AGREEMENT AND PLAN OF MERGER BY AND AMONG PSIVIDA LIMITED, PSIVIDA INC., AND CONTROL DELIVERY SYSTEMS, INC. Dated as of October 3, 2005
THE
MERGER AGREEMENT IS BEING FILED AS AN EXHIBIT TO A REPORT OF FOREIGN ISSUER
ON
FORM 6-K TO PROVIDE INVESTORS WITH INFORMATION REGARDING ITS TERMS. THE MERGER
AGREEMENT CONTAINS REPRESENTATIONS AND WARRANTIES THAT PSIVIDA LIMITED, PSIVIDA
INCORPORATED, AND CONTROL DELIVERY SYSTEMS, INC. MADE TO EACH OTHER AS OF
THE
DATE OF THE MERGER AGREEMENT OR OTHER SPECIFIC DATES, AND SUCH REPRESENTATIONS
AND WARRANTIES SHOULD NOT BE RELIED UPON BY ANY OTHER PERSON. THE ASSERTIONS
EMBODIED IN THOSE REPRESENTATIONS ARE QUALIFIED BY INFORMATION IN CONFIDENTIAL
DISCLOSURE SCHEDULES THAT THE PARTIES HAVE EXCHANGED IN CONNECTION WITH SIGNING
THE MERGER AGREEMENT. THE DISCLOSURE SCHEDULES CONTAIN INFORMATION THAT
MODIFIES, QUALIFIES AND CREATES EXCEPTIONS TO THE REPRESENTATIONS AND WARRANTIES
SET FORTH IN THE MERGER AGREEMENT. THE PARTIES RESERVE THE RIGHT TO, BUT
ARE NOT
OBLIGATED TO, REVISE THE MERGER AGREEMENT OR THE DISCLOSURE SCHEDULES.
ACCORDINGLY, INVESTORS SHOULD NOT RELY ON THE REPRESENTATIONS AND WARRANTIES
AS
CHARACTERIZATIONS OF THE ACTUAL STATE OF FACTS OR FOR ANY OTHER PURPOSE AT
THE
TIME THEY WERE MADE OR OTHERWISE.
AGREEMENT
AND PLAN OF MERGER
BY
AND AMONG
PSIVIDA
LIMITED,
PSIVIDA
INC.,
AND
CONTROL
DELIVERY SYSTEMS, INC.
Dated
as of October 3, 2005
AGREEMENT
AND PLAN OF MERGER
This
AGREEMENT AND PLAN OF MERGER (the “Agreement”) is made and entered into as of
October 3, 2005 at 8 a.m., New York City time, by and among pSivida Limited,
an
Australian corporation (“Parent”), pSivida Inc., a Delaware corporation and a
wholly-owned subsidiary of Parent (“Merger Sub”), and Control Delivery Systems,
Inc., a Delaware corporation (the “Company”).
RECITALS
A. The
Boards of Directors of each of the Company, Parent and Merger Sub believe
it is
advisable and in the best interests of each company and their respective
stockholders that Parent acquire the Company through the statutory merger
of
Merger Sub with and into the Company (the “Merger”) and, in furtherance thereof,
have approved the Merger, this Agreement and the transactions contemplated
hereby.
B. Pursuant
to the Merger, among other things, each issued and outstanding share of common
stock, par value $0.01 per share, of the Company (the “Company Common Stock”)
and Series A Preferred Stock, par value $0.01 per share, of the Company (the
“Company Preferred Stock” and, together with the Company Common Stock, the
“Company Capital Stock”), other than the shares of Company Capital Stock held by
certain holders, shall be converted into the right to receive a number of
American Depositary Shares (“ADSs”) of Parent (“Parent ADSs”) determined
pursuant to Section 1.7,
and
each issued and outstanding share of Company Capital Stock held by each holder
who is not entitled to receive Parent ADSs shall be converted into the right
to
receive cash in an amount determined pursuant to Section 1.7
hereof.
C. Pursuant
to the Merger, all outstanding options (“Company Options”) to purchase shares of
Company Common Stock at the Effective Time shall be assumed by Parent and
shall
become exercisable for Parent ADSs from and after the Effective Time, as
provided in Section 1.7(e)
below.
D. The
Company, Parent and Merger Sub desire to make certain representations and
warranties and other agreements in connection with the Merger.
E. In
recognition of the consideration receivable pursuant to the Agreement and
in
connection with the purchase of all his shares of Company Capital Stock pursuant
to the Merger, ▇▇▇▇ ▇▇▇▇▇▇ has entered into a non-competition agreement with
the
Company, to become effective at the Effective Time.
F. For
United States federal income tax purposes, the Company and Parent intend
that
the Merger qualify as a reorganization under the provisions of section 368(a)
of
the Internal Revenue Code of 1986, as amended (the “Code”), and intend by
executing this Agreement to adopt a plan of reorganization within the meaning
of
Treasury Regulation Section 1.368-2(g).
NOW,
THEREFORE, in consideration of the foregoing premises and the covenants,
agreements, representations and warranties set forth herein, and intending
to be
legally bound hereby, the parties to this Agreement hereby agree as follows:
ARTICLE
I
THE
MERGER
1.1 The
Charter Amendment.
On the
Closing Date prior to the Effective Time (as defined in
Section 1.4),
the
Company shall file with the Secretary of State of the State of Delaware an
amendment to its Certificate of Incorporation in the form attached hereto
as
Exhibit
A
(the
“Charter Amendment”).
1.2 The
Merger.
At the
Effective Time and upon the terms and subject to the conditions of this
Agreement and the applicable provisions of the Delaware General Corporation
Law,
as amended (the “DGCL”) (a) Merger Sub shall be merged with and into the
Company, (b) the separate corporate existence of Merger Sub shall
cease and
(c) the Company shall continue as the corporation surviving the Merger
and
as a wholly-owned subsidiary of Parent. The Company after the Effective Time
as
the corporation surviving the Merger is sometimes referred to herein as the
“Surviving Corporation.”
1.3 Closing.
Unless
this Agreement is earlier terminated pursuant to Section 7.1,
the
closing of the Merger (the “Closing”) will take place at the offices of ▇▇▇▇▇▇,
▇▇▇▇▇▇-▇▇▇▇▇▇▇, Colt & Mosle LLP at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇ as promptly as practicable following the satisfaction or valid waiver
of
the conditions set forth in Article
VI,
unless
another place or time is agreed in writing by Parent and the Company. The
date
the Closing actually occurs is referred to herein as the “Closing
Date.”
1.4 Actions
at the Closing.
At the
Closing: (a) Parent and Merger Sub shall deliver to the Company the
certificates, instruments and documents referenced in Section 6.2,
(b) the Company shall deliver to Parent and Merger Sub the certificates,
instruments and documents referenced in Section 6.3,
and
(c) the parties hereto shall consummate the Merger by filing the
Certificate of Merger in the form of Exhibit
B
attached
hereto (the “Certificate of Merger”) with the Secretary of State of the State of
Delaware in accordance with the relevant provisions of the DGCL (the time
of
acceptance of such Certificate of Merger by the Secretary of State of the
State
of Delaware, or such later time of effectiveness as set forth in the Certificate
of Merger, being referred to herein as the “Effective Time”).
1.5 Effect
of the Merger.
At the
Effective Time, the effect of the Merger shall be as provided in the applicable
provisions of the DGCL. Without limiting the generality of the foregoing,
and
subject hereto, at the Effective Time, all the property, rights, privileges,
powers and franchises of the Company and Merger Sub shall vest in the Surviving
Corporation, and all debts, liabilities and duties of the Company and Merger
Sub
shall become the debts, liabilities and duties of the Surviving
Corporation.
1.6 Certificate
of Incorporation; Bylaws; Officers and Directors.
Unless
otherwise determined by Parent prior to the Effective Time, at the Effective
Time:
(a) the
Certificate of Incorporation of Merger Sub shall be the Certificate of
Incorporation of the Surviving Corporation except that such Certificate of
Incorporation shall be amended so that the name of the Surviving Corporation
shall be “pSivida Inc.”;
-2-
(b) the
Bylaws of the Company shall, without further action, be amended and restated
to
read the same as the Bylaws of Merger Sub in effect at the Effective Time,
and
shall be the Bylaws of the Surviving Corporation until thereafter amended
in
accordance with applicable law; and
(c) the
directors and officers of the Surviving Corporation at and from the Effective
Time shall be those individuals set forth on Schedule 1.6(c),
in each
case to serve as such until the death, resignation, removal or replacement
of
such persons as provided by law and the Certificate of Incorporation and
Bylaws
of the Surviving Corporation.
1.7 Merger
Consideration; Effect on Company Capital Stock.
On
the
terms and subject to the conditions set forth in this Agreement, at the
Effective Time, by virtue of the Merger and without any action on the part
of
Parent, Merger Sub, the Company or the Company Stockholders, the following
shall
occur (the aggregate Parent ADSs and cash payable in the Merger in exchange
for
Company Capital Stock is referred to in this Agreement as the “Merger
Consideration”):
(a) Company
Preferred Stock.
(i) Subject
to Section 1.7(g),
each
share of Company Preferred Stock outstanding at the Effective Time held by
a
person listed on Schedule 1.7(a)(i),
other
than Dissenting Shares (as defined in Section 1.7(f))
and any
shares of Company Capital Stock canceled pursuant to Section 1.7(f),
automatically will be converted into the right to receive 11.79 Parent ADSs
(such ratio of Parent ADSs to be exchanged for each share of Company Preferred
Stock, the “Preferred Stock Exchange Ratio”).
(ii) Each
share of Company Preferred Stock outstanding at the Effective Time held by
a
person listed on Schedule 1.7(a)(ii),
other
than Dissenting Shares and any shares of Company Capital Stock canceled pursuant
to Section 1.7(f),
automatically will be converted into the right to receive a cash payment
calculated by multiplying the Preferred Stock Exchange Ratio by the average
of
the closing price of Parent ADSs on The Nasdaq National Market for each of
the
ten (10) trading days ending on the trading day that is four (4) full trading
days prior to the Closing Date.
(b) Company
Common Stock.
(i) Subject
to Section 1.7(g),
each
share of Company Common Stock outstanding at the Effective Time held by a
person
listed on Schedule 1.7(b)(i),
other
than Dissenting Shares and any shares of Company Capital Stock canceled pursuant
to Section 1.7(f),
automatically will be converted into the right to receive a number of Parent
ADSs calculated as the quotient of (A) the difference between (1) 16,000,000
(adjusted in accordance with Section 1.7(g)) and (2) the product of (I) the
Preferred Exchange Ratio and (II) the number of shares of Company Preferred
Stock outstanding at the Effective Time and (B) the number of shares of Company
Common Stock outstanding at the Effective Time (such ratio of Parent ADSs
to be
exchanged for each share of Company Common Stock, the “Common Stock Exchange
Ratio”).
(ii) Each
share of Company Common Stock outstanding at the Effective Time held by a
person
listed on Schedule 1.7(b)(ii),
other
than Dissenting Shares and any shares of Company Capital Stock canceled pursuant
to Section 1.7(f),
automatically will be converted into the right to receive a cash payment
calculated by multiplying the Common Stock Exchange Ratio by the average
of the
closing price of Parent ADSs on The Nasdaq National Market for each of the
ten
(10) trading days ending on the trading day that is four (4) full trading
days
prior to the Closing Date.
-3-
(c) Schedules
1.7.
Schedules 1.7(a)(i),
1.7(a)(ii),
1.7(b)(i)
and
1.7(b)(ii)
attached
to this Agreement as of the date of this Agreement are based on information
available to the Company at the date of this Agreement. On the Closing Date,
the
Company shall deliver to the Parent (i) updated Schedules 1.7(a)(i),
1.7(a)(ii),
1.7(b)(i)
and
1.7(b)(ii)
to
reflect the stockholders of record of the Company (each, a “Company Stockholder”
and collectively the “Company Stockholders”) as of the Closing Date, and (ii)
information available to the Company such that the issuance of Parent ADSs
in
the Merger to Company Stockholders will not disqualify as an offering pursuant
to Rule 506 under the Securities Act of 1933, as amended (the “Securities
Act”).
(d) Alternative
Registration Procedure. Notwithstanding
clauses (a)
through
(c)
above,
if Parent (i) reasonably concludes that the Parent ADSs cannot be
issued to
the Company Stockholders in the Merger without registration under the Securities
Act or (ii) that Parent would be required to expend an amount of cash as
Merger
Consideration to holders listed on Schedules 1.7(a)(ii)
and
1.7(b)(ii)
in
excess of 1.25 times the amount of cash Parent would be required to expend
as
Merger Consideration based on the identity and share holdings of the Company
Stockholders listed on Schedules 1.7(a)(ii)
and
1.7(b)(ii)
as
delivered as of the date hereof and as calculated as of the date hereof,
Parent
may elect to register Parent ADSs to be issued to all holders of Company
Common
Stock and Company Preferred Stock other than Dissenting Shares and any shares
of
Company Capital Stock canceled pursuant to Section 1.7(f),
in
which case:
(i) Subject
to Section 1.7(g),
each
share of Company Preferred Stock outstanding at the Effective Time, other
than
Dissenting Shares (as defined in Section 1.7(f))
and any
shares of Company Capital Stock canceled pursuant to Section 1.7(f),
automatically will be converted into the right to receive 11.79 Parent ADSs,
and
no shares of Company Preferred Stock shall be converted into the right to
receive cash; and
(ii) Subject
to Section 1.7(g),
each
share of Company Common Stock outstanding at the Effective Time, other than
Dissenting Shares and any shares of Company Capital Stock canceled pursuant
to
Section 1.7(f),
automatically will be converted into the right to receive a number of Parent
ADSs calculated as the quotient of (A) the difference between (1) 16,000,000
(adjusted in accordance with Section 1.7(g)) and (2) the product of (I) the
Preferred Exchange Ratio and (II) the number of shares of Company Preferred
Stock outstanding at the Effective Time and (B) the number of shares of Company
Common Stock outstanding at the Effective Time, and no shares of Company
Common
Stock shall be converted into the right to receive cash.
Parent
may make such election by written notice to the Company at any time prior
to the
filing of the Certificate of Merger.
-4-
(e) Company
Options.
(i) At
the
Effective Time, each outstanding Company Option, whether vested or unvested,
shall be deemed assumed by Parent and deemed to constitute an option to acquire
the number (rounded down to the nearest whole number) of Parent ADSs as the
holder of such Company Option would be entitled to receive in the Merger
had
such holder been listed on Schedule 1.7(a)(i)
and
exercised such Company Option in full immediately prior to the Effective
Time
(not taking into account whether such Company Option was in fact exercisable),
at a price per Parent ADS (rounded up to the nearest one-hundredth of a cent)
equal to (i) the aggregate exercise price for Company Common Stock
otherwise purchasable pursuant to such Company Option, divided by (ii) the
number of Parent ADSs deemed purchasable pursuant to such Company
Option.
(ii) As
soon
as practicable after the Effective Time, Parent shall deliver to the holders
of
Company Options appropriate notices of the rights of such holders pursuant
to
Section 1.7(e)(i) pursuant to such Company Options, and such Company Options
shall continue in effect on the same terms and conditions (subject to amendments
provided for in this Section 1.7(e) and such other amendments, if any, required
by Applicable Law or the Listing Rules of ASX).
(f) Treasury
Shares.
Each
share of Company Capital Stock held as treasury stock immediately prior to
the
Effective Time shall be canceled and retired at the Effective Time and no
consideration shall be issued in exchange therefor.
(g) No
Fractional Shares.
No
certificates or scrip representing fractional Parent ADSs shall be issued
by
virtue of the Merger, and no dividend, stock split or other distribution
with
respect to Parent ADSs shall relate to any such fractional interest, and
any
such fractional interests shall not entitle the owner thereof to vote or
to any
rights of a security holder. In lieu thereof, Parent shall pay to the holder
of
shares of Company Capital Stock who would otherwise be entitled to a fraction
of
a share of a Parent ADS, as soon as practicable after the Effective Time
(and in
the same manner required for delivery of ADRs (as defined in
Section 1.7)
representing Parent ADSs provided in Section 1.9),
an
amount in cash equal to such fraction multiplied by the average of the closing
price of Parent ADSs on The Nasdaq National Market for each of the ten (10)
trading days ending on the trading day that is four (4) full trading days
prior
to the Closing Date.
(h) Adjustments
for Subsequent Changes.
If,
after the date of this Agreement and prior to the Effective Time, the
outstanding Parent Ordinary Shares or Parent ADSs shall have been changed
into
or exchanged for a different number of shares or kind of shares and/or other
securities of Parent by reason of any reclassification, split-up, stock dividend
or stock combination or any similar event (an “Adjustment Event”), then the
number of Parent ADSs to be delivered as the Merger Consideration shall be
appropriately adjusted so that each holder of Certificates (as defined in
Section 1.7)
shall
be entitled to receive at the Effective Time, in lieu of the number of Parent
ADSs provided for in this Section 1.7,
such
number and kind of shares and/or other securities as such holder would have
received if the record date and payment date for such Adjustment Event had
been
immediately after the Effective Time.
-5-
1.8 Dissenting
Shares.
(a) Notwithstanding
any provision of this Agreement to the contrary, any shares of Company Capital
Stock held by a Company Stockholder who has properly exercised and perfected
appraisal rights for such shares in accordance with the DGCL and who has
not
effectively withdrawn or lost such appraisal rights (“Dissenting Shares”), shall
not be converted into or represent a right to receive Merger Consideration
pursuant to Section 1.7,
but the
holder thereof shall only be entitled to such rights as are expressly specified
in Section 262 of the DGCL.
(b) Notwithstanding
the provisions of Section 1.8(a),
if any
holder of Dissenting Shares shall effectively withdraw or lose such holder’s
appraisal rights (by failing to properly perfect the same or otherwise),
then,
as of the occurrence of such event, such holder’s shares of Company Capital
Stock automatically shall be converted into and represent the right to receive
only its share of the Merger Consideration as provided in
Section 1.7,
in each
case without interest thereon, upon surrender of the Certificates representing
such shares.
(c) The
Company shall give Parent (i) prompt notice of any written demand for appraisal
received by the Company pursuant to the applicable provisions of the DGCL
and
(ii) the opportunity to participate in all negotiations and proceedings with
respect to such demands. The Company shall not, except with the prior written
consent of Parent, voluntarily make any payment with respect to any such
demands
or offer to settle or settle any such demands.
1.9 Surrender
of Certificates; Payment of Merger Consideration.
(a) Exchange
Procedures.
Following the date of this Agreement and prior to the Effective Time, Parent
shall select a bank or trust company reasonably acceptable to the Company
to act
as exchange agent in connection with the Merger (the “Exchange Agent”) for the
purpose of exchanging certificates representing issued and outstanding Company
Capital Stock (“Certificates”) for Merger Consideration. As soon as practicable
after the Effective Time (or by agreement of the Company and Parent at some
time
prior to the Effective Time), Parent will instruct the Exchange Agent to
mail to
each holder of record of Certificates a notice and letter of transmittal
in a
form mutually agreed upon by the Company and Parent advising such holder
of the
Merger and the procedure for surrendering to Parent such Certificates in
exchange for Merger Consideration. At the Effective Time, Parent shall supply
to
the Exchange Agent, in trust for the benefit of the holders of Company Capital
Stock, a sufficient number of ADRs representing Parent ADSs and cash to pay
the
Merger Consideration. Upon surrender of a Certificate to the Exchange Agent,
together with a duly completed and validly executed letter of transmittal,
the
Exchange Agent shall deliver, as promptly as practicable after the Effective
Time, to the surrendering Company Stockholder, ADRs representing the number
of
Parent ADSs and/or cash to which such Company Stockholder is entitled pursuant
to Section 1.7.
From
and after the Effective Time, until properly surrendered and cancelled, each
outstanding Certificate will be deemed to evidence only the right to receive
the
portion of the Merger Consideration issuable in respect of the shares of
Company
Capital Stock represented by such Certificate pursuant to the Merger. No
dividends or other distributions with respect to Parent ADSs with a record
date
occurring on or after the Effective Time shall be paid to the holder of any
unsurrendered Certificate.
-6-
(b) Transfers
of Ownership.
If any
Merger Consideration is to be paid or allocated to a person other than the
holder in whose name the Certificate surrendered is registered, it will be
a
condition of the payment or allocation thereof that any Certificate so
surrendered must be properly endorsed, and each shall be accompanied by all
documents required to evidence and effect such transfer and to evidence
compliance with any applicable securities laws and that any applicable stock
transfer taxes have been paid.
(c) No
Liability.
At any
time following the date that is twelve (12) months after the Effective Time,
Parent shall be entitled to require the Exchange Agent to deliver to Parent
any
Merger Consideration which has been made available to the Exchange Agent
by and
on behalf of Parent and which has not been disbursed to holders of Certificates.
Notwithstanding anything to the contrary in this Article
I,
none of
Parent, Merger Sub or the Surviving Corporation shall be liable to any Company
Stockholder for any amount properly paid to a public official pursuant to
any
applicable abandoned property, escheat or similar law.
1.10 No
Further Ownership Rights in Company Capital Stock.
The
Merger Consideration issued pursuant to the Merger shall be deemed to have
been
issued in full payment and satisfaction of all rights or obligations pertaining
thereto. There shall be no further registration of transfers on the records
of
the Surviving Corporation of any shares of Company Capital Stock which were
outstanding immediately prior to the Effective Time. If Certificates are
presented to the Surviving Corporation for any reason after the Effective
Time,
such Certificates immediately shall, subject to receipt of all required
documentation, be canceled and exchanged as provided in this Article
I.
1.11 Lost,
Stolen or Destroyed Certificates.
If any
Certificates have been lost, stolen or destroyed, Parent shall issue such
amount
of the Merger Consideration as otherwise would be required pursuant to this
Article
I
in
exchange for such lost, stolen or destroyed Certificates promptly following
receipt of an affidavit and indemnity in a form satisfactory to Parent of
that
fact.
1.12 Merger
Sub Stock.
Each
share of common stock of Merger Sub outstanding as of the Effective Time
automatically shall be converted into one validly issued, fully paid and
non-assessable share of common stock of the Surviving Corporation. From and
after the Effective Time, each stock certificate formerly representing shares
of
common stock of Merger Sub shall be deemed to represent an equivalent number
of
shares of common stock of the Surviving Corporation.
1.13 Necessary
Actions; Further Action.
If any
further action is necessary or desirable at any time after the Effective
Time to
carry out the purposes of this Agreement and to vest full right, title and
possession to all assets, property, rights, privileges, powers and franchises
of
Company and Merger Sub in the Surviving Corporation or to vest Parent with
a
100% ownership interest in the Surviving Corporation, the officers and directors
of the Surviving Corporation are fully authorized in the name of the Company
and
the Surviving Corporation or otherwise to take, and the Surviving Corporation
shall reasonably cause such persons to take, all such lawful, necessary or
desirable action so long as such action is not inconsistent with this
Agreement.
-7-
1.14 Accounting
and Tax Treatment.
The
Merger is intended to constitute a purchase of the Company for purposes of
applicable accounting principles. It is intended by Parent and the Company
that
the Merger shall constitute a reorganization within the meaning of Section
368(a) of the Code. The parties hereto hereby adopt this Agreement as a plan
of
reorganization within the meaning of Treasury Regulation Section
1.368-2(g).
1.15 Fluctuations
in Market Price of Parent ADSs.
Parent
and the Company acknowledge that the market price of Parent ADSs may fluctuate
significantly. The potential risk of increases or decreases in the price
of
Parent ADSs has been taken into account in connection with the negotiation
of
the number of Parent ADSs to which Company Stockholders will be entitled
in
connection with the Merger and the conditions on which they will become so
entitled.
1.16 No
Interest.
No
interest will be paid or accrued on any Merger Consideration, including any
cash
to be paid to holders of Company Capital Stock, in lieu of fractional Parent
ADSs or in respect of dividends or distributions, that any holder of shares
of
Company Capital Stock that remains outstanding immediately prior to the
Effective Time shall be entitled to receive pursuant to this Article
I
or
otherwise.
1.17 Legending
of Securities.
(a) Parent
ADSs to be delivered in connection with this Agreement will be issued in
a
transaction exempt from registration under the Securities Act by reason of
Rule
506 of Regulation D under the Securities Act (“Regulation D”), and similar
exemptions under applicable state securities laws, and Parent is relying
on the
representations of the Company Stockholders with respect to such exemptions.
There will be placed on the American Depositary Receipts (“ADRs”) representing
such Parent ADSs a legend stating in substance as follows:
“The
securities represented hereby have not been registered under the Securities
Act
of 1933, as amended, or any state or other securities laws and may not be
offered, sold, transferred or otherwise disposed of unless registered with
the
United States Securities and Exchange Commission and the securities regulatory
authorities of applicable states or foreign countries or unless an exemption
from such registration is available.”
(b) The
above
legend on an ADR representing ADSs issued in the Merger shall be removed,
and
the Company shall issue a certificate or instrument without such legend to
the
holder of such security, (a) if such ADSs are being disposed of pursuant
to a
registration under the Securities Act and any applicable state acts or pursuant
to Rule 144 or any similar rule then in effect, (b) if such ADSs are
eligible for sale under Rule 144(k), and (c) if such holder provides Parent
with
an opinion of counsel or such other evidence satisfactory to Parent to the
effect that a sale, transfer, assignment, offer, pledge or distribution for
value of such ADSs may be made without registration.
(c) The
foregoing legends will also be placed on any certificate representing securities
issued subsequent to the original issuance of Parent ADSs pursuant to this
Agreement as a result of any transfer of such shares or any stock dividend,
stock split or other recapitalization as long as Parent ADSs issued to the
holders of shares of Company Capital Stock pursuant to this Agreement has
not
been transferred in such manner to justify the removal of the legends
therefrom.
-8-
ARTICLE
II
REPRESENTATIONS
AND WARRANTIES OF COMPANY
Except
as
set forth on the disclosure schedule prepared by the Company and delivered
by
the Company to Parent on the date hereof (the “Company Disclosure Schedule”),
the Company hereby makes the following representations and warranties to
Parent
and Merger Sub. Notwithstanding any other provision of this Agreement or
the
Company Disclosure Schedule, each exception set forth in the Company Disclosure
Schedule will be deemed to qualify each representation and warranty set forth
in
this Agreement that is specifically identified (by cross-reference or otherwise)
in the Company Disclosure Schedule as being qualified by such exception,
unless
it is reasonably apparent from the face of the exception that such exception
qualifies another representation and warranty, in which case such exception
shall also qualify such other representation and warranty.
2.1 Organization
and Qualification.
(a) The
Company is a corporation duly organized, validly existing and in good standing
under the laws of its jurisdiction of organization and has corporate power
and
authority to own, lease and operate its assets and to carry on its business
as
now conducted, heretofore conducted and as proposed to be conducted. The
Company
is qualified or otherwise authorized to transact business as a foreign
corporation or other organization in all jurisdictions in which such
qualification or authorization is required by law, except for jurisdictions
in
which the failure to be so qualified or authorized does not constitute a
Company
Material Adverse Effect. “Company Material Adverse Effect” means any change,
event, circumstance or effect that has or is reasonably likely to have a
material adverse effect on (i) the assets, liabilities, properties, business
or
prospects of
the
Company other than any change, event, circumstance or effect relating to
(x) the
economy, the healthcare industry or financial markets in general (provided
that
the impact on the Company is not disproportionate relative to the impact
on
similarly situated entities); (y) changes in United States generally accepted
accounting principles (“GAAP”) or (ii) the ability of the Company to
consummate the transactions contemplated hereby. Section 2.1(a)
of the
Company Disclosure Schedule sets forth a true and complete list of the
jurisdictions in which the Company is qualified or otherwise authorized to
transact business.
(b) The
Company previously has provided to Parent true and complete copies of the
Certificate of Incorporation and Bylaws of the Company as presently in effect,
and the Company is not in default in the performance, observation or fulfillment
of such documents. Except as set forth in Section 2.1(b) of the Company
Disclosure Schedule, the minute books of the Company, copies of which the
Company previously has provided to Parent, contain records of all meetings
of
the Company’s Board of Directors and Company Stockholders and all actions by
written consent of the Company’s Board of Directors and Company Stockholders for
the five-year period preceding the date hereof, except for records, minutes
and
consents pertaining to the transaction contemplated by this Agreement. Such
records of meetings are true and correct in all material respects and such
consents are true and correct in all respects. Such records accurately reflect
all transactions referred to in such minutes and consents in lieu of meetings
other than with respect to the transaction contemplated by this Agreement.
The
stock record books of the Company, copies of which the Company previously
has
provided to Parent, are accurate and complete.
-9-
(c) Company
has neither passed any resolutions nor taken any step, and no legal proceedings
have commenced or to the knowledge of Company, been threatened, against Company,
for its winding up or dissolution or for the appointment of a liquidator,
receiver, administrator or similar officer over any or all of its
assets.
2.2 Authority
to Execute and Perform Agreements.
Subject
to obtaining the Company Stockholder approvals (as defined below), the Company
has the corporate power and authority to enter into, execute and deliver
this
Agreement and to perform fully its obligations hereunder. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by the Board of Directors of the Company.
This
Agreement has been duly executed and delivered by the Company and constitutes
a
legal, valid and binding obligation of the Company, enforceable in accordance
with its terms, except as enforceability may be limited by bankruptcy,
insolvency, and other similar laws affecting the rights and remedies of
creditors generally and general principles of equity (the “Equitable
Exceptions”). The only votes, approvals or consents of the Company Stockholders
required in connection with this Agreement (the “Company Stockholder Approvals”)
are:
(a) the
approval of the Charter Amendment by holders of a majority of the outstanding
shares of Company Common Stock and Company Preferred Stock (on an as-converted
basis), voting together as a single class, and by holders of a majority of
the
outstanding shares of Company Preferred Stock, voting as a separate
class;
(b) the
adoption of this Agreement by affirmative vote of a majority of the outstanding
shares of Company Common Stock and Company Preferred Stock (on an as-converted
basis) voting together as a single class;
(c) the
consent to the Merger and the other transactions contemplated by this Agreement
and the Registration Rights Agreement (as defined in Section 5.10) by the
holders of a majority of the outstanding shares of the Company Preferred
Stock
pursuant to Section 6.9(6) of the Stockholders’ Agreement (the “Stockholders
Agreement”), dated as of August 8, 2000, among the Company, the Investors, the
Founding Stockholders and Bausch & Lomb Incorporated (“B&L”), as
amended; and
(d) the
termination of the Stockholders Agreement by the Requisite Holders (as defined
in the Stockholders Agreement), Essex Woodlands Health Ventures V, LP and
B&L.
2.3 Capitalization.
(a) The
Company is authorized to issue Five Million (5,000,000) shares of Company
Common
Stock, of which 2,393,847 shares are issued and outstanding as of the date
hereof. All of the issued and outstanding shares of Company Common Stock
are
duly authorized, validly issued, fully paid and nonassessable. The
Company is authorized to issue Two Million (2,000,000) shares of preferred
stock, of which Six Hundred Fifty Thousand (650,000) shares
are designated as Series A Preferred Stock, Six Hundred Forty-One
Thousand
Six Hundred Forty-Two (641,642) shares of which are issued and outstanding
as of
the date hereof. All the issued and outstanding shares of Company Preferred
Stock are duly authorized, validly issued, fully paid and nonassessable.
Except
as set forth in Section 2.3(a)
of the
Company Disclosure Schedule, no holder of any Company Capital Stock has any
unexercised preemptive rights outstanding. The outstanding shares of Series
A
Preferred Stock are convertible into Seven Hundred Ninety-Five Thousand Eight
Hundred Forty-Four (795,844) shares of Company Common Stock. Section 2.3(a)
of the
Company Disclosure Schedule lists each Company Stockholder, including the
number, class and series of shares held by each such holder and the holder’s
most recent address, to the knowledge of the Company.
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(b) Company
Options to purchase Fifty Thousand Fifty (50,050) shares of Company Common
Stock
are outstanding as of the date hereof. Section 2.3(b)
of the
Company Disclosure Schedule includes a true and complete list of all Company
Options with grant dates, expiration dates and exercise prices, including
the
names and positions of the respective holders thereof, the plan pursuant
to
which the Company Options were granted, whether such Company Options are
incentive stock options within the meaning of Section 422 of the Code
(“ISOs”) or options that are not ISOs. True and complete copies of all
instruments (or the forms of such instruments) referred to in this section
have
been furnished previously to Parent. All
Company Options are vested or will vest upon the earlier of October 31, 2005
and
the Closing. All Company Options have been issued to employees, officers,
directors and consultants pursuant to the Company’s 1997 Stock Option Plan, as
amended (the “1997 Plan”), or the 2001 Incentive Plan, as amended (the “2001
Plan” and, together with the 1997 Plan, the “Company Plans”). The Company has no
outstanding obligations to issue securities under stock option, stock incentive
or similar plans of the Company in effect since inception other than the
Company
Options. All Company Options issued pursuant to the Company Plans (and all
shares of Company Common Stock issued upon exercise thereof) were issued
in
compliance with the terms and requirements of the Company Plans and the
requirements of applicable federal and state securities laws. The Company
has
made available to Parent true and correct copies of the Company Plans, in
each
case as amended to date and in effect. There are no currently pending or
contemplated amendments, modifications or supplements to either Company
Plan.
(c) The
Company’s authorized capital stock consists solely of the Company Common Stock
and the Company Preferred Stock described in Section 2.3(a).
There
are not as of the date hereof, and at the Effective Time there will not be,
authorized or outstanding any subscriptions, options, conversion or exchange
rights, warrants, repurchase or redemption agreements, or other agreements,
claims or commitments of any nature whatsoever obligating the Company to
issue,
transfer, deliver or sell, or cause to be issued, transferred, delivered,
sold,
repurchased or redeemed, additional shares of the capital stock or other
securities of the Company or obligating the Company to grant, extend or enter
into any such agreement, other than the Company Options and agreements listed
in
Sections 2.3(b)
and
2.3(c)of
the
Company Disclosure Schedule or are permitted under Article
IV.
Except
as set forth in Section 2.3(c) of the Company Disclosure Schedule, to the
knowledge of the Company, there are no stockholder agreements, voting trusts,
proxies or other agreements, instruments or understandings with respect to
the
voting of the capital stock of the Company.
-11-
(d) The
Company does not beneficially own, directly or indirectly, any shares of
capital
stock of Parent.
(e) The
Company has no outstanding bonds, debentures, notes or other indebtedness
which
have the right to vote on any matters on which stockholders may
vote.
2.4 Company
Subsidiaries and Joint Ventures.
The
Company does not own, directly or indirectly, any equity or voting interest
in
any other corporation, partnership (limited or general), limited liability
company, joint venture, association, trust, or other entity, and has no
agreement or commitment to purchase such interest.
2.5 Financial
Statements.
(a) The
Company has previously delivered to Parent the audited financial statements
of
the Company for the years ended December 31, 2001 and 2002 (including the
notes
thereto) (the “Audited Financial Statements”) and the unaudited balance sheets
of the Company at December 31, 2003, December 31, 2004 (the “Company Balance
Sheet”) and June 30, 2005 and the related statements of income and cash
flows for the one-year and six-month periods, as applicable, ending on such
dates. All of such financial statements referred to in this section are
collectively referred to herein as the “Company Financial Statements.” The
Company Financial Statements have been prepared from, and are in accordance
with, the books and records of the Company and fairly present in all material
respects the consolidated financial position and the results of operations
of
the Company as of the dates and for the periods indicated, in each case in
accordance with GAAP applied on a consistent basis, except as otherwise stated
therein, except as set forth in Section 2.5(a) of the Company Disclosure
Schedule, and, in the case of unaudited financial statements, except to the
extent that they may not include footnotes or may be condensed or summary
statements and subject to normal year-end adjustments that have not been
and are
not expected to be material in amount.
(b) Section
2.5(b) of the Company Disclosure Schedule contains an estimate by the Company
of
the Working Capital of the Company as of November 30, 2005 (the “Working Capital
Calculation”). The Working Capital Calculation has been prepared by the Company
in good faith as of the date of this Agreement, and represents the Company’s
estimation (as of the date of this Agreement) of its Working Capital as of
November 30, 2005. “Working Capital” shall mean (i) total current assets (as
defined under GAAP) of the Company, less (ii) the sum of total current
liabilities of the Company (as defined under GAAP). Section 2.5(b) of the
Company Disclosure Schedule also includes the Company's good faith estimation
as
of the date of this Agreement of the expenses of the Company with respect
to
this Agreement.
2.6 Absence
of Undisclosed Liabilities.
As of
December 31, 2004, the Company had no material liabilities of any nature,
whether accrued, absolute, contingent or otherwise (including without
limitation, liabilities as guarantor or otherwise with respect to obligations
of
others or liabilities for taxes due or then accrued or to become due), required
to be reflected or disclosed in the Company Balance Sheet (or notes thereto)
that were not adequately reflected or reserved against on the Company Balance
Sheet (or disclosed in the notes thereto). Except as set forth in Section
2.6 of
the Company Disclosure Schedule, the Company has no material liabilities
of the
type required to be disclosed on a balance sheet (or in the notes thereto)
other
than liabilities (i) set forth on the Company Balance Sheet (or disclosed
in the
notes thereto), (ii) incurred since December 31, 2004 in the ordinary course
of
business, or (iii) incurred in connection with this Agreement and the
transactions contemplated hereby.
-12-
2.7 Absence
of Adverse Changes.
(a) Except
as
set forth in Section 2.7(a) of the Company Disclosure Schedule, since December
31, 2004, there has not been any change, event or circumstance that constitutes
a Company Material Adverse Effect.
(b) Except
as
set forth in Section 2.7(b) of the Company Disclosure Schedule, there has
not
been any action taken by the Company during the period from December 31,
2004
through the date of this Agreement that, if taken during the period from
the
date of this Agreement through the Effective Time, would constitute a breach
of
Section 4.1(b).
2.8 Compliance
With Laws.
(a) The
Company has all licenses, permits, franchises, orders or approvals of any
federal, state, local or foreign governmental, administrative or regulatory
body, authority, agency or court (a “Governmental Entity”) necessary to the
conduct of their businesses as presently being conducted (collectively,
“Permits”); such Permits are in full force and effect; and no proceeding is
pending or, to the knowledge of the Company, threatened to revoke or limit
any
Permit except in each case where the failure to have such Permit or to retain
it
in full force and effect would not constitute a Company Material Adverse
Effect;
(b) Other
than Environmental Laws and laws regarding employment and employment practices
(“Employment Laws”) which are addressed in Sections 2.17
and
2.16,
respectively, the Company has complied with, is not in violation of, and
has not
received any written notices of violation with respect to, any applicable
federal, state or local statute, law, ordinance, rule or regulation, domestic
or
foreign (together with Environmental Laws and Employment Laws, “Applicable Law”)
or any order, judgment, injunction, decree or other requirement (“Orders”) of
any Governmental Entity, relating to the operation of the Company’s business
except for non-compliance or violations which do not, individually or in
the
aggregate, constitute a Company Material Adverse Effect.
(c) The
Company’s products, Retisert for Uveitis and Medidur for Diabetic Macular Edema
(the “Company Products”) are being manufactured, tested, distributed, held
and/or marketed by or, under Company Out-Licenses (as defined in Section
2.12),
on behalf of the Company in compliance with all applicable requirements under
the United States Federal Food, Drug and Cosmetic Act (“FDCA”), except for such
failures to comply as do not constitute a Company Material Adverse Effect.
The
Company has disclosed or made available to Parent all material reports and
documents in the Company’s possession which have been submitted to the FDA and
any other Governmental Entities with regulatory jurisdiction over the safety
and
efficacy of the Company Products and all material correspondence between
the
Company and the FDA or such Governmental Entities relating to the Company
Products.
-13-
(d) Retisert
has been granted an “orphan drug” designation and has been approved for
marketing in the United States by the FDA. The Office of Orphan Products
has
been notified of Retisert’s approval for marketing, the notation of Retisert’s
orphan drug exclusivity will be made in due course and such exclusivity period
will expire on April 8, 2012. The Company has no knowledge of any changes,
events or circumstances that would limit, modify or cause Retisert to lose
“orphan drug” exclusivity prior to such date (including, without limitation, any
challenge to such orphan drug status or the development or approval of any
new,
chemically different or clinically superior drug for the same
indication).
(e) Neither
the Company nor, to the knowledge of the Company, any director, officer,
agent,
employee or other person acting on behalf of the Company, has accepted or
received any unlawful contributions, payments or gifts. Neither the Company
nor,
to the knowledge of the Company, any director, officer, agent, employee or
other
person has, acting on behalf of the Company:
(i) made
any
unlawful contributions, payments, gifts or entertainment,
(ii) made
any
unlawful expenditures relating to political activity to government officials
or
others, or
(iii) established
or maintained any unlawful or unrecorded funds in a manner that would violate
the Foreign Corrupt Practices Act of 1977, as amended (assuming such law
was
applicable to the Company).
2.9 Actions
and Proceedings.
Except
as set forth in Section 2.9
of the
Company Disclosure Schedule, as of the date hereof, there are no outstanding
Orders of any Governmental Entity against the Company, or any of its securities,
assets or properties. Except as set forth in Section 2.9
of the
Company Disclosure Schedule, there are no actions or suits or legal,
administrative or arbitration proceedings pending or, to the knowledge of
the
Company, threatened against the Company or any of its securities, assets
or
properties or its officers or directors, in their respective capacities as
such,
that constitute a Company Material Adverse Effect or would reasonably be
expected to result in damages in excess of Fifty Thousand Dollars
($50,000).
2.10 Contracts
and Other Agreements.
Section 2.10
of the
Company Disclosure Schedule includes, but is not limited to, all contracts
that
are material to the business or operations of the Company. Except as set
forth
in Section 2.10
of the
Company Disclosure Schedule, the Company does not have, is not a party to
nor is
it or its assets or properties bound by or subject to (any of the following,
a
“Material Contract”):
(i) any
agreement, other than a material transfer agreement or technology evaluation
agreement, (A) involving research, development or the license of Company
Intellectual Property or Technology (as defined in Section 2.12),
(B)
granting a right of first refusal, or right of first offer or comparable
right
with respect to Company Intellectual Property or Technology, (C) establishing
a
joint venture, partnership or other arrangement involving a sharing of profits,
losses, costs or liabilities with another person or entity, (D) providing
for
the payment or receipt by the Company of milestone payments or royalties,
(E)
containing a “most favored nation” pricing or terms clause, or (F) granting
marketing, distribution or similar rights with respect to any Company
Intellectual Property or Technology;
-14-
(ii) any
indenture, trust agreement, loan agreement or note that involves or evidences
outstanding indebtedness, obligations or liabilities for borrowed
money;
(iii) any
agreement which relates primarily to surety, guarantee or indemnification;
(iv) any
agreement that limits or restricts the Company or any of its affiliates or
successors in competing or engaging in any line of business, without limitation,
in any therapeutic category, in any geographic area or with any
person;
(v) any
interest rate, equity or other swap or derivative instrument;
(vi) any
agreement obligating the Company to register securities under the Securities
Act;
(vii) any
agreement for the sale of any of the securities, material assets or properties
of the Company or for the grant to any person of any options, rights of first
refusal, or preferential or similar rights to purchase any of such securities,
assets or properties other than the Company Options;
(viii) any
agreement relating to the acquisition by the Company of any operating business
or the capital stock issued by any other person;
(ix) any
agreement which cannot be terminated by the Company on 30 days’ or less notice
without premium or penalty requiring the payment to any person of a commission
or fee other than in the ordinary course of business consistent with past
practice or providing for sharing of fees, rebating of charges, or similar
arrangements;
(x) any
agreement involving a payment or value in excess of $25,000 which cannot
be
terminated by the Company on 30 days’ or less notice without premium or penalty
with any officer, director, stockholder, employee, consultant, agent or other
representative of the Company, including any agreement for the payment of
fees
or other consideration to any entity in which to the knowledge of the Company
any officer or director of the Company has an interest,; or
(xi) any
other
agreement involving an expenditure by the Company of more than $25,000 annually
or $50,000 in the aggregate which cannot be terminable by the Company on
30
days’ or less notice without premium or penalty.
Except
as
set forth in Section 2.10 of the Company Disclosure Schedule, all of the
Material Contracts are, to the knowledge of the Company, (A) valid, subsisting,
in full force and effect, (B) binding upon the Company and (C) binding upon
the
other parties thereto in accordance with their terms, and the Company has
satisfied in full or provided for all of its liabilities and obligations
thereunder which are presently required to be satisfied or provided for,
and is
not in default under any of them, nor, to the knowledge of the Company, is
any
other party to any such contract or other agreement in default thereunder,
nor,
to the knowledge of the Company, does any condition exist that with notice
or
lapse of time or both would constitute a default thereunder except in each
case
in this Section 2.10 for failure to pay, accrue, satisfy liabilities and
obligations and conditions which do not constitute a Company Material Adverse
Effect. True and complete copies of all of the Material Contracts (and all
amendments or other modifications thereto) and all of the contracts which
are
listed in Section 2.11(a)
or
Section 2.12
of the
Company Disclosure Schedule have been provided previously to Parent.
The
Company has no knowledge of any plan or intention of any counterparty to
a
Material Contract, and has not received any written threat or notice from
any
such person, to terminate, cancel or otherwise materially and adversely modify
its relationship with the Company.
-15-
No
Material Contract requires any consent, approval or waiver by the other parties
thereto in connection with this Agreement, the Registration Rights Agreement
or
the consummation of the transactions contemplated hereby and thereby in order
to
avoid any conflict with, any violation of, or default under (with or without
notice or lapse of time, or both), or to avoid giving rise to any right of
termination, cancellation, modification or acceleration of any obligation
or
loss of any benefit under, any contract.
2.11 Title
to Properties; Absence of Liens and Encumbrances.
(a) The
Company does not own any real property nor does it have options or any
contractual obligations to purchase or acquire any interest in real property.
Section 2.11(a)
of the
Company Disclosure Schedule lists all real property leases to which the Company
is a party and each amendment thereto. All such leases are (A) valid,
subsisting, in full force and effect in accordance with their respective
terms,
(B) binding upon the Company and (C) to the knowledge of the Company, binding
upon the other parties thereto in accordance with their respective terms,
and
the Company has satisfied in full or provided for all of its liabilities
and
obligations thereunder which are presently required to be satisfied or provided
for, and is not in default under any of them, nor, to the knowledge of the
Company, is any other party to any such contract or other agreement in default
thereunder, nor, to the knowledge of the Company, does any condition exist
that
with notice or lapse of time or both would constitute a default thereunder
except in each case in this Section 2.11(a)
for
failure to pay, accrue, satisfy liabilities and obligations and conditions
which
do not constitute a Company Material Adverse Effect.
(b) The
Company has good and valid title to, or, in the case of leased properties
and
assets, valid leasehold interests in, all of its significant tangible properties
and assets, real, personal and mixed, used or held for use in its business,
and
such properties and assets, as well as all other properties and assets of
the
Company whether tangible or intangible (other than Company Technology), are
free
and clear of any liens, pledges, charges, claims, security interests or other
encumbrances of any sort (“Liens”), except as reflected in the Company Balance
Sheet and except for Liens for Taxes (as defined in Section 2.14) not yet
due
and payable and such imperfections of title and encumbrances, if any, that
are
not material in character, amount or extent, and that do not materially detract
from the value, or materially interfere with the present use, of the property
subject thereto or affected thereby.
(c) The
equipment, furniture, leasehold improvements, fixtures, vehicles, any related
capitalized items and other tangible property material to the business of
the
Company, are in reasonably satisfactory operating condition and repair, ordinary
wear and tear excepted. Section 2.11(c)
of the
Company Disclosure Schedule sets forth a true and correct summary of capital
assets of the Company of
and
depreciation schedules as of August 31, 2005 which is true and correct in
all
material respects.
-16-
2.12 Intellectual
Property.
(a) For
the
purposes hereof:
“Company
Intellectual Property” shall mean Intellectual Property included within the
definition of Company Technology.
“Company
Technology” means all Technology used in connection with the Company Products or
in research and development activities of the Company and all Intellectual
Property in any and all such Technology that is owned by or exclusively licensed
to the Company.
“Intellectual
Property” shall
mean all rights, title and interests in:
(i) Patents
(foreign and domestic), copyrights, and trade secrets;
(ii) trademarks,
trade names, service marks, trade dress and logos, and the goodwill and
activities associated therewith;
(iii) domain
names, rights of privacy and publicity, and moral rights; and
(iv) any
and
all registrations, applications, publications, recordings, licenses, common-law
rights and contracts relating to any of the foregoing.
“Off-the-Shelf-Software”
means commercial software (including, without limitation, all source code,
object code and documentation) obtained from a third party (i) on general
commercial terms and which continues to be widely available on such commercial
terms, (ii) which is not material to the conduct of the business of the Company
or Parent, as applicable, (iii) which is used for internal purposes, and
(iv)
which is not distributed with or incorporated in the Company Products, in
the
case of Article
II,
or the
Parent Product, in the case of Article
III,
or
necessary for use or development of the Company Products or the Parent Product,
as applicable.
“Technology”
means all inventions, discoveries, innovations, know-how, information, software,
works of authorship, materials, and all other forms of technology, and any
improvements, modifications, works in progress, derivatives or changes, whether
tangible or intangible, embodied in any form, whether or not protectable
or
protected by patent, copyright, trade secret law or otherwise, and all documents
and other recordings or embodiments (including, without limitation, notebooks,
technical memoranda, lists, descriptions, etc.) of any of the
foregoing.
-17-
(b) Section 2.12(b)
of the
Company Disclosure Schedule contains a list of (i) all registered trademarks,
registered service marks, registered trade names, registered copyrights,
patents
and patent applications pending as of the date of this Agreement owned or
licensed by the Company (the “Company Registered Intellectual Property”), (ii)
all Material Contracts pursuant to which the Company is licensed to use any
Intellectual Property owned by a third person other than licenses of
Off-the-Shelf Software (the “Company In-Licenses”), and (iii) all Material
Contracts pursuant to which the Company licenses third parties to use Company
Technology (the “Company Out-Licenses”). Except as set forth on Section 2.12(b)
of the Company Disclosure Schedule, none of the Company Registered Intellectual
Property has been intentionally abandoned or unintentionally abandoned, and
all
maintenance fees and all other required payments or actions required to maintain
such Company Registered Intellectual Property have been timely paid and taken,
respectively.
(c) Except
as
set forth on Section 2.12(c) of the Company Disclosure Schedule, (i) the
Company owns or licenses the Company Intellectual Property and (ii) to
the
Company’s knowledge, subject to the Company Out-Licenses, the Company has the
right to use the Company Intellectual Property as such Intellectual Property
is
currently licensed or used by the Company.
(d) Except
as
set forth on Section 2.12(d) of the Company Disclosure Schedule, the Company
has
no knowledge and has not received any notice, claim or suit, inquiry or other
correspondence or information from any third party that any issued Company
Registered Intellectual Property, as such Intellectual Property is used in
the
Company’s business as it is currently conducted (i) infringes upon the
Intellectual Property rights of any third party or (ii) is invalid, the subject
of any challenge (including, without limitation, ex parte or inter partes
reexamination) or the rights therein are otherwise unenforceable (including,
without limitation, by reason of any interference, opposition, cancellation
or
other similar means). Except for royalty obligations, if any, due under the
Company In-Licenses, to the Company’s knowledge, the Company is not obligated to
pay any third party any royalty on the sale of any Company
Products.
(e) Except
as
set forth on Section 2.12(e) of the Company Disclosure Schedule, (i) to
the
Company’s knowledge, there is no material unauthorized use, unauthorized
disclosure, infringement, threatened infringement or misappropriation by
any
third party of any Company Registered Intellectual Property owned by or licensed
to the Company, including any employee or former employee of the Company;
and
(ii) the Company has not entered into any agreement to indemnify any other
person against any charge of infringement of the Intellectual Property of
any
third party, other than as set forth on Section 2.10 of the Company Disclosure
Schedule, indemnification provisions contained in purchase orders or other
agreements arising in the ordinary course of business consistent with past
practice.
(f) To
the
knowledge of the Company, none of the activities of the employees of the
Company
on behalf of the Company violates any agreement which any such employees
have
with former employers. To the Company’s knowledge, all employees, consultants
and contractors and joint developers who contributed to the discovery or
development of any of the Company Technology (other than Technology licensed
to
the Company by any third party) did so either (a) within the scope of his
or her
employment, or (b) pursuant to written agreements assigning or licensing
all
Intellectual Property developed thereunder to the Company.
-18-
2.13 Insurance.
Section
2.13 of the Company Disclosure Schedule sets forth a true and complete list
as
of the date of this Agreement of all policies or binders of fire, liability,
product liability, workmen’s compensation, vehicular, directors’ and officers’
and other insurance held by or on behalf of the Company. To the Company’s
knowledge, such policies are in full force and effect or have been extended
with
replacement policies on similar terms and conditions and with similar limits
and
retentions. The Company is not in default in any material respect with respect
to any provision contained in such policy or binder and the Company has not
failed to give any notice or present any claim under any such policy or binder
in due and timely fashion. There are no outstanding unpaid claims as of the
date
of this Agreement under any such policy or binder. The Company has received
no
notice of cancellation or non-renewal of any such policy or binder.
2.14 Tax
Matters.
(a) For
purposes of this Agreement, the term “Tax” (and, with correlative meaning,
“Taxes” and “Taxable”) means all United States federal, state and local, and all
foreign, income, profits, franchise, gross receipts, payroll, transfer, sales,
employment, use, property, excise, value added, ad
valorem,
estimated, stamp, alternative or add-on minimum, recapture, withholding and
any
other taxes, together with all interest, penalties, and additions imposed
on or
with respect to such amounts. “Tax Return” means any return, declaration,
report, claim for refund, or information return or statement filed or required
to be filed with any taxing authority in connection with the determination,
assessment, collection or imposition of any Taxes.
(b) All
Tax
Returns required to be filed on or before the date hereof by or with respect
to
the Company have been filed within the time and in the manner prescribed
by law.
All such Tax Returns are true, correct and complete in all material respects,
and all Taxes owed by the Company, whether or not shown on any Tax Return
(including all withholding and payroll Taxes), have been paid. The Company
has
not received written notice of any claim by any taxing authority in any other
jurisdiction that the Company is or may be subject to taxation by that
jurisdiction.
(c) There
are
no Liens or other encumbrances with respect to Taxes upon any of the assets
or
properties of the Company, other than with respect to Taxes not yet due and
payable.
(d) No
audit
is currently pending with respect to any Tax Return of the Company, nor has
the
Company received any written communication from any taxing authority that
an
audit is forthcoming. No deficiency for any Taxes has been proposed in writing
against the Company, which deficiency has not been paid in full when due
and
payable.
(e) There
are
no outstanding written agreements or waivers extending the statutory period
of
limitation applicable to any claim for, or the period for the collection
or
assessment of, Taxes due from or with respect to the Company for any taxable
period, no power of attorney granted by or with respect to the Company relating
to Taxes is currently in force, and no extension of time for filing any Tax
Return required to be filed by or on behalf of the Company is in force. The
Company has delivered or made available to Parent complete and correct copies
of
all federal income Tax Returns, audit reports and statements of deficiencies
for
each of the past three taxable years filed by or issued to or with respect
to
the Company.
-19-
(f) With
respect to any period for which Tax Returns have not yet been filed, or for
which Taxes are not yet due or owing, the Company has made such accruals
for
such Taxes in the Audited Financial Statements as are required by
GAAP.
(g) The
Company is not a party to or bound by, nor does it have any obligation under,
any Tax sharing agreement or similar contract or arrangement. Except where
it
would not have a Company Material Adverse Effect, the Company has no liability
for the Taxes of any person other than the Company under Treasury Regulation
1.1502-6 (or any similar provision of state, local or foreign law), as a
transferee or successor, by contract, or otherwise.
(h) There
is
no contract or agreement, plan or arrangement obligating the Company to make
any
payment that would not be deductible by reason of Section 162(m) or 280G
of the
Code. The Company has not agreed to, and is not required to, make any
adjustments under Section 481(a) of the Code by reason of a change in accounting
method or otherwise.
(i) The
Company is not, and during the applicable period specified in Section
897(c)(1)(A)(ii) of the Code has not been, a United States real property
holding
corporation within the meaning of Section 897(c)(2) of the Code.
2.15 Employee
Benefit Plans.
(a) Section
2.15
of the
Company Disclosure Schedule sets forth a complete list of all material pension,
savings, stock bonus, profit-sharing, retirement, deferred compensation,
welfare, fringe benefit, medical or life insurance, short and long term
disability, incentive, bonus, stock, vacation pay, severance pay and similar
plans (the “Benefit Plans”), including without limitation, all cafeteria plans
maintained under Section 125 of the Code and any other employee benefit plans
as
defined in Section 3(3) of the Employee Retirement Income Security Act of
1974,
as amended (“ERISA”) maintained by the Company or to which the Company is a
party or is required to contribute. Each employee of the Company is eligible
to
participate in each Benefit Plan maintained by the Company.
(b) The
Company has delivered or made available to Parent current, accurate and complete
copies of (i) each Benefit Plan that has been reduced to writing and all
amendments thereto, (ii) a summary of the material terms of each Benefit
Plan
that has not been reduced to writing, including all amendments thereto, (iii)
the summary plan description for each Benefit Plan subject to Title I of
ERISA,
(iv) for each Benefit Plan intended to be qualified under Section 401(a)
or
Section 501(c)(9) of the Code, the most recent determination letter or exemption
determination issued by the Internal Revenue Service (“IRS”), (v) for each
Benefit Plan with respect to which a Form 5500 series annual report/return
is
required to be filed, the most recently filed such annual report/return and
annual report/return for the three (3) preceding plan years, together with
all
schedules and exhibits thereto and (vi) all insurance contracts, administrative
services contracts, trust agreements, investment management agreements or
similar agreements maintained in connection with any Benefit Plan.
-20-
(c) At
no
time in the prior six years has the Company maintained, contributed to or
incurred any liability under: (i) any “multiemployer plan” as defined in Section
4001(a)(3) of ERISA or a “multiple employer plan” as defined in Section 413(c)
of the Code; (ii) any pension plan subject to Title IV of ERISA or Section
412
of the Code or Section 302 of ERISA; or (iii) any voluntary employees’
beneficiary association within the meaning of Section 501(c)(9) of the Code
or
any welfare benefit fund within the meaning of Section 419(e) of the Code.
The
Company has incurred no liability under Sections 4062, 4063 or 4201 of
ERISA.
(d) Each
Benefit Plan maintained by the Company that is intended to qualify under
Section
401(a) of the Code (“Qualified Plans”) has been determined to be so qualified by
the IRS in a current determination letter or the equivalent thereof, and,
and to
the Company’s knowledge no circumstances exist that could reasonably be expected
to cause any of the Qualified Plans to lose such qualified status. Each such
Qualified Plan and each other Benefit Plan has been administered in all material
respects in accordance with the terms of such Benefit Plan and the provisions
of
any Applicable Law, including without limitation ERISA and the Code, and
to the
knowledge of the Company, nothing has been done or not done with respect
to any
Benefit Plan that could result in any material liability on the part of the
Company with respect to a violation of any requirement of Title I of ERISA
or
Chapter 43 of the Code.
(e) All
contributions, and premiums and other amounts due to or in connection with
each
Benefit Plan under the terms of the Benefit Plan or applicable law have been
timely made except for any failure or failures which do not constitute a
Company
Material Adverse Effect.
(f) With
respect to each Benefit Plan subject to Section 412 of the Code, there is
no
accumulated funding deficiency (whether or not waived or subject to an extension
of amortization periods with respect to amortizable liabilities in the plan’s
minimum funding standard account or alternative minimum funding standard
account, as the case may be) under such Benefit Plan and no such plan is
currently subject to the “deficit reduction contribution” requirements of Code
Section 412(l).
(g) Except
for continuation of health coverage to the extent required under Section
4980B
of the Code or Section 601 et seq. of ERISA, other applicable law or as set
forth in Section 2.15
of the
Company Disclosure Schedule or otherwise set forth in this Agreement, there
are
no obligations under any Benefit Plan providing medical or life insurance
benefits after termination of employment.
(h) Except
as
provided under the terms of a Benefit Plan or as disclosed in Section
2.15
of the
Company Disclosure Schedule, no current or former employee of the Company
will
become entitled to any bonus, retirement, severance, job security or similar
benefit or enhanced payment or benefit (including acceleration of vesting
or
exercise of any equity incentive award) as a result of this Agreement or
of the
transactions contemplated hereby.
-21-
2.16 Employee
Relations.
(a) As
of the
date of this Agreement, the Company has twelve (12) full-time equivalent
employees. The Company generally enjoys good employer-employee relations.
The
Company is not delinquent in payments to any of its employees or consultants
for
any wages, salaries, commissions, bonuses or other direct compensation for
any
services performed by them or amounts required to be reimbursed to such
employees. Except as set forth on Section 2.16
of the
Company Disclosure Schedule, upon termination of the employment of any
employees, neither the Company nor Parent shall be liable, by reason of the
Merger or anything done prior to the Effective Time, to any of such employees
for severance pay or any other payments (other than accrued salary, vacation
or
sick pay in accordance with normal policies). Section 2.16
of the
Company Disclosure Schedule contains with respect to all current directors,
officers, employees or consultants of the Company the name, current job title
and annual rate of compensation (including bonuses and equity compensation)
for
each of the last two (2) years.
(b) The
Company (i) is in compliance in all material respects with all applicable
foreign, federal, state and local laws, rules and regulations respecting
employment, employment practices, terms and conditions of employment and
wages
and hours, in each case, with respect to employees, (ii) has withheld all
amounts required by law or by agreement to be withheld from the wages, salaries
and other payments to employees, (iii) is not liable for any arrears of wages
or
any taxes or any penalty for failure to comply with any of the foregoing,
and
(iv) is not liable for any payment to any trust or other fund or to any
Governmental Entity, with respect to unemployment compensation benefits,
social
security or other benefits or obligations for employees (other than routine
payments to be made in the ordinary course of business consistent with past
practice).
(c) No
work
stoppage or labor strike against the Company is pending or, to the knowledge
of
the Company, threatened. The Company is not involved in or, to the knowledge
of
the Company, threatened with, any labor dispute, grievance, or litigation
relating to labor, safety or discrimination matters involving any employee
or
former employee, including without limitation charges of unfair labor practices
or discrimination complaints that, if adversely determined would constitute
a
Company Material Adverse Effect. The Company has not engaged in any unfair
labor
practices within the meaning of the National Labor Relations Act that would,
directly or indirectly result in liability to the Company. The Company is
not
presently, nor has it been in the past, a party to or bound by any collective
bargaining agreement or union contract with respect to employees, and no
collective bargaining agreement is being negotiated by the Company. No union
organizing campaign or activity with respect to non-union employees of the
Company is ongoing, pending or, to the knowledge of the Company,
threatened.
(d) As
of the
date of this Agreement, none of ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇ or ▇▇▇▇ ▇▇▇▇▇▇▇▇
(the
“Key Employees”) has given notice to the Company, nor is the Company otherwise
aware, as of the date of this Agreement, that any such person intends to
terminate his or her employment with the Company. The Company has not incurred
any liability or obligation under the Worker Adjustment and Retraining
Notification Act or any similar state or local law that remains
unsatisfied.
-22-
2.17 Environmental
Matters.
(a) The
Company has not violated, is not in violation of, and has not been notified
that
it is in violation of, Environmental Laws, and except in compliance with
Environmental Laws, the Company has not generated, used, handled, transported
or
stored any Hazardous Materials or shipped any Hazardous Materials for treatment,
storage or disposal at any other site or facility except for violations and
noncompliance which does not constitute a Company Material Adverse Effect.
There
has been no generation, use, handling, storage or disposal of any Hazardous
Materials in material violation of any Environmental Laws at any site owned
or
operated by, or premises leased by, the Company during the period of the
Company’s ownership, operation or lease or, to the Company’s knowledge, prior
thereto, nor has there been or is there threatened any material Release of
any
Environmental Contaminants into, on, at, under or from any such site or
premises, including without limitation into the ambient air, groundwater,
surface water, soils or subsurface strata, during such period or, to the
Company’s knowledge, prior thereto in material violation of any Environmental
Laws or which created or will create an obligation to report or respond in
any
way to such Release. To the Company’s knowledge, there is no underground storage
tank or any condition at or under at any site owned or operated by the Company
or on any site formerly owned or operated by the Company that is reasonably
anticipated to result in material liability under Environmental
Law.
(b) The
Company has not received notification in any form, including, without
limitation, a request for information, and the Company has no knowledge that,
any site currently or formerly owned or operated by, or premises currently
or
formerly leased by, the Company is the subject of any federal, state or local
civil, criminal or administrative investigation evaluating whether, or alleging
that, any action is necessary to respond to a Release or a threatened Release
of
any Environmental Contaminant. No such site or premises is listed, or to
the
Company’s knowledge, proposed for listing, on the National Priorities List or
the Comprehensive Environmental Response, Compensation, and Liability
Information System, both as provided under the federal Comprehensive
Environmental Response, Compensation and Liability Act (“CERCLA”), or any
comparable state or local governmental lists. The Company has not received
written notification of, and the Company has no knowledge of, any potential
responsibility of the Company pursuant to the provisions of (i) CERCLA, (ii)
any
similar federal, state, local or other Environmental Laws, or (iii) any Order
issued or agreement entered into pursuant to the provisions of any such
Environmental Laws with respect to any Environmental Contaminant used,
manufactured, generated, stored, or treated at, transported from, or disposed
of
on, any site currently or formerly owned or operated by, or premises currently
or formerly leased by, the Company.
(c) The
Company has obtained all Permits required by Environmental Laws necessary
to
enable it to conduct its business and is in compliance with said Permits
in all
material aspects.
(d) There
is
no environmental or health and safety matter that constitutes a Company Material
Adverse Effect. Section 2.17(d)
of the
Company Disclosure Schedule contains a list of any and all environmental
audits
or risk assessments and site assessments conducted since December 1, 2003
and
all other material correspondence, documents or communications with any
Governmental Entity regarding the foregoing.
The
Company has previously furnished or made available to Parent copies of
documentation related to items described in the prior sentence.
-23-
(e) For
purposes of this Agreement:
(i) “Environmental
Laws” means any federal, state, local or foreign laws, regulations, codes,
rules, orders, ordinances, permits, requirements and final governmental
determinations pertaining to the environment, pollution or protection of
the
environment, as adopted or in effect in the jurisdictions in which the
applicable site or premises are located, including without limitation, the
Comprehensive Environmental Response Compensation and Liability Act of 1980,
as
amended by the Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C.
Section 9601 et seq.; the Emergency Planning and Community Right-to-Know
Act, 42
U.S.C. Section 11001 et seq.; the Resource Conservation and Recovery Act,
42
U.S.C. Section 6901 et seq.; the federal Water Pollution Control Act, 33
U.S.C.
Section 1251 et seq.; the federal Insecticide, Fungicide and Rodenticide
Act, 7
U.S.C. Section 136 et seq.; the Toxic Substance Control Act, 15 U.S.C. Section
2601 et seq.; the Oil Pollution Act of 1990, 33 U.S.C. Section 1001 et seq.;
the
Hazardous Materials Transportation Act, as amended, 49 U.S.C. Section 1801
et
seq.; the Atomic Energy Act, as amended 42 U.S.C. Section 2011 et seq.; the
Occupational Safety and Health Act, as amended, 29 U.S.C. Section 651 et
seq.;
and any state or local statute of similar effect; and including without
limitation any laws relating to protection of safety, health or the environment
which regulate the use of biological agents or substances including medical
or
infectious wastes as any such laws have been amended;
(ii) “Environmental
Contaminant” means Hazardous Materials, or any other pollutants, contaminants,
toxic or constituent substances or waste radioactive substances, materials
or
special wastes, petroleum or petroleum products, polychlorinated biphenyls,
asbestos containing materials, or any other substance or material, in each
case
regulated by applicable Environmental Laws;
(iii) “Hazardous
Materials” means (A) any chemicals, materials or substances defined as or
included in the definition of “hazardous substances,”“hazardous wastes,”“hazardous materials,”“extremely hazardous wastes,”“restricted hazardous
wastes,”“toxic substances,”“toxic pollutants,”“hazardous air pollutants,”“contaminants,”“toxic chemicals,”“toxics,”“hazardous chemicals,”“extremely
hazardous substances,”“pesticides,”“oil” or related materials as defined in
any applicable Environmental Law, or (B) any petroleum or petroleum products,
oil, natural or synthetic gas, radioactive materials, asbestos-containing
materials, urea formaldehyde foam insulation, radon, and any other substance
defined or designated as hazardous, toxic or harmful to human health, safety
or
the environment under any Environmental Law; and
(iv) “Release”
has the meaning specified in CERCLA.
2.18 No
Breach.
Except
for the Company Stockholder Approvals and filings with the Secretary of State
of
Delaware (including the Charter Amendment and Certificate of Merger), the
execution, delivery and performance of this Agreement by the Company and
the
consummation by the Company of the transactions contemplated hereby will
not (i)
violate any provision of the Certificate of Incorporation or Bylaws of the
Company, (ii) violate, conflict with or result in the breach of any of the
terms
or conditions of, result in modification of, or otherwise give any other
contracting party the right to terminate, accelerate obligations under or
receive payment under or constitute (or with notice or lapse of time or both
constitute) a default under, any Material Contract or any other instrument,
contract or other agreement to which the Company is a party or to which the
Company or any of its assets or properties is bound or subject that would
constitute a Company Material Adverse Effect, (iii) violate any Applicable
Law
or Order of any Governmental Entity applicable to the Company or by which
any of
the Company’s assets or properties are bound, (iv) violate any Permit, (v)
require any filing with, notice to, or permit, consent or approval of, any
Governmental Entity, or (vi) result in the creation of any Lien or other
encumbrance on the assets or properties of the Company.
-24-
2.19 Board
Approvals.
The
Board of Directors of the Company has (i) approved and declared the advisability
of this Agreement and (ii) recommended that the Company Stockholders adopt
this
Agreement. The Company has taken all action necessary such that no “fair price,”“control share acquisition,”“business combination” or similar statute
(including Section 203 of the DGCL) will apply to the execution, delivery
or
performance of this Agreement.
2.20 Brokers’
and Finders’ Fees; Third Party Expenses.
Except
as set forth in Section 2.20 of the Company Disclosure Schedule, no broker,
finder, agent or similar intermediary has acted on behalf of the Company
in
connection with this Agreement or the transactions contemplated hereby, and
the
Company has not incurred, nor will it incur, directly or indirectly, any
liability for brokerage or finders’ fees or agents’ commissions or any similar
charges in connection with this Agreement or the Registration Rights Agreement
or any transaction contemplated hereby or thereby.
2.21 Bank
Accounts and Powers of Attorney.
Section
2.21
of the
Company Disclosure Schedule identifies all bank accounts of the Company,
lists
the respective signatories therefor and lists the names of all persons or
entities holding a power of attorney from the Company
and a
summary of the terms of any such power of attorney.
2.22 Related
Party Transactions.
Except
as set forth in Section 2.22 of the Company Disclosure Schedule and except
for
compensation and payment of reimbursable expenses incurred in the ordinary
course of business consistent with past practice to regular employees and
directors of the Company, no officer, director, or other affiliate of the
Company is now, or has been since January 1, 2004, (i) a party to any material
transaction or Material Contract with the Company, (ii) indebted to the Company,
or (iii) to the Company’s knowledge, the holder of a direct or indirect
ownership interest in any person which is a material supplier or customer
of the
Company (other than non-affiliated holdings of less than 5% of a class of
securities of a publicly traded company).
2.23 Information
Provided.
None of
the information supplied by the Company for inclusion in (i) the information
statement to be provided to the Company Stockholders in connection with the
Merger (the “Regulation D Information Statement”) or (ii) the information
statement to be provided to Parent shareholders will, as of the date of the
Regulation D Information Statement or the Effective Time, contain any untrue
statement of a material fact or omit to state any material fact necessary
to
make the statements therein, in light of the circumstances under which they
were
made, not misleading.
-25-
2.24 Rule
506 Compliance.
The
Company has not offered the Parent ADSs by any form of general solicitation
or
general advertising in violation of Rule 506. The Company has delivered to
Parent documentation indicating that there are not more than thirty-five
(35)
“purchasers” (as such term is defined in Rule 501 under the Securities Act)
listed on Schedules 1.7(a)(i)
and
1.7(b)(i)
(as
updated on the Closing Date). To the knowledge of the Company, the information
contained in such documentation is not false.
ARTICLE
III
REPRESENTATIONS
AND WARRANTIES OF PARENT AND MERGER SUB
Except
as
set forth on the disclosure schedule prepared by Parent and delivered by
Parent
to the Company on the date hereof (the “Parent Disclosure Schedule”), Parent and
Merger Sub hereby make the following representations and warranties to the
Company. Notwithstanding any other provision of this Agreement or the Parent
Disclosure Schedule, each exception set forth in the Parent Disclosure Schedule
will be deemed to qualify each representation and warranty set forth in this
Agreement that is specifically identified (by cross-reference or otherwise)
in
the Parent Disclosure Schedule as being qualified by such exception, unless
it
is reasonably apparent from the face of the exception that such exception
qualifies another representation and warranty, in which case such exception
shall also qualify such other representation and warranty.
3.1 Organization
and Qualification.
(a) Parent
and each Parent Subsidiary (as defined below) is a corporation or other legal
entity duly organized, validly existing and in good standing under the laws
of
its jurisdiction of organization and has corporate power and authority to
own,
lease and operate its assets and to carry on its business as now conducted,
heretofore conducted and as proposed to be conducted. Parent and each Parent
Subsidiary is qualified or otherwise authorized to transact business as a
foreign corporation or other organization in all jurisdictions in which such
qualification or authorization is required by law, except for jurisdictions
in
which the failure to be so qualified or authorized does not constitute a
Parent
Material Adverse Effect. “Parent Material Adverse Effect” means any change,
event, circumstance or effect that has or is reasonably likely to have a
material adverse effect on (i) the assets, liabilities, properties,
business or prospects, of Parent and the Parent Subsidiaries, taken as a
whole,
other than any change, event, circumstance or effect relating to (x) the
economy, the healthcare industry or financial markets in general (provided
that
the impact on Parent and Parent Subsidiaries is not disproportionate relative
to
the impact on similarly situated entities), or (y) changes in applicable
accounting standards; or (ii) the ability of Parent to consummate the
transactions contemplated hereby. “Parent Subsidiary” means Merger Sub and any
other corporation, partnership or other organization, whether incorporated
or
unincorporated, (i) of which Parent or any Parent Subsidiary is a
general
partner, (ii) at least 50% of the securities or other interests having
voting power to elect a majority of the Board of Directors or others performing
similar functions with respect to such corporation, partnership or other
organization are directly or indirectly owned or controlled by Parent or
by any
Parent Subsidiary, or by Parent and one or more Parent Subsidiaries, (iii)
which
are consolidated on Parent’s financial statements, or (iv) the management or
majority of the Board of Directors of which Parent otherwise has the right
to
appoint or elect.
-26-
(b) Merger
Sub is a corporation validly existing and in good standing under the laws
of the
State of Delaware. Merger Sub has been formed solely for the purpose of engaging
in the transactions contemplated by this Agreement and, prior to the Effective
Time, will not have engaged in any other business activities.
(c) Parent
previously has provided to the Company true and complete copies of the
constitution or other organizational documents of Parent as presently in
effect,
and Parent is not in default in the performance, observation or fulfillment
of
such documents. Except as set forth in Section 3.1(c), of the Parent Disclosure
Schedule, the minute books of Parent, copies of which Parent previously has
provided to the Company, contain true and complete records of (i) in all
material respects, all meetings and (ii) all consents in lieu of meetings
of the
Board of Directors (and any committees thereof) and of the stockholders of
Parent since December 1, 2000 and accurately reflect all transactions referred
to in such minutes and consents in lieu of meetings, in each case other than
records and minutes relating to the transactions contemplated by this
Agreement.
(d) ▇▇▇▇▇▇
has neither passed any resolutions nor taken any step, and no legal proceedings
have commenced or to the knowledge of Parent, been threatened, against Parent,
for its winding up or dissolution or for the appointment of a liquidator,
receiver, administrator or similar officer over any or all of its
assets.
3.2 Authority
to Execute and Perform Agreements.
Each of
Parent and ▇▇▇▇▇▇ Sub has the corporate power and authority to enter into,
execute and deliver this Agreement and to perform fully its obligations
hereunder subject to obtaining the stockholder approval. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by all necessary corporate action (other
than
the vote of shareholders of Parent described in the following sentence) on
the
part of Parent and Merger Sub. The only approval of holders of Parent’s Ordinary
Shares (as defined in 3.3(a)) required for the performance by Parent of the
transactions contemplated by this Agreement and the Registration Rights
Agreement is that the members of Parent must pass a resolution by vote of
a
majority of the votes cast by members entitled to vote on the resolution
at a
general meeting of the members of Parent in accordance with Listing
Rules 7.1 and 7.3 of Australian Stock Exchange Limited (“ASX”) approving
the issue to the Company Stockholders on the terms and conditions of this
Agreement of the Parent ADSs and options to acquire Parent ADSs (the “Parent
Stockholder Approval”) and, if necessary, in the case of any restrictions on the
disposal of any Parent Ordinary Shares, for purposes of section 611(7) of
the
Corporations Act.
This
Agreement has been duly executed and delivered by each of Parent and Merger
Sub
and constitutes their valid and binding obligation, enforceable against each
of
them in accordance with its terms, except as enforceability may be limited
by
the Equitable Exceptions.
-27-
3.3 Capitalization.
(a) The
capital stock of Parent consists of ordinary shares (“Parent Ordinary Shares”).
As of September 20, 2005, Two Hundred Twenty-Five Million Nine Hundred Sixty-Two
Thousand One Hundred Sixty-Six (225,962,166) Parent Ordinary Shares were
issued
and outstanding. All of the issued and outstanding Parent Ordinary Shares
and
Parent ADSs are duly authorized, validly issued, fully paid and
nonassessable.
No
holders of Parent Ordinary Shares have any preemptive rights. Parent has
not
authorized the issuance of and has not issued any preference
shares.
(b) As
of the
date hereof, Parent has outstanding options to purchase Eighteen Million
Nine
Hundred Seventy-One Thousand Seven Hundred Thirteen (18,971,713) Parent Ordinary
Shares (“Parent Options”) and has proposed to issue an additional One Million
Six Hundred Fifty Thousand (1,650,000) options to executive and non-executive
directors, subject to shareholder approval. Parent has previously provided
to
the Company a true and complete list of all outstanding Parent Options including
grant dates, expiration dates, vesting schedules and exercise prices. Parent
is
not obligated to accelerate the vesting of any Parent Options as a result
of the
Merger. Except as set forth in Section 3.3(b) of the Parent Disclosure Schedule,
all Parent Options have been issued to employees, officers, directors and
consultants pursuant to the pSivida Limited Employee Share Option
Plan (the
“Parent Plan”). The Parent Plan is the only stock option, stock incentive or
similar plan of Parent since December 1, 2000. All Parent Options issued
pursuant to the Parent Plan (and all Parent Ordinary Shares issued upon exercise
thereof) were issued in compliance with the terms and requirements of the
Parent
Plan and the requirements of applicable securities laws. Parent has made
available to the Company a true and correct copy of the rules of the Parent
Plan
as amended to date and in effect. There are no currently pending or contemplated
amendments, modifications or supplements to the Parent Plan.
(c) Warrants
to purchase One Hundred Forty-Four Thousand Five Hundred (144,500) Parent
ADSs
(the “Parent Warrants”) are outstanding or proposed to be issued as of the date
hereof. Section 3.3(c)
of the
Parent Disclosure Schedule includes a true and complete list of all outstanding
warrants with grant dates, expiration dates and exercise prices. True and
complete copies of all instruments (or the forms of such instruments) referred
to in this section have been furnished previously to the Company.
(d) Except
as
disclosed in the Parent SEC Reports (as defined in Section 3.3(b))
or in
Section 3.3(d) of the Parent Disclosure Schedule, there are not authorized
or
outstanding any subscriptions, options, conversion or exchange rights, warrants,
repurchase or redemption agreements, or other agreements of any nature
whatsoever obligating Parent or any Parent Subsidiary to issue, transfer,
deliver or sell, or cause to be issued, transferred, delivered, sold,
repurchased or redeemed, additional Parent Ordinary Shares or additional
shares
of capital stock of a Parent Subsidiary or other securities or obligating
Parent
or a Parent Subsidiary to grant, extend or enter into any such agreement,
other
than the Parent Options and Parent Warrants described in
Sections 3.3(b)
and
3.3(c)
or
Parent Options issued after the date hereof in the ordinary course of business.
Except as set forth in Section 3.3(d) of the Parent Disclosure Schedule or
the
Parent SEC Reports, there are no stockholder agreements, voting trusts, proxies
or other agreements, instruments or understandings with respect to the voting
of
the capital stock of Parent to which Parent is a party. Except
as
set forth in Section 3.3(d) of the Parent Disclosure Schedule, Parent has
no
outstanding bonds, debentures, notes or other indebtedness which have the
right
to vote on any matters on which ▇▇▇▇▇▇’s stockholders may vote. There are no
stockholder agreements, voting trusts, proxies or other agreements, instruments
or understandings with respect to the voting of the capital stock of any
Parent
Subsidiary. Except
as
set forth in Section 3.3(d) of the Parent Disclosure Schedule, all outstanding
shares of each Parent Subsidiary are owned beneficially and of record by
Parent
or a (direct or indirect) Parent Subsidiary.
-28-
3.4 SEC
Reports.
Parent
has made available to the Company (i) its Registration Statement on Form
20-F
dated January 20, 2005 (the “Parent 20-F”), and (ii) all other documents
submitted by Parent to the SEC under the Exchange Act since January 20, 2005
and
prior to the date of this Agreement (the “Parent SEC Reports”). As of their
respective dates, each of the Parent SEC Reports complied, and each document
submitted by Parent to the SEC under the Exchange Act after the execution
and
delivery of this Agreement and prior to the Effective Time (the “Post-Agreement
Parent SEC Reports”) will comply, in all material respects with applicable SEC
requirements and did not, and in the case of the Post-Agreement Parent SEC
Reports, will not, contain any untrue statement of a material fact or omit
to
state a material fact required to be stated therein or necessary to make
the
statements therein, in light of the circumstances under which they were made,
not misleading. Since January 20, 2005, Parent has timely filed and between
the
date of this Agreement and the Closing Date, Parent will file with the SEC,
all
reports required to be filed by it under the Exchange Act and has timely
lodged
or will lodge all reports required under Chapter 2M of the Corporations Act
(as
defined below) and Chapter 4 of the Listing Rules of ASX.
3.5 Financial
Statements.
The
audited consolidated financial statements contained in Parent SEC Reports
at and
for the period ended June 30, 2005 have been prepared in accordance with
the
requirements of the Corporations Act which includes applicable accounting
standards, as set forth therein, applied on a consistent basis, except as
otherwise indicated therein (all such financial statements in this section
collectively referred to herein as the “Parent Financial Statements”). The
Parent Financial Statements have been prepared from and are in accordance
with
the books and records of Parent and fairly present in all material respects
the
consolidated financial condition, results of operations and cash flows of
Parent
and its consolidated subsidiaries as of and for the periods presented
therein.
3.6 Absence
of Undisclosed Liabilities.
As of
June 30, 2005, Parent had no material liabilities of any nature, whether
accrued, absolute, contingent, or otherwise (including, without limitation,
liabilities as guarantor or otherwise with respect to obligations of others
or
liabilities for taxes due or then accrued or to become due), required to
be
reflected or disclosed in the Parent balance sheet as of June 30, 2005 (or
the
notes thereto), that were not adequately reflected or reserved against on
such
balance sheet (or disclosed in the notes thereto). Parent has no material
liabilities of the type required to be disclosed on a balance sheet (or in
the
notes thereto) other than liabilities (i) included in Parent’s balance sheet as
of June 30, 2005 (or disclosed in the notes thereto), (ii) incurred
since
June 30, 2005 in the ordinary course of business, (iii) incurred in connection
with this Agreement and the transactions contemplated hereby, or (iv) that
do
not, in the aggregate, constitute a Parent Material Adverse Effect.
-29-
3.7 Absence
of Adverse Changes.
Since
June 30, 2005, there has not been any change, event or circumstance that
constitutes a Parent Material Adverse Effect.
3.8 Compliance
With Laws.
(a) Parent
and Parent Subsidiaries have all Permits necessary to the conduct of their
businesses as presently being conducted and such Permits are in full force
and
effect and no proceeding is pending or, to the knowledge of Parent, threatened
to revoke or limit any Permit, except in each case where the failure to have
such Permit or to retain it in full force and effect would not constitute
a
Parent Material Adverse Effect.
(b) Other
than Environmental Laws and Employment Laws (which are addressed in Sections
3.16
and
3.15
respectively), Parent and each Parent Subsidiary has complied with, is not
in
violation of, and has not received any written notices of violation with
respect
to, any Applicable Law or Order, relating to the operation of Parent’s business,
except for non-compliance or violations which do not, individually or in
the
aggregate, constitute a Parent Material Adverse Effect.
(c) Parent
has disclosed or made available to the Company all material reports and
documents in the possession of Parent or any Parent Subsidiary which have
been
submitted to the Governmental Entities with regulatory jurisdiction over
the
safety and efficacy of BrachySil for inoperable primary liver cancer (the
“Parent Product”) and all material correspondence between Parent and such
Governmental Entities relating to the Parent Product.
(d) Neither
the Parent nor any Parent Subsidiary nor, to the knowledge of Parent, any
director, officer, agent, employee or other person acting on behalf of Parent,
has accepted or received any unlawful contributions, payments or gifts. Neither
the Parent nor any Parent Subsidiary, nor to the knowledge of the Parent,
any
director, officer, agent, employee or other person has, acting on behalf
of the
Parent:
(i) made
any
unlawful contributions, payments, gifts or entertainment, or
(ii) made
any
unlawful expenditures relating to political activity to government officials
or
others.
3.9 Actions
and Proceedings.
As of
the date hereof, there are no outstanding Orders of any Governmental Entity
against Parent, any Parent Subsidiary, or any of their securities, assets
or
properties. There are no actions or suits or legal, administrative or
arbitration proceedings pending or, to the knowledge of Parent, threatened
against Parent, any Parent Subsidiary, or any of their securities, assets
or
properties or their officers or directors, in their respective capacities
as
such that constitute a Parent Material Adverse Effect or would reasonably
be
expected to result in damages in excess of Fifty Thousand Dollars
($50,000).
-30-
3.10 Contracts
and Other Agreements.
(a) Parent
has filed with the Parent SEC Reports, and will with respect to such contracts
entered into after the date hereof file with the Post-Agreement Parent SEC
Reports, all contracts that are material to the business or operations of
Parent
(including its subsidiaries) and which are required to be so filed. All of
such
contracts and other agreements are, to the knowledge of Parent, (A) valid,
subsisting, in full force and effect in accordance with their respective
terms,
(B) binding upon Parent or the applicable Parent Subsidiary and (C) binding
upon
the other parties thereto in accordance with their respective terms, and
Parent
and Parent Subsidiaries have satisfied in full or provided for all of their
liabilities and obligations thereunder which are presently required to be
satisfied or provided for and are not in default under any of them, nor,
to the
knowledge of Parent, is any other party to any such contract or other agreement
in default thereunder, nor, to the knowledge of Parent, does any condition
exist
that with notice or lapse of time or both would constitute a default thereunder,
except in each case in this Section 3.10,
for
failures to pay, accrue, satisfy liabilities and obligations and conditions
which do not constitute a Parent Material Adverse Effect.
Parent
has no knowledge of any plan or intention of any counterparty to a contract
required to be listed in Section 3.10
of the
Parent Disclosure Schedule, and has not received any written threat or notice
from any such person, to terminate, cancel or otherwise materially and adversely
modify its relationship with the Parent or a Parent Subsidiary.
(b) No
Material Contract requires any consent, approval or waiver by the other parties
thereto in connection with this Agreement, the Registration Rights Agreement
or
the consummation of the transactions contemplated hereby and thereby in order
to
avoid any conflict with, any violation of, or default under (with or without
notice or lapse of time, or both), or to avoid giving rise to any right of
termination, cancellation, modification or acceleration of any obligation
or
loss of any benefit under, any contract.
3.11 Title
to Properties; Absence of Liens and Encumbrances.
(a) Parent
and Parent Subsidiaries do not own any real property nor does any of them
have
options or any contractual obligations to purchase or acquire any interest
in
real property. Section 3.11(a)
of the
Parent Disclosure Schedule lists all real property leases to which Parent
or the
Parent Subsidiaries are a party. All such leases are
(A)
valid, subsisting, in full force and effect in accordance with their respective
terms, (B) binding upon Parent or the applicable Parent Subsidiary and (C),
to
the knowledge of Parent, binding upon the other parties thereto in accordance
with their respective terms, and Parent and Parent Subsidiaries have satisfied
in full or provided for all of their liabilities and obligations thereunder
which are presently required to be satisfied or provided for and are not
in
default under any of them, nor, to the knowledge of Parent, is any other
party
to any such contract or other agreement in default thereunder, nor, to the
knowledge of Parent, does any condition exist that with notice or lapse of
time
or both would constitute a default thereunder, except in each case in this
Section 3.11,
for
failures to pay, accrue, satisfy liabilities and obligations and conditions
which do not constitute a Parent Material Adverse Effect.
(b) Parent
and Parent Subsidiaries have good and valid title to, or, in the case of
leased
properties and assets, valid leasehold interests in, all of their significant
tangible properties and assets, real, personal and mixed, used or held for
use
in its business, and such properties and assets, whether tangible or intangible
(other than Parent Technology), are free and clear of any Liens, except as
reflected in the Parent SEC Reports and except for Liens for Taxes not yet
due
and payable and such imperfections of title and encumbrances, if any, that
are
not material in character, amount or extent, and that do not materially detract
from the value, or materially interfere with the present use, of the property
subject thereto or affected thereby.
-31-
(c) The
equipment, furniture, leasehold improvements, fixtures, vehicles, any related
capitalized items and other tangible property material to the business of
Parent
and Parent Subsidiaries, in the aggregate, are in reasonably satisfactory
operating condition and repair, ordinary wear and tear excepted.
3.12 Intellectual
Property.
(a) For
the
purposes hereof:
“Parent
Intellectual Property” shall mean Intellectual Property included within the
definition of Parent Technology.
“Parent
Technology” means all Technology used in connection with the Parent Product or
in research and development activities of Parent and any Parent Subsidiary
and
all Intellectual Property in any and all such Technology that is owned by
or
exclusively licensed to Parent or any Parent Subsidiary.
(b) Section
3.12 of the Parent Disclosure Schedule contains a list of (i) all registered
trademarks, registered service marks, registered trade names, registered
copyrights, patents and patent applications pending as of the date of this
Agreement owned or licensed by Parent or a Parent Subsidiary (the “Parent
Registered Intellectual Property”), (ii) all agreements pursuant to which Parent
or a Parent Subsidiary is licensed to use any Intellectual Property owned
by a
third person other than licenses of Off-the-Shelf Software (the “Parent
In-Licenses”), and (iii) all agreements pursuant to which Parent or any Parent
Subsidiary licenses third parties to use Parent Technology (the “Parent
Out-Licenses”). Except as set forth in Section 3.12 of the Parent Disclosure
Schedule, none of the Parent Registered Intellectual Property has been
intentionally abandoned or unintentionally abandoned, and all maintenance
fees
and other required payments or actions required to maintain such Parent
Registered Intellectual Property have been timely paid and taken,
respectively.
(c) Except
as
set forth on Section 3.12 of the Parent Disclosure Schedule, (i) Parent
or
the Parent Subsidiaries own or license the Parent Intellectual Property;
and
(ii) to Parent’s knowledge, subject to the Parent Out-Licenses, Parent and the
Parent Subsidiaries have the right to use the Parent Intellectual Property,
in
each case as such Intellectual Property is currently licensed or used by
Parent
and the Parent Subsidiaries.
(d) Except
as
set forth on Section 3.12 of the Parent Disclosure Schedule, neither Parent
nor
any Parent Subsidiary has received any notice, claim, suit, inquiry or other
correspondence or information from any third party that any Parent Registered
Intellectual Property, as such Intellectual Property is used in Parent’s
business or in the business of the Parent Subsidiaries, in each case, as
it is
currently conducted (i) infringes upon the Intellectual Property rights of
any
third party or (ii) is invalid, the subject of any challenge (including,
without
limitation, ex parte or inter partes reexamination) or the rights therein
are
otherwise unenforceable (including, without limitation, by means of
interference, opposition, cancellation or other similar means). Except for
royalty obligations, if any, due under the Parent In-Licenses, to Parent’s
knowledge, Parent and the Parent Subsidiaries are not obligated to pay any
third
party any royalty on the sale of any Parent Product.
-32-
(e) Except
as
set forth on Section 3.12(e) of the Parent Disclosure Schedule, (i) to Parent’s
knowledge, there is no material unauthorized use, unauthorized disclosure,
infringement, threatened infringement or misappropriation by any third party
of
any Parent Registered Intellectual Property owned by or licensed to Parent
or
any Parent Subsidiary, including by any employee or former employee of Parent
or
the Parent Subsidiaries; and (ii) neither Parent nor the Parent Subsidiaries
has
entered into any agreement to indemnify any other person against any charge
of
infringement of the Intellectual Property of any third party, other than
indemnification provisions contained in purchase orders or other agreements
arising in the ordinary course of business.
(f) To
the
knowledge of Parent, none of the activities of the employees of Parent or
any
Parent Subsidiary on behalf of such entity violates any agreement which any
such
employees have with former employers. To Parent’s knowledge, all employees,
consultants contractors and joint developers who contributed to the discovery
or
development of any of the Parent Technology (other than Technology licensed
to
Parent or a Parent Subsidiary by any third party) did so either (a) within
the
scope of his or her employment, or (b) pursuant to written agreements assigning
or licensing all Intellectual Property developed thereunder to Parent or
a
Parent Subsidiary.
3.13 Tax
Matters.
(a) All
Tax
Returns required to be filed on or before the date hereof by or with respect
to
Parent and Parent Subsidiaries have been filed within the time and in the
manner
prescribed by law. All such Tax Returns are true, correct and complete in
all
material respects and all Taxes owed by Parent or Parent Subsidiaries, whether
or not shown on any Tax Return (including all withholding and payroll Taxes),
have been paid, except in each case where it would not have a Parent Material
Adverse Effect. Parent has not received written notice of any claim by any
taxing authority in any other jurisdiction that Parent or Parent Subsidiaries
are or may be subject to taxation by that jurisdiction.
(b) There
are
no Liens or other encumbrances with respect to Taxes upon any of the assets
or
properties of Parent or Parent Subsidiaries, other than with respect to Taxes
not yet due and payable.
(c) No
audit
is currently pending with respect to the Tax Return of Parent or the Parent
Subsidiaries, nor has Parent received any written communication from any
taxing
authority that an audit is forthcoming. No deficiency for any Taxes has been
proposed in writing against Parent or Parent Subsidiaries, which deficiency
has
not been paid in full when due and payable.
(d) There
are
no outstanding written agreements or waivers extending the statutory period
of
limitation applicable to any claim for, or the period for the collection
or
assessment of, Taxes due from or with respect to Parent or Parent Subsidiaries
for any taxable period, no power of attorney granted by or with respect to
Parent or Parent Subsidiaries relating to Taxes is currently in force, and
no
extension of time for filing any Tax Return required to be filed by or on
behalf
of Parent or any Parent Subsidiary is in force.
-33-
(e) With
respect to any period for which Tax Returns have not yet been filed, or for
which Taxes are not yet due or owing, Parent has made such accruals for such
Taxes in the Audited Financial Statements as are required by accounting
standards applicable to Parent.
(f) Neither
Parent nor the Parent Subsidiaries are, or were during the applicable period
specified in Section 897(c)(1)(A)(ii) of the Code, a United States
real
property holding corporation within the meaning of Section 897(c)(2) of the
Code.
(g) Immediately
after the Effective Time, the merger consideration received by the Company
Stockholders shall not represent more than 50% of the total voting power
of
Parent and shall not represent more than 50% of the total value of the stock
of
Parent.
(h) To
the
knowledge of Parent, immediately after the Effective Time, 50% or less of
the
total voting power of Parent and 50% or less of the total value of the stock
of
Parent is owned by United States persons that are or were either officers
or
directors of the Company or that are “five-percent target shareholders” (as such
term is defined in Treas. Reg. 1.367(a)-3(c)(5)(iii)) of the Company.
3.14 Employee
Benefit Plans.
(a) Section 3.13(f)
of the
Parent Disclosure Schedule sets forth a complete list of all material Benefit
Plans maintained by Parent or Parent Subsidiaries or to which Parent or any
of
Parent Subsidiaries is a party or is required to contribute.
(b) Each
Benefit Plan maintained by Parent or a Parent Subsidiary has been administered
in all material respects in accordance with the terms of such Benefit Plan
and
the provisions of any Applicable Law. All contributions, and premiums and
other
amounts due to or in connection with each Benefit Plan under the terms of
the
Benefit Plan or applicable law have been timely made except for any failure
or
failures which do not constitute a Parent Material Adverse Effect.
(c) No
Parent
Benefit Plan has any unfunded benefit liabilities, and there is no accumulated
funding deficiency (whether or not waived) under such Benefit Plan.
(d) Except
for continuation of health coverage to the extent required under Applicable
Law
or as otherwise set forth in this Agreement, there are no obligations under
any
Benefit Plan providing medical or life insurance benefits after termination
of
employment.
(e) Except
as
provided under the terms of a Parent Benefit Plan, no current or former employee
of Parent will become entitled to any bonus, retirement, severance, job security
or similar benefit or enhanced benefit (including acceleration of vesting
or
exercise of any equity incentive award) as a result of this Agreement or
the
transactions contemplated hereby.
-34-
3.15 Employee
Relations.
(a) As
of the
date of this Agreement, Parent and Parent Subsidiaries, collectively, have
approximately thirty-six (36) full-time
equivalent employees. Parent generally enjoys good employer-employee relations.
Neither Parent nor any Parent Subsidiary is delinquent in payments to any
of its
employees or consultants for any wages, salaries, commissions, bonuses or
other
direct compensation for any services performed by them or amounts required
to be
reimbursed to such employees.
(b) Parent
and each Parent Subsidiary (i) is in compliance in all material respects
with
all applicable foreign, federal, state and local laws, rules and regulations
respecting employment, employment practices, terms and conditions of employment
and wages and hours, in each case, with respect to employees, (ii) has withheld
all amounts required by law or by agreement to be withheld from the wages,
salaries and other payments to employees, (iii) is not liable for any arrears
of
wages or any taxes or any penalty for failure to comply with any of the
foregoing, and (iv) is not liable for any payment to any trust or other fund
or
to any Governmental Entity, with respect to unemployment compensation benefits,
social security or other benefits or obligations for employees (other than
routine payments to be made in the ordinary course of business consistent
with
past practice).
(c) No
work
stoppage or labor strike against Parent or any Parent Subsidiary is pending
or,
to the knowledge of Parent, threatened. Neither Parent nor any Parent Subsidiary
is involved in or, to the knowledge of Parent, threatened with, any labor
dispute, grievance, or litigation relating to labor, safety or discrimination
matters involving any employee, including without limitation charges of unfair
labor practices or discrimination complaints, that, if adversely determined,
would constitute a Parent Material Adverse Effect. Neither Parent nor any
Parent
Subsidiary has engaged in any unfair labor practices within the meaning of
the
National Labor Relations Act that would, directly or indirectly result in
liability to Parent.
3.16 Environmental
Matters.
(a) Neither
Parent nor any of Parent Subsidiaries has violated, is in violation of, or
has
been notified that it is in violation of, Environmental Laws, and except
in
compliance with Environmental Laws, neither Parent nor any of Parent
Subsidiaries has generated, used, handled, transported or stored any Hazardous
Materials or shipped any Hazardous Materials for treatment, storage or disposal
at any other site or facility, except for violations and non-compliance which
does not constitute a Parent Material Adverse Effect. There has been no
generation, use, handling, storage or disposal of any Hazardous Materials
in
material violation of any Environmental Laws at any site owned or operated
by,
or premises leased by, Parent or any of Parent Subsidiaries during the period
of
Parent’s or such Parent Subsidiary’s ownership, operation or lease, nor has
there been or is there threatened any material Release of any Environmental
Contaminants into, on, at or from any such site or premises, including without
limitation into the ambient air, groundwater, surface water, soils or subsurface
strata, during such period in material violation of any Environmental Laws
or
which created or will create an obligation to report or respond in any way
to
such Release. To Parent’s knowledge, there is no underground storage tank or any
condition at or under any site owned or operated by, or on any site formerly
owned or operated by, Parent or any Parent Subsidiary that is reasonably
anticipated to result in material liability under Environmental
Law.
-35-
(b) Neither
Parent nor any Parent Subsidiary has received notification in any form that,
and
Parent has no knowledge that, any site currently or formerly owned or operated
by, or premises currently or formerly leased by, Parent or any Parent Subsidiary
is the subject of any federal, state or local civil, criminal or administrative
investigation evaluating whether, or alleging that, any action is necessary
to
respond to a Release or a threatened Release of any Environmental Contaminant.
No such site or premises is listed, or to Parent’s knowledge, proposed for
listing, on the National Priorities List or the Comprehensive Environmental
Response, Compensation, and Liability Information System, both as provided
under
CERCLA, or any comparable state, local or foreign governmental lists. Neither
Parent nor any Parent Subsidiary has received written notification of, and
Parent has no knowledge of, any potential responsibility of Parent or any
Parent
Subsidiary pursuant to the provisions of (i) CERCLA, (ii) any similar federal,
state, local or other Environmental Laws, or (iii) any Order issued pursuant
to
the provisions of any such Environmental Laws with respect to any Environmental
Contaminant used, manufactured, generated, stored, or treated at, transported
from, or disposed of on, any site currently or formerly owned or operated
by, or
premises currently or formerly leased by, Parent or any Parent Subsidiary.
(c) Parent
and Parent Subsidiaries have obtained all Permits required by Environmental
Laws
necessary to enable them to conduct their respective businesses and are in
compliance with said Permits in all material aspects.
(d) There
is
no environmental or health and safety matter that constitutes a Parent Material
Adverse Effect. Section 2.17(d)
of the
Parent Disclosure Schedule contains a list of any and all environmental audits
or risk assessments and site assessments and all other material correspondence,
documents or communications with any Governmental Entity regarding the
foregoing. Parent has previously furnished or made available to the Company
copies of documentation related to items described in the prior
sentence.
3.17 No
Breach.
Except
for the filing of the Certificate of Merger with the Secretary of State of
Delaware, the Parent Stockholder Approval, the provision to ASX and to the
Australian Securities Investments Commission of a draft and a final version
of
the notice of meeting to be prepared in accordance with Section 5.1(b),
the
application for quotation to ASX to be made in accordance with Section
5.15(a),
the
execution, delivery and performance of this Agreement by ▇▇▇▇▇▇ and Merger
Sub
and consummation by each of them of the transactions contemplated hereby
will
not (i) violate any provision of the charter or bylaws of Parent or Merger
Sub,
(ii) violate, conflict with or result in the breach of any of the terms or
conditions of, result in modification of, or otherwise give any other
contracting party the right to terminate, accelerate obligations under or
receive payment under or constitute (or with notice or lapse of time or both
constitute) a default under, any instrument, contract or other agreement
to
which Parent, Merger Sub or any Parent Subsidiary is a party or to which
any of
them or any of their assets or properties is bound or subject, which would
constitute a Parent Material Adverse Effect, (iii) violate any Applicable
Law or
Order of any Governmental Entity applicable to Parent, Merger Sub or any
Parent
Subsidiary or by which any of their assets or properties are bound, (iv)
require
any filing with, notice to, or permit, consent or approval of, any Governmental
Entity, or (v) result in the creation of any Lien or other encumbrance on
the
assets of properties of Parent, Merger Sub or any Parent
Subsidiary.
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3.18 Brokers’
and Finders’ Fees; Third Party Expenses.
Except
as set forth in Section 3.18 of the Parent Disclosure Schedule, no broker,
finder, agent or similar intermediary has acted on behalf of Parent in
connection with this Agreement or the transactions contemplated hereby, and
Parent and Parent Subsidiaries have not incurred, nor will they incur, directly
or indirectly, any liability for brokerage or finders’ fees or agents’
commissions or any similar charges in connection with this Agreement, or
the
Registration Rights Agreement or any transaction contemplated hereby or
thereby.
3.19 Board
Approval.
(a) As
of the
date of this Agreement, the Board of Directors of the Parent has
unanimously (i)
approved and declared the advisability of this Agreement, the Registration
Rights Agreement and the transactions contemplated hereby and thereby and
(ii)
determined to recommend that the Parent stockholders approve the issuance
of
shares of Parent ADSs in the Merger. Parent has taken all action necessary
such
that no “fair price,”“control share acquisition,”“business combination” or
similar statute will apply to the execution, delivery or performance of this
Agreement.
3.20 Information
Provided.
None of
the information supplied by the Parent and the Parent Subsidiaries for inclusion
in the Regulation D Information Statement will, as of the date of the Regulation
D Information Statement or the Effective Time, contain any untrue statement
of a
material fact or omit to state any material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. None of the information supplied by Parent and the Parent
Subsidiaries for inclusion in the Stockholder Approval Information Statement
(as
defined below) will, as of the date of the Stockholder Approval Information
Statement or the date of the Parent Stockholder Meeting, contain any untrue
statement of a material fact or omit to state any material fact necessary
to
make the statements therein, in light of the circumstances under which they
were
made, not misleading.
3.21 Rule
506 Compliance.
The
Parent has not offered the Parent ADSs by any form of general solicitation
or
general advertising in violation of Rule 506.
3.22 Interim
Operations of Merger Sub.
Merger
Sub was formed solely for the purpose of engaging in the transactions
contemplated by this Agreement, has engaged in no other business activities
and
has conducted its operations only as contemplated by this
Agreement.
ARTICLE
IV
CONDUCT
PRIOR TO THE EFFECTIVE TIME
4.1 Conduct
of Business of the Company.
During
the period from the date of this Agreement and continuing until the earlier
of
the termination of this Agreement pursuant to Section 7.1
and the
Effective Time, except as expressly required by this Agreement or otherwise
agreed to by Parent in writing (not to be unreasonably withheld, conditioned
or
delayed), the Company agrees:
-37-
(a) to
carry
on its business and pay its debts in the usual, regular and ordinary course
in
substantially the same manner as heretofore conducted and, in any event,
consistent with past practices;
(b) to
timely
pay its material Taxes and to timely file all material Tax Returns when
due;
and
(c) use
its
commercially reasonable efforts to preserve intact the Company’s current
business organizations, keep available the services of its Key Employees
and
preserve its relationships with customers, suppliers, distributors, licensors,
licensees and others having business dealings with it;
in
each
case with the goal of preserving unimpaired the Company’s goodwill and ongoing
business through the Effective Time. The Company shall promptly notify Parent
of
any event or occurrence or emergency not in the ordinary course of business
consistent with past practice, and any material event involving the Company.
4.2 Company
Negative Covenants.
Except
as set forth on Section 4.2
of the
Company Disclosure Schedule, during the period from the date hereof and
continuing until the earlier of the termination of this Agreement pursuant
to
Section 7.1
and the
Effective Time, the Company shall not, except as expressly contemplated by
this
Agreement, as set forth on Section 4.2 of the Company Disclosure Schedule,
or
with the prior written consent of Parent, which consent may not be unreasonably
withheld, delayed or conditioned:
(a) enter
into any commitment or transaction not in the ordinary course of business
consistent with past practice or any Material Contract;
(b) sell,
transfer, license (other than pursuant to a material transfer agreement or
technology evaluation agreement), abandon, let lapse, disclose (except in
the
ordinary course of business consistent with past practice), diminish, destroy
or
otherwise dispose of or encumber the Company Intellectual Property and
Technology in any manner;
(c) amend
or
otherwise modify, or fail to comply in all material respects with, any Material
Contract;
(d) commence
(other than litigation to defend or enforce Company Intellectual Property
or
seeking emergency equitable relief) or settle any litigation, action or claim,
other than a settlement that would not exceed Twenty-Five Thousand Dollars
($25,000) in cost, liability or value to the Company or result in material
continuing obligations or restrictions applicable to the Company;
(e) declare
or pay any dividends on or make any other distributions (whether in cash,
stock
or property) in respect of any of its capital stock or other
securities;
(f) split,
combine or reclassify any of its capital stock or other securities;
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(g) except
for the issuance of shares of Company Common Stock upon exercise or conversion
of Company Options or Company Preferred Stock outstanding as of the date
hereof,
(i) issue, deliver or sell, or authorize or propose the issuance,
delivery
or sale of, or (ii) purchase or propose the purchase of, any shares
of its
capital stock or securities convertible into, or subscriptions, rights, warrants
or options to acquire its capital stock, or enter into any agreement or
commitment of any character obligating it to sell or issue any such shares
or
other convertible securities;
(h) amend
the
Certificate of Incorporation or Bylaws of the Company;
(i) acquire
any business or any corporation, partnership, association or other business
organization or division thereof by merging or consolidating with, or by
purchasing a substantial portion of the assets of any such person, or by
any
other manner;
(j) acquire
any asset in excess of Ten Thousand Dollars ($10,000) or assets in excess
of
Twenty-Five Thousand Dollars ($25,000) in the aggregate, other than leasehold
improvements to construct office space in an amount not in excess of ($50,000)
and in the ordinary course of business consistent with past
practice;
(k) sell,
lease, license or otherwise transfer or dispose of any of its properties
or
assets with a value greater than Five Thousand Dollars ($5,000) individually
or
Twenty-Five Thousand Dollars ($25,000) in the aggregate, or cause or fail
to use
its commercially reasonable efforts to prevent the termination or lapse of
any
material leases or licenses with respect to any of its leased or licensed
properties or assets, except in the ordinary course of business consistent
with
past practice;
(l) incur
any
indebtedness for borrowed money or sell or issue any debt securities of the
Company, or guarantee or agree to act as a surety for any such indebtedness
or
debt securities of the Company or others;
(m) (A)
adopt
any new severance, termination, indemnification or other policies, agreements
or
arrangements to provide severance or termination pay, (B) grant or amend
any
existing such policy, agreement or arrangement or (C) provide any severance
pay,
except severance payments made pursuant to policies, agreements or arrangements
disclosed on the Company Disclosure Schedule or as required by Applicable
Law;
(n) (A)
adopt
or amend any Benefit Plan, (B) enter into any employment contract with, or
pay
any special bonus or special remuneration to, any director, officer or employee,
or (C) increase the salaries or wage rates, or fringe benefits of any such
persons (including the modification of any existing compensation or equity
arrangements with such individuals or the change of vesting terms of any
Company
Options), except pursuant to policies, agreements or arrangements outstanding
on
the date hereof which are disclosed on the Company Disclosure
Schedule;
(o) expressly
waive any stock purchase rights prior to their expiration;
(p) accelerate,
amend or otherwise modify the terms of any outstanding Company Options or
reprice or replace Company Options or authorize cash payments in exchange
for
any Company Options;
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(q) revalue
any Company assets or properties, including writing down the value of inventory
or writing off notes or accounts receivable, except as required by
GAAP;
(r) except
as
would not be prohibited by Section 4.2(d)
hereof,
pay, discharge or satisfy any claim, liability or obligation (whether absolute,
accrued, asserted or unasserted, contingent or otherwise) in an amount in
excess
of Twenty-Five Thousand Dollars ($25,000) (in any one case) or Fifty Thousand
Dollars ($50,000) (in the aggregate), other than the payment, discharge or
satisfaction in the ordinary course of business consistent with past practice,
of liabilities reflected or reserved against in the Company Financial Statements
(or the notes thereto) or incurred in the ordinary course of business since
December 31, 2004 or disclosed on the Company Disclosure Schedule;
(s) except
as
required by Applicable Law, make or change any material election in respect
of
Taxes, file an amended Tax Return or claim for refund of Taxes, adopt or
change
any accounting method in respect of Taxes, enter into any agreement with
respect
to Taxes with any Governmental Entity, settle any claim or assessment in
respect
of Taxes, or consent to any extension or waiver of the limitation period
applicable to any claim or assessment in respect of Taxes; or
(t) take,
or
agree to take any of the actions described above, or any other action that
would
constitute a Company Material Adverse Effect.
4.3 Conduct
of Business of Parent and Parent Subsidiaries.
During
the period from the date of this Agreement and continuing until the earlier
of
the termination of this Agreement pursuant to Section 7.1
and the
Effective Time, except as expressly required by this Agreement or otherwise
agreed to by the Company in writing (not to be unreasonably withheld,
conditioned or delayed), Parent agrees:
(a) to
carry
on its business and pay its debts in the usual, regular and ordinary course
in
substantially the same manner as heretofore conducted and, in any event,
consistent with past practices;
(b) to
timely
file all Tax Returns when due; and
(c) use
its
commercially reasonable efforts to preserve intact the Parent’s and the Parent
Subsidiaries’ current business organizations, keep available the services of its
key employees and preserve its relationships with customers, suppliers,
distributors, licensors, licensees and others having business dealings with
it;
in
each
case with the goal of preserving unimpaired the Parent’s and the Parent
Subsidiaries’ goodwill and ongoing businesses through the Effective Time. The
Parent shall promptly notify the Company of any event or occurrence or emergency
not in the ordinary course of business consistent with past practice, and
any
material event involving the Parent.
4.4 Parent
Negative Covenants.
Except
as
set forth on Section 4.4
of the
Parent Disclosure Schedule, during the period from the date hereof and
continuing until the earlier of the termination of this Agreement pursuant
to
Section 7.1
and the
Effective Time, the Parent shall not and shall cause the Parent Subsidiaries
not
to, except as expressly contemplated by this Agreement, as set forth in Section
4.4 of the Parent Disclosure Schedule or with the prior written consent of
the
Company, which consent may not be unreasonably withheld, delayed or
conditioned:
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(a) sell,
transfer, license or otherwise dispose of or encumber the Parent Registered
Intellectual Property;
(b) issue
any
securities other than grants of options to purchase Parent common stock in
the
ordinary course of business or upon the exercise of convertible securities
outstanding on the date of this agreement or described in Section 3.3
of the
Parent Disclosure Schedule;
(c) acquire
any business, line of business or any corporation, partnership, association
or
other business organization or division thereof by merging or consolidating
with, or by purchasing a substantial portion of the assets of any such person,
or by any other manner, but only if such acquisition would require the approval
of Parent’s shareholders;
(d) declare
or pay any dividends on or make any other distributions (whether in cash,
stock
or property) in respect of any of its capital stock or other securities;
or
split, combine or reclassify any of its capital stock or other securities;
or,
issue or authorize the issuance of any other securities in respect of, in
lieu
of or in substitution for, shares of capital stock or other securities of
Parent; or
(e) agree
in
writing to take any of the foregoing actions.
4.5 No
Solicitation.
Until
the earlier of the termination of this Agreement pursuant to
Section 7.1
and the
Effective Time, the Company will not, nor will the Company permit, authorize
or
encourage any of the Company’s officers, directors, agents or representatives
(any of the foregoing, a “Company Representative”) to, directly or indirectly,
take any of the following actions with any party other than Parent and its
designees:
(a) solicit,
initiate, or knowingly encourage any proposals or offers from, or conduct
discussions or engage in negotiations with, any person other than Parent
and its
designees relating to any possible acquisition of the Company (whether by
way of
merger, purchase of capital stock or any material portion of assets or
otherwise), any portion of the Company’s capital stock or assets or any equity
interest in the Company (an “Acquisition”);
(b) provide
information with respect to the Company or its business to any person other
than
Parent and its designees, relating to a possible Acquisition or otherwise
cooperate with, facilitate or encourage any effort or attempt by any such
person
in connection with any possible Acquisition;
(c) enter
into any agreement or understanding with any person other than Parent and
its
designees, providing for any Acquisition; or
(d) make
or
authorize any statement, recommendation or solicitation in support of any
possible Acquisition by any person other than Parent and its
designees.
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The
Company shall immediately cease and cause to be terminated any such contacts,
negotiations or activities with third parties relating to any such transaction
or proposed transaction. In addition to the foregoing, if the Company, or
to the
knowledge of the Company, any Company Representative, receives any offer
or
proposal relating to any such transaction or proposed transaction at any
time
prior to the earlier of the Effective Time or the termination of this Agreement,
the Company immediately shall notify Parent thereof and provide Parent with
information as to the identity of the offeror(s) making any such offer or
proposal and the specific terms of such offer or proposal, as the case may
be,
and such other information related thereto as Parent may reasonably request.
ARTICLE
V
ADDITIONAL
AGREEMENTS
5.1 Information
Statements.
(a) Regulation
D Information Statement.
Each of
Parent and the Company shall each use their reasonable best efforts (provided,
however, that Parent shall not for any such purpose be required to qualify
to
transact business as a foreign corporation in any jurisdiction where it is
not
so qualified or to consent to general service of process in any such
jurisdiction) such that the issuance of Parent ADSs to Company Stockholders
in
the Merger constitutes a valid “private placement” under the Securities Act in
accordance with Rule 506 under Regulation D, including, without limitation,
the following:
(i) Parent
will prepare and the Company will assist in the preparation of the Regulation
D
Information Statement in connection with the Merger in accordance with
Regulation D, Delaware Law and the laws of the Commonwealth of Australia,
and
the Parent shall provide the Regulation D Information Statement to the Company
Stockholders a reasonable time prior to the Closing Date. The Company and
Parent
and the Parent Subsidiaries will furnish all information concerning the Company
and Parent and the Parent Subsidiaries, respectively, as may be reasonably
necessary in connection with the foregoing. If either Parent or the Company
becomes aware prior to the Effective Time of any information furnished by
it
(including the Parent Subsidiaries in the case of Parent) that would cause
any
of the statements in the Regulation D Information Statement to be false or
misleading with respect to any material fact, or to omit to state any material
fact necessary to make the statements therein not false or misleading, it
will
promptly inform the other party thereof, and Parent will take the necessary
steps to correct the Information Statement.
(ii) The
Company shall provide Parent with the information in its possession relevant
to
determining whether a Company Stockholder is a “purchaser” as defined in Rule
501 of Regulation D. The Company will retain a purchaser representative to
assist and advise each Company Stockholder who is not an “accredited investor”
as defined in Rule 501 of Regulation D to assist each such Company Stockholder
in evaluating the Regulation D Information Statement, the Merger and the
merits
and risks of receiving Parent ADSs in the Merger.
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(b) Stockholder
Approval Information Statement.
As soon
as practicable following the date of this Agreement, Parent shall prepare
(i) a
notice in accordance with the Corporations Act 2001 (Cth) (the "Corporations
Act"), the Listing Rules of ASX and Parent’s constitution convening a meeting,
which may be Parent’s pre-scheduled annual meeting, of its members to approve
the issue of Parent ADSs and options to acquire parent ADSs as set out in
Section 6.1(c) and for all other purposes as Parent shall determine necessary
or
desirable and (ii) an information memorandum containing the information required
to be included therein by the Corporations Act, the Listing Rules of ASX
and
Parent’s constitution (the "Stockholder Approval Information Statement"). Parent
shall prepare the Stockholder Approval Information Statement in a manner,
and
shall ensure that it contains such information, as is required to comply
with
the Corporations Act and Listing Rules of ASX, including without limitation,
ASX
Listing Rule 7.3. Parent shall include in the Stockholder Approval Information
Statement an explanatory statement as required by and in compliance with
the
Corporations Act and such other documents as may by law be required in
connection with the issuance of Parent Ordinary Shares and the other
transactions contemplated by this Agreement and the Registration Rights
Agreement. Parent will provide the Company with a draft of the Stockholder
Approval Information Statement and make such changes to the Stockholder Approval
Information Statement as the Company reasonably requests and Parent reasonably
agrees. Parent shall distribute the Stockholder Approval Information Statement
to its stockholders as promptly as practicable in accordance with the
Corporations Act and Listing Rules of ASX and, if required by law, after
the
Stockholder Information Statement shall have been so mailed, promptly circulate
supplemental or amended material, and, if required in connection therewith,
resolicit proxies.
The
Company shall provide such assistance to the Parent and the independent
financial expert engaged by Parent to prepare an opinion on the fairness
and
reasonableness of the transactions contemplated by this Agreement to Parent’s
stockholders as the Parent or such financial expert reasonably requests in
connection with the preparation of the Stockholder Approval Information
Statement.
5.2 Parent
Shareholder Meeting.
(a) Parent
shall, as soon as practicable following the date of this Agreement, and as
set
forth in the notice referred to in Section 5.1(b)(i), convene and hold the
Parent Stockholder Meeting. The Parent Board of Directors, except as otherwise
permitted in this Section 5.2,
shall
give its unqualified recommendation that Parent’s stockholders approve the
issuance of Parent ADSs in the Merger. Unless the Parent Board of Directors
has
withdrawn, modified, changed or qualified its recommendation that Parent’s
stockholders approve the issuance of Parent ADSs in the Merger, Parent shall
use
reasonable best efforts to solicit sufficient proxies for such approval.
Notwithstanding the foregoing, at any time prior to the receipt of the Parent
Stockholder Approval, if the Parent Board of Directors, in the exercise of
its
duties to the stockholders of Parent, determines in good faith by a majority
vote, after consultation with its outside counsel, that it cannot provide
an
unqualified recommendation or must withdraw, modify, change or qualify its
recommendation that Parent’s stockholders approve the issuance of Parent ADSs in
the Merger (a “Parent Adverse Recommendation Change”) in order to comply with
its duties to the stockholders of Parent under Applicable Law or any Order,
the
Parent Board of Directors may make a Parent Adverse Recommendation Change
after,
if permitted under Applicable Law, providing Company with at least 24 hours
prior notice of its determination and a reasonably detailed description of
the
reasons therefor. No Parent Adverse Recommendation Change shall change the
obligation of Parent to convene and hold the Parent Stockholders Meeting
or to
permit Parent stockholders to authorize the issuance of shares of Parent
ADSs in
the Merger at the Parent Stockholders Meeting.
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5.3 Access
to Information; Cooperation.
(a) Audit.
The
Company shall and shall use its reasonable best efforts to cause its affiliates,
officers, employees, auditors and other representatives to cooperate with
and
assist Parent, as Parent may reasonably request, to enable Parent to prepare
and
submit to the SEC, in connection with the Merger, a Current Report on Form
6-K
and any additional amendments or supplements thereto required by or deemed
by
Parent to be desirable pursuant to the Exchange Act and the rules and
regulations promulgated thereunder. The Company shall use its reasonable
best
efforts to cause its auditors to deliver any opinions or consents necessary
for
Parent to file the Company’s financial statements with the SEC, and shall take
such actions, and shall use its reasonable best efforts to cause its auditors
to
take such actions to prepare and complete an audit for the fiscal year ended
December 31, 2004 and such statements and reports as Parent reasonably requires
as of and for the year ended June 30, 2005, and the Company shall cause its
auditors to deliver any opinions or consents necessary for Parent to file
such
financial statements audited or otherwise and pro forma financial statements
for
the fiscal year ended June 30, 2005 with the SEC. Any financial statements
of
the Company prepared pursuant to this paragraph shall be prepared in accordance
with GAAP and otherwise in accordance with the requirements of the Exchange
Act
and the rules and regulations promulgated thereunder.
(b) General
Access.
The
Company shall cooperate with and afford Parent and its accountants, counsel
and
other representatives reasonable access, upon reasonable advance notice,
during
normal business hours during the period prior to the Effective Time to
(i) all of the Company’s properties, books, contracts, commitments and
records and (ii) all other information concerning the business, properties
and personnel of Company as Parent reasonably may request in conducting its
business, accounting and legal review and investigation of the Company. The
Company agrees to provide to Parent and its accountants, counsel and other
representatives copies of internal financial statements and any related work
papers and supporting documentation promptly upon request. No information
or
knowledge obtained in any investigation pursuant to this
Section 5.3
or
otherwise shall affect or be deemed to modify any representation or warranty
contained herein or the conditions to the obligations of the parties to
consummate the Merger and the other transactions contemplated hereby and
thereby. In addition, the Company shall, and agrees to use commercial reasonable
efforts to cause its appropriate officers and other personnel to, execute
and
deliver such documents and instruments as may be reasonably requested by
Parent
or required by third party accountants and auditors in connection with the
matters contemplated by this Section 5.3(a),
including any work papers, documents, books, record, certifications or reliance
representation letters requested by the accounting firm, auditors or other
persons engaged to conduct an audit of the Company’s financial books and records
as of and for each of the three years ended December 31, 2004 (the “Audit”). The
Company agrees that it shall bear all of the fees, costs and expenses incurred
in connection with the Audit.
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(c) Information
Technology Access.
To
facilitate prompt integration of the Company’s information technology (“IT”)
inventory (e.g., voice and data network services and software and hardware,
licenses, financial/accounting software, IT budgets, etc.) with Parent’s IT
following the Closing, the Company will provide Parent and its agents, employees
and representatives reasonable access, upon reasonable advance notice during
normal business hours from the date hereof through the Effective Time, to
the
Company’s IT inventory and the Company’s personnel responsible for such IT
inventory.
5.4 Confidentiality.
Each
of
the parties hereto hereby agrees that the information obtained in any
investigation or disclosure pursuant to Section 5.3,
or
pursuant to the negotiation and execution of this Agreement or the effectuation
of the transaction contemplated hereby shall be governed by the terms of
the
Mutual Non-Disclosure Agreement effective as of May 9, 2005 between the Company
and Parent (the “Non-Disclosure Agreement”). Notwithstanding the foregoing, the
parties may disclose to any and all persons, without limitation, the tax
treatment and tax structure of, and strategies relating to, the transactions
contemplated by this Agreement and all materials of any kind (including opinions
or other tax analyses) that are provided to any of the parties relating to
such
tax treatment, tax structure or tax strategies.
5.5 Public
Disclosure.
Other
than the Regulation D Information Statement, the Stockholder Approval
Information Statement and as otherwise required by law, no disclosure (whether
or not in response to an inquiry) of the subject matter of this Agreement
shall
be made by the Company or any of its directors, officers, stockholders,
employees, agents, consultants, advisors or other representatives without
the
prior written consent of Parent and the Company. The parties acknowledge
and
agree that it is their mutual intent to issue a joint press release announcing
the transaction and to that end will in good faith agree to mutually acceptable
text for such press release. Between the date hereof and the earlier of the
Termination Date or the Effective Time, to the extent that Parent issues
a press
release principally concerning the execution of this Agreement or the
transactions contemplated hereby, unless otherwise required by law, Parent
shall
obtain the prior approval of such release by the Company, such approval not
to
be unreasonably withheld
5.6 Reasonable
Efforts.
(a) Subject
to the terms and conditions provided in this Agreement and any other standards
applicable to specific obligations or actions contemplated hereby, each of
the
parties hereto shall use its reasonable best efforts to take promptly, or
cause
to be taken, all actions, and to do promptly, or cause to be done, all things
necessary, proper or advisable under Applicable Law to consummate the
transactions contemplated hereby, to obtain all necessary waivers, consents
and
approvals, to effect all necessary registrations and filings and to remove
any
injunctions or other legal or other impediments or delays, in order to
consummate the transactions contemplated by this Agreement or the Registration
Rights Agreement and secure to the parties hereto the benefits contemplated
hereby and thereby.
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(b) Promptly
after the date of this Agreement, each of Parent and the Company will prepare
and file pre-merger notification forms required by the merger notification
or
control laws and regulations of any applicable jurisdiction, as agreed to
by the
parties. Parent and the Company each shall promptly supply the other with
any
information which may be required in order to effectuate any required filings
pursuant to this Section 5.6.
Each of
Parent and the Company shall, in connection with the efforts referenced in
this
Section 5.6
to
obtain all requisite approvals and authorizations for the transactions
contemplated by this Agreement, use its commercially reasonable efforts to
(i) cooperate in all respects with each other in connection with any
filing
or submission and in connection with any investigation or other inquiry,
including any proceeding initiated by a private party; (ii) keep the
other
party informed of any material communication received by such party from,
or
given by such party to, any other governmental authority and of any material
communication received or given in connection with any proceeding by a private
party, in each case regarding any of the transactions contemplated hereby;
and
(iii) permit the other party to review any material communication
given by
it to, and consult with each other in advance of any meeting or conference
with,
or any such other governmental authority or, in connection with any proceeding
by a private party, with any other person.
(c) Notwithstanding
anything to the contrary herein, Parent shall not be required to agree to
any
divestiture by Parent, the Company or any of Parent’s or the Company’s
subsidiaries or affiliates of shares of capital stock or any business, assets
or
property, or the imposition of any limitation on the ability of any such
persons
to conduct their respective businesses or to own or exercise control of such
assets, properties and stock either prior to or following the
Merger.
5.7 Notification
of Certain Matters.
(a) General
Notices.
The
Company shall give prompt notice to Parent of the occurrence or non-occurrence
of any event, the occurrence or non-occurrence of which is reasonably likely
to
cause any representation or warranty of the Company contained in this Agreement
to be untrue or inaccurate in any material respect at or prior to the Effective
Time or any failure of the Company to comply with or satisfy in any material
respect any covenant, condition or agreement to be complied with or satisfied
by
the Company hereunder or a condition set forth in Section 6.1
or
Section 6.3
to fail
to be met. Parent shall give prompt notice to the Company of the occurrence
or
non-occurrence of any event, the occurrence or non-occurrence of which is
reasonably likely to cause any representation or warranty of Parent contained
in
this Agreement to be untrue or inaccurate in any material respect at or prior
to
the Effective Time or any failure of Parent to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder or a condition set forth in Section 6.1
or
Section 6.2
to fail
to be met. Notwithstanding the foregoing, the delivery of any notice pursuant
to
this Section 5.7
shall
not act as a waiver of or limit or otherwise affect any remedies available
to
the party receiving such notice by virtue of the events or circumstances
referenced in such notice.
(b) Intellectual
Property Notices; IP Assignments.
(i) Each
of
the Company and Parent shall give the other prompt notice if any third person
shall have (A) commenced, or shall have notified such party that it
intends
to commence, an action or proceeding or (B) provided such party with
notice, in either case, which allege(s) that any of such party’s
Intellectual Property or Technology currently embodied, or proposed to be
embodied, in the current and proposed products of such party or utilized
in such
party’s research and development activities (X) infringes or otherwise violates
the intellectual property rights of such third person, (Y) is available
for
licensing from a potential licensor providing the notice or (Z) such
party
does not otherwise own or have the right to use and exploit such party’s
Intellectual Property or Technology.
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(ii) Except
as
set forth on Schedule 4.2,
the
Company shall use all commercially reasonable efforts to maintain, perfect,
preserve or renew the Company Registered Intellectual Property, and Parent
shall
use all commercially reasonable efforts to maintain, perfect, preserve or
renew
the Parent Registered Intellectual Property through the Effective Time,
including the payment of any registration, maintenance, renewal fees, annuity
fees and taxes or the filing of any documents, applications or certificates
related thereto, and to promptly respond and prepare to respond to all requests,
related to such intellectual property, received from Governmental
Entities.
(iii) At
the
Closing, the Company will notify Parent of all actions which must be taken
within the one hundred eighty (180) days following the Closing Date and which
are necessary to maintain, perfect, preserve or renew any Company Registered
Intellectual Property (and applications or registrations with respect to
the
same), including the payment of any registration, maintenance, renewal fees,
annuity fees and taxes or the filing of any documents, applications
or
certificates related thereto.
(c) Section
228 Notice; Notice of Termination of Stockholders Agreement.
Following the adoption of this Agreement by the Company Stockholders by less
than unanimous written consent, the Company shall provide prompt notice of
such
action as required by Section 228(e) of the DGCL. Following the termination
of
the Stockholders Agreement pursuant to Section 9.4 of the Stockholders
Agreement, the Company shall deliver written notice of the taking of such
action
to each party to the Stockholders Agreement who has not consented in writing
to
the taking of such action.
5.8 Other
Covenants.
(a) Third
Party Expenses.
The
Company shall use commercially reasonable efforts to cause all Third Party
Expenses (as defined in Section 7.3)
to be
invoiced on or prior to the Closing Date.
(b) Updates
to Capitalization.
At the
Closing, the Company shall deliver an updated copy of Section 2.3(a)
of the
Company Disclosure Schedule current as of the Closing Date.
(c) Copies
of Board and Stockholder Actions.
At
least four (4) business days prior to the Closing Date, (i) the Company shall
provide Parent copies of all minutes of any meetings, and actions by written
consent, of the Board of Directors of the Company which have not previously
been
provided and a written record of the proceedings of any meetings or actions
by
written consent of the Company Stockholders and any subsidiaries thereof,
which
transpire or are executed after the date hereof and prior to the Effective
Time
and (ii) Parent shall provide Company copies of all minutes of any meetings,
and
actions by written consent, of the Board of Directors of Parent which have
not
previously been provided and a written record of the proceedings of any meetings
or actions by written consent of the stockholders of Parent and any subsidiaries
thereof, which transpire or are executed after the date hereof and prior
to the
Effective Time.
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5.9 Registration
Rights.
At the
Closing, Parent shall enter into a Registration Rights Agreement with Company
Stockholders in substantially the form of Exhibit
C
hereto
(the “Registration Rights Agreement”).
5.10 Indemnification
Provisions.
(a) From
and
after the Effective Time, the Surviving Corporation will fulfill and honor
the
obligations of the Company to its directors pursuant to the indemnification
provisions set forth in the Company’s Certificate of Incorporation and Bylaws,
as in effect on the date hereof.
(b) The
Certificate of Incorporation and Bylaws of the Surviving Corporation or any
successor shall contain provisions that are no less favorable with respect
to
indemnification, advancement of expenses and exculpation of former or present
directors and officers as are set forth in the Company’s Certificate of
Incorporation and Bylaws as of the date of this Agreement.
(c) The
Company may purchase a run-off (i.e., “tail”) policy or endorsement with respect
to its two policies of directors’ and officers’ liability insurance covering
claims asserted within six years after the Effective Time arising from facts
or
events that occurred at or before the Effective Time (including consummation
of
the Merger); and such policies or endorsements shall name as insureds thereunder
all people entitled to coverage under the Company’s two policies of directors’
and officers’ liability insurance on the date of this Agreement.
5.11 Certain
Tax Matters.
(a) From
and
after the date of this Agreement, neither the Company, Parent nor any of
their
respective Affiliates shall take any action, or fail to take any necessary
action, that could reasonably be expected to prevent the Merger from qualifying
as a reorganization within the meaning of Section 368(a) of the Code. Unless
otherwise required by Applicable Law, the Company, Parent and their respective
Affiliates shall treat the Merger as having qualified as a reorganization
within
the meaning of Section 368(a) of the Code on all Tax Returns filed by them,
and
shall not take any position contrary thereto for any Tax purposes. Parent
and its Affiliates (i) shall cause the Company to comply with the reporting
requirements of Treas. Reg. 1.367(a)-3(c)(6), (ii) shall notify Company
Stockholders and timely provide Company Stockholders with sufficient information
to enable them to make a timely QEF election in the event Parent may be
classified as a “passive foreign investment company” for federal income tax
purposes in any taxable year, and (iii) shall offer to enter into an agreement
with each "five percent transferee shareholder" (as such term is used in
Treas.
Reg. 1.367(a)-3(c)(iii)(B)) that files a gain recognition agreement pursuant
to
Treas. Reg. 1.367(a)-8 in the form of the agreement entered into with B&L on
or about the date of this Agreement.
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(b) Tax-Free
Reorganization.
Parent
and Company shall cooperate with each other in obtaining the opinion of ▇▇▇▇▇▇,
▇▇▇▇▇▇-▇▇▇▇▇▇▇, Colt & Mosle LLP (“▇▇▇▇▇▇ ▇▇▇▇▇▇”), for the benefit of
Parent, the Company and the Company Stockholders, dated on the date of this
Agreement and updated as of the Closing Date, constituting conditions precedent
to the Merger pursuant to Sections 6.2 and 6.3 hereof that the Merger will
constitute a reorganization within the meaning of Section 368(a) of
the
Code and that Section 367(a)(1) of the Code should not apply to the exchange
of
CDS stock for Parent ADSs (the “Tax Opinions”). The Tax Opinions shall satisfy
the requirements for covered and marketed opinions within the meaning of
Circular 230 Regulation 10.35. In connection with the Tax Opinions, each
of
Parent and Company shall deliver to ▇▇▇▇▇▇ ▇▇▇▇▇▇ customary representation
letters in form and substance reasonably satisfactory to such law firm, and
at
such time or times that may be reasonably requested by such law firm (the
representation letters referred to in this sentence are collectively referred
to
as the “Tax Certificates” ).
5.12 Directors
of Company.
Except
as listed on Schedule 1.6(c), the Company shall obtain written letters of
resignation from each current member of the Board of Directors of the Company
as
of the Effective Time, and the Surviving Company shall appoint the individuals
listed on Schedule 1.6(c)
to fill
the vacancies created thereby, effective immediately upon the occurrence
of the
Effective Time.
5.13 Board
of Directors of Parent.
Parent
shall cause the Board of Directors of Parent to consist of the individuals
set
forth on Schedule 5.13
effective immediately upon the Effective Time.
5.14 Employee
Benefits.
For a
period of one year following the Effective Time and effective upon the Merger,
Parent shall, or shall cause the Surviving Corporation to provide medical,
401(k), life and disability benefits, cash compensation and other benefits
to
employees of such Surviving Corporation that are substantially similar to
the
medical, 401(k), life and disability benefits, cash compensation and other
benefits that were provided to each such employee under the employee benefit
plans, programs, contracts and arrangements of the Company as in effect
immediately prior to the Effective Time.
5.15 Nasdaq/ASX
Listing.
(a) As
soon
as practicable after the date of this Agreement, Parent will apply to the
ASX
for the Parent Ordinary Shares representing the Parent ADSs to be quoted
on the
ASX within six (6) months of the Closing Date, or such sooner time as required
by Applicable Law.
(b) ▇▇▇▇▇▇
agrees to authorize for listing on The Nasdaq National Market the Parent
ADSs
issuable in connection with the Merger, within six (6) months of the Closing
Date.
5.16 Relocation
of Company’s Headquarters.
Parent
acknowledges its intention within two years to (i) relocate its corporate
headquarters and its principal executive offices to the Boston, Massachusetts
area; (ii) appoint a Chief Executive Officer and Chief Financial Officer
in the
Boston, Massachusetts area; and (iii) reincorporate as a U.S. corporation
and
cause the common equity of such successor corporation to be included for
quotation on The Nasdaq National Market or listed on a nationally recognized
exchange.
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5.17 Registration.
(a) In
the
event that Parent makes the election provided in Section 1.7(d),
as
promptly as practicable after Parent makes such election, Parent will prepare
and file with the SEC a Registration Statement on Form F-4 (or any other
appropriate form or successor form) (the "Registration Statement"). The Company
shall provide Parent with such information concerning it, such consents of
its
auditors, and such other documents, consents and opinions as may be required
or
appropriate for inclusion in the Registration Statement, or in any amendments
or
supplements thereto. Parent shall, and the Company shall assist Parent to,
respond to any comments from the SEC, shall use all commercially reasonable
efforts to cause the Registration Statement to be declared effective under
the
Securities Act as promptly as practicable after such filing and to keep the
Registration Statement effective as long as is necessary to consummate the
Merger and the transactions contemplated hereby. Parent will notify the Company
promptly upon the receipt of any comments from the SEC or its staff in
connection with the filing of, or amendments or supplements to, the Registration
Statement. Whenever any event occurs which is required to be set forth in
an
amendment or supplement to the Registration Statement, Parent or the Company,
as
the case may be, will promptly inform the other of such occurrence and cooperate
in filing with the SEC or its staff such amendment or supplement. Parent
shall
use all commercially reasonable efforts to take any action required to be
taken
by it under any applicable state securities laws in connection with the issuance
of Parent ADSs and assumption of the Company Options pursuant to the Merger,
and
the Company shall furnish any information concerning the Company and the
holders
of Company Capital Stock as may be reasonably requested in connection with
any
such action.
(b) Parent
will use all commercially reasonable efforts to file and cause a Registration
Statement on a Form S-8 (or any successor form) under the Securities Act
with
respect to all Parent ADSs issuable upon exercise of the Company Options
that
may be registered on such form to become effective within six (6) months
of the
Closing Date and shall use all commercially reasonable efforts to maintain
the
effectiveness of such Registration Statement for so long as such Company
Options
remain outstanding.
ARTICLE
VI
CONDITIONS
TO THE MERGER
6.1 Conditions
to Obligations of Each Party to Effect the Merger.
The
respective obligations of each party to this Agreement to effect the Merger
and
the other transactions contemplated hereby and by the Registration Rights
Agreement shall be subject to the satisfaction or mutual waiver of the following
conditions at or prior to the Effective Time:
(a) No
Restraints; Illegality.
No
temporary restraining order, preliminary or permanent injunction or other
Order
issued by any Governmental Entity or other legal restraint or prohibition
preventing the consummation of the Merger shall be in effect, nor shall there
be
any pending proceeding brought by any Governmental Entity seeking any of
the
foregoing, nor any Order enacted, entered, or deemed applicable to the Merger
by
a Governmental Entity which makes the consummation of the Merger illegal;
and
-50-
(b) Stockholder
Approvals.
The
Parent Stockholder Approval shall have been obtained.
6.2 Additional
Conditions to Obligation of the Company.
The
obligation of the Company to consummate the Merger and the other transactions
contemplated hereby shall be subject to the satisfaction or waiver of each
of
the following conditions at or prior to the Effective Time (all of which
are for
the benefit of the Company and may only be waived by the Company in writing
if
not satisfied):
(a) Representations,
Warranties and Covenants.
The
representations and warranties of Parent and Merger Sub in this Agreement
(reading such representations and warranties as if all materiality and Parent
Material Adverse Effect qualifiers were not present) shall be true and correct
as of the Effective Time (except representations or warranties that by their
terms speak only as of an earlier date or time, which shall be true and correct
as of such earlier date or time), except for changes contemplated by this
Agreement and except where any failure to be true and correct does not
constitute a Parent Material Adverse Effect, provided,
however,
that
any reasonably foreseeable development in any matter described on the Parent
Disclosure Schedule shall not be taken into account when determining if a
Parent
Material Adverse Effect has occurred. Each of Parent and Merger Sub shall
have
observed, performed and complied with, in all material respects, all covenants,
obligations and conditions of this Agreement required to be observed, performed
and complied with by ▇▇▇▇▇▇ and Merger Sub at or prior to the Effective
Time.
(b) Opinion
of Parent Counsel.
The
Company shall have received an opinion of US legal counsel to Parent and
Merger
Sub in the form attached hereto as Exhibit
D-1
and an
opinion of Australian counsel to Merger Sub, in a form reasonably acceptable
to
the Company, containing the opinions set forth in Exhibit
D-2.
(c) Certificate
of Parent.
The
Company shall have been provided with a certificate executed on behalf of
Parent
by each of the Chief Executive Officer and Chief Financial Officer of Parent
to
the effect that, as of the Effective Time, the conditions set forth in
Section 6.2(a)
and
6.2(d)
have
been satisfied.
(d) No
Parent Material Adverse Effect.
There
shall not have occurred any Parent Material Adverse Effect since the date
of
this Agreement, provided,
however,
that
any reasonably foreseeable development in any matter described on the Parent
Disclosure Schedule shall not be taken into account when determining if a
Parent
Material Adverse Effect has occurred.
(e) Tax
Opinion.
The
Company and the Company Stockholders shall have received the opinion of ▇▇▇▇▇▇
▇▇▇▇▇▇, dated the date of this Agreement and the
Closing Date, to the effect that, on the basis of facts, representations,
and
assumptions set forth or referred to in such opinion, the Merger will
be
treated for federal income tax purposes as a reorganization within the meaning
of Section 368(a) of the Code and Section 367(a)(1) of the Code should
not
apply to the exchange of CDS stock for Parent ADSs. The opinion shall satisfy
the requirements for a covered and marketed opinion within the meaning of
Circular 230 Regulation 10.35. In rendering such opinion, ▇▇▇▇▇▇ ▇▇▇▇▇▇ may
require and shall be entitled to rely upon customary representations contained
in Tax Certificates of officers of Parent, Company, and others.
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(f) Registration
Rights Agreement.
The
Registration Rights Agreement shall have been executed by ▇▇▇▇▇▇ and delivered
to the Company.
6.3 Additional
Conditions to the Obligations of Parent and Merger Sub.
The
obligations of Parent and Merger Sub to consummate the Merger and the other
transactions contemplated hereby and by the Registration Rights Agreement
shall
be subject to the satisfaction or waiver of each of the following conditions
at
or prior to the Effective Time (all of which are for the benefit of Parent
and
Merger Sub and may only be waived by Parent in writing if not
satisfied):
(a) Representations,
Warranties and Covenants.
The
representations and warranties of the Company in this Agreement (reading
such
representations and warranties as if all materiality and Company Material
Adverse Effect qualifiers were not present) shall be true and correct as
of the
Effective Time (except representations or warranties that by their terms
speak
only as of an earlier date or time, which shall be true and correct as of
such
earlier date or time), except for changes contemplated by this Agreement
and
except where any failure to be true and correct does not constitute a Company
Material Adverse Effect, provided,
however,
that
any reasonably foreseeable development in any matter described on the Company
Disclosure Schedule shall not be taken into account when determining if a
Company Material Adverse Effect has occurred. The Company shall have observed,
performed and complied with, in all material respects, all covenants,
obligations and conditions of this Agreement required to be observed, performed
and complied with by the Company at or prior to the Effective Time.
(b) No
Company Material Adverse Effect.
There
shall not have occurred any Company Material Adverse Effect since the date
of
this Agreement, provided,
however,
that
any reasonably foreseeable development in any matter described on the Company
Disclosure Schedule shall not be taken into account when determining if a
Company Material Adverse Effect has occurred.
(c) Certificate
of the Company.
The
Company shall have provided Parent with a certificate executed on behalf
of the
Company by the Company’s Chief Executive Officer and Chief Financial Officer to
the effect that, as of the Effective Time, all conditions set forth in
Sections 6.3(a)
and
6.3(b)
have
been satisfied.
(d) Opinion
of Company Counsel.
Parent
shall have received the opinion of the Company’s legal counsel in the form
attached hereto as Exhibit
E.
(e) Tax
Opinion.
Parent
shall have received the opinion of ▇▇▇▇▇▇ ▇▇▇▇▇▇, dated the date of this
Agreement and the Closing Date, to the effect that, on the basis of facts,
representations and assumptions set forth or referred to in such opinion,
the
Merger will be treated for federal income tax purposes as a reorganization
within the meaning of Section 368(a) of the Code and Section 367(a)(1)
of
the Code should not apply to the exchange of CDS stock for Parent ADSs. The
opinion shall satisfy the requirements for a covered and marketed opinion
within
the meaning of Circular 230 Regulation 10.35. In rendering such opinion,
▇▇▇▇▇▇
▇▇▇▇▇▇ may require and shall be entitled to rely upon customary representations
contained in Tax Certificates of officers of Parent, Company and
others.
-52-
(f) Audit.
The
Company’s audited financial statements (including the auditor’s report thereon)
as of December 31, 2004 and for each of the three years then ended shall
have
been delivered to Parent.
(g) Appraisal
Rights.
Holders
of no more than five percent (5%) of the outstanding Company Capital Stock
shall
have properly made a demand in writing to the Company for an appraisal with
respect to such holder’s Company Capital Stock in accordance with Delaware
Law.
ARTICLE
VII
TERMINATION,
EXPENSES, AMENDMENT AND WAIVER
7.1 Termination.
Except
as provided in Section 7.2
below,
this Agreement may be terminated by delivery of a written notice of termination,
and the Merger abandoned at any time prior to the Effective Time (the date
of
any termination pursuant to this Section 7.1
shall be
referred to as the “Termination Date”):
(a) by
mutual
consent of the Company and Parent;
(b) by
Parent:
(i) if
there
has been a breach of, or inaccuracy in, any representation, warranty, covenant
or agreement of the Company set forth in this Agreement, which breach or
inaccuracy (A) has resulted in the condition set forth in Section
6.3(a)
not
being satisfied and (B) is not capable of being cured prior to the
Final
Date; or
(ii) if
there
shall be any statute, rule, regulation or Order enacted, promulgated or issued
or deemed applicable to the Merger by any US or Australian Governmental Entity
that would: (A) prohibit the Surviving Corporation’s ownership or operation
of all or any material portion of the business or intellectual property assets
of the Company or (B) compel Parent or the Surviving Corporation to
dispose
of any material portion of the business or intellectual property assets of
Parent or the Surviving Corporation as a result of or after the Merger,
provided
that
Parent has used its reasonable best efforts to oppose, resolve, resist or
lift
any such statute, rule, regulation or Order;
(iii) but
only
within (2) hours after the execution and delivery of this Agreement, if consents
in writing setting forth the Company Stockholder Approvals signed by the
holders
of outstanding Company Common Stock and Company Preferred Stock having not
less
than the minimum number of votes and/or shares, as applicable, that are
necessary to authorize or take such action as set forth in
Section 2.2
hereof
shall not have been delivered to the Company, in the case of consents given
pursuant to Section 228(a) of the DGCL, by delivery to the Company's registered
office in Delaware, its principal place of business (by hand or by certified
or
registered mail, return receipt requested) or to an officer or agent of the
corporation having custody of the book in which proceedings of meetings of
such
stockholders are recorded, and true and correct copies of such consents shall
not have been delivered to Parent within one (1) hour after the execution
and
delivery of this Agreement accompanied by a legal opinion of Ropes & Gray
LLP for the benefit of Parent dated as of the date of this Agreement to the
effect that each of the Company Stockholder Approvals has been
obtained.
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(c) by
Parent
or the Company if:
(i) the
Closing has not occurred by March 31, 2006, or in the event Parent makes
the
election provided in Section 1.7(d),
the
later to occur of June 30, 2006 or the date that is one hundred twenty (120)
days after the initial filing with the SEC of the Registration Statement,
(the
“Final Date”); provided, that no party may terminate this Agreement pursuant to
this clause (i)
if such
party’s willful failure to fulfill any of its material obligations under this
Agreement shall have been the reason that the Closing shall not have occurred
on
or before said date;
(ii) there
shall be any statute, rule, regulation or Order enacted, promulgated or issued
or deemed applicable to the Merger by any US or Australian Governmental Entity
that would permanently enjoin or prohibit the Merger or make consummation
of the
Merger illegal, provided that the party seeking to terminate the Agreement
must
have used its reasonable best efforts to oppose, resolve, resist or lift
any
such statute, rule, regulation or Order;
(iii) at
the
initial or an adjourned session of the Parent Stockholder Meeting, the Parent
Stockholder Approval is not obtained; or
(d) by
the
Company
(i) if
there
has been a breach of, or inaccuracy in, any representation, warranty, covenant
or agreement of Parent or Merger Sub set forth in this Agreement that breach
or
inaccuracy (A) has resulted in the condition set forth in Section 6.2(a)
not
being satisfied and (B) is not capable of being cured prior to the Final
Date;
or
(ii) if
a
Parent Adverse Recommendation Change shall have occurred or if Parent’s Board of
Directors shall at any time take any action inconsistent with, or which
otherwise discourages or prevents, Parent Stockholder approval of this
Agreement, the Registration Rights Agreement and the transactions contemplated
hereby and thereby requiring stockholder approval.
(iii) if
Parent
fails to call a meeting of Parent’s stockholders as set forth in
Section 5.2
above.
(iv) if
by
5:00 pm New York Time on the tenth (10th)
day
after the date of this Agreement (or if such date is not a business day,
5:00 pm
New York Time on the first succeeding business day), the Company has not
received the opinion described in Section 5.11(b)
dated as
of the date of this Agreement; but only (A) within seventeen (17)
days
after the execution and delivery of this Agreement and (B) if the
Company
has not at any time prior to such termination received such
opinion.
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Where
action is taken to terminate this Agreement pursuant to this
Section 7.1,
it
shall be sufficient for such action to be authorized by the Board of Directors
(as applicable) of the party taking such action.
7.2 Effect
of Termination.
If this
Agreement is terminated pursuant to this Section 7.1,
this
Agreement shall forthwith become void and there shall be no liability or
obligation on the part of Parent, Merger Sub or Company, or their respective
officers, directors or stockholders; provided, however, that each party shall
remain liable for any breaches of this Agreement prior to its termination;
provided, further, that the provisions of Sections 5.4,
5.5,
7.2,
7.3
and
Article
VIII
of this
Agreement and the definitions of any defined terms used in such provisions
shall
remain in full force and effect and survive any termination of this
Agreement.
7.3 Fees
and Expenses.
(a) Except
as
expressly provided otherwise herein, whether or not the Merger is consummated,
all fees and expenses incurred in connection with the Merger including all
legal, accounting, financial advisory, consulting and all other fees and
expenses of third parties (“Third Party Expenses”) incurred by a party (meaning
with respect to the Company, the Company and not the Company Shareholders)
in
connection with the negotiation and effectuation of the terms and conditions
of
this Agreement and the transactions contemplated hereby, shall be the obligation
of the respective party incurring such fees and expenses.
(b) Notwithstanding
Section 7.3(a):
(i) in
the
event that this Agreement is terminated pursuant to (A) Section
7.1(c)(i)
and at
the time of such termination, the Parent Stockholder Approval has not been
obtained, (B) Section 7.1(c)(iii)
or
(C) Section 7.1(d)(ii),
Parent
shall pay to the Company an amount equal to one million fifty thousand dollars
($1,050,000) (the "Termination Fee Amount") within three (3) business days
following the effective date of such termination. Promptly upon demand therefor
and reasonable substantiation thereof, Parent shall reimburse the Company
for
all Third Party Expenses incurred by the Company.
(ii) in
the
event that this Agreement is terminated by Parent pursuant to
Section 7.1(b)(i)
or
Section 7.1(c)(i),
as a
result of the Company's willfully or intentionally and in bad faith causing
a
breach of any representation, warranty, covenant or agreement of the Company
set
forth in this Agreement, the Company shall pay to Parent an amount equal
to the
Termination Fee Amount within three (3) business days following the effective
date of such termination. Promptly upon demand therefor and reasonable
substantiation thereof, the Company shall reimburse Parent for all Third
Party
Expenses incurred by Parent.
(iii) in
the
event that this Agreement is terminated by the Company pursuant to
Section 7.1(d)(i)
or
Section 7.1(c)(i),
as a
result of Parent’s willfully or intentionally and in bad faith causing a breach
of any representation, warranty, covenant or agreement of Parent set forth
in
this Agreement, the Parent shall pay to the Company an amount equal to the
Termination Fee Amount within three (3) business days following the effective
date of such termination. Promptly upon demand therefor and reasonable
substantiation thereof, the Parent shall reimburse the Company for all Third
Party Expenses incurred by Parent.
-55-
(c) The
payment of fees and reimbursement of expenses pursuant to
Section 7.3(b)
is a
genuine and reasonable pre-estimate of at least part of each party’s loss if one
or more of the above-listed events occurs, but is not necessarily an adequate
or
complete remedy. Each party therefore acknowledges and agrees with the other
party that the other party may seek and obtain such other or additional remedies
(including, but not limited to, injunctive relief) as such other party thinks
fit if one or more of the above-listed events occurs.
7.4 Amendment.
Except
as otherwise required by Applicable Law, this Agreement may be amended by
the
parties hereto at any time before or after the Company Stockholders approve
this
Agreement pursuant to a written instrument executed by the Company, Parent,
and
Merger Sub.
7.5 Extension;
Waiver.
At any
time prior to the Effective Time, Parent and Merger Sub, on the one hand,
and
the Company, on the other, may, to the extent legally allowed, (a) extend
the time for the performance of any of the obligations of the other party
hereto, (b) waive any inaccuracies in the representations and warranties
made to such party contained herein or in any document delivered pursuant
hereto
and (c) waive compliance with any of the covenants, agreements or
conditions for the benefit of such party contained herein. Any agreement
on the
part of a party hereto to any such extension or waiver shall be valid only
if in
writing and signed by an authorized agent of such party.
ARTICLE
VIII
GENERAL
PROVISIONS
8.1 No
Survival.
The
representations, warranties, covenants and other agreements in this Agreement
or
any instrument delivered pursuant to or in connection with this Agreement
(including any rights arising out of any breach or noncompliance with such
representations, warranties, covenants and other agreements) shall not survive
the Effective Time other than those herein specified to survive and to be
performed after the Effective Time.
8.2 Notices.
All
notices and other communications hereunder shall be in writing and deemed
given
if delivered personally or by commercial delivery service, or mailed by
registered or certified mail (return receipt requested) or sent via facsimile
(with acknowledgment of complete transmission) to the parties at the following
addresses (or at such other address as a party from time to time may specify
by
like notice):
(a) if
to
Parent or Merger Sub, to:
pSivida
Limited
Level
12
BGC Centre
28
The
Esplanade
Perth,
WA
6000 Australia
Attention:
▇▇▇▇▇ ▇▇▇▇▇, Managing Director
Facsimile
No.: ▇▇▇ (▇) ▇▇▇▇ ▇▇▇▇
-56-
with
a
copy (which shall not constitute notice) to Parent’s Counsel:
▇▇▇▇▇▇,
▇▇▇▇▇▇-▇▇▇▇▇▇▇, Colt & Mosle LLP
▇▇▇
▇▇▇▇
▇▇▇▇▇▇
New
York,
NY 10178
Attention:
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
Facsimile
No.: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if
to the
Company, to:
Control
Delivery Systems, Inc.
▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Watertown,
MA 02472
Attention:
▇▇▇▇ ▇▇▇▇▇▇▇▇, General Counsel
Facsimile
No.: (▇▇▇) ▇▇▇-▇▇▇▇
with
a
copy (which shall not constitute notice) to the Company’s Outside
Counsel:
Ropes
& Gray LLP
One
International Place
Boston,
MA 02110
Attention:
▇▇▇▇ ▇▇▇▇▇, Esq.
Facsimile
No.: (▇▇▇) ▇▇▇-▇▇▇▇
8.3 Interpretation.
Unless
the context clearly indicates otherwise (a) words of any gender include
each other gender, (b) words using the singular number include the
plural,
and vice versa, (c) the terms “hereof,”“herein,”“hereby,” and derivative
or similar words refer to this Agreement as a whole and not to any particular
Article, Section or subsection, (d) the words “include,”“includes”
and “including” when used herein shall be deemed in each case to be followed by
the words “without limitation” and (e) references to “person” include any
individual, corporation, limited or general partnership, association,
proprietorship, limited liability company, joint venture, trust, other business
organization or Governmental Entity. The headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning
or
interpretation of this Agreement.
8.4 Counterparts.
This
Agreement may be executed by facsimile signature and in two or more
counterparts, each of which shall constitute an original, but all of which,
when
taken together, shall constitute but one instrument. This Agreement shall
become
effective when one or more counterparts have been signed by each party hereto
and delivered to the other parties.
8.5 Entire
Agreement; Assignment.
This
Agreement, the schedules and exhibits hereto, and the documents and instruments
and other agreements among the parties hereto referenced herein:
(a) constitute the entire agreement among the parties with respect
to the
respective subject matters hereof and thereof and supersede in their entirety
any prior or contemporaneous oral or written discussions, negotiations,
agreements or understandings between or among the parties with respect to
such
subject matter, except that the Non-Disclosure Agreement shall not be superseded
and shall remain in full force and effect; (b) are not intended to
and
shall not confer upon any other person (including those persons listed on
any
exhibits or schedules attached hereto or any Company Stockholders) any rights
or
remedies hereunder, provided,
that
(i) the current and former directors and officers of the Company are entitled
to
the benefits of, and to enforce against the Parent, the covenants contained
in
Section 5.10,
and
(ii) the Company Stockholders are entitled to the benefits of and
to
enforce against the Parent the covenants contained in Section 5.11,
which
such covenants shall survive and are to be performed after the Effective
Time;
and (c) may not be assigned by operation of law or otherwise without
the
prior written consent of each other party hereto, and any purported assignment
in violation of this requirement shall be null and void. Subject to the
preceding sentence, this Agreement shall be binding on and inure to the benefit
of, and is enforceable by, the respective parties hereto and their respective
successors, permitted assigns, heirs, executors and administrators.
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8.6 Severability.
If any
provision of this Agreement or the application thereof becomes or is declared
by
a court of competent jurisdiction to be illegal, void or unenforceable, the
remainder of this Agreement will continue in full force and effect and the
application of such provision to other persons or circumstances will be
interpreted so as reasonably to effect the express intent of the parties
hereto.
The parties further agree that any such void or unenforceable provision of
this
Agreement shall be deemed replaced with a valid and enforceable provision
that
will achieve, to the extent possible, the economic, business and other purposes
of such void or unenforceable provision.
8.7 Remedies;
Exercise of Rights.
Except
as otherwise provided herein, any and all remedies herein expressly conferred
upon a party will be deemed cumulative with and not exclusive of any other
remedy available to such party hereunder or at law or in equity, and the
exercise by any party of any one remedy at any time will not preclude the
exercise of any other remedy at the same time, at another time, or in different
circumstances. No failure or delay by any party in exercising any right,
power
or privilege hereunder shall operate as a waiver thereof nor shall any single
or
partial exercise thereof (or failure to exercise) preclude any other, further
or
▇▇▇▇▇▇ exercise thereof or the exercise of any other right, power or
privilege.
8.8 Governing
Law.
This
Agreement shall be governed by and construed in accordance with the laws
of the
State of New York.
8.9 Jurisdiction
and Venue; Attorney’s Fees.
Any
action, suit or proceeding seeking to enforce any provision of, or based
on any
matter arising out of or in connection with, this Agreement or the transactions
contemplated hereby shall be brought exclusively in the federal or state
courts
located in the State of New York sitting in New York County and each party
hereto hereby unconditionally and irrevocably submits and consents to the
exclusive jurisdiction of such courts (and of the appropriate appellate courts
therefrom) in any such suit, action or proceeding and hereby unconditionally
and
irrevocably waives, to the fullest extent permitted by law, any objection
which
such party may now or hereafter have to the laying of venue in any such court
or
that any such suit, action or proceeding which is brought in any such court
has
been brought in an inconvenient forum. Process in any such suit, action or
proceeding may be served on any party anywhere in the world, whether within
or
without the jurisdiction of any such court. Without limiting the generality
of
the foregoing, each party hereto agrees that service of process on such party
as
provided in Section 8.1
shall be
deemed effective service of process on such party. In addition to any damages
or
other recovery to which a party may be entitled hereunder or at law or in
equity, the prevailing party in any action to enforce this Agreement or to
seek
any right or remedy available hereunder or at law or in equity shall be entitled
to reasonable attorney’s fees and costs incurred in connection with such action
and any related appeals therefrom.
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8.10 Specific
Performance.
The
parties acknowledge and agree that any failure of any party to perform its
agreements and obligations hereunder or contemplated hereby will cause
irreparable injury to the other parties, for which damages, even if available,
will not provide an adequate remedy. Accordingly, each party hereby consents
to
the issuance of injunctive relief by any court of competent jurisdiction
to
compel performance of such party’s obligations and to the granting by any court
of the remedy of specific performance of its obligations hereunder.
8.11 Rules
of Construction.
The
parties have participated jointly in the negotiation and drafting of this
Agreement and the Registration Rights Agreement. In the event an ambiguity
or
question of intent or interpretation arises, this Agreement and the Registration
Rights Agreement shall be construed as if drafted jointly by the parties
and no
presumption or burden of proof shall arise favoring or disfavoring any party
by
virtue of the authorship of any provisions hereof or thereof. Accordingly,
each
party understands and agrees that the common law principles of construing
ambiguities against the drafter shall have no application to this Agreement
or
the Registration Rights Agreement. Each party hereto acknowledges and agrees
that such party has had a full and complete opportunity to review this Agreement
and the Registration Rights Agreement, to make suggestions or changes to
their
terms and to seek independent legal and other advice in connection herewith
and
therewith.
8.12 Certain
Definitions.
For the
purposes of this Agreement the term:
(a) “business
day” means any day other than a day on which the banks in New York, New York
are
closed;
(b) “capital
stock” means common stock, preferred stock, partnership interests, limited
liability company interests or other ownership interests entitling the holder
thereof to vote with respect to matters involving the issuer thereof;
and
(c) “knowledge”
or “known” means, with respect to any matter in question, the knowledge of such
matter by, in the case of the Company, any of ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇
or
▇▇▇▇▇▇▇ ▇▇▇▇, and in the case of Parent, any of ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇
▇▇▇▇▇ or ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇.
[Signature
page follows.]
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IN
WITNESS WHEREOF, the undersigned have executed this Agreement as of the date
first written above.
| CONTROL DELIVERY SYSTEMS, INC. | ||
| |
|
|
| By: | /s/ ▇▇▇▇ ▇▇▇▇▇▇ | |
|
Name: ▇▇▇▇ ▇▇▇▇▇▇ |
||
| Title: Chief Executive Officer | ||
| PSIVIDA LIMITED | ||
| |
|
|
| By: | /s/ ▇▇▇▇▇ ▇▇▇▇▇ | |
|
Name: ▇▇▇▇▇ ▇▇▇▇▇ |
||
| Title: Managing Director | ||
| |
|
|
| By: | /s/ ▇▇▇▇▇ ▇▇▇▇▇▇ | |
|
Name: ▇▇▇▇▇ ▇▇▇▇▇▇ |
||
| Title: Company Secretary and Chief Financial Officer | ||
| PSIVIDA INC. | ||
| |
|
|
| By: | /s/ ▇▇▇▇▇ ▇▇▇▇▇ | |
|
Name: ▇▇▇▇▇ ▇▇▇▇▇ |
||
| Title: President | ||
| |
|
|
| By: | /s/ ▇▇▇▇▇ ▇▇▇▇▇▇ | |
|
Name: ▇▇▇▇▇ ▇▇▇▇▇▇ |
||
| Title: Company Secretary and Chief Financial Officer | ||
-60-