of Undisclosed Liabilities.............................. 10
2.8 Absence of Adverse Changes...................................... 11
2.9 Compliance with Laws............................................ 11
2.10 Actions and Proceedings......................................... 12
2.11 Contracts and Other Agreements.................................. 12
2.12 Intellectual Property........................................... 13
2.13 Insurance....................................................... 14
2.14 Commercial Relationships........................................ 14
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TABLE OF CONTENTS
(CONTINUED)
PAGE
2.15 Tax Matters..................................................... 15
2.16 Employee Benefit Plans.......................................... 16
2.17 Employee Relations.............................................. 18
2.18 Environmental Matters........................................... 19
2.19 No Breach....................................................... 21
2.20 Board Approvals................................................. 22
2.21 Financial Advisor............................................... 22
2.22 Proxy Statement and Registration Statement...................... 22
SECTION 3 - REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB.. 23
3.1 Organization and Qualification.................................. 23
3.2 Authority to Execute and Perform Agreement...................... 23
3.3 Capitalization.................................................. 23
3.4 SEC Reports..................................................... 24
3.5 Financial Statements............................................ 24
3.6 Absence of Undisclosed Liabilities.............................. 24
3.7 Absence of Adverse Changes...................................... 24
3.8 Actions and Proceedings......................................... 24
3.9 No Breach....................................................... 25
3.10 Compliance with Laws............................................ 25
3.11 Intellectual Property........................................... 25
3.12 Commercial Relationships........................................ 26
3.13 Proxy Statement and Registration Statement...................... 26
3.14 Interim Operations of Merger Sub................................ 26
SECTION 4 - COVENANTS AND AGREEMENTS................................. 26
4.1 Conduct of Business............................................. 26
4.2 Corporate Examinations and Investigations....................... 29
4.3 Expenses........................................................ 29
4.4 Authorization from Others....................................... 29
4.5 Further Assurances.............................................. 29
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TABLE OF CONTENTS
(CONTINUED)
PAGE
4.6 Preparation of Disclosure Documents............................. 30
4.7 Public Announcements............................................ 31
4.8 Affiliate Letters............................................... 31
4.9 Nasdaq Listings................................................. 31
4.10 No Solicitation................................................. 31
4.11 Regulatory Filings.............................................. 32
4.12 Termination of 401(k) Plan...................................... 32
4.13 Termination of Severance and Salary Continuation Plans.......... 32
4.14 Notification of Certain Matters................................. 33
4.15 Registration of Certain Shares.................................. 33
4.16 Employee Matters................................................ 33
4.17 Indemnification................................................. 34
4.18 Participation in Certain Actions and Proceedings................ 34
SECTION 5 - CONDITIONS PRECEDENT TO THE OBLIGATIONS OF EACH PARTY TO
CONSUMMATE THE MERGER....................................... 34
5.1 Stockholder Approval............................................ 34
5.2 Registration Statement.......................................... 34
5.3 Absence of Order................................................ 35
5.4 Regulatory Approvals............................................ 35
5.5 HSR Act......................................................... 35
SECTION 6 - CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PARENT AND
MERGER SUB TO CONSUMMATE THE MERGER......................... 35
6.1 Representations, Warranties and Covenants....................... 35
6.2 Corporate Certificates.......................................... 35
6.3 Secretary's Certificate......................................... 35
6.4 Affiliate Letters............................................... 36
6.5 Tax Opinion..................................................... 36
6.6 Consents........................................................ 36
SECTION 7 - CONDITIONS PRECEDENT TO THE OBLIGATION OF COMPANY TO
CONSUMMATE THE MERGER....................................... 36
7.1 Representations, Warranties and Covenants....................... 36
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48
TABLE OF CONTENTS
(CONTINUED)
PAGE
7.2 Tax Opinion..................................................... 36
SECTION 8 - TERMINATION, AMENDMENT AND WAIVER........................ 37
8.1 Termination..................................................... 37
8.2 Effect of Termination........................................... 38
8.3 Termination Fee................................................. 38
8.4 Amendment....................................................... 39
8.5 Waiver.......................................................... 39
SECTION 9 - MISCELLANEOUS............................................ 39
9.1 No Survival..................................................... 39
9.2 Notices......................................................... 39
9.3 Entire Agreement................................................ 40
9.4 Governing Law................................................... 41
9.5 Binding Effect; No Assignment; No Third-Party Beneficiaries..... 41
9.6 Section Headings, Construction.................................. 41
9.7 Counterparts.................................................... 41
9.8 Severability.................................................... 41
9.9 Submission to Jurisdiction; Waiver.............................. 41
9.10 Enforcement..................................................... 42
9.11 Rules of Construction........................................... 42
9.12 Waiver of Jury Trial............................................ 42
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EXHIBITS
Exhibit A Form of Contingent Value Rights Agreement
Exhibit B Form of Affiliate Letter
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Exhibit A
FORM OF CONTINGENT VALUE RIGHTS AGREEMENT
CONTINGENT VALUE RIGHTS AGREEMENT, dated _______ 2001, between Antigenics
Inc. ("Parent"), a Delaware corporation, and [_______], as Rights Agent (the
"Rights Agent"), in favor of each person (a "Holder") who from time to time
holds one or more Contingent Value Rights (the "CVRs") to receive a number of
shares of Parent common stock, $0.01 par value per share (the "Parent Common
Stock"), in the amounts and subject to the terms and conditions set forth
herein. A registration statement on Form S-4 (No. 333-______) (the "Registration
Statement") with respect to, among other securities, the CVRs, has been prepared
and filed by Parent with the Securities and Exchange Commission (the
"Commission") and has become effective in accordance with the Securities Act of
1933 (the "Act"). This Agreement is entered into in connection with the
Agreement and Plan of Merger (the "Merger Agreement") dated as of April 23,
2001, by and among Parent, Nasa Merger Corp. ("Merger Sub"), and Aronex
Pharmaceuticals, Inc. (the "Company"), which sets forth the initial allocation
of one CVR to each outstanding share of Company Common Stock (as defined in the
Merger Agreement) and each share of Company Common Stock subject to issuance
under the Company Options (as defined in the Merger Agreement), the Company
Warrants (as defined in the Merger Agreement) and the Convertible Note.
Section 1. Appointment of Rights Agent. Parent hereby appoints the Rights
Agent to act as agent for the Holders in accordance with the instructions set
forth herein, and the Rights Agent hereby accepts such appointment, upon the
terms and conditions hereinafter set forth.
Section 2. Form of CVR Certificate.
2.1 The CVRs shall be evidenced by certificates (the "CVR Certificates").
The CVR Certificates may have such letters, numbers, or other marks of
identification or designation and such legends, summaries, or endorsements
printed, lithographed, or engraved thereon as Parent may deem appropriate and as
are not inconsistent with the provisions of this Agreement, or as may be
required to comply with applicable law or with any rule or regulation made
pursuant thereto.
2.2 The CVR Certificates shall be executed on behalf of Parent by the
manual or facsimile signature of the present or any future President or Vice
President of Parent, under its corporate seal, affixed or in facsimile, attested
by the manual or facsimile signature of the present or any future Secretary or
Assistant Secretary of Parent. CVR Certificates shall be dated as of the date of
the initial issuance thereof or the date of any subsequent transfer, as the case
may be.
Section 3. Registration.
3.1 The Rights Agent shall maintain books for the registration of the CVR
Certificates.
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3.2 Prior to transfer of the CVR Certificates as provided for herein,
Parent and the Rights Agent may deem and treat the registered Holder thereof as
the absolute owner of the CVR Certificates (notwithstanding any notation of
ownership or other writing thereon made by anyone other than Parent or the
Rights Agent), for the purpose of the CVR Consideration (as defined herein) and
for all other purposes, and neither Parent nor the Rights Agent shall be
affected by any notice to the contrary.
Section 4. Payment and Exchange of CVRs.
4.1 Milestone and Exchange Ratio. For purposes of this Agreement,
"Milestone" means the granting of final approval by the U.S. Food and Drug
Administration (the "FDA") of the Company's New Drug Application, on or before
July 6, 2002, for ATRAGEN(R) (tretinoin liposome for injection) as a treatment
for patients with acute promyelocytic leukemia in any indication. Unless this
Agreement and the CVRs shall have been earlier terminated as provided herein,
the Holders shall be entitled to the following consideration, to be delivered by
the Rights Agent in accordance with the procedures set forth herein.
(a) On the date the Milestone occurs (the "Milestone Date"), each
CVR outstanding immediately prior to the Milestone Date shall be cancelled and
extinguished and automatically converted into and become the right to receive a
fraction of a share of Parent Common Stock equal to the Exchange Ratio, subject
to payment of cash in lieu of fractional shares as provided in Section 4.1(b).
The Exchange Ratio shall equal (A) $.15 divided by (B) the Closing Parent Price
(as defined below); provided, however, that the Exchange Ratio shall not be less
than .0075 (the "Floor") nor greater than .0125 (the "Ceiling"); and provided,
further, that the Exchange Ratio (including the Floor or the Ceiling, if
applicable) shall be reduced in 10% increments for each $50,000 increment above
$4,000,000 that the Company exceeds the Transaction Expenses (as defined below),
such that the Exchange Ratio shall equal 0 if the Transaction Expenses exceed
$4,500,000. The "Transaction Expenses" are (i) fees and expenses of the
Company's attorneys, accountants, financial advisors and other outside advisors
directly relating to the Merger Agreement or the Merger and (ii) severance
payments triggered or to be triggered by the transaction or the termination of
the Company's employees by the Company as a direct result of the Merger
Agreement or the Merger. The "Closing Parent Price" shall equal the average of
the per share closing prices of Parent Common Stock as reported by the Nasdaq
National Market for the ten trading days ending three trading days prior to the
Milestone Date, rounded to the fourth decimal place. Notwithstanding the
foregoing, if prior to the Milestone Date, there is a change in the number of
issued and outstanding shares of Parent Common Stock as the result of
reclassification, subdivision, recapitalization, stock split (including reverse
stock split) or stock dividend, the number of shares of Parent Common Stock
issued in exchange for the CVRs shall be equitably adjusted to give effect to
such event. The shares of Parent Common Stock payable pursuant to this Section,
together with cash payments in lieu of fractional shares pursuant to Section
4.1(b), are referred to collectively as the "CVR Consideration."
(b) No fractional shares of Parent Common Stock shall be issued
pursuant to this Agreement. In lieu of fractional shares, each Holder who would
otherwise have been entitled to a fraction of a share of Parent Common Stock
hereunder (after aggregating all fractional shares to be received by such
Holder), shall receive, without interest, an amount in cash (rounded to the
nearest whole cent) determined by multiplying such fraction by the per
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52
share closing price of Parent Common Stock as reported by the Nasdaq National
Market on the trading day on which the Milestone Date occurs (or, if the
Milestone Date occurs on a date that is not a trading day, on the immediately
preceding trading day).
4.2 Exchange of Certificates. As soon as practicable after the Milestone
Date, Parent shall notify the Rights Agent and the Rights Agent shall promptly
thereafter mail, to all Holders of record of CVRs that were converted into the
right to receive CVR Consideration, instructions for surrendering their CVR
Certificates in exchange for a certificate representing shares of Parent Common
Stock and cash in lieu of fractional shares. Upon surrender of CVR Certificates
for cancellation to the Rights Agent, together with a letter of transmittal
(which shall specify that delivery shall be effected, and risk of loss of, and
title to, the CVR Certificates shall pass, only upon delivery of the CVR
Certificates to the Rights Agent) and other requested documents and in
accordance with the instructions thereon, the Holder of such Certificates shall
be entitled to receive in exchange therefor (a) a certificate representing that
number of whole shares of Parent Common Stock into which the CVRs theretofore
represented by the CVR Certificates so surrendered shall have been converted
pursuant to the provisions of this Agreement and (b) a check in the amount of
any cash due pursuant to Section 4.1(b) or Section 4.4. No interest shall be
paid or shall accrue on any such amounts. Until surrendered in accordance with
the provisions of this Section, each CVR Certificate shall represent for all
purposes only the right to receive CVR Consideration and, if applicable, amounts
under Section 4.4. Shares of Parent Common Stock into which the CVRs shall be
converted at the Milestone Date shall be deemed to have been issued on the
Milestone Date. If any certificates representing shares of Parent Common Stock
are to be issued in a name other than that in which the CVR Certificate
surrendered is registered, it shall be a condition of such exchange that the
person requesting such exchange shall deliver to the Rights Agent all documents
necessary to evidence and effect such transfer and shall pay to the Rights Agent
any transfer or other taxes required by reason of the issuance of a certificate
representing shares of Parent Common Stock in a name other than that of the
registered Holder of the CVR Certificate surrendered, or establish to the
satisfaction of the Rights Agent that such tax has been paid or is not
applicable. Beginning the date which is six months following the Milestone Date,
Parent shall act as the Rights Agent and thereafter any holder of an
unsurrendered CVR Certificate shall look solely to Parent for any amounts to
which such Holder may be due, subject to applicable law. Notwithstanding any
other provisions of this Agreement, any portion of the CVR Consideration
remaining unclaimed five years after the Milestone Date (or such earlier date
immediately prior to such time as such amounts would otherwise escheat to, or
become property of, any governmental entity) shall, to the extent permitted by
law, become the property of Parent free and clear of any claims or interest of
any person previously entitled thereto.
4.3 Lost Certificates. If any CVR Certificate shall have been lost, stolen
or destroyed, upon the making of an affidavit of that fact by the person
claiming such CVR Certificate to be lost, stolen or destroyed and, if required
by Parent or the Rights Agent, the posting by such person of a bond in such
reasonable amount as Parent or the Rights Agent may direct as indemnity against
any claim that may be made against it with respect to such CVR Certificate, the
Rights Agent shall deliver in exchange for such lost, stolen or destroyed CVR
Certificate (a) if prior to the Milestone Date, a new CVR Certificate of like
tenor and evidencing the number of CVRs evidenced by the CVR Certificate so
lost, stolen or destroyed or (b) if after the Milestone
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53
Date, the applicable certificates representing shares of Parent Common Stock,
cash in lieu of fractional shares and any amounts due pursuant to Section 4.4.
4.4 Distributions with Respect to Unexchanged Shares. No dividend or other
distribution declared with respect to Parent Common Stock with a record date
after the Milestone Date shall be paid to holders of unsurrendered CVR
Certificates until such holders surrender such CVR Certificates. Upon the
surrender of such CVR Certificates in accordance with Section 4.2, there shall
be paid to such holders, promptly after such surrender, the amount of dividends
or other distributions, without interest, declared with a record date after the
Milestone Date and not paid because of the failure to surrender such CVR
Certificates for exchange.
4.5 Withholding Rights. Parent shall be entitled to deduct and withhold
from the consideration otherwise payable pursuant to this Agreement to any
Holder of CVRs such amounts as it is required to deduct and withhold with
respect to the making of such payment under the any provision of federal, state,
local or foreign tax law. To the extent that amounts are so withheld by Parent,
such withheld amounts shall be treated for all purposes of this Agreement as
having been paid to the Holder of the CVRs in respect of which such deduction
and withholding was made.
Section 5. Non-Transferability and Registration of CVRs.
5.1 The CVRs and any interest therein may not be sold, assigned, pledged,
encumbered, or in any other manner transferred or disposed of, in whole or in
part, other than in accordance with Section 6 hereof and in compliance with
applicable United States federal and state securities laws and the terms and
conditions hereof.
5.2 The CVRs have been registered pursuant to the Registration Statement
under the Act. Parent covenants and agrees:
(a) To use its reasonable best efforts to register or qualify any
transfers of the CVRs pursuant to Section 6 hereof under the Securities or Blue
Sky laws of each jurisdiction in which such registration or qualification is
necessary; and
(b) To pay all expenses incurred by it in complying with this
Section 5.2, including, without limitation, (i) all registration and filing
fees, (ii) all printing expenses, (iii) all fees and disbursements of counsel
and independent public accountants for Parent, and (iv) all Blue Sky fees and
expenses.
Section 6. Exchange, Transfer, or Assignment of CVRs.
6.1 CVRs and any interest therein shall not be sold, assigned,
transferred, pledged, encumbered or in any other manner transferred or disposed
of, in whole or in part, other than through a Permitted Transfer (as defined
herein). A "Permitted Transfer" shall mean (i) the transfer of any or all of the
CVRs on death by will or intestacy; (ii) transfer by instrument to an inter
vivos or testamentary trust in which the CVRs are to be passed to beneficiaries
upon the death of the trustee, (iii) transfers made pursuant to a court order;
(iv) if the Holder is a partnership, a distribution to the transferring
partnership to its partners; or (v) a transfer made by operation of law.
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6.2 In the event of a Permitted Transfer, CVRs may be assigned or
transferred upon surrender of CVR Certificates to the Rights Agent, accompanied
(if so required by Parent or the Rights Agent) by a written instrument or
instruments of transfer in form satisfactory to Parent and the Rights Agent,
duly executed by the registered holder or by a duly authorized representative or
attorney, such signature to be guaranteed by a commercial bank or trust company
having an office in the United States, by a broker or dealer that is a member of
the National Association of Securities Dealers, Inc., or by a member of a
national securities exchange. Upon any such registration of transfer, a new CVR
Certificate shall be issued to the transferee and the surrendered CVR
Certificate shall be cancelled by the Rights Agent. CVR Certificates so
cancelled shall be delivered by the Rights Agent to Parent from time to time or
otherwise disposed of by the Rights Agent in a manner satisfactory to Parent.
6.3 Any transfer or assignment of CVRs shall be without charge (other than
the cost of any transfer tax) to the holder and any new CVR Certificates issued
pursuant to this Section 6 shall be dated the date of such transfer or
assignment.
Section 7. Rights of CVR Certificate Holder. The Holder of any CVR
Certificate or CVR, shall not, by virtue thereof, be entitled to any rights of a
stockholder of Parent, either at law or in equity, and the rights of the Holders
are limited to those expressed in this Agreement.
Section 8. Availability of Information. Parent will provide to the Rights
Agent all information in connection with this Agreement and the CVRs that the
Rights Agent may reasonably request.
Section 9. Duties of Rights Agent. The Rights Agent undertakes the duties
and obligations imposed by this Agreement upon the following terms and
conditions, by all of which Parent and the Holders, by their acceptance hereof,
shall be bound.
9.1 The statements contained herein and in the CVR Certificates shall be
taken as statements of Parent, and the Rights Agent assumes no responsibility
for the correctness of any of the same except such as describe the Rights Agent
or actions taken or to be taken by it. The Rights Agent assumes no
responsibility with respect to the delivery of CVRs and the CVR Consideration
except as herein otherwise provided.
9.2 The Rights Agent shall not be responsible for any failure of Parent to
comply with any of the covenants contained in this Agreement or in the CVR
Certificates to be complied with by Parent.
9.3 The Rights Agent may consult at any time with counsel satisfactory to
it (who may be counsel for Parent), and the Rights Agent shall incur no
liability or responsibility to Parent or to any Holder with respect to any
action taken, suffered, or omitted by it hereunder in good faith and in
accordance with the opinion or the advice of such counsel, provided that the
Rights Agent shall have exercised reasonable care in the selection and continued
employment of such counsel.
9.4 The Rights Agent shall incur no liability or responsibility to Parent
or to any Holder for any action taken in reliance on any notice, resolution,
waiver, consent, order,
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55
certificate, or other paper, document, or instrument believed by it to be
genuine and to have been signed, sent, or presented by the proper party or
parties.
9.5 Parent agrees (i) to pay to the Rights Agent reasonable compensation
for all services rendered by the Rights Agent in the execution of this Agreement
and (ii) to reimburse the Rights Agent for all taxes and governmental charges,
reasonable expenses, and other charges of any kind and nature incurred by the
Rights Agent in connection with this Agreement. Parent shall reimburse the
Rights Agent for the reasonable costs of any counsel engaged by the Rights Agent
for the purposes contemplated by Section 9.3, provided that (x) such engagement
is reasonably necessary in the discharge of the Rights Agent's function
hereunder and relates to matters outside the ordinary course and (y) the Rights
Agent first consults with Parent a reasonable amount of time prior to incurring
any such liability. The Rights Agent shall be paid any compensation or
reimbursement owed to it directly.
9.6 The Holders of at least two-thirds of the outstanding CVRs may direct
the Rights Agent to act on behalf of the Holders in enforcing any of their
rights hereunder and pursuant to the CVRs. The Rights Agent shall be under no
obligation to institute any action, suit, or legal proceeding or to take any
other action likely to involve material expense unless the Holders shall furnish
the Rights Agent with reasonable security and indemnity for any costs and
expenses which may be incurred. All rights of action under this Agreement or
under any of the CVR Certificates may be enforced by the Rights Agent without
the possession of any of the CVR Certificates or the production thereof at any
trial or other proceeding relative thereto, and any such action, suit, or
proceeding instituted by the Rights Agent shall be brought in its name as Rights
Agent, and any recovery of judgment shall be for the ratable benefit of the
registered Holders, as their respective rights or interests may appear.
9.7 The Rights Agent shall act hereunder solely as agent, and its duties
shall be determined solely by the provisions hereof. The Rights Agent shall not
be liable for anything which it may do or refrain from doing in connection with
this Agreement except for its own gross negligence or bad faith.
Section 10. Change of Rights Agent.
10.1 Any corporation into which the Rights Agent may be merged or with
which it may be consolidated, or any corporation resulting from any merger or
consolidation to which the Rights Agent shall be a party, or any corporation
succeeding to the corporate trust business of the Rights Agent, shall be the
successor to the Rights Agent hereunder without the execution or filing of any
paper or any further act on the part of any of the parties hereto.
10.2 The Rights Agent may resign and be discharged from its duties under
this Agreement by giving to Parent notice in writing, specifying a date when
such resignation shall take effect, which notice shall be sent at least 30 days
prior to the date so specified. If the Rights Agent shall resign or otherwise
become incapable of acting, Parent shall appoint a successor to the Rights
Agent. After appointment the successor Rights Agent shall be vested with the
same powers, rights, duties, and responsibilities as if it had been originally
named as Rights Agent without further act or deed; but the former Rights Agent
shall deliver and transfer to the successor Rights Agent copies of all books,
records, plans, and other documents in the former
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56
Rights Agent's possession relating to the CVRs or this Agreement and execute and
deliver any further assurance, conveyance, act, or deed necessary for the
purpose. Failure to give any notice provided for in this Section 10.2 or any
defect therein, shall not affect the legality or validity of the resignation or
removal of the Rights Agent or the appointment of the successor Rights Agent, as
the case may be.
Section 11. Successors. All covenants and provisions of this Agreement by
or for the benefit of Parent, the Rights Agent, or the Holders shall bind and
inure to the benefit of their respective successors, assigns, heirs, and
personal representatives.
Section 12. Termination. This Agreement shall terminate on the earlier to
occur of the following events:
(i) Six months after the Milestone Date; or
(ii) July 6, 2002.
Section 13. Counterparts. This Agreement may be executed in any number of
counterparts; and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute one and the
same agreement.
Section 14. Headings. The headings of sections of this Agreement have been
inserted for convenience of reference only, are not to be considered a part
hereof, and shall in no way modify or restrict any of the terms or provisions
hereof.
Section 15. Amendments. This Agreement may be amended by the written
consent of Parent and the affirmative vote or the written consent of holders
holding not less than two-thirds in interest of the then outstanding CVRs;
provided, however, that no such modification or amendment to this Agreement may,
without the consent of each Holder affected thereby, change in manner adverse to
the Holders, (a) any provision contained herein with respect to termination of
this Agreement or the CVRs, (b) the amount of CVR Consideration to be issued
according to the terms of this Agreement to the Holders of the CVRs, or (c) the
provisions of this Section 15. Notwithstanding the foregoing, Parent and the
Rights Agent may from time to time supplement or amend this Agreement, without
the approval of any Holder, in order to cure any ambiguity or to correct or
supplement any provision contained in this Agreement which may be defective or
inconsistent with any other provision in this Agreement, or to make any other
provisions in regard to matters or questions arising under this Agreement which
Parent and the Rights Agent may deem necessary or desirable and which shall not
be inconsistent with the provisions of the CVRs and which shall not adversely
affect the interests of the Holders.
Section 16. Notices. Any notice required to be given hereunder shall be
sufficient if in writing and sent by facsimile transmission, by courier or other
national overnight express mail service (with proof of service), hand delivery,
or certified or registered mail (return receipt requested and first-class
postage prepaid), addressed as follows:
If to Parent:
Antigenics Inc.
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630 Fifth Avenue, Suite 1200
New York, New York 10111
Attn: Garo H. Armen, Ph.D.
Telephone: (212) 332-4774
If to the Rights Agent:
or to such other address as any party shall specify by written notice so
given, and such notice shall be deemed to have been delivered as of the date of
receipt.
Section 17. Benefits of this Agreement. Nothing in this Agreement shall be
construed to give to any person or corporation, other than Parent, the Rights
Agent, and the registered Holders, any legal or equitable right, remedy, or
claim under this Agreement; but this Agreement shall be for the sole and
exclusive benefit of Parent, the Rights Agent, and the registered Holders.
Section 18. Governing Law; Submission to Jurisdiction. This Agreement
shall be governed by and construed in accordance with the laws of the State of
Delaware without regard to its rules of conflict of laws. The parties hereto
agree that any suit, action, or proceeding seeking to enforce any provision of,
or based on any matter arising out of, this Agreement may be brought in the
United States District Court for the District of Massachusetts, and each of the
parties hereby consents to the jurisdiction of such courts (and of the
appropriate appellate courts) in any such suit, action, or proceeding and
irrevocably waives any objection which it may now or hereafter have to the
laying of the venue of any such suit, action, or proceeding in any such court or
that any such suit, action, or proceeding which is brought in any such court has
been brought in an inconvenient forum. Process in any such suit, action, or
proceeding may be served on any party anywhere in the world, whether within or
without the jurisdiction of any such court. Without limiting the foregoing, each
party agrees that service of process on such party in the manner provided for
notices in Section 16 shall be deemed effective service of process on such
party.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement and
caused the same to be duly delivered on their behalf on the day and year first
written above.
ANTIGENICS INC.
By:____________________________________
Name:
Title:
[______], as Rights Agent
By:____________________________________
Name:
Title:
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EXHIBIT B
[FORM OF AFFILIATE LETTER]
___________, 2001
Antigenics Inc.
630 Fifth Avenue, Suite 1200
New York, New York 10111
Ladies and Gentlemen:
I have been advised that as of the date of this letter I may be deemed to
be an "affiliate" of Aronex Pharmaceuticals, Inc. (the "Company"), a Delaware
corporation, as the term "affiliate" is used in Rule 145 of the rules and
regulations of the Securities and Exchange Commission (the "SEC") under the
Securities Act of 1933, as amended (the "Securities Act"). Pursuant to the terms
of the Agreement and Plan of Merger (the "Merger Agreement") dated as of April
23, 2001 between Antigenics Inc. ("Parent"), a Delaware corporation, and the
Company, the Company will be merged with and into a wholly owned subsidiary of
Parent (the "Merger").
In connection with the Merger, I am entitled to receive shares of common
stock, $0.01 par value per share, of Parent (including shares of Parent common
stock issuable under Contingent Value Rights granted pursuant to the Merger
Agreement, the "Parent Shares"), in exchange for the shares owned by me of
common stock, $0.001 par value per share, of the Company (the "Company Shares").
I represent, warrant and covenant to Parent that in the event I receive
any Parent Shares as a result of the Merger:
(a) I shall not make any sale, transfer or other disposition of the Parent
Shares in violation of the Securities Act or the rules and regulations
thereunder.
(b) I have carefully read this letter and the Merger Agreement and
discussed the requirements of such documents and other applicable limitations
upon my ability to sell, transfer or otherwise dispose of the Parent Shares, to
the extent I felt necessary, with my counsel or counsel for the Company.
(c) I have been advised that the issuance of the Parent Shares to me
pursuant to the Merger has been or will be registered with the SEC under the
Securities Act on a Registration Statement on Form S-4; however, because I may
be deemed to be an affiliate of the Company and the distribution of the Parent
Shares by me or on my behalf has not been registered under the Securities Act,
dispositions of the Parent Shares by me or on my behalf may be restricted under
the Securities Act and the rules and regulations thereunder. I will not sell,
transfer, hedge, encumber or otherwise dispose of the Parent Shares issued to me
in the Merger unless the disposition (x) is made in conformity with the volume
and other limitations of Rule 145 under the Securities Act, (y) is made pursuant
to an effective Registration Statement under the Securities Act, or (z) is, in
the opinion of counsel reasonably acceptable to Parent or as described
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in a "no-action" or interpretive letter from the staff of the SEC, exempt from
registration under the Securities Act.
(d) I understand that Parent is under no obligation to register under the
Securities Act the disposition of the Parent Shares by me or on my behalf or to
take any other action necessary in order to make compliance with an exemption
from such registration available.
(e) I also understand that there will be placed on the certificates for
the Parent Shares issued to me, or any substitutions therefor, a legend stating
in substance:
THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, APPLIES. THE SHARES REPRESENTED BY THIS
CERTIFICATE MAY ONLY BE TRANSFERRED IN ACCORDANCE WITH THE TERMS OF
AN AGREEMENT BETWEEN THE REGISTERED HOLDER HEREOF AND ANTIGENICS
INC.
(f) I also understand that unless a sale or transfer is made in conformity
with the provisions of Rule 145 under the Securities Act (and satisfactory
evidence of such conformity is provided to Parent), or pursuant to an effective
registration statement, Parent reserves the right to put the following legend on
the certificates issued to my transferee:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND WERE ACQUIRED FROM
A PERSON WHO RECEIVED SUCH SHARES IN A TRANSACTION TO WHICH RULE 145
PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, APPLIES.
THE SHARES HAVE BEEN ACQUIRED BY THE HOLDER NOT WITH A VIEW TO, OR
FOR RESALE IN CONNECTION WITH, ANY DISTRIBUTION THEREOF WITHIN THE
MEANING OF THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
OF 1933, AS AMENDED.
It is understood and agreed that the legends set forth in paragraphs (e)
and (f) above shall be removed by delivery of substitute certificates without
such legend if the undersigned shall have delivered to Parent a copy of a "no
action" or interpretive letter from the staff of the SEC, or an opinion of
counsel reasonably satisfactory to Parent in form and substance satisfactory to
Parent, to the effect that disposition of the shares by the holder thereof is
not restricted under the Securities Act.
Execution of this letter should not be considered an admission on my part
that I am an "affiliate" of the Company as described in the first paragraph of
this letter, or as a waiver of any
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rights I may have to object to any claim that I am such an affiliate on or after
the date of this letter.
Very truly yours,
Name (print):
Address:
Accepted:
ANTIGENICS INC.
By:___________________________
Name (print):
Title:
Dated:________________________
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