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EXHIBIT 10.95
AGREEMENT AND PLAN OF MERGER
between
INTERCARDIA, INC.,
TRANSCELL TECHNOLOGIES, INC.
and
INTERNEURON PHARMACEUTICALS, INC.
March 2, 1998
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TABLE OF CONTENTS
Page
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ARTICLE 1 The Merger ..................................................................... 1
1.1. The Merger ..................................................................... 1
1.2 Effective Time ................................................................. 1
ARTICLE 2 Certificate of Incorporation and Bylaws of the Surviving Corporation............ 2
2.1. Certificate of Incorporation ................................................... 2
2.2. Bylaws ......................................................................... 2
ARTICLE 3 Directors and Officers of the Surviving Corporation............................. 2
3.1. Directors ...................................................................... 2
3.2. Officers ....................................................................... 2
ARTICLE 4 Consideration and Closing....................................................... 3
4.1. Transcell Securities ........................................................... 3
4.2. Exchange of Certificates Representing Capital Stock ............................ 6
4.3. Adjustment of Merger Consideration ............................................. 7
4.4. Dissenting Transcell Shareholders .............................................. 7
4.5. The Closing .................................................................... 8
ARTICLE 5 Representations and Warranties of Transcell..................................... 8
5.1. Existence; Good Standing; Corporate Authority .................................. 8
5.2. Authorization, Validity and Effect of Agreements ............................... 9
5.3. Compliance with Laws ........................................................... 9
5.4. Capitalization ................................................................. 9
5.5. Subsidiaries ................................................................... 10
5.6. No Violation ................................................................... 10
5.7. Financial Statements ........................................................... 11
5.8. Litigation ..................................................................... 11
5.9. Absence of Certain Changes ..................................................... 11
5.10. Taxes .......................................................................... 11
5.11. Employee Benefit Plans ......................................................... 13
5.12 Labor and Employment Matters ................................................... 14
5.13 Brokers and Finders ............................................................ 14
5.14 Opinion of Financial Advisor ................................................... 14
5.15 Material Contracts ............................................................. 14
5.16 Intellectual Property: Technology .............................................. 15
5.17 Investments .................................................................... 16
5.18 Insurance ...................................................................... 16
5.19 Product Liability .............................................................. 16
5.20 Governmental Approvals ......................................................... 16
ARTICLE 6 Representations and Warranties of Intercardia................................... 17
6.1 Existence; Good Standing; Corporate Authority .................................. 17
6.2 Subsidiaries ................................................................... 17
6.3 Authorization; Validity and Effect of Agreements ............................... 17
6.4 Litigation ..................................................................... 18
6.5 No Violation ................................................................... 18
6.6 Capital Stock of Intercardia ................................................... 18
6.7 SEC Reports; Financial Statements .............................................. 19
6.8 Brokers and Finders ............................................................ 19
6.9 Opinion of Financial Advisor ................................................... 20
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ARTICLE 7 Covenants....................................................................... 20
7.1 No Solicitation ................................................................ 20
7.2 Interim Operations ............................................................. 20
7.3 Stockholder Approvals; Information Statement ................................... 23
7.4 Filings; Other Action .......................................................... 25
7.5 Access to Information .......................................................... 25
7.6 Publicity ...................................................................... 25
7.7 Further Action ................................................................. 26
7.8 Insurance; Indemnity ........................................................... 26
7.9. Employees and Employee Benefit Plans ........................................... 26
7.10 Reasonable Efforts ............................................................. 26
7.11 Certain Notification ........................................................... 27
7.12 Interneuron Obligations ........................................................ 27
7.13 Interneuron Royalty ............................................................ 27
7.14 SEC Filings and Transaction Costs .............................................. 28
7.15. Authorization for Trading; Reporting Status .................................... 28
7.16 Intercardia Approval ........................................................... 28
7.17 Tax Covenant ................................................................... 28
ARTICLE 8 Conditions...................................................................... 29
8.1 Conditions to Each Party's Obligation to Effect the Merger ..................... 29
8.2 Conditions to Obligations of Intercardia ....................................... 29
8.3 Conditions to Obligations of Transcell and Interneuron ......................... 31
ARTICLE 9 Termination; Amendment; Waiver.................................................. 33
9.1 Termination .................................................................... 33
9.2 Effect of Termination .......................................................... 34
9.3 Amendment ...................................................................... 34
9.4 Extension; Waiver .............................................................. 34
ARTICLE 10Indemnification................................................................. 35
10.1 Indemnification of Intercardia ................................................. 35
10.2 Indemnification of Exchanging Stockholders ..................................... 36
10.3 Procedures Relating to Indemnification of Tax Claims ........................... 37
10.4 Remedies ....................................................................... 37
10.5 Survival ....................................................................... 38
10.6 Limitation on Liability38 10.7 Calculation of Indemnification .................. 39
ARTICLE 11General Provisions.............................................................. 39
11.1 Survival of Representations and Warranties ..................................... 39
11.2 Notices ........................................................................ 39
11.3 Assignment; Binding Effect; Third Party Beneficiaries ......................... 40
11.4 Entire Agreement ............................................................... 40
11.5 Governing Law .................................................................. 40
11.6 Headings ....................................................................... 41
11.7 Interpretation; Certain Definitions ............................................ 41
11.8 Investigations ................................................................. 41
11.9 Severability ................................................................... 41
11.10 Enforcement of Agreement ....................................................... 41
11.11 Counterparts ................................................................... 42
11.13 Further Action ................................................................. 42
11.14 Arbitration .................................................................... 42
11.15 Invalidity, Etc ................................................................ 42
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Schedules and Exhibits:
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Exhibit 4.1 Schedule of Outstanding Capital Stock, Transcell Options
and Transcell Warrants
Exhibit 7.6 Form of Press Release relating to this Agreement
Exhibit 7.13 Form of Assignment and Assumption and Royalty Agreement
to be entered into between Intercardia and Interneuron
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") is made and entered
into as of March 2, 1998, by and among Intercardia, Inc., a Delaware corporation
("Intercardia"); Transcell Technologies, Inc. a Delaware corporation
("Transcell"); and Interneuron Pharmaceuticals, Inc., a Delaware corporation
("Interneuron").
W I T N E S S E T H:
WHEREAS, Transcell is a Delaware corporation with authorized capital
stock of 50,000,000 shares of Transcell Class A Common Stock, $.001 par value
("Class A Common Stock"), 500,000 shares of Transcell Class B Common Stock,
$.001 par value ("Class B Common Stock"), 2,000,000 shares of Transcell Series A
Preferred Stock, $.01 par value ("Series A Preferred Stock"), 880,000 shares of
Transcell Series B Preferred Stock, $.01 par value ("Series B Preferred Stock")
and 2,120,000 shares of Transcell additional Preferred Stock, $.01 par value
("Additional Preferred Stock"); the authorized Class A Common Stock, Class B
Common Stock, Series A Preferred Stock, Series B Preferred Stock and Additional
Preferred Stock are hereinafter sometimes collectively referred to as
"Authorized Capital Stock";
NOW, THEREFORE, in reliance upon the premises, representations,
warranties and covenants made herein and in consideration of the mutual
agreements herein contained, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereby
agree as follows:
ARTICLE 1
THE MERGER
1.1. The Merger. Subject to the terms and conditions of this Agreement,
at the Effective Time (defined terms used herein not previously defined having
the meanings as hereinafter defined), Transcell shall be merged with and into
Intercardia in accordance with the Delaware General Corporation Law ("DGCL") and
this Agreement, and the separate corporate existence of Transcell shall
thereupon cease (the "Merger"). Intercardia shall be the surviving corporation
in the Merger (sometimes hereinafter referred to as the "Surviving
Corporation"). The Merger shall have the effects specified in Section 259 of the
DGCL.
1.2 Effective Time. If all the conditions to the Merger set forth in
Article 8 shall have been fulfilled or waived in accordance herewith and this
Agreement shall not have been terminated as provided in Article 9, the parties
hereto shall cause a Certificate of Merger meeting the requirements of Section
251 of the DGCL to be properly executed and duly filed on the Closing Date. The
Merger shall become effective at the time of filing of a Certificate of Merger
with the Secretary of State of Delaware or at such later time which the parties
hereto shall have agreed upon and designated in such filing as the effective
time of the Merger (the "Effective Time"). At the Effective Time, the effect of
the Merger shall be as
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provided in Section 259 of the DGCL. Without limiting the generality of the
foregoing, and subject to Section 259 of the DGCL, at the Effective Time, all of
the property, rights, privileges, powers and franchises of Transcell shall vest
in the Surviving Corporation and, except as otherwise provided herein, all
debts, liabilities and duties of Transcell shall become the debts, liabilities
and duties of the Surviving Corporation.
ARTICLE 2
CERTIFICATE OF INCORPORATION AND BYLAWS OF THE SURVIVING CORPORATION
2.1. Certificate of Incorporation. The Certificate of Incorporation of
Intercardia in effect immediately prior to the Effective Time shall be the
Certificate of Incorporation of the Surviving Corporation, until duly amended in
accordance with applicable law.
2.2. Bylaws. The Bylaws of Intercardia in effect immediately prior to
the Effective Time shall be the Bylaws of the Surviving Corporation, until duly
amended in accordance with the terms thereof and applicable law.
ARTICLE 3
DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION
3.1. Directors. The directors of Intercardia immediately prior to the
Effective Time shall be the directors of the Surviving Corporation as of the
Effective Time and shall hold office until their respective successors are duly
appointed or elected and qualified or until their earlier death, resignation or
removal, in accordance with the Certificate of Incorporation and Bylaws of the
Surviving Corporation, or as otherwise provided by applicable law.
3.2. Officers. The officers of Intercardia immediately prior to the
Effective Time, together with such additions thereto as Intercardia shall
designate, shall be the initial officers of the Surviving Corporation as of the
Effective Time and shall hold office from the Effective Time until their
successors are duly appointed or elected in accordance with applicable law.
ARTICLE 4
CONSIDERATION AND CLOSING
4.1. Purchase Price; Exchange Ratios.
(a) At the Effective Time, each share of Authorized Capital Stock that
is issued and outstanding ("Outstanding Capital Stock") immediately prior to the
Effective Time (other than shares owned or held by Transcell, all of which shall
be canceled as provided in Section 4.1(c), and other than shares of Dissenting
Capital Stock) shall, by virtue of the Merger and without any action on the part
of the holder thereof, be converted into the right to receive in three
installments (the first at Closing, as defined in Section 4.5 hereof (the "First
Installment"), the second on the 15-month anniversary of Closing (the "Second
Installment") and the third on the 21-month anniversary of Closing (the "Third
Installment," together with
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the Second Installment the "Future Installments")) that number of shares of
Intercardia Common Stock calculated in accordance with the exchange ratio
applicable for each installment for such class or series as follows:
(i)(A) The exchange ratios for each share of Series B
Preferred Stock outstanding as of the Effective Time (the "Series B
Exchange Ratios") shall be determined by dividing:
(I) $4.3750 by the Initial Market Price (as defined in
Section 4.1(a)(iv) hereof) for the First Installment;
(II) $2.4609 by the Intercardia Stock Price (as defined in
Section 4.1(a)(iv) hereof) determined at the 15-month
anniversary of Closing for the Second Installment;
and
(III) $2.5703 by the Intercardia Stock Price determined at
the 21-month anniversary of Closing for the Third
Installment.
The total number of shares of Intercardia Common Stock
issuable in exchange for the outstanding Series B Preferred Stock, as
determined by the Series B Exchange Ratios, is sometimes referred to
herein as the "Series B Purchase Price". Exhibit 4.1 sets forth the
number of shares of Series B Preferred Stock outstanding as of the date
hereof.
(B) The exchange ratios for each Class A Common Equivalent
Share (the aggregate number of "Class A Common Equivalent Shares" shall
be calculated by adding to the number of issued and outstanding shares
of Class A Common Stock the number of shares of Class A Common Stock
issuable upon conversion of the Class B Common Stock and Series A
Preferred Stock as determined under the provisions of the Transcell
Certificate of Incorporation) outstanding (or deemed to be outstanding)
as of the Effective Time (the "Class A Exchange Ratios") shall be
determined by dividing:
(I) for the Initial Installment (the "Closing Class A
Exchange Ratio"), $1.40 by the Initial Market Price
multiplied by 50%; provided, however, that if the
Initial Market Price is less than $15, then the
Closing Class A Exchange Ratio shall be 0.0467 ($1.40
divided by $15 multiplied by 50%) and if the Initial
Market Price is greater than $29, then the Closing A
Exchange Ratio shall be 0.0241 ($1.40 divided by $29
multiplied by 50%); and
(II) for each of the Future Installments (the "Installment
Class A Exchange Ratio(s)"), $1.40 by (a) the
Intercardia Stock Price determined on the fifteen
(15) month anniversary of the Closing with respect to
the Second Installment and (b) the Intercardia Stock
Price determined on the twenty-one (21) month
anniversary of the Closing with respect to the Third
Installment, in each case multiplied by 25%.
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The total number of shares of Intercardia Common Stock
issuable in exchange for the Class A Common Equivalent Shares
outstanding (or deemed to be outstanding), as determined by the Class A
Exchange Ratios, is sometimes referred to herein as the "Class A
Purchase Price". Exhibit 4.1 sets forth the number of Class A Common
Equivalent Shares outstanding (or deemed to be outstanding) as of the
date hereof.
(ii) Each of the outstanding warrants to purchase shares of
Series B Preferred Stock (the "Transcell Warrants") as of the Effective
Time shall be converted into the right to receive a replacement warrant
to purchase a number of shares of Intercardia Common Stock
("Replacement Warrant") equal to the number of shares of Series B
Preferred Stock underlying such Transcell Warrant multiplied by the
Warrant Exchange Ratio. The "Warrant Exchange Ratio" shall be
determined by dividing $8.75 by the Initial Market Price. The exercise
price per share of Intercardia Common Stock (rounded down to the
nearest cent) issuable under each Replacement Warrant will equal the
per share exercise price of the corresponding Transcell Warrant divided
by the Warrant Exchange Ratio.
Exhibit 4.1 sets forth, with respect to Transcell Warrants as
of the date hereof, the number of underlying shares of Series B
Preferred Stock and the exercise price thereof.
(iii) Intercardia shall assume the existing Transcell 1992
Stock Option Plan as amended (the "1992 Plan") and each of the
outstanding options to purchase shares of Class A Common Stock under
the 1992 Plan (the "Transcell Options") as of the Effective Time shall
be converted into the right to receive a replacement option to purchase
shares of Intercardia Common Stock ("Replacement Options") on terms as
set forth below:
(A) Each Replacement Option will represent the right
to purchase a number of shares of Intercardia Common Stock
(rounded to the nearest whole share) equal to the number of
shares of Class A Common Stock issuable upon exercise of the
corresponding Transcell Option multiplied by the Closing Class
A Exchange Ratio multiplied by two (2).
(B) The exercise price per share of Intercardia
Common Stock (rounded to the nearest cent) of each Replacement
Option will equal the per share exercise price of the
corresponding Transcell Option divided by the Closing Class A
Exchange Ratio multiplied by two (2).
(C) The term of each Replacement Option will be the
same as the remaining term of the corresponding Transcell
Option.
(D) The vesting restrictions contained in each
Replacement Option will be the same as the vesting
restrictions contained in the corresponding Transcell Options,
except as otherwise agreed.
Exhibit 4.1 sets forth, with respect to Transcell
Options as of the date
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hereof, the number of underlying shares of Class A Common
Stock and the exercise price thereof.
(iv) The Series B Purchase Price and the Class A Purchase
Price are sometimes collectively referred to herein as the "Aggregate
Purchase Price".
The Aggregate Purchase Price, the Replacement Warrants and the
Replacement Options are sometimes collectively referred to herein as
the "Aggregate Merger Consideration".
The "Initial Market Price" shall mean the Intercardia Stock
Price determined as of the Closing.
The "Intercardia Stock Price" shall mean the average of the
high and the low sales prices of Intercardia Common Stock for the five
(5) most recent trading days in which trading volume exceeds 1500
shares ending two (2) business days immediately prior to the date of
determination. In lieu of issuing any fractional shares, Intercardia
shall pay the holders of Outstanding Capital Stock an amount in cash
equal to such fraction multiplied by the applicable Intercardia Stock
Price.
All exchange ratios hereunder shall be calculated to four
decimal places, rounding up from 0.00005.
(b) As a result of the Merger and without any action on the part of the
holders thereof, at the Effective Time, all shares of Outstanding Capital Stock
shall cease to be outstanding and shall be automatically canceled and retired
and shall cease to exist, and each holder of shares of Outstanding Capital Stock
(other than Transcell) shall thereafter cease to have any rights with respect to
such shares of Outstanding Capital Stock, except the right to receive, without
interest, the number of shares of Intercardia Common Stock determined by the
applicable exchange ratio in accordance with Section 4.1 upon the surrender of a
certificate or certificates (a "Certificate") representing such shares of
Outstanding Capital Stock or, with respect to shares of Dissenting Capital
Stock, payment of the appraised value of shares of Dissenting Capital Stock in
accordance with Section 4.4.
(c) Each share of Outstanding Capital Stock owned or held by Transcell
immediately prior to the Effective Time shall, by virtue of the Merger, cease to
be outstanding and shall be automatically canceled and retired without payment
of any consideration therefor.
(d) Each Transcell Option or Transcell Warrant, whether or not then
exercisable, outstanding on the Effective Time, upon presentation to Intercardia
of the option or warrant agreement or certificate representing such Transcell
Option or Transcell Warrant, shall be exchangeable only as stated in this
Agreement and, upon presentation to Intercardia, shall be cancelled and shall
cease to exist.
(e) If, prior to the date of either the Second or Third Installment,
Intercardia enters into an agreement relating to the consolidation or merger of
Intercardia or sale of all or
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substantially all of Intercardia's assets, the due date of any outstanding
installment shall be accelerated to the time immediately prior to the specified
effective date of any such transaction and the consideration payable in
connection with such transaction shall be payable at the specified effective
date to the persons entitled to receive the installment payments based upon the
values stated in this Agreement with the Intercardia Stock Price determined as
of the effective date of the closing of any such transaction.
4.2. Exchange of Certificates Representing Outstanding Capital Stock.
(a) Prior to the Effective Time, Intercardia shall appoint a Transfer
Agent hereunder for payment of the Merger Consideration upon surrender of
Certificates (the "Transfer Agent"). Intercardia shall provide the Transfer
Agent with Intercardia Common Stock in amounts necessary to pay for all the
shares of Outstanding Capital Stock pursuant to Section 4.1(a).
(b) Promptly after the Effective Time, Intercardia shall cause the
Transfer Agent to mail to each holder of record of shares of Outstanding Capital
Stock immediately prior to the Effective Time (i) a letter of transmittal which
shall specify that delivery shall be effected, and risk of loss and title to
such Certificates shall pass, only upon delivery of the Certificates to the
Transfer Agent and which letter shall be in customary form and have such other
provisions as Intercardia may reasonably specify and (ii) instructions for
effecting the surrender of such Certificates in exchange for the Merger
Consideration applicable thereto. Upon surrender of a Certificate to the
Transfer Agent together with such letter of transmittal, duly executed and
completed in accordance with the instructions thereto, and such other documents
as may reasonably be required by the Transfer Agent, the holder of such
Certificate shall be entitled to receive in exchange therefor the amount of the
shares of Intercardia Common Stock into which shares of Outstanding Capital
Stock theretofore represented by such Certificate shall have been converted
pursuant to Section 4.1, and at the installment dates set forth in Section 4.1,
and the shares represented by the Certificate so surrendered shall forthwith be
canceled. No interest will be paid or will accrue on the shares of Intercardia
Common Stock payable upon surrender of any Certificate. In the event of a
transfer of ownership of Outstanding Capital Stock which is not registered in
the transfer records of Transcell, payment may be made with respect to such
Outstanding Capital Stock to such a transferee if the Certificate representing
such shares of Outstanding Capital Stock is presented to the Transfer Agent,
accompanied by all documents required to evidence and effect such transfer and
to evidence that any applicable stock transfer taxes have been paid.
(c) At and after the Effective Time, there shall be no transfers on the
share transfer books of Transcell of the shares of Outstanding Capital Stock as
of immediately prior to the Effective Time. If, after the Effective Time,
Certificates are presented to the Surviving Corporation, they shall be canceled
and exchanged as provided in this Article 4.
(d) None of Intercardia, Transcell, the Transfer Agent or any other
person shall be liable to any former holder of shares of Outstanding Capital
Stock for any amount properly delivered to a public official pursuant to
applicable abandoned property, escheat or similar laws.
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(e) 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 the Surviving Corporation or
the Transfer Agent, the posting by such person of a bond in such reasonable
amount as the Surviving Corporation or the Transfer Agent may direct as
indemnity against any claim that may be made against it with respect to such
Certificate, the Transfer Agent will issue in exchange for such lost, stolen or
destroyed Certificate the Merger Consideration payable in respect thereof
pursuant to this Agreement.
4.3. Adjustment of Merger Consideration. If, subsequent to the date of
this Agreement but prior to the Effective Time, the Outstanding Capital Stock
shall have been changed into a different number of shares or a different class
as a result of a stock split, reverse stock split, stock dividend, subdivision,
reclassification, split, combination, exchange, recapitalization or other
similar transaction, the applicable Exchange Ratios shall be appropriately
adjusted.
4.4. Dissenting Transcell Stockholders. Notwithstanding any provision
of this Agreement to the contrary, if required by the DGCL but only to the
extent required thereby, shares of Outstanding Capital Stock as of immediately
prior to the Effective Time and which are held by holders of such shares who
have not voted in favor of the Merger and have properly exercised their rights
of appraisal with respect thereto (the "Dissenting Capital Stock") in accordance
with Section 262 of the DGCL will not be converted into the right to receive the
number of shares of Intercardia Common Stock determined in accordance with the
applicable exchange ratio for their Outstanding Capital Stock unless and until
such holders fail to perfect or effectively withdraw or lose their rights to
appraisal and payment under the DGCL. If, after the Effective Time, any such
holder fails to perfect or effectively withdraws or loses such right, such
shares of Dissenting Capital Stock will thereupon be treated as if they had been
converted into, at the Effective Time, the right to receive the number of shares
of Intercardia Common Stock determined in accordance with the applicable
exchange ratio for their Outstanding Capital Stock, without any interest
thereon. Notwithstanding anything to the contrary contained in this Section 4.4,
if (a) the Merger is rescinded or abandoned or (b) the stockholders of Transcell
or Intercardia revoke the authority to effect the Merger, then the right of any
stockholder pursuant to Section 262 of the DCGL shall cease. Transcell will give
Intercardia prompt notice of any demands and withdrawals of such demands
received by Transcell for appraisals of shares of Dissenting Capital Stock.
Transcell shall not, except with the written consent of Intercardia, make any
payment with respect to any demands for appraisal or otherwise offer to settle
or settle any such demands.
4.5. The Closing. Subject to the terms and conditions of this
Agreement, the closing of the Merger (the "Closing") shall take place at the
offices of Wyrick Robbins Yates & Ponton LLP, at 10:00 a.m., local time, as soon
as practicable (but in no event more than three business days) following the
satisfaction (or waiver if permissible) of the conditions set forth in Article 8
or at such other time, date or place as Intercardia, Transcell and Interneuron
may agree. The date on which the Closing occurs is hereinafter referred to as
the "Closing Date").
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ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF TRANSCELL
Except as set forth in the writing from Transcell to Intercardia that
is dated the date of this Agreement and that is identified by Transcell as the
disclosure letter to this Agreement (the "Transcell Disclosure Letter"), as of
the date hereof and as of the Effective Time, Transcell hereby represents and
warrants to Intercardia as follows:
5.1. Existence; Good Standing; Corporate Authority. Transcell is (a) a
corporation duly incorporated, validly existing and in good standing under the
laws of Delaware and (b) duly licensed or qualified to do business as a foreign
corporation and is in good standing under the laws of any other jurisdiction in
which the character of the properties owned or leased by it or in which the
transaction of its business makes such licensure, qualification or good standing
necessary, except where the failure to be so in good standing or to be so
licensed or qualified, individually or in the aggregate, would not have a
material adverse effect on the business, operations, results of operations,
assets, financial condition or prospects of Transcell (excluding any material
adverse effect resulting from actions taken by Intercardia) (a "Transcell
Material Adverse Effect"). Transcell has the requisite corporate power and
authority to own, operate and lease its properties and carry on its business as
now conducted. Transcell has heretofore delivered to Intercardia true and
correct copies of the Certificate of Incorporation and Bylaws of Transcell as
currently in effect.
5.2. Authorization, Validity and Effect of Agreement. Transcell has the
requisite corporate power and authority to execute and deliver this Agreement
and, subject to Transcell stockholder approval, to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation by Transcell of the transactions contemplated hereby have been duly
and validly authorized by the Transcell Board of Directors, and no other
corporate proceedings on the part of Transcell (other than Transcell stockholder
approval) are necessary to authorize this Agreement or to consummate the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by Transcell, and (assuming this Agreement constitutes
the valid and binding obligation of Intercardia) constitutes the valid and
binding obligation of Transcell, enforceable against Transcell in accordance
with its terms, except as the same may be limited by (a) applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general application
affecting enforcement of creditors' rights, (b) laws relating to the
availability of specific performance, injunctive relief or other equitable
remedies, and (c) the extent to which the enforceability of the indemnification
provisions contained in this Agreement may be limited by applicable laws.
5.3. Compliance with Laws. Transcell is not in violation in any
material respect of any federal, state, local or foreign law, statute,
ordinance, rule, regulation, order, judgment, ruling or decree ("Laws") of any
federal, state, local or foreign judicial, legislative, execution,
administrative or regulatory body or authority or any court, arbitration, board
or tribunal (each such entity, a "Governmental Entity") applicable to Transcell
or any of its properties or assets, except for violations which, individually or
in the aggregate, would not prevent or materially
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delay the consummation of the transactions. No action, demand, requirement or
investigation by any governmental entity with respect to Transcell is pending
or, to the knowledge of Transcell, threatened, with respect to any of the
foregoing.
5.4. Capitalization. The authorized capital stock of Transcell consists
of 55,500,000 shares of Authorized Capital Stock of which 50,000,000 shares are
designated as Class A Common Stock, 500,000 shares are designated as Class B
Common Stock, 2,000,000 shares are designated as Series A Preferred Stock,
880,000 shares are designated as Series B Preferred Stock and 2,120,000 are
designated as Additional Preferred Stock. As of the date hereof, the following
shares of Authorized Capital Stock were issued and outstanding (the "Outstanding
Capital Stock") (a) 3,928,603 shares of Class A Common Stock; (b) 199,488 shares
of Class B Common Stock (which are convertible into 279,696 shares of Class A
Common Stock); (c) 1,460,388 shares of Series A Preferred Stock; and (d) 349,000
shares of Series B Preferred Stock. In addition, as of the date hereof,
Transcell has outstanding (i) Transcell Options to purchase an aggregate of
2,963,377 shares of Class A Common Stock, (ii) Transcell Warrants to purchase an
aggregate of 34,901 shares of Series B Preferred Stock, and (iii) promissory
notes and convertible debentures payable to Interneuron (collectively
"Intercompany Notes") in the aggregate amount of $14,296,343, including
principal and accrued interest, as of December 31, 1997, the then outstanding
amount of which will be contributed to the capital of Transcell at Closing.
Transcell has reserved adequate shares of Authorized Capital Stock for issuance
upon the exercise of outstanding Transcell Options and Transcell Warrants, and
there were no stock appreciation rights or limited stock appreciation rights
outstanding. Except for the Outstanding Capital Stock, Transcell Options,
Transcell Warrants and Intercompany Notes, Transcell has no outstanding bonds,
debentures, notes or other obligations or securities entitling the holders
thereof to vote (or which are convertible into or exercisable for securities
having the right to vote) with the stockholders of Transcell on any matter
except an agreement to issue warrants to Interneuron which righs will be waived
by Interneuron immediately prior to the Effective Time. All of the Outstanding
Capital Stock is duly authorized, validly issued, fully paid, nonassessable and
free of preemptive rights. Except as set forth in this Section 5.4 or in the
Transcell Disclosure Letter, there are no preemptive or similar rights on the
part of any holders of any class of securities of Transcell, and there are no
other shares of capital stock of Transcell, no securities of Transcell
convertible or exchangeable for shares of capital stock or voting securities of
Transcell, and no existing options, warrants, calls, subscriptions, convertible
securities, or other rights, agreements or commitments which obligate Transcell
to issue, transfer or sell any shares of capital stock of, or equity interests
in, Transcell. There are no outstanding obligations of Transcell to repurchase,
redeem or otherwise acquire any shares of capital stock of Transcell. There are
no voting trusts or other agreements or understandings to which Transcell is a
party with respect to the voting of Outstanding Capital Stock.
5.5. Subsidiaries. Transcell owns no subsidiaries.
5.6. No Violation. Neither the execution and delivery by Transcell of
this Agreement nor the consummation by Transcell of the transactions
contemplated hereby will: (a) violate any provisions of the Certificate of
Incorporation or Bylaws of Transcell; (b) violate or conflict in any material
respect with, result in a breach of any material provision of,
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constitute a default (or an event which, with notice or lapse of time or both,
would constitute a default) under, result in the termination or in a right of
termination of, accelerate the performance required by or benefit obtainable
under, result in the vesting, triggering or acceleration of any material payment
or other material obligations pursuant to, result in the creation of any
material encumbrance upon any of the properties of Transcell under, or result in
there being declared void, voidable, subject to withdrawal, or without further
binding effect, any of the material terms, conditions or provisions of any
material note, bond, mortgage, indenture, deed of trust, license, franchise,
permit, lease, contract, agreement or other material instrument, commitment or
obligation to which Transcell is a party, by which Transcell or any of its
properties is bound (each of the foregoing, to the extent the same have any
continuing force or effect, a "Transcell Contract" and collectively, "Transcell
Contracts") except where such violation would not have a Transcell Material
Adverse Effect; (c) other than the filings provided for in Section 1.2, any
filings under the Securities Act of 1933, as amended (the "1933 Act"), or the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), the filings as
may be required to be made pursuant to applicable federal or state securities
laws or with the Nasdaq National Market on which the Intercardia Common Stock is
listed, or filings in connection with the maintenance of qualification to do
business in other jurisdictions (the filings disclosed in the Transcell
Disclosure Letter in response to this clause (c), the other filings referred to
in this clause (c) and consents required or permitted to be made or obtained,
collectively, the "Regulatory Filings"), require any consent, approval or
authorization of, or declaration, filing or registration with, any governmental
entity, except for those consents, approvals, authorizations, declarations,
filings or registrations the failure of which to obtain or make individually or
in the aggregate would not have a Transcell Material Adverse Effect; or (d)
violate in any material respect any laws applicable to Transcell or any of its
assets except for such violations which would not have a Transcell Material
Adverse Effect.
5.7. Financial Statements. Transcell has made available to Intercardia
a balance sheet of Transcell at September 30, 1996 and 1997, and statements of
operations, changes in stockholders' deficit and cash flows for the years then
ended, certified by Coopers & Lybrand LLP, independent public accountants, and a
balance sheet of Transcell at December 31, 1997 (the "1997 Balance Sheet") and
statements of operations and cash flows for the three months then ended. Said
financial statements (the "Financial Statements") have been prepared in
accordance with generally accepted accounting principles ("GAAP") applied
consistently during the periods covered thereby, are complete and correct in all
material respects and present fairly in all material respects the financial
condition of Transcell at the 1997 Balance Sheet date and the results of its
operations for the periods covered by the Financial Statements. As of the date
of the 1997 Balance Sheet, Transcell had no liabilities or obligations,
contingent or otherwise, except liabilities and obligations (i) in the
respective amounts reflected on or reserved against in the 1997 Balance Sheet,
(ii) not required by GAAP to be included in the 1997 Balance Sheet and (iii)
incurred in the ordinary course of business since the 1997 Balance Sheet date
and (iv) less than $50,000 individually and $150,000 in the aggregate.
5.8. Litigation. There are no claims, actions, suits, proceedings,
arbitrations, investigations or audits (collectively, "Litigation") by a third
party (including a governmental
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entity) which have been filed and served on Transcell and are pending or, to the
knowledge of Transcell, threatened against Transcell, at law or in equity.
5.9. Absence of Certain Changes. Except as set forth in the Transcell
Disclosure Letter, since December 31, 1997, Transcell has conducted its business
only in the ordinary course of such business consistent with past practices, and
there has not been (a) any Transcell Material Adverse Effect suffered by
Transcell; (b) any declaration, setting aside or payment of any dividend or
other distribution with respect to the Outstanding Capital Stock or, except as
required by Transcell's benefit plans, any repurchase, redemption or any other
acquisition by Transcell of any Outstanding Capital Stock or other securities
of, or other ownership interests in, Transcell; (c) any material change in
accounting principles, practices or methods; (d) any increase or commitment to
increase the remuneration (including salary, incentive compensation or benefits)
of any director or employee of or consultant to Transcell, whether directly or
indirectly (including by amendment, implementation or the entering into of any
employment or employee benefit or compensation agreement, plan or arrangement),
by a material amount (or, in the case of any executive officer of Transcell, by
any amount) other than any changes required by the terms of any existing plan or
agreement, customary changes consistent with past practices or pursuant to this
Agreement; (e) any revaluation by Transcell of any of its assets other than
normal recurring adjustments made in the ordinary course of business, including,
without limitation, write-downs of inventory or write-offs of accounts
receivable; or (f) any transaction or commitment made by Transcell to buy or
sell any assets that are material to Transcell's business.
5.10. Taxes.
(a) Transcell has (or will have by the Effective Time) timely filed or
received timely extensions for the filing of all material tax returns required
to be filed by Transcell. All such tax returns are correct and complete in all
material respects. All material taxes of Transcell which are (i) shown as due on
such tax returns, or (ii) to Transcell's knowledge, otherwise due and payable,
have been paid, except for those taxes being contested in good faith and for
which adequate reserves have been established as of the 1997 Balance Sheet date
in accordance with GAAP. Transcell is not now, nor will it be in the future,
required to pay any additional Taxes due for any period ending prior to the
Effective Time. Transcell has either withheld and paid over to the relevant
taxing authority or set aside in accounts an amount equal to all material taxes
required to have been withheld and paid in connection with payments made by
Transcell to employees, independent contractors, creditors or stockholders of
Transcell ("Payment Taxes").
(b) Except as set forth in the Transcell Disclosure Letter, (i) there
are no material liens for taxes upon the assets of Transcell except liens for
taxes not yet due; (ii) there are no material outstanding deficiencies for any
taxes threatened, proposed, asserted or assessed against Transcell which are not
provided for in the Financial Statements; (iii) there are no federal, state,
local or foreign audits or other administrative proceedings or judicial
proceedings presently pending with regard to any material taxes or tax returns
required to be filed by or with respect to Transcell; (iv) Transcell has filed a
tax return for federal income tax purposes on behalf of itself and not as a
member of an "affiliated group" (within the
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meaning of Section 1504(a) of the Internal Revenue Code of 1986, as amended (
the "Code")); (v) to Transcell's knowledge, the Internal Revenue Service has not
examined any of the federal income tax returns filed by or with respect to
Transcell for all periods through and including September 30, 1996; (vi)
Transcell has not been a member of an "affiliated group" (as defined above)
since March 31, 1996, or any similar affiliated, combined or consolidated group
for state, local or foreign tax purposes nor has any liability for the taxes of
any person (other than Transcell) under Treasury Regulation section 1.1502-6 or
any similar provision of state, local or foreign law or as a transferee,
successor, by contract or otherwise; and (vii) Transcell is not a party to any
tax sharing, tax indemnity or other agreement or arrangement with respect to
taxes.
(c) Transcell is not a "U.S. real property holding company" as defined
in Section 897 of the Code.
(d) For purposes of this Agreement, (i) "tax" means any federal, state,
local or foreign income, gross receipts, property, sales, use, license, excise,
franchise, employment, payroll, premium, withholding, alternative or added
minimum, ad valorem, transfer or excise tax, or any other tax, custom, duty,
governmental fee or other like assessment or charge of any kind whatsoever,
together with any interest or penalty, imposed on Transcell by any governmental
entity, and (ii) "tax return" means any return, report or similar statement
required to be filed by Transcell with respect to any tax (including any
attached schedules), including, without limitation, any information return,
claim for refund, amended return or declaration of estimated tax.
5.11. Employee Benefit Plans. The Disclosure Letter sets forth a
complete and correct list of each "employee benefit plan" (within the meaning of
section 3(3) of the Employment Retirement Income Security Act of 1974, as
amended ("ERISA")) and each other bonus, incentive or deferred compensation,
severance, retention, change in control, fringe benefit, employment or other
employment compensation or benefit agreement, plan or arrangement to which
Transcell is a party or is bound or in respect of which Transcell may have any
material liability (collectively, the "Plans"). True and complete copies of each
Plan and all documents related thereto or the funding thereof have been made
available to Intercardia. Each Plan intended to be qualified under section
401(a) of the Code, and the trust (if any) forming a part thereof, has received
a favorable determination letter from the Internal Revenue Service or is an
adoption of a prototype or volume submitter plan whose sponsor has received a
favorable determination letter as to its qualifications under the Code and to
the effect that each such trust is exempt from taxation under section 501(a) of
the Code, and, to the knowledge of Transcell, no event has occurred since the
date of such determination letter that could reasonably be expected to
materially and adversely affect such qualifications or tax-exempt status. No
Plan is subject to section 412 of the Code or section 301 or Title IV of ERISA
and, except as set forth in the Transcell Disclosure Letter, no Plan is a
multiemployer plan, within the meaning of section 4001(a)(3) of ERISA. No
material liability has been incurred by, and no event, transaction or condition
has occurred or exists that would result in any material liability of, Transcell
(either directly or indirectly, including as a result of an indemnification
obligation or any joint and several liability obligations) under or pursuant to
Title I or IV of ERISA or the penalty, excise tax or joint and several liability
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provisions of the Code relating to employee benefit plans. Each of the Plans has
been operated and administered in all respects in compliance with all applicable
Laws, except for any failure so to comply that, individually or together with
all other such failures, has not resulted in, and will not have or result in, a
Transcell Material Adverse Effect. There are no material pending or, to the
knowledge of Transcell, threatened claims by or on behalf of any of the Plans,
by any government entity, by any current or former employee of Transcell
(collectively, the "Employees") or otherwise involving any such Plan or the
assets of any Plan (other than routine claims for benefits). All material
contributions, premiums and expenses payable to or in respect of any Plan or the
operation or administration thereof relating to any period on or prior to the
date hereof have been paid, adequately accrued in the Financial Statements or
incurred and relate to services rendered after the date of such Financial
Statements in the ordinary course of business consistent with prior practice and
in accordance with the terms of this Agreement. Except as set forth in the
Transcell Disclosure Letter, (i) the execution of, and performance of the
transactions contemplated in, this Agreement will not constitute an event under
any Plan that has resulted or may result in any material payment (whether of
severance pay or otherwise), acceleration other than vesting of certain options,
forgiveness of indebtedness, vesting, distribution or increase in any
compensation or benefits of any Employees or any obligation of Transcell to fund
any compensation or benefits in respect of any Employee; and (ii) no payment or
benefit which has been or may be made by Transcell in respect of any Employee
will constitute an "excess parachute payment" within the meaning of Section
280G(b)(1) of the Code.
5.12 Labor and Employment Matters. Except as set forth in the Transcell
Disclosure Letter, (a) Transcell is not a party to, or bound by, any collective
bargaining agreement or other contracts or understanding with a labor union or
labor organization; and (b) there is no material (i) unfair labor practice,
labor dispute (other than routine individual grievances) or labor arbitration
proceeding pending or, to the knowledge of Transcell, threatened against
Transcell, (ii) activity or proceeding by a labor union or representative
thereof to organize any employees of Transcell, or (iii) lockouts, strikes,
slowdowns, work stoppages or similar labor activities or threats thereof by or
with respect to any such employees. Transcell is in compliance in all material
respects with all laws regarding employment, employment practices, terms and
conditions of employment and wages.
5.13 Brokers and Finders. No broker, dealer or financial advisor (other
than Hempstead & Co. ("Hempstead")) is entitled to receive from Transcell any
broker's, finder's or investment banking or other fee in connection with this
Agreement or the transactions contemplated hereby.
5.14 Opinion of Financial Advisor. Transcell has received the verbal
opinion of Hempstead to the effect that, as of the date of this Agreement, the
proposed terms and conditions of the Merger (assuming the Initial Market Price
is not less than $10.00 per share or more than $34.00 per share) are fair from a
financial point of view to the holders of the Outstanding Capital Stock other
than Interneuron.
5.15 Material Contracts. The Transcell Disclosure Letter sets
forth a list as of the date hereof of all of the following contracts which are
in effect as of the date hereof: (a)
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contracts for borrowed money or guarantees thereof other than contracts entered
into in the ordinary course of business consistent with the past practice of
Transcell, (b) contracts containing covenants by Transcell restricting its
ability to engage in any line of business, (c) contracts involving a "strategic
alliance" or similar relationship, (d) contracts involving or related to
acquisitions, mergers, sales or dispositions, and (e) other contracts under
which the obligation of Transcell is $10,000 or more (all contracts described in
each of the categories (a) through (e) above, "Material Contracts"). All
Material Contracts are, with respect to Transcell, valid and binding, in full
force and effect and enforceable against Transcell, in accordance with their
respective terms except as the same may be limited by (a) applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general application
affecting enforcement of creditors' rights, (b) laws relating to the
availability of specific performance, injunctive relief or other equitable
remedies, and (c) the extent to which the enforceability of the indemnification
provisions contained in this Agreement and the Royalty Agreement may be limited
by applicable laws. There is not, under any such contract, any existing default,
or event, which after notice or lapse of time, or both, would constitute a
default, by Transcell, or to Transcell's knowledge, any other party, other than
any such defaults or events which, individually or in the aggregate, would not
have a Transcell Material Adverse Effect.
5.16 Intellectual Property: Technology. (a) The Transcell Disclosure
Letter sets forth a complete and correct list of all patents and patent
applications that (i) are owned or licensed to Transcell or (ii) are used or
held for use, in each case, by Transcell in connection with, or that are
material to, the business currently conducted or proposed to be conducted by
Transcell (the "Intellectual Property"), except that the Disclosure Letter does
not need to set forth inventions, processes, formulae, trade secrets, know-how
or confidential information that are not disclosed in the Intellectual Property
or that are not susceptible to legal protection by any statutory filing or
registration with any governmental entity.
(a) Subject to agreements with licensors and licensees of the
Intellectual Property and to the Intellectual Property Agreements,
Interneuron's rights to which will be assigned to Intercardia pursuant
to the Royalty Agreement, Transcell owns, or has the valid right and
license to use, and the Surviving Corporation will, immediately after
the Closing, own or have the valid right and license to use, all of the
Intellectual Property material to the conduct of the business of
Transcell as currently conducted. Subject to agreements with licensors
and licensees of the Intellectual Property, Transcell owns all of its
rights in and to the Intellectual Property, free and clear of any
material liens.
(b) To the knowledge of Transcell, the conduct of the business
of Transcell does not infringe the patent rights of any Person and none
of the Intellectual Property is being infringed, misappropriated or
otherwise used or available for use by any Person without written
authority from or under written agreement with Transcell.
(c) No claim or demand of any Person has been made or, to the
knowledge of Transcell, threatened, nor is there any litigation that is
pending or, to the knowledge of Transcell, threatened, that (i)
challenges the rights of Transcell in respect of any
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Intellectual Property, or (ii) asserts that Transcell is infringing or
otherwise in conflict with, or is required to pay any material royalty,
license fee, charge or other material amount with regard to, the
conduct of the business of Transcell. To Transcell's knowledge, none of
the Intellectual Property is subject to any material outstanding order,
ruling, decree, judgment or stipulation by or with any court, tribunal,
arbitrator or other governmental entity.
(d) The Transcell Disclosure Letter sets forth a complete list
of Intellectual Property that is registered with, filed in or issued
by, as the case may be, the United States Patent and Trademark Office,
the United States Copyright Office or other filing offices, domestic or
foreign, and such registrations, filings, issuances and other actions
remain in full force and effect.
(e) To the knowledge of Transcell, Transcell has valid
licenses to all copies of all software that is utilized by it in
connection with the conduct of its business and that it does not own
("Commercial Software"), and the use by Transcell of such Commercial
Software, including without limitation all modifications and
enhancements thereto (whether created by Transcell or by a third party)
is in material compliance with the terms and provisions of such
licenses. True and correct copies of all material licenses and
arrangements (including amendments, supplements, waivers and other
modifications) for any and all Intellectual Property that is not owned
by Transcell (including but not limited to any and all material
Commercial Software) have been delivered to Intercardia. All royalties,
license fees, charges and other amounts payable by, or on behalf of, to
or for the account of Transcell in respect of any Intellectual Property
are reflected in the Financial Statements.
5.17 Investments. Except as disclosed in the Transcell Disclosure
Letter, Transcell does not own any shares of capital stock or other securities
or interest in any other Person.
5.18 Insurance. The Transcell Disclosure Letter contains a complete and
correct list and summary description of all insurance policies maintained
(including Directors' and Officers' insurance) by or on behalf of Transcell.
Transcell has delivered to Intercardia complete and correct copies of all such
policies together with all riders and amendments thereto. Such policies are in
full force and effect, and all premiums due thereon have been paid. Transcell
has complied in all material respects with the terms and provisions of such
policies.
5.19 Product Liability. Except as set forth in the Transcell Disclosure
Letter, there are no liabilities of Transcell, fixed or contingent, asserted (a)
with respect to any product liability or any similar claim that relates to any
product sold or manufactured by Transcell, or (b) with respect to any claim for
the breach of an express or implied product warranty or any other similar claim
with respect to any products of Transcell.
5.20 Governmental Approvals. There are no products now being
manufactured, sold or distributed by Transcell which at the date hereof would
require any approval of the United States Food and Drug Administration (the
"FDA") or any other governmental body, whether Federal, state, local or foreign
for the purpose for which they are being manufactured, sold or
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distributed, for which such approval has not been obtained.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF INTERCARDIA
As of the Effective Time, Intercardia hereby represents and warrants to
Transcell as follows:
6.1 Existence; Good Standing; Corporate Authority. Intercardia is (a) a
corporation duly incorporated, validly existing and in good standing under the
laws of Delaware and (b) duly licensed or qualified to do business as a foreign
corporation and is in good standing under the laws of any other jurisdiction in
which the character of the properties owned or leased by it or in which the
transaction of its business makes such licensure, qualification or good standing
necessary, except where the failure to be so in good standing or to be so
licensed or qualified, individually or in the aggregate, would not have an
Intercardia Material Adverse Effect. Intercardia has the requisite corporate
power and authority to own, operate and lease its properties and carry on its
business as now conducted. Intercardia has heretofore delivered to Transcell
true and correct copies of the Certificate of Incorporation and Bylaws of
Intercardia as currently in effect.
6.2. Subsidiaries. Intercardia has no subsidiaries other than Aeolus
Pharmaceuticals, Inc., a Delaware corporation ("Aeolus"), Renaissance Cell
Technologies, Inc., a Delaware corporation ("Renaissance"), and CPEC, Inc., a
Nevada corporation ("CPEC") (collectively, the "Subsidiaries"). Unless the
context indicates otherwise, all references to Intercardia include the
Subsidiaries. Each of the Subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation and is duly licensed or qualified to do business, and is in good
standing, in all jurisdiction of incorporation and is duly licensed or qualified
to do business, and is in good standing, in all jurisdictions wherein the
character of the properties owned or leased by it or in which the transaction of
its business makes such licensure, qualification or good standing necessary.
Each Subsidiary has the requisite corporate power and authority to own, operate
and lease its properties and carry on its business as now conducted. Intercardia
has heretofore made available to Transcell true and correct copies of the
Certificate of Incorporation and Bylaws of each of its Subsidiaries as such are
currently in effect. Intercardia owns approximately 80.1% of the issued and
outstanding capital stock of CPEC, approximately 65.8% of the issued and
outstanding capital stock of Aeolus, and approximately 79.6% of the issued and
outstanding stock of Renaissance, free and clear of any security interests,
liens, encumbrances, claims or charges.
6.3. Authorization; Validity and Effect of Agreements. Intercardia has
the requisite corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby and thereby.
The execution and delivery of this Agreement and the consummation by Intercardia
of the transactions contemplated hereby have been duly and validly authorized by
the Board of Directors of Intercardia, and no other corporate proceedings on the
part of Intercardia are necessary to authorize this Agreement or to consummate
the transactions contemplated hereby other than Intercardia Stockholder
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Approval. This Agreement has been duly and validly executed and delivered by
Intercardia, and (assuming this Agreement constitutes the valid and binding
obligation of Transcell) constitutes valid and binding obligations of
Intercardia, enforceable against Intercardia in accordance with its terms,
except as the same may be limited by bankruptcy, insolvency or reorganization
laws relating to or affecting the availability of the remedy of specific
performance or equitable principles of general application.
6.4 Litigation. There is no judgment, decree or order pending or, to
the knowledge of Intercardia or any of its directors or officers, threatened
against Intercardia that would have an Intercardia Material Adverse Effect.
6.5 No Violation. Neither the execution and delivery of this Agreement
by Intercardia nor the consummation by Intercardia of the transactions
contemplated hereby will (a) violate, conflict with or result in any breach of
any provision of the Certificate of Incorporation or Bylaws of Intercardia; (b)
violate or conflict in any material respect with, result in a breach of any
material provision of, constitute a default (or an event which, with notice or
lapse of time or both, would constitute a default) under, result in the
termination or in a right of termination of, accelerate the performance required
by or benefit obtainable under, result in the vesting, triggering or
acceleration of any material payment or other material obligations pursuant to,
result in the creation of any material encumbrance upon any of the properties of
Intercardia under, or result in there being declared void, voidable, subject to
withdrawal, or without further binding effect, any of the material terms,
conditions or provisions of any material note, bond, mortgage, indenture, deed
of trust, license, franchise, permit, lease, contract, agreement or other
material instrument, commitment or obligation to which Intercardia is a party,
by which Intercardia or any of its properties is bound (each of the foregoing,
to the extent the same have any continuing force or effect, an "Intercardia
Contract" and collectively, "Intercardia Contracts") except where such violation
would not have an Intercardia Material Adverse Effect; (c) other than the
Regulatory Filings, require any consent, approval or authorization of, or
declaration, filing or registration with, any governmental entity, the lack of
which individually or in the aggregate would adversely affect the ability of
Intercardia to consummate the transactions contemplated hereby or (d) violate
any laws applicable to Intercardia or any of its respective assets, except for
such violations which individually or in the aggregate would not adversely
affect the ability of Intercardia to consummate the transactions cntemplated
hereby.
6.6 Capital Stock of Intercardia. The authorized capital stock of
Intercardia consists of (i) 40,000,000 shares of common stock, $.001 per share,
of which 6,765,162 shares were duly and validly issued and outstanding, fully
paid and non-assessable as of September 30, 1997; and (ii) 3,000,000 shares of
preferred stock, $.01 per share, of which no shares are issued and outstanding.
Except for options to purchase up to 1,299,923 shares of Intercardia Common
Stock which were granted under Intercardia's Stock Option Plan and warrants to
purchase 49,033 shares of Intercardia Common Stock, all of which are outstanding
as of September 30, 1997, there are no outstanding options, warrants, rights,
commitments, preemptive rights or agreements of any kind for the issuance or
sale of, or outstanding securities convertible into, any additional shares of
capital stock of any class of Intercardia. Intercardia has reserved a sufficient
number of shares of authorized Intercardia Common
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Stock for issuance in the First Installment. The shares of Intercardia Common
Stock issuable at Closing pursuant to the Agreement and the Royalty Agreement
have been duly authorized and, when issued and paid for at the Closing, will be
validly issued, fully paid and non-assessable and free of any preemptive rights
and of all restrictions on transfer except under applicable federal and state
securities laws. The Intercardia Common Stock is authorized for trading on the
Nasdaq National Market and no suspension of trading in the Intercardia Common
Stock is in effect. Except as disclosed in the Intercardia SEC Reports and as
contemplated by this Agreement, no holder of Intercardia Common Stock or any
security convertible into or exchangeable for Intercardia Common Stock has any
registration rights with respect to such securities.
6.7 SEC Reports; Financial Statements. Since February 1996, Intercardia
has filed (x) all forms, reports, statements and other documents required to be
filed with (i) the Securities and Exchange Commission ("SEC") and Nasdaq
including, without limitation, (A) all Annual Reports on Form 10-K, (B) all
Quarterly Reports on Form 10-Q, (C) all proxy statements relating to meetings of
stockholders (whether annual or special), (D) all required Current Reports on
Form 8-K, (E) all other reports or registration statements required under the
Securities Act, or the Exchange Act, and (F) all amendments and supplements to
all such reports and registration statements (collectively, the "Intercardia SEC
Reports") and (ii) any applicable state securities and authorities; and (y) all
forms, reports, statements and other documents required to be filed with any
other applicable federal or state regulatory authorities (all such forms,
reports, statements and other documents in clauses (x) and (y) of this Section
6.7 being collectively referred to as the "Intercardia Reports"). The
Intercardia Reports, including all Intercardia Reports filed after the date of
this Agreement and prior to the Effective Time, (i) were or will be prepared in
all material respects in accordance with the requirements of applicable law
(including, with respect to the Intercardia SEC Reports, the 1933 Act and the
Exchange Act, as the case may be), (ii) accurately describe, in all material
respects, as of their respective dates, the business then conducted by
Intercardia and its Subsidiaries, and (iii) did not at the time they were filed,
or will not at the time they are filed, contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were or will be made, not misleading. There is no
fact known to Intercardia which has not been set forth in this Agreement or the
Intercardia Reports which may have a material adverse effect on the assets,
properties, results of operations or financial condition of Intercardia and its
Subsidiaries (an "Intercardia Material Adverse Effect").
6.8 Brokers and Finders. No broker, dealer or financial advisor (other
than NationsBanc Montgomery Securities, Inc. ("NMSI")) is entitled to receive
from Intercardia any broker's, finder's or investment banking or other fee in
connection with this Agreement or the transactions contemplated hereby.
6.9 Opinion of Financial Advisor. Intercardia has received the verbal
opinion of NMSI to the effect that, as of the date of this Agreement, the
proposed terms and conditions of the Merger (assuming the Initial Market Price
is not less than $10.00 per share or more than $34.00 per share) are fair from a
financial point of view to the holders of the Intercardia
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Common Stock.
ARTICLE 7
COVENANTS
7.1 No Solicitation. (a) Interneuron and Transcell shall, and shall
direct and use reasonable efforts to cause their respective officers, directors,
employees, representatives and agents to, immediately cease any discussions or
negotiations with any parties other than Intercardia that may be ongoing with
respect to an Acquisition Proposal. Transcell and Interneuron shall not, and
shall not authorize any of their respective officers, directors or employees or
any investment banker, financial advisor, attorney, accountant or other
representative retained by it to, directly or indirectly, (i) solicit, initiate
or encourage (including by way of furnishing non-public information), or take
any other action to facilitate, any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to, an Acquisition Proposal
or (ii) participate in any discussions or negotiations regarding an Acquisition
Proposal; provided, however, that Interneuron and Transcell shall be entitled to
respond to unsolicited offers relating to an Acquisition Proposal in the
exercise of the fiduciary duties of the Board of Directors of Transcell. For
purposes of this Agreement, "Acquisition Proposal" means any proposal or offer
from any person other than Intercardia relating to any direct or indirect
acquisition or purchase of any of the assets or securities of Transcell except
(x) in the ordinary course of business of Transcell consistent with the terms of
this Agreement or (y) an acquisition or purchase that would not have a Transcell
Material Adverse Effect.
From the date of this Agreement until the Effective Time or, if the
Merger is not consummated, for a period of two years following the date of this
Agreement, and except as otherwise provided by the terms of this Agreement,
Intercardia shall not solicit or encourage any officer, employee or consultant
of Transcell to leave its employ or terminate any consulting relationship, for
employment at, consultation with or any other role associated with the
operations of Intercardia, or hire or offer employment to, or retain as a
consultant any person whom Transcell employs, or retains as a consultant,
provided, however, Intercardia shall be permitted to retain Dr. Daniel Kahne as
a consultant for up to four (4) days per year so long as such consultation does
not interfere with Dr. Kahne's consulting obligations to Transcell.
7.2 Interim Operations.
(a) From the date of this Agreement to the Effective Time, except as
required pursuant to this Agreement, unless Intercardia has consented in writing
thereto, Transcell shall:
(i) conduct its operations according to its usual, regular and
ordinary course of business consistent with past practice;
(ii) use its reasonable efforts to preserve intact its
business organizations and goodwill, to maintain in effect all existing
qualifications, licenses, permits, approvals and other authorizations,
to keep available the services of their officers and employees
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and to maintain satisfactory relationships with suppliers and all other
persons having business relationships with them except where the
failure to do so would not have a Material Adverse Effect;
(iii) deliver, within fifteen (15) business days after the end
of each accounting month, monthly financial accounts prepared
internally by Transcell's management, in the same format as heretofore
furnished to Intercardia, for Transcell for and as of the end of each
such month; and
(iv) promptly notify Intercardia of any Litigation instituted
or threatened against Transcell;
(b) From the date of this Agreement to the Effective Time, unless
Intercardia has consented in writing thereto, Transcell shall not:
(i) amend its Certificate of Incorporation or Bylaws;
(ii) issue, sell, pledge or otherwise dispose of any shares of
its Authorized Capital Stock (other than issuances of Authorized
Capital Stock in respect of any exercise of Transcell Options or
Transcell Warrants or any conversion of Class B Common Stock, Series A
Preferred Stock or Series B Preferred Stock outstanding on the date
hereof), or any securities convertible into or exchangeable for any
such shares, or any rights, warrants or options to acquire or with
respect to any such shares of Authorized Capital Stock, or convertible
or exchangeable securities; or accelerate any right to convert or
exchange or acquire any securities of Transcell for any such shares;
(iii) effect any stock split, reverse stock split, stock
dividend, subdivision, reclassification or similar transaction, or
otherwise change its capitalization as it exists on the date hereof;
(iv) other than pursuant to this Agreement, grant, confer,
award or amend any option, warrant, convertible security or other right
to acquire any shares of its Authorized Capital Stock or take any
action to cause to be exercisable any otherwise unexercisable option
under any stock option plan;
(v) declare, set aside or pay any dividend or make any other
distribution or payment with respect to any shares of its Outstanding
Capital Stock;
(vi) directly or indirectly redeem, purchase or otherwise
acquire any shares of its Outstanding Capital Stock;
(vii) sell, lease, assign, transfer or otherwise dispose of
(by merger or otherwise) any of its property, business or assets
(including, without limitation, any Intellectual Property) except in
the ordinary course of business;
(viii) settle or compromise any pending or threatened
Litigation without Intercardia's consent (which consent will not be
unreasonably withheld or delayed);
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(ix) make any loan, extension of credit or capital
contribution to, or purchase to acquire (by merger or otherwise) any
stock, bonds, notes, debentures or other securities of, or any assets
constituting a business unit of, or make any other investment in, any
person, firm or entity, except (v) loans, extensions of credit, capital
contributions, purchases, acquisitions or investments that are,
individually and in the aggregate, of de minimis value, (w) extensions
of trade credit and endorsements of negotiable instruments and other
negotiable documents in the ordinary course of business (x) investments
in cash and cash equivalents, (y) investments in wholly owned
subsidiaries;
(x) incur, assume or create any indebtedness for borrowed
money or the deferred purchase price for property or services or
pursuant to any capital lease or other financing, except indebtedness
owed to Interneuron or incurred in the ordinary course of business for
equipment financing or working capital purposes pursuant to Transcell's
existing credit facilities; or amend in a manner materially adverse to
Transcell any of Transcell's existing credit facilities;
(xi) assume, guarantee or otherwise become liable or
responsible (whether directly, contingently or otherwise) for the
obligations of any other person except for obligations in the ordinary
course of business consistent with the past practice of Transcell;
(xii) make any material tax election (unless required by law
or unless consistent with prior practice), settle or compromise any
material income tax liability or amend any tax return;
(xiii) waive or amend any term or condition of any
confidentiality or "standstill" agreement to which Transcell is a party
and which relates to a business combination with Transcell or the
purchase of shares or assets of Transcell;
(xiv) grant or amend any share-related or performance awards;
(xv) except with respect to agreements which are terminable at
will by Transcell without any material penalty to Transcell, enter into
or amend any legally binding employment, severance, consulting or
salary continuation agreements with any officers, directors or
employees or grant any increases in compensation or benefits to
employees other than increases to officers and employees in the
ordinary course of business consistent with the past practice of
Transcell;
(xvi) adopt, amend or terminate any employee benefit plan or
arrangement (except as expressly contemplated by this Agreement);
(xvii) change any accounting principles or practices used by
Transcell;
(xviii) waive, relinquish, release or terminate any material
right or claim, including any such right or claim under any Material
Contract or permit any rights of material value to use any Intellectual
Property to lapse or be forfeited; or
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(xix) agree in writing or otherwise to take any of the
foregoing actions.
7.3 Stockholder Approvals; Information Statement.
(a) Transcell shall (i) call a meeting of its stockholders (the
"Transcell Stockholder Meeting") for the purpose of voting upon the Merger, (ii)
hold the Transcell Stockholder Meeting as soon as practicable following the date
of this Agreement, and (iii) subject to its fiduciary duties and to the
provisions of Section 8.1(b), recommend to its stockholders the approval of the
Merger through its Board of Directors.
(b) Transcell will, as soon as practicable following the date of this
Agreement, prepare a proxy statement or information statement (any such
statement, and amendments or supplements thereto, the "Information Statement"),
with respect to the Transcell Stockholder Meeting. Transcell shall give
Intercardia and its counsel (who shall provide any comments thereon as soon as
practicable) the opportunity to review the Information Statement prior to its
being mailed to Transcell's stockholders. As promptly as practicable after the
Information Statement has been reviewed and commented on by Intercardia, and
upon receipt of clearance by the SEC of the Statement or any of Intercardia's
other filings made in connection with the Merger, Transcell shall mail the
Information Statement to the stockholders of Transcell. If at any time prior to
the approval of this Agreement by Transcell's stockholders there shall occur any
event that should be set forth in an amendment or supplement to the Information
Statement, Transcell will prepare and mail to its stockholders such an amendment
or supplement. Notwithstanding anything to the contrary contained in this
Agreement, Transcell shall be entitled to deliver a copy of Intercardia's
Statement to its stockholders in lieu of an Information Statement to the extent
such Statement complies with Transcell's disclosure obligations in connection
with the Merger.
(c) Transcell represents and warrants that the Information Statement at
the time it is mailed to Transcell Stockholders will not contain any untrue
statement of a material fact or omit or state any material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading; provided
that Transcell makes no representation or warranty as to any information
included in the Information Statement which relates to or was provided by
Intercardia. Intercardia represents and warrants that none of the information
supplied by Intercardia for inclusion in the Information Statement will at the
time distributed to stockholders of Transcell, 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 the light of the
circumstances under which they were made, not misleading. Transcell agrees to
notify Intercardia a reasonable time prior to the distribution of the
Information Statement of such distribution.
(d) Intercardia shall (i) call a meeting of its stockholders (the
"Intercardia Stockholder Meeting") for the purpose of, among other things,
voting upon the Merger, (ii) hold Intercardia Stockholder Meeting as soon as
practicable following the date of this Agreement and (iii) subject to its
fiduciary duties under applicable law as advised by outside counsel, recommend
to its stockholders the approval of the Merger.
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(e) Intercardia will, as soon as practicable following the date of this
Agreement, prepare and file with the SEC a registration statement on Form S-4,
including a proxy statement and prospectus (such statement, and amendments or
supplements thereto, the "Statement"), with respect to the registration of the
Intercardia Common Stock issuable in connection with the Merger and the
Intercardia Stockholder Meeting. Intercardia shall as soon as practicable
subsequent to the Effective Time file appropriate registration statements
relating to the issuance and resale of Intercardia Common Stock underlying the
Transcell Options (and, if required, the Transcell Warrants). Intercardia shall
give Transcell and its counsel (who shall provide any comments thereon as soon
as practicable) the opportunity to review the Statement prior to its being
mailed to Intercardia's stockholders. As promptly as practicable after the
Statement has been reviewed and commented on by Intercardia, and upon receipt of
clearance by the SEC of the Statement, Intercardia shall mail the Statement to
the stockholders of Intercardia. If at any time prior to the approval of this
Agreement by Intercardia's stockholders there shall occur any event that should
be set forth in an amendment or supplement to the Statement, Intercardia will
prepare and mail to its stockholders such an amendment or supplement.
(f) Intercardia represents and warrants that the Statement will not, at
the time it is mailed to Intercardia Stockholders, contain any untrue statement
of a material fact or omit or state any material fact required to be stated
therein or necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading; provided that
Intercardia makes no representation or warranty as to any information included
in the Statement which was provided by Interneuron or Transcell. Transcell
represents and warrants that none of the information supplied by Transcell for
inclusion in the Statement will at the time distributed to stockholders of
Intercardia, 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 the light of the circumstances under which they were
made, not misleading. Intercardia agrees to notify Transcell a reasonable time
prior to the distribution of the Statement of such distribution.
(g) Interneuron shall cause all shares of Outstanding Capital Stock
owned by Interneuron to be voted in favor of the Merger, and subject to the
fiduciary duties of the Board of Directors of Transcell, Transcell shall use its
reasonable efforts to obtain the Transcell Stockholder Approval.
(h) Subject to the fiduciary duties of the board of directors of
Intercardia as advised by outside counsel, Intercardia shall use its reasonable
efforts to obtain Intercardia Stockholder Approval.
7.4 Filings; Other Action. Subject to the terms and conditions herein
provided, Transcell and Intercardia shall cooperate and consult with one another
in (i) determining which Regulatory Filings are required to be made prior to the
Effective Time with, and which consents, approvals, permits, authorizations or
waivers (collectively, "Consents") are required or to be obtained prior to the
Effective Time from governmental entities or other third parties in connection
with the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby; (ii) preparing all Regulatory Filings and all
other filings,
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submissions and presentations required or prudent to obtain all Consents,
including by providing to the other party drafts of such material reasonably in
advance of the anticipated filing or submission dates; and (iii) timely making
all such Regulatory Filings and timely seeking all such Consents; efforts to
take, or cause to be taken, all other action and do, or cause to be done, all
other things necessary, proper or appropriate to consummate and make effective
the transactions contemplated by this Agreement. If, at any time after the
Effective Time, any further action is necessary or desirable to carry out the
purpose of this Agreement, the proper officers and directors of the Surviving
Corporation shall take all such necessary action.
7.5 Access to Information. Until the Closing, upon reasonable notice,
Transcell shall, subject to the compliance with applicable laws and
confidentiality obligations to third parties, (i) give Intercardia and its
authorized representatives reasonable access during normal business hours to all
books, records, personnel, research and other consultants, offices and other
facilities and properties of Transcell and their accountants, (ii) permit
Intercardia to make such copies and inspections thereof as Intercardia may
reasonably request and (iii) furnish Intercardia with such financial and
operating data and other information with respect to the business and properties
of Transcell as Intercardia may from time to time reasonably request.
Intercardia agrees that, unless and until the Closing has been consummated, it
and its officers, directors, agents and representatives will hold in strict
confidence any confidential or proprietary data or information obtained from
Transcell or Interneuron with respect to the business or financial condition of
Transcell. Information generally known in the biotechnology industry or which
has been disclosed to Intercardia by third parties which have a right to do so
shall not be deemed confidential or proprietary information for purposes of this
Agreement. If the transaction contemplated by this Agreement is not consummated,
Intercardia will return to Transcell (or certify that it has destroyed) all
copies of such data and information and all documents prepared from such data
and information.
7.6 Publicity. The initial press release relating to this Agreement
shall be a joint press release in substantially the form attached hereto as
Exhibit 7.6 and thereafter Interneuron, Transcell and Intercardia shall, subject
to their respective legal obligations, obtain the prior consent of the other
parties (which consent will not be unreasonably withheld or delayed) before
issuing any such press release or otherwise making public statements with
respect to the transactions contemplated hereby and in making any filings with
any national securities exchange with respect thereto.
7.7 Further Action. Each party hereto shall, subject to the fulfillment
at or before the Effective Time of each of the conditions of performance set
forth herein or the waiver thereof, perform such further acts and execute such
documents as may be reasonably required to effect the Merger.
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7.8 Insurance; Indemnity.
(a) Intercardia shall use reasonable efforts to maintain
officers' and directors' liability insurance covering the parties who
are currently covered in their capacities as officers and directors of
Transcell with limits of $5,000,000 for coverage of acts or omissions
prior to the Effective Time.
(b) From and after the Effective Time, the Surviving
Corporation shall indemnify and hold harmless, to the fullest extent
permitted under applicable law, each person who is, or has been at any
time prior to the date hereof or who becomes prior to the Effective
Time, an officer or director of Transcell against all losses, claims,
damages, liabilities, costs or expenses (including attorneys' fees),
judgments, fines, penalties and amounts paid in settlement
(collectively, "Losses") in connection with any Litigation arising out
of or pertaining to acts or omissions, or alleged acts or omissions, by
them in their capacities as such, which acts or omissions occurred
prior to the Effective Time. Without limiting the foregoing, Transcell
and after the Effective Time the Surviving Corporation shall
periodically advance expenses as incurred with respect to the foregoing
to the fullest extent permitted under applicable law provided that the
person to whom the expenses are advanced provides an undertaking to
repay such advance if it is ultimately determined that such person is
not entitled to indemnification.
7.9. Employees and Employee Benefit Plans. Through December 31, 1998,
Intercardia shall maintain employee compensation policies and benefit plans for
its employees (who were formerly with Transcell) that, in the aggregate, are
similar to the compensation policies and benefit plans of Transcell as of the
date hereof. From and after the Closing, Intercardia shall honor all existing
employment agreements in accordance with the terms thereof as in effect on the
date hereof or as the same may be amended with the consent of the employee party
thereto and Intercardia. To the extent that employees of the Surviving
Corporation become eligible to participate in any employee benefit plan of
Intercardia after the Effective Time, Intercardia shall cause the service of
such employees with Transcell completed prior to the Effective Time to be
recognized under such employee benefit plan of Intercardia for all purposes of
vesting and eligibility to participate thereunder.
7.10 Reasonable Efforts. Subject to the terms and conditions of this
Agreement, Interneuron, Intercardia, and Transcell shall use their reasonable
efforts to take, or cause to be taken, all action, and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated by
this Agreement, including, without limitation, using their reasonable efforts to
satisfy the conditions contained in Article 8 hereof.
7.11 Certain Notification. At all times until the Effective Time, each
party shall promptly notify the other in writing of the occurrence of any event
that will or may result in the failure to satisfy any of the conditions
specified in Article 8.
7.12 Interneuron Obligations. Interneuron shall
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(a) as of Closing, contribute to Transcell's equity, with no
cost to Transcell, all debt and open accounts payable owed to
Interneuron by Transcell.
(b) as of Closing, cancel and waive any rights it may have to
any and all warrants to purchase Authorized Capital Stock.
(c) as of Closing, release any and all security interests it
may have in any Transcell asset, except for those in which
Interneuron's guaranty remains after closing.
7.13 Interneuron Royalty. At Closing, Intercardia and Interneuron will
enter into an Assignment and Assumption and Royalty Agreement substantially in
the form attached hereto as Exhibit 7.13 (the "Royalty Agreement"), pursuant to
which (i) Interneuron will assign to Intercardia, and Intercardia will assume,
any and all of Interneuron's rights and obligations to and in the Research
Collaboration and License Agreement by and among Merck & Co., Inc., Transcell
and Interneuron dated as of June 30, 1997 (the "Merck Agreement"), the Research
Agreements by and between the Trustees of Princeton and Interneuron dated April
29, 1997, relating to "Construction of a Vancomycin Library" and "Towards a Map
of the Active Site of MurG" (the "Princeton Research Agreements"), and the Side
Agreement by and among Merck & Co., Inc., Transcell, the Trustees of Princeton
University and Interneuron effective as of June 30, 1997 (the "Side Agreement"),
the Agreement to License effective as of June 30, 1997 by and between Princeton
and Interneuron ("Agreement to License") and any license agreement entered into
under the Agreement to License (collectively, the "Intellectual Property
Agreements"); and (ii) Interneuron shall agree to continue to guarantee (the
"Guaranties") Transcell's building and equipment lease obligations until those
obligations can be terminated on the terms and conditions set forth in the
Royalty Agreement.
In consideration for the above promises and assignment of rights by
Interneuron, Intercardia will pay to Interneuron THREE MILLION DOLLARS
($3,000,000) in Intercardia Common Stock at Closing, based upon the Initial
Market Price as determined according to Section 4.1(a)(iv) and certain royalties
resulting from the commercialization of compounds under the Intellectual
Property Agreements, on the terms and conditions set forth in the Royalty
Agreement.
7.14 SEC Filings and Transaction Costs. Intercardia, Interneuron and
Transcell shall cooperate to assist Intercardia in preparing and filing an
Intercardia registration statement (including the Statement) with the SEC. Each
party shall pay its own legal, accounting, valuation and other costs associated
with this transaction, but any transaction costs incurred by Transcell which are
not paid prior to Closing will be paid by or reimbursed by Interneuron.
Interneuron shall fund all of Transcell's operating costs through Closing,
provided however, without Interneuron's approval, Interneuron's cumulative
average monthly net funding requirements from October 1, 1997 until Closing
shall not exceed $700,000 per month plus any payments made for costs incurred in
connection with this Merger. As of Closing, Transcell shall not have any open
accounts payable which have not been paid within thirty days of the invoice
date, calculated in accordance with GAAP. Any and all payments due on all other
Transcell liabilities shall be paid when due and shall be current as of Closing.
Interneuron shall reimburse Intercardia for any amounts which, as of Closing,
exceed these
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accounts payable and liability provisions.
7.15 Authorization for Trading; Reporting Status. Intercardia shall
cause the Intercardia Common Stock to be authorized for trading on the Nasdaq
National Market at such time as it shall be required to file any additional
listing application and shall file such additional listing application or other
reports required in connection with such authorization on a timely basis.
Intercardia shall file all reports required to be filed with the SEC pursuant to
Section 13 or 15(d) of the Exchange Act, and Intercardia shall not terminate its
status as an issuer required to file reports under the Exchange Act even if the
Exchange Act or the rules and regulations thereunder would permit such
termination. Intercardia shall use its best efforts to maintain, authorize and
reserve a sufficient number of shares of authorized Intercardia Common Stock for
issuance in the First Installment, the Second Installment and the Third
Installment, including, if necessary, amending its Certificate of Incorporation.
7.16 Intercardia Approval. Intercardia agrees not to withhold
unreasonably its consent of any action proposed to be taken by Transcell for
which Intercardia's consent is required under this Article VII.
7.17 Tax Covenant. Intercardia shall take no action, without the
consent of Interneuron, for a period of two (2) years subsequent to the
Effective Time to disqualify the Merger from qualifying as a tax-free
reorganization under Section 368 of the Code. In particular (i) except for
fractional share interests Intercardia has no plan or intention to reacquire any
of the Intercardia Common Stock issuable in connection with the Merger and
Intercardia has not created a stock repurchase program in connection with the
Merger; (ii) Intercardia has no plan or intention to sell or otherwise dispose
of any of the assets of Transcell acquired in the Merger, except for
dispositions made in the ordinary course of business or transfers described in
Section 368(a)(2)(C) of the Code; and (iii) after the Merger, Intercardia will
continue the historic business of Transcell or use a significant portion of
Transcell's historic business assets in a business.
ARTICLE 8
CONDITIONS
8.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligations of each party to effect the Merger and the other
transactions contemplated hereby shall be subject to the satisfaction or waiver
at or prior to the Effective Time of the following conditions, any one or more
of which may be waived:
(a) Stockholder Approvals. Intercardia Stockholder Approval
and Transcell Stockholder Approval shall have been obtained.
(b) Other Approvals. Other than the filing provided for by
Section 1.3, all Consents and Regulatory Filings which are necessary
for the consummation of the Merger, other than Consents and Regulatory
Filings the failure to obtain or make which would, individually and in
the aggregate, be immaterial to the Surviving Corporation or which
would, individually and in the aggregate, not have a Material
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Adverse Effect on the Merger, shall have been filed, occurred or been
obtained (all such Consents, Regulatory Filings and the lapse of all
such waiting periods being referred to as the "Requisite Regulatory
Approvals"), and all such Requisite Regulatory Approvals shall be in
full force and effect.
(b) No Injunctions or Restraints; Illegality. No temporary
restraining order, preliminary or permanent injunction or other order
or decree issued by any court of competent jurisdiction or other legal
restraint or prohibition preventing the consummation of the Merger
shall be in effect; provided, however, that each of the parties shall
have used its reasonable efforts to appeal as promptly as possible any
injunction or other order or restraint that may be entered. There shall
not be any action taken, or any statute, rule, regulation or order
enacted, entered, enforced or deemed applicable to the Merger, which
makes the consummation of the Merger illegal. No action, suit,
proceeding, writ, judgment, injunction, decree or similar order of any
governmental authority or other person restraining, enjoining or
otherwise preventing (or seeking to restrain, enjoin or otherwise
prevent) the consummation of any of the transactions contemplated by
this Agreement shall be pending or threatened.
8.2 Conditions to Obligations of Intercardia. The obligation of
Intercardia to effect the Merger is subject to the satisfaction of the
following conditions unless waived by Intercardia:
(a) Representations and Warranties. The representations and
warranties of Transcell and Interneuron set forth in this Agreement
shall be true and correct in all material respects as of the date of
this Agreement and (except to the extent such representations and
warranties speak as of an earlier date) as of the Closing Date as
though made on and as of the Closing Date, except as otherwise
contemplated by this Agreement, and Intercardia shall have received a
certificate signed on behalf of Transcell by its Chairman or Chief
Executive Officer and its Chief Financial Officer or other acting
executive officer performing duties equivalent to those of a "chief
financial officer" to such effect. Transcell shall be entitled, as of
the Closing Date, to supplement the representations and warranties set
forth in this Agreement to reflect changes occurring between the date
of this Agreement and the Closing by giving written notice to
Intercardia on or before the Closing, provided, however, Intercardia
shall not be obligated to effect the Merger to the extent that any such
update would, individually or in the aggregate have a Material Adverse
Effect on the Merger; provided however that, if the Closing occurs,
neither Transcell nor any of its stockholders shall have any liability
under Article 10 or otherwise for breach of representation or warranty
with respect to matters disclosed in the amended or supplemented
representations or warranties.
(b) Performance of Obligations of Transcell. Transcell shall
have performed in all material respects all obligations required to be
performed by it under this Agreement at or prior to the Closing Date,
and Intercardia shall have received a certificate signed on behalf of
Transcell by its Chairman or Chief Executive Officer and its Chief
Financial Officer or other acting executive officer performing duties
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equivalent to those of a "chief financial officer" to such effect.
(c) Burdensome Conditions. There shall not be any action
taken, or any statute, rule, regulation or order enacted, entered,
enforced or deemed applicable to the Merger, by any governmental entity
which, in connection with the grant of any Regulatory Approval, imposes
any requirement upon Intercardia, or Transcell to (i) dispose of any
asset which is material to such person, or (ii) materially restrict or
curtail the current operations or activities of such person or any of
its affiliates.
(d) FIRPTA Certificate. Intercardia shall have received such
affidavits or certifications in form and substance reasonably
satisfactory to Intercardia as are necessary to exempt the Merger from
the provisions of section 1445 of the Code.
(e) Price Protection. The Initial Market Price as determined
by Section 4.1(a)(iv)(A) is not less than $10.00 per share or more than
$34.00 per share.
(f) Fairness Opinions. Intercardia shall have received and
accepted the opinion of NMSI to the effect that, as of the date hereof,
the consideration to be paid to the security holders of Transcell
pursuant to this Agreement, is fair from a financial point of view, to
Intercardia. Intercardia shall have received a copy of the Transcell
fairness opinion prepared by Hempstead and shall in its sole discretion
be satisfied with the contents of such opinion.
(g) Princeton License. The license agreement currently being
negotiated by Interneuron with Princeton University will be completed
and all initial payments due thereunder upon execution of such
agreement will be paid prior to Closing.
(h) Limitation on Liabilities. As of Closing, the liabilities
associated with Transcell's building obligations and capital lease
obligations shall not exceed $491,000 and $1,509,000, respectively,
without the written consent of Intercardia, unless incurred in the
ordinary course of business.
(i) SEC Matters. The SEC shall have declared effective the
Statement for the registration of the Intercardia Common Stock
constituting the Aggregate Merger Consideration under the 1933 Act. No
stop order suspending the effectiveness of the Statement or any part
thereof shall have been issued and no proceeding for that purpose, and
no similar proceeding in respect of the Statement, shall have been
initiated or to the knowledge of Intercardia threatened by the SEC. All
necessary state securities and blue sky permits, approvals and
exemption orders required in connection with the transactions
contemplated by this Agreement shall have been obtained and the
Intercardia Common Stock constituting the Aggregate Merger
Consideration shall have been listed with the Nasdaq National Market.
(j) Voting Requirements. The affirmative vote of the holders
of a majority of the voting power of all Outstanding Capital Stock,
voting as a single class, at the Transcell stockholder meeting (the
"Transcell Stockholder Approval") to adopt this Agreement shall have
been obtained and shall be the only vote of the holders of
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any class or series of the Outstanding Capital Stock necessary to
approve and adopt this Agreement and the transactions contemplated
hereby.
(k) Absence of Material Adverse Effect. No event, occurrence,
fact, condition, change, development or effect shall have occurred,
exist or come to exist since the date of this Agreement that,
individually or in the aggregate, has constituted or resulted in, or
could reasonably be expected to constitute or result in a Transcell
Material Adverse Effect. As of the Closing Date, Intercardia shall have
received a certificate to such effect signed on behalf of Transcell by
its Chief Executive Officer and Chief Financial Officer.
(l) Intercompany Agreement. The Intercompany Agreement between
Interneuron and Transcell, dated as of June 30, 1997, shall have
terminated.
8.3 Conditions to Obligations of Transcell and Interneuron. The
obligations of Transcell and Interneuron to effect the Merger are subject to the
satisfaction of the following conditions unless waived by Transcell and
Interneuron:
(a) Representations and Warranties. The representations and
warranties of Intercardia set forth in this Agreement shall be true and
correct in all material respects, in either case as of the date of this
Agreement and (except to the extent such representations speak as of an
earlier date) as of the Closing Date as though made on and as of the
Closing Date, except as otherwise contemplated by this Agreement, and
Transcell shall have received a certificate signed on behalf of
Intercardia by its Chief Executive Officer and Chief Financial Officer
to such effect.
(b) Performance of Obligations of Intercardia . Intercardia
shall have performed in all material respects all obligations required
to be performed by it under this Agreement at or prior to the Closing
Date, and Transcell shall have received a certificate signed on behalf
of Intercardia by its Chief Executive Officer and its Chief Financial
Officer to such effect.
(c) Price Protection. The Initial Market Price as determined
by Section 4.1(a)(iv)(A) is not less than $10.00 per share or more than
$34.00 per share.
(d) Fairness Opinion. Transcell shall have received and
accepted the opinion of Hempstead to the effect that, as of the date
hereof, the consideration to be paid to the security holders of
Transcell pursuant to this Agreement, is fair from a financial point of
view, to stockholders of Transcell (other than Interneuron). Transcell
shall have received a copy of the Intercardia fairness opinion prepared
by NMSI and shall in its sole discretion be satisfied with the contents
of such opinion.
(e) SEC Matters. The SEC shall have declared effective the
Statement for the registration of the Intercardia Common Stock
constituting the Aggregate Merger Consideration under the 1933 Act. No
stop order suspending the effectiveness of the Statement or any part
thereof shall have been issued and no proceeding for that purpose, and
no similar proceeding in respect of the Statement, shall have been
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initiated or to the knowledge of Intercardia threatened by the SEC. All
necessary state securities and blue sky permits approvals and exemption
orders required in connection with the transactions contemplated by
this Agreement shall have been obtained and the Intercardia Common
Stock constituting the Aggregate Merger Consideration shall have been
listed with the Nasdaq National Market.
(f) Voting Requirements. The affirmative vote of the holders
of a majority of the issued shares of Common Stock of Intercardia,
voting as a single class, which are voted at a duly called Intercardia
Stockholder Meeting (the "Intercardia Stockholder Approval"), to adopt
this Agreement shall have been obtained and shall be the only vote of
the holders of any class or series of shares of Intercardia necessary
to approve and adopt this Agreement and the transactions contemplated
hereby.
(g) Confirmation. Intercardia shall confirm to Transcell that,
as of the time of execution hereof and the time of the Closing, after a
review of the Transcell Disclosure Letter, neither Clayton I. Duncan
nor Richard W. Reichow has, in connection with their performance of due
diligence related to the Merger, received or reviewed information which
if omitted from the Transcell Disclosure Letter would at such date and
time cause the Transcell Disclosure Letter to be incorrect or
incomplete in any material respect and Transcell shall have received a
certificate signed on behalf of Intercardia by Messrs. Duncan and
Reichow to such effect.
(h) Absence of Material Adverse Effect. No event, occurrence,
fact, condition, change, development or effect shall have occurred,
exist or come to exist since the date of this Agreement that,
individually or in the aggregate, has constituted or resulted in, or
could reasonably be expected to constitute or result in an Intercardia
Material Adverse Effect. As of the Closing Date, Transcell shall have
received a certificate to such effect signed on behalf of Intercardia
by its Chief Executive Officer and Chief Financial Officer.
ARTICLE 9
TERMINATION; AMENDMENT; WAIVER
9.1 Termination. This Agreement may be terminated at any time prior to
the Effective Time, whether before or after Transcell Stockholder Approval or
Intercardia Stockholder Approval:
(a) by mutual written consent of Transcell, Interneuron
and Intercardia;
(b) by any of Transcell, Interneuron or Intercardia:
(i) if the Merger shall not have been consummated by
May 31, 1998, provided, that the right to terminate this
Agreement pursuant to this Section 9.1(b)(i) shall not be
available to any party whose failure to perform any of its
obligations under this Agreement results in the failure of the
Merger to be consummated by such time;
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(ii) if Transcell Stockholder Approval shall not have
been obtained at a Transcell Stockholders Meeting duly
convened therefor or at any adjournment or postponement
thereof (or pursuant to a written consent in lieu thereof);
(iii) if Intercardia Stockholder Approval shall not
have been obtained at an Intercardia Stockholders Meeting duly
convened therefor or at any adjournment or postponement
thereof; or
(iv) if any governmental entity shall have issued a
judgment, order, decree, statute, law, ordinance, rule,
regulation, temporary restraining order, preliminary or
permanent injunction or other order, legal restraint or
prohibition (collectively, "Restraints") or taken any other
action permanently enjoining, restraining or otherwise
prohibiting the consummation of the Merger and such Restraint
or other action shall have become final and nonappealable.
(c) by Intercardia, if Transcell shall have breached or failed
to perform in any material respect any of its representations,
warranties, covenants or other agreements contained in this Agreement,
which breach or failure to perform (i) would give rise to the failure
of a condition set forth in Section 8.2(a) or (b), and (ii) cannot be
or has not been cured within 30 days after the giving of written notice
to Transcell of such breach provided, that such 30-day period shall be
extended for so long as Transcell shall be making all reasonable
attempts to cure such breach, unless the breach is not susceptible of a
cure.
(d) by Intercardia, if Transcell, or any of its directors,
employees, representatives or agents shall take any of the actions
proscribed by Section 7.1, unless such action was taken by a director,
employee, representative or Agent and was inadvertent, provided that,
upon learning of such violation, Transcell forthwith gives Intercardia
notice thereof and takes all reasonable action requested by Intercardia
to cure such violation and to ensure future compliance with Section
7.1;
(e) by Transcell, if Intercardia shall have breached or failed
to perform in any material respect any of its representations,
warranties, covenants or other agreements contained in this Agreement,
or if Intercardia shall have failed to satisfy the condition set forth
in Section 8.3(b) prior to the date set forth in Section 9.1(b)(i) (and
all other conditions set forth in Sections 8.1 (other than obtaining
Intercardia Stockholder Approval) and 8.2 have been satisfied or
waived), which breach or failure to perform (i) would give rise to the
failure of a condition set forth in Sections 8.3(a) or (b) and (ii)
cannot be or has not been cured within 30 days after the giving of
written notice to Intercardia of such breach, provided that such 30 day
period shall be extended for so long as Intercardia shall be making all
reasonable attempts to cure such breach unless the breach is not
susceptible of a cure.
9.2 Effect of Termination. If this Agreement is terminated and the
Merger is abandoned pursuant to Section 9.1 hereof, this Agreement, except for
the provisions of Sections 7.6, 9.2 and 11.5, shall terminate, without any
liability on the part of any party to
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this Agreement for breach of this Agreement. Such a termination will not
prejudice the ability of the non-breaching party to seek damages from any other
party for any breach of this Agreement, including without limitation, reasonable
attorneys' fees.
9.3 Amendment. To the extent permitted by applicable law, this
Agreement may be amended by action taken by or on behalf of the Board of
Directors of Transcell, and Intercardia at any time before or after Transcell
Stockholder Approval is obtained but, after such approval, no amendment shall be
made which decreases the Merger Consideration or which adversely affects the
rights of Transcell's stockholders hereunder without the approval of such
stockholders as required by law. This Agreement may not be amended except by an
instrument in writing signed on behalf of all of the parties.
9.4 Extension; Waiver. At any time prior to the Effective Time, the
parties hereto, by action taken by or on behalf of the Board of Directors of
Transcell and Intercardia, may (i) extend the time for the performance of any of
the obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties contained herein or in any
document, certificate or writing delivered pursuant hereto or (iii) waive
compliance with any of the agreements or conditions contained herein. Any
agreement on the part of any party to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party.
ARTICLE 10
INDEMNIFICATION
10.1 Indemnification of Intercardia. The stockholders of Transcell
(hereinafter the "Exchanging Stockholders") agree to indemnify and hold harmless
Intercardia and its successors and assigns (individually an "Acquiror
Indemnitee", and collectively the "Acquiror Indemnitees") from, against, and in
respect of the following:
(a) any and all losses, damages, deficiencies or liabilities
caused by or resulting or arising from: (i) any breach of the
representations and warranties of Transcell contained in this
Agreement; (ii) any failure by Transcell or Interneuron to perform or
otherwise fulfill or comply with (X) if this Agreement shall have been
terminated, any other covenant, undertaking, agreement or obligation to
be performed, fulfilled or complied with by Transcell or Interneuron,
as applicable, prior to the Closing; or (Y) if the Closing shall occur,
any undertaking or other agreement or obligation hereunder to be
performed, fulfilled or otherwise complied with by Transcell or
Interneuron, as applicable, after the Closing; or (iii) taxes due for
periods ending prior to the Effective Time, including Payment Taxes;
and
(b) any and all actions, suits, proceedings, claims,
liabilities, demands, assessments, judgments, interest, penalties,
costs and expenses, including reasonable attorneys' fees (whether or
not incurred by the Acquiror Indemnitees or in connection with
investigating, defending, settling (with the consent of Interneuron,
which shall not be unreasonably withheld) or prosecuting any action,
suit, proceeding or claim against any of the Acquiror Indemnitors
hereunder), directly incident to such indemnification;
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provided, however, that if any action, suit, proceeding, claim, liability,
demand or assessment shall be asserted against any Acquiror Indemnitee in
respect of which such Acquiror Indemnitee proposes to demand indemnification,
such Acquiror Indemnitee shall notify Interneuron thereof within twenty (20)
days after assertion thereof, and such notice shall include copies of all suit,
service and claim documents, all other relevant documents in the possession of
the Acquiror Indemnitee, and an explanation of the Acquiror Indemnitee's
contentions and defenses with as much specificity and particularity as the
circumstances permit. Subject to rights of or duties to any insurer or other
third Person having liability therefor, Interneuron shall have the right within
20 days after receipt of such notice to assume the control of the defense,
compromise or settlement of any such action, suit, proceeding, claim, liability,
demand or assessment, including, at its own expense, employment of counsel;
provided further, however, that if Transcell or Interneuron shall have exercised
its right to assume such control, the Acquiror Indemnitees: (X) may, in their
sole discretion and expense, employ counsel to represent them (in addition to
counsel employed by Interneuron) in any such matter, and in such event counsel
selected by Interneuron shall be required to reasonably cooperate with such
counsel of the Acquiror Indemnitee in such defense, compromise or settlement for
the purpose of informing and sharing information with such Acquiror Indemnitee;
and (Y) shall, at its own expense, make available to Interneuron those employees
of the Acquiror Indemnitees whose assistance, testimony or presence is
reasonably deemed by Interneuron necessary or beneficial to assist Interneuron
in evaluating and in defending any such action, suit, proceeding, claim,
liability, demand or assessment; provided further, however, that any such access
shall be conducted in such a manner as not to interfere unreasonably with the
operations of the businesses o the Acquiror Indemnitees.
10.2 Indemnification of Exchanging Stockholders. Intercardia agrees to
indemnify and hold harmless the Exchanging Stockholders and their respective
successors and assigns (individually a "Transferor Indemnitee", and collectively
the "Transferor Indemnitees") from, against and in respect of:
(a) any and all losses, damages, deficiencies or liabilities
caused by, resulting or arising from or otherwise relating to: (i) any
breach of the representations and warranties of Intercardia contained
in this Agreement; and (ii) any failure by Intercardia to perform or
otherwise fulfill or comply with (X) if this Agreement shall have been
terminated or any covenant, undertaking, agreement or obligation to be
performed, fulfilled or complied with by Intercardia prior to or in
connection with the Closing; or (Y) if the Closing shall occur, any
undertaking or other agreement or obligation hereunder to be performed,
fulfilled or otherwise complied with by Intercardia after the Closing;
and
(b) any and all actions, suits, proceedings, claims,
liabilities, demands, assessments, judgments, interest, penalties,
costs and expenses, including reasonable attorneys' fees (whether or
not incurred by the Transferor Indemnitees in connection with
investigating, defending, settling or prosecuting any action, suit,
proceeding or claim against Intercardia hereunder), incident to any of
the items referred to herein or such indemnification;
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provided, however, that if any action, suit, proceeding, claim, liability,
demand or assessment shall be asserted against any Transferor Indemnitee in
respect of which such Transferor Indemnitee proposes to demand indemnification,
such Transferor Indemnitee shall notify Intercardia thereof within a reasonable
period of time after assertion thereof, and such notice shall include copies of
all suit, service and claim documents, all other relevant documents in the
possession of the Transferor Indemnitees and an explanation of the Transferor
Indemnitees' contentions and defenses with as much specificity and particularity
as the circumstances permit, provided that the failure of the Transferor
Indemnitee to give such notice shall not relieve Intercardia of its obligations
under this Section 10.2 if the Transferor Indemnitee shall have demonstrated
that: (i) it acted in good faith and without unreasonable delay; and (ii)
Intercardia shall not have been prejudiced thereby. Subject to rights of or
duties to any insurer or other third Person having liability therefor,
Intercardia shall have the right within 10 days after receipt of such notice to
assume the control of the defense, compromise or settlement of any such action,
suit, proceeding, claim, liability, demand or assessment, including, at its own
expense, employment of counsel; provided further, however, that if Intercardia
shall have exercised its right to assume such control, the Transferor
Indemnitees: (X) may, in their sole discretion and expense, employ one counsel
to represent them (in addition to counsel employed by Intercardia) in any such
matter, and in such event counsel selected by Intercardia shall be required to
cooperate with such counsel of the Transferor Indemnitees in such defense,
compromise or settlement for the purpose of informing and sharing information
with such Transferor Indemnitees; and (Y) shall, at their own expense, make
available to Intercardia those employees of Transcell whose assistance,
testimony or presence is reasonably deemed y Intercardia necessary or beneficial
to assist Intercardia or Interneuron in evaluating and in defending any such
action, suit, proceeding, claim, liability, demand or assessment; provided
further, however, that any such access shall be conducted in such a manner as
not to interfere unreasonably with the operations of the businesses of the
Acquiror Indemnitees.
10.3 Procedures Relating to Indemnification of Tax Claims. If an
inquiry shall be made by any taxing authority, which, if successful, might
result in an indemnity payment to any Acquiror Indemnitee relating to Payment
Taxes (a "Tax Claim"), Intercardia shall as promptly as reasonably practicable
notify Interneuron in writing of such claim; provided, however, that the failure
to give such notice shall not affect the indemnification provided hereunder
except to the extent Interneuron has been actually prejudiced as a result of
such failure.
With respect to any Tax Claim, Intercardia shall control proceedings in
connection with such Tax Claim (including selection of counsel reasonably
acceptable to Interneuron) and Interneuron shall be entitled to participate in
any such proceedings and, without limiting the foregoing, Intercardia may pursue
or forego administrative appeals, proceedings, hearings and conferences with any
taxing authority with respect thereto, and Intercardia may either pay the tax
claimed and sue for a refund where applicable law permits such refund suits or
contest the Tax Claim in any permissible manner; provided, however, that (i)
Interneuron shall have no liability for indemnification under this Section 10
for any Tax Claims if any payment of the tax claimed was made by Intercardia
without Interneuron's prior written consent, which consent shall not be
unreasonably withheld, and (ii) Interneuron may, upon written request,
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assume control of such proceedings including, without limiting the generality of
the foregoing, assuming the rights of Intercardia in the preceding clause and
Intercardia shall be entitled to continue to participate in any such proceeding.
Intercardia and Interneuron shall cooperate in contesting any Tax
Claim, which cooperation shall include, without limitation, the retention and
(upon request) the provision to the requesting party of records and information
which are reasonably relevant to such Tax Claim, and in making employees
available on a mutually convenient basis to provide additional information or
explanation of any material provided hereunder or to testify at proceedings
relating to such Tax Claim.
10.4 Remedies. Notwithstanding any provision to the contrary in this
Agreement, the indemnification rights set forth in this Article 10, all of which
are subject to the terms, limitations and restrictions of this Article 10, and
the enforcement thereof and collection thereunder, shall be the exclusive remedy
after Closing with respect to claims relating to the subject matter of this
Agreement or certificates to be delivered at Closing hereunder. Such limitations
set forth in this Section 10.4 shall not impair the rights of any of the parties
to seek non-monetary equitable relief, including (without limitation) specific
performance or injunctive relief to redress any default or breach of this
Agreement. In connection with the seeking of any non-monetary equitable relief,
each of the parties acknowledges and agrees that the other parties hereto would
be damaged irreparably in the event any of the provisions of this Agreement are
not performed in accordance with their specific terms or otherwise are breached.
Accordingly, each of the parties hereto agrees the other parties hereto shall be
entitled to an injunction or injunctions to prevent breaches of the provisions
of this Agreement and to enforce specifically this Agreement and the terms and
provisions hereof in any competent court having jurisdiction over the parties
(subject to the provisions of Section 11.11 below), in addition to any other
remedy to which they may be entitled, at law or in equity.
10.5 Survival. Notwithstanding anything herein to the contrary, this
Article 10 shall survive termination of this Agreement without limitation;
provided however, that this survival shall not extend a liability otherwise
limited by Article 9, and no indemnifying party shall be liable for any claim
for indemnification initially asserted by an indemnified party pursuant to any
provision of this Agreement after the date which is eighteen (18) months after
the Effective Time except for indemnification relating to Section 5.4 (relating
in any manner to employment tax matters) and Section 5.10 (relating in any
manner to Class A Common Stock or the calculation of Class A Common Stock
Equivalents) which indemnity obligation shall survive without limitation so long
as notice of such indemnity obligation is given to the indemnifying party on a
timely basis.
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10.6 Limitation on Liability.
(a) Notwithstanding any provision to the contrary in this Article 10,
no claim, either individually or in the aggregate, for indemnification
hereunder, shall be valid and assertable unless such claims in the aggregate are
equal to or greater than $75,000 (the "Basket Deductible"), in which case,
subject to the limitations set forth in Section 10.9(b), the indemnifying party
shall be liable for amounts relating back to amounts in excess of $50,000.
(b) In no event shall the aggregate liability of any of the Exchanging
Stockholders for indemnification hereunder or otherwise arising out of or
relating to this Agreement exceed the aggregate market value of his pro rata
share of the Aggregate Merger Consideration as of the Closing Date; provided,
however, the aggregate amount of the indemnity obligation under Article 10
(except those relating to a breach or breaches of Section 5.10, relating in any
manner to Class A Common Stock or the calculation of Class A Common Equivalent
Shares) shall not exceed One Million Five Hundred Thousand ($1,500,000) Dollars.
Notwithstanding anything to the contrary stated above, the indemnity obligation
relating to a breach or breaches of Section 5.4 relating in any manner to
Payment Taxes shall not be an obligation of any Exchanging Stockholder other
than Interneuron, as to whom it shall be unlimited. In no event shall the
aggregate liability of Intercardia and Transcell for indemnification hereunder
or otherwise arising out of or relating to this Agreement exceed One Million
Five Hundred Thousand ($1,500,000) Dollars.
(c) The Exchanging Stockholders shall have no claim or right to action
against Transcell for recovery of any indemnity obligation hereunder;
(d) Transcell hereby appoints Interneuron to act on behalf of the
Exchanging Stockholders with respect to all matters under this Article 10.
10.7 Calculation of Indemnification. The amount of indemnification
payable by an indemnifying party under this Article 10 shall be (a) reduced by
any insurance proceeds received by the indemnified party with respect to the
claim for which indemnification is sought and (b) reduced by the amount of any
net tax benefits realized by the indemnified party. If the amount to be netted
under this Section 10.7 (the "Reduction Amount") from any payment required under
this Article 10 is determined after payment by the indemnifying party of any
amount otherwise required to be paid to an indemnified party pursuant to this
Article 10, the indemnified party shall promptly upon such determination repay
the Reduction Amount to the indemnifying party.
ARTICLE 11
GENERAL PROVISIONS
11.1 Survival of Representations and Warranties. The representations
and warranties in this Agreement or in any instrument delivered pursuant to this
Agreement shall survive the Effective Time for a period of eighteen (18) months,
provided, however, that representation and warranties set forth in Section 5.4
(relating in any manner to employment tax matters) and Section 5.10 (relating in
any manner to Class A Common Stock or the calculation of
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Class A Common Stock Equivalents) shall survive the Effective Time without
limitation
11.2 Notices. Any notice required to be given hereunder shall be
sufficient if in writing, and sent by facsimile transmission (with a
confirmatory copy sent by overnight courier), by courier 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 Intercardia With a copy to:
Post Office Box 14287 Wyrick Robbins Yates & Ponton LLP
3200 East Highway 54 4101 Lake Boone Trail - Suite 300
Cape Fear Building, Suite 300 Raleigh, North Carolina 27670
Research Triangle Park, NC 27709 Telephone: 919-781-4000
Telephone: 919-558-8688 Facsimile: 919-781-4865
Facsimile: 919-544-1245 Attention: Larry E. Robbins, Esq.
Attention: Clayton I. Duncan
If to Transcell: With a copy to:
Transcell Technologies, Inc. Bachner Tally Polevoy & Misher LLP
8 Cedar Brook Drive 380 Madison Avenue, 18th Floor
Cranbury, NJ 08512 New York, NY 10017
Telephone: 609-655-6900 Telephone: 212-687-7000
Facsimile: 609-655-6960 Facsimile: 212-682-5729
Attention: Glenn L. Cooper, M.D. Attention: Jill M. Cohen, Esq.
If to Interneuron: With a copy to:
Interneuron Pharmaceuticals, Inc. Bachner Tally Polevoy & Misher LLP
99 Hayden Avenue 380 Madison Avenue, 18th Floor
Lexington, MA 02173 New York, NY 10017
Attention: Glenn L. Cooper, M.D. Telephone: 212-687-7000
Facsimile: 617-862-3859 Facsimile: 212-682-5729
Attention: Jill M. Cohen, Esq.
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 so
telecommunicated, personally delivered or mailed.
11.3 Assignment; Binding Effect; Third Party Beneficiaries. Neither
this Agreement nor any of the rights, interests or obligations hereunder shall
be assigned by any of the parties hereto (whether by operation of law or
otherwise) without the prior written consent of the other parties. Subject to
the preceding sentence, this Agreement shall be binding upon and shall inure to
the benefit to the parties hereto and their respective successors and assigns.
Notwithstanding anything contained in this Agreement to the contrary, except for
the provisions of Section 7.8, nothing in this Agreement, expressed or implied,
is intended to confer on any person other than the parties hereto or their
respective heirs, successors, executors, administrators and assigns any rights,
remedies, obligations or liabilities under or by reason of this Agreement.
11.4 Entire Agreement. This Agreement, the Disclosure Letter, the
Schedules and the Exhibits, and any other documents delivered by the parties in
connection herewith
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constitute the entire agreement among the parties with respect to the subject
matter hereof and supersede all prior agreements and understandings among the
parties with respect thereto including, without limitation, the letter dated
November 5, 1997 by and among Intercardia, Transcell and Interneuron.
11.5 Governing Law. 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. Each of Transcell and Intercardia hereby irrevocably and
unconditionally consents to submit to the exclusive jurisdiction of the courts
of the State of Delaware and of the United States of America located in the
State of Delaware (the "Delaware Courts") for any litigation arising out of or
relating to this Agreement and the transactions contemplated hereby (and agrees
not to commence any litigation relating thereto except in such courts), waives
any objection to the laying of venue of any such litigation in the Delaware
Courts and agrees not to plead or claim in any Delaware Court that such
litigation brought therein has been brought in an inconvenient forum.
11.6 Headings. Headings of the Articles and Sections of this Agreement
are for the convenience of the parties only, and shall be given no substantive
or interpretive effect whatsoever.
11.7 Interpretation; Certain Definitions. In this Agreement, unless the
context otherwise requires, words describing the singular number shall include
the plural and vice versa, and words denoting any gender shall include all
genders and words denoting natural persons shall include corporations and
partnerships and vice versa. Whenever the words "include," "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation." As used in this Agreement, the words
"Subsidiary," "affiliate" and "associate" shall have the meanings ascribed
thereto in Rule 12b-2 under the Exchange Act. For purposes of this Agreement,
one party shall be considered "wholly owned" by another party if all of the
shares of its outstanding capital stock or issued share capital, other than
directors' qualifying shares, are beneficially owned by such other party.
11.8 Investigations. No action taken pursuant to this Agreement,
including, without limitation, any investigation by or on behalf of any party,
shall be deemed to constitute a waiver by the party taking such action of
compliance with any representations, warranties, covenants or agreements
contained in this Agreement.
11.9 Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
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11.10 Enforcement of Agreement.
(a) The parties hereto agree that irreparable damage would occur in the
event that any of the provisions of this Agreement were not performed in
accordance with its specific terms or was otherwise breached. It is accordingly
agreed that the parties shall be entitled to an injunction or injunctions to
prevent breaches of this Agreement and to enforce specifically the terms and
provisions hereof in any Delaware Court, this being in addition to any other
remedy to which they are entitled at law or in equity.
(b) The prevailing party in any judicial action shall be entitled to
receive from the other party reimbursement for the prevailing party's reasonably
attorneys' fees and disbursements, and court costs.
11.11 Counterparts. This Agreement may be executed by the parties
hereto in separate counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall together constitute one
and the same instrument. Each counterpart may consist of a number of copies
hereof each signed by less than all, but together signed by all, of the parties
hereto.
11.12 Knowledge. Intercardia hereby agrees that to the extent that any
representation or warranty of Transcell contained in this Agreement is untrue or
incorrect and Intercardia had actual knowledge of such untruth or inaccuracy
prior to the execution of this Agreement, (i) Intercardia shall have no rights
under this Agreement with respect to such untruth or inaccuracy and (ii) any
such representation or warranty shall be deemed to be amended to the extent
necessary to render it consistent with the actual knowledge of Intercardia;
provided, however, the provisions of this Section 11.12 shall not apply to
warranties or representations relating to Payment Taxes or the calculation of
Class A Common Equivalent Shares. The knowledge of Intercardia shall be defined
as the actual knowledge of Clayton I. Duncan or Richard W. Reichow.
11.13 Further Action. Each of the parties hereto shall use such party's
best efforts to take such actions as may be necessary or reasonably requested by
the other parties hereto to carry out and consummate the transactions
contemplated by this Agreement.
11.14 Arbitration. The parties agree that they shall attempt in good
faith to settle any controversy or claim arising out of or relating to this
Agreement, or any breach hereof by arbitration in accordance with the rules of
the American Arbitration Association then in effect. The arbitration shall be
held in Wilmington, Delaware. Any arbitration award shall be final and
conclusive and shall be binding upon the parties and a judgment may be entered
in the highest state or federal court of Delaware having jurisdiction.
11.15 Invalidity, Etc. Should any provision of this Agreement be held
by a court of arbitration panel of competent jurisdiction to be enforceable only
if modified, such holding shall not affect the validity of the remainder of this
Agreement, the balance of which shall continue to be binding upon the parties
hereto with any such modification to become a party hereof and treated as though
originally set forth in this Agreement. The parties further agreed that any such
court or arbitration panel is expressly authorized to modify any such
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unenforceable provision of this Agreement in lieu of severing such unenforceable
provision from this Agreement in its entirety, whether by rewriting the
offending provision, deleting any or all of the offending provision, adding
additional language to this Agreement, or by making such other modifications as
it deems warranted to carry out the intent and agreement of the parties as
embodied herein to the maximum extent permitted by law. The parties expressly
agree that this Agreement as so modified by the arbitration panel shall be
binding upon and enforceable against each of them. In any event, should one or
more provisions of this
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Agreement be held to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other provisions
hereof, and if such provision or provisions are not modified as provided above,
this Agreement shall be construed as if such invalid, illegal or unenforceable
provisions had never been set forth herein.
IN WITNESS WHEREOF, the parties have executed this Agreement and Plan
of Merger and caused the same to be duly delivered on their behalf on the day
and year first written above.
TRANSCELL TECHNOLOGIES, INC.
By:/s/ Glenn L. Cooper
------------------
Glenn L. Cooper
Acting President and CEO
INTERNEURON PHARMACEUTICALS,
INC.
By:/s/ Glenn L. Cooper
------------------
Glenn L. Cooper
President and CEO
INTERCARDIA, INC.
By:/s/ Clayton Duncan
------------------
Clayton Duncan
President and CEO
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