THE MERGER
Section 1.1. The Merger
Upon the terms and subject to the conditions set forth in this Agreement, and in accordance with the Delaware General Corporation Law (
Delaware
Law
), at the Effective Time (as defined in Section 1.2) Merger Sub shall be merged with and into DARA (the
Merger
). As a result of the Merger, the separate corporate existence of Merger Sub shall cease and DARA
shall continue as the surviving corporation of the Merger (sometimes referred to herein as the
Surviving Corporation
) and a wholly-owned subsidiary of Point.
Section 1.2. Effective Time
As promptly as practicable on the Closing Date (as defined in
Section 1.6), the parties hereto shall cause the Merger to be consummated by filing a certificate of merger (the
Certificate of Merger
) with the Secretary of State of the State of Delaware, as required by, and executed in
accordance with the relevant provisions of, Delaware Law, such certificate to be in such form as approved by each of Point and DARA prior to such filing (the time of the filing of the Certificate of Merger or the time specified therein being the
Effective Time
). The Certificate of Merger shall provide that the name of the Surviving Corporation as of and after the Effective Time will be DARA Pharmaceuticals, Inc.
Section 1.3. Effect of the Merger
At the Effective Time, the effect of the Merger shall be as
provided in the applicable provisions of Delaware Law. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, except as otherwise provided herein, all the rights, privileges, powers and franchises of Merger Sub
and DARA shall vest in the Surviving Corporation, and all debts, liabilities and duties of Merger Sub and DARA shall become the debts, liabilities and duties of the Surviving Corporation.
Section 1.4. Certificate of Incorporation; Bylaws
At the Effective Time, (a) the certificate of
incorporation of DARA, as in effect immediately prior to the Effective Time, shall be the certificate of incorporation of the Surviving Corporation, and (b) the bylaws of DARA, as in effect immediately prior to the Effective Time, shall be the
bylaws of the Surviving Corporation.
Section 1.5. Directors and Officers
(a) The directors of the Surviving Corporation immediately upon
the effectiveness of the Merger shall be the directors of DARA immediately prior to the effectiveness of the Merger, each to hold office in accordance with the certificate of incorporation and bylaws of the Surviving Corporation until the earlier of
their resignation or removal or until their respective successors are duly elected or appointed and qualified, as the case may be.
(b) The
officers of the Surviving Corporation immediately upon the effectiveness of the Merger shall be the officers of DARA immediately prior to the effectiveness of the Merger, each to hold office in accordance with the certificate of incorporation and
bylaws of the Surviving Corporation until the earlier of their resignation or removal or until their respective successors are duly elected or appointed and qualified, as the case may be.
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Section 1.6. Closing
Subject to the terms and conditions of this Agreement, the closing of the Merger
(the
Closing
) will take place on or before March 31, 2008, or as promptly as practicable thereafter upon the satisfaction or, if permissible, waiver of the conditions set forth in Article VIII hereof (the
Closing
Date
). The Closing shall take place at the offices of Wyrick Robbins Yates & Ponton LLP, 4101 Lake Boone Trail, Suite 300, Raleigh, North Carolina 27607, or at such other place as agreed to in writing by the parties hereto. It is
the intention of the parties that the Closing shall occur as soon as practicable after the Point Stockholders Meeting and the DARA Stockholders Meeting.
Section 1.7. Subsequent Actions
If, at any time after the Effective Time, the Surviving Corporation
shall consider or be advised that any deeds, bills of sale, assignments, assurances or any other actions or things are necessary or desirable to continue in, vest, perfect or confirm of record or otherwise in the Surviving Corporation its right,
title or interest in, to or under any of the rights, properties, privileges, franchises or assets of either of its constituent corporations acquired or to be acquired by the Surviving Corporation as a result of, or in connection with, the Merger or
otherwise to carry out this Agreement, the officers and directors of the Surviving Corporation shall be and hereby are directed and authorized to execute and deliver, in the name and on behalf of either of such constituent corporations, all such
deeds, bills of sale, assignments and assurances and to take and do, in the name and on behalf of each of such corporations or otherwise, all such other actions and things as may be necessary or desirable to vest, perfect or confirm any and all
right, title and interest in, to and under such rights, properties, privileges, franchises or assets in the Surviving Corporation or otherwise to carry out this Agreement.
Section 1.8. Tax Treatment of the Merger
It is intended by the parties hereto that the Merger shall
constitute a reorganization of Point, Merger Sub and DARA within the meaning of Section 368(a) of the Code. The parties hereby adopt this Agreement as a plan of reorganization within the meaning of Section 1.368-2(g) of the
Treasury Regulations.
ARTICLE II
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
Section 2.1. Conversion of Securities
At the Effective Time, by virtue of the Merger and without any
action on the part of DARA, Merger Sub, Point or the holders of any of the securities referred to in this Section 2.1:
(a)
Capital
Stock
. Each share of DARA Common Stock (excluding any shares described in Section 2.1(b)) issued and outstanding immediately prior to the Effective Time shall cease to be outstanding and shall be converted into and exchanged for the right
to receive such number of shares of Point Common Stock (the
Exchange Ratio
) so that the holders of DARA Common Stock, DARA Series A Preferred Stock, DARA Series B Preferred Stock, DARA Options and DARA Warrants receiving Point
Common Stock or the right to receive Point Common Stock pursuant to Section 2 hereof collectively own 96.4% of the outstanding shares of Point Common Stock, on a fully diluted basis, following the Closing. For purposes of the calculation in the
preceding sentence, the 3.6% of the outstanding Point Common Stock immediately after the Effective Time that will be held by the holders of Point Common Stock immediately prior to the Effective Time shall be calculated on a fully diluted basis
immediately before the Effective Time. Each share of DARA Series A Preferred Stock (excluding any shares described in Section 2.1(c)) issued and outstanding immediately prior to the Effective Time shall cease to be outstanding and shall be
converted into and exchanged for the right to receive a number of shares of Point Common Stock equal to (i) the number of shares of DARA Common Stock into which the shares
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of DARA Series A Preferred Stock are convertible immediately prior to the Effective Time multiplied by (ii) the Exchange Ratio. Each share of DARA
Series B Preferred Stock (excluding any shares described in Section 2.1(c)) issued and outstanding immediately prior to the Effective Time shall cease to be outstanding and shall be converted into and exchanged for the right to receive a number
of shares of Point Common Stock equal to (i) the number of shares of DARA Common Stock into which the shares of Series B Preferred Stock are convertible immediately prior to the Effective Time multiplied by (ii) the Exchange Ratio.
The shares of Point Common Stock issuable to the holders of DARA Common Stock, DARA Series A Preferred Stock and DARA Series B Preferred
Stock pursuant hereto, together with the amount of cash in lieu of fractional shares payable pursuant to Section 2.1(d), is sometimes referred to herein, collectively, as the
Merger Consideration
. All such shares of DARA
Common Stock, DARA Series A Preferred Stock and DARA Series B Preferred Stock shall cease to be outstanding and shall automatically be canceled and retired and shall cease to exist, and each certificate previously evidencing any such shares shall
thereafter represent only the right to receive the Merger Consideration. Except as otherwise provided herein or by applicable law, the holders of certificates previously evidencing such shares of DARA Common Stock, DARA Series A Preferred Stock and
DARA Series B Preferred Stock outstanding immediately prior to the Effective Time shall cease to have any rights with respect to such shares of DARA Common Stock, DARA Series A Preferred Stock and DARA Series B Preferred Stock. Each such certificate
previously evidencing such shares of DARA Common Stock, DARA Series A Preferred Stock and DARA Series B Preferred Stock shall be exchanged for the number of shares previously evidenced by the canceled certificate upon the surrender of such
certificate in accordance with the provisions of Section 2.2 multiplied by the Exchange Ratio.
(b)
Treasury Stock
. All shares
of capital stock of DARA held in the treasury of DARA immediately prior to the Effective Time shall be canceled and extinguished without any conversion thereof and no amount shall be delivered or deliverable in exchange therefor.
(c)
Merger Sub Stock
. Each share of common stock, par value $.0.01 per share, of Merger Sub issued and outstanding immediately prior to the
Effective Time shall be converted into and exchanged for one (1) duly and validly issued, fully paid and nonassessable share of common stock of the Surviving Corporation.
(d)
No Fractional Shares
. No certificate or scrip representing any fractional shares of Point Common Stock shall be issued pursuant to
Section 2.1(a), and other than the right to receive the cash payment pursuant to this Section 2.1(d), any such fractional interests shall not entitle the owner thereof to any rights as a securityholder of Point. Notwithstanding any other
provision hereof, all holders of DARA Common Stock, DARA Series A Preferred Stock or DARA Series B Preferred Stock otherwise entitled to receive fractional shares of Point Common Stock pursuant to Section 2.1(a) shall be entitled to receive, in
lieu thereof, cash (without interest) in an amount equal to the product of (i) such fractional part of a share of Point Common Stock to which the holder of DARA Common Stock, DARA Series A Preferred Stock or DARA Series B Preferred Stock would
otherwise be entitled under Section 2.1(a) multiplied by the last trade price prior to the Closing Date. As promptly as possible after the determination of the amount of cash to be paid to holders of fractional interests, the Exchange Agent
shall so notify Point, and Point shall deposit such amount with the Exchange Agent and shall cause the Exchange Agent to forward payments to holders of such fractional interests subject to and in accordance with the terms hereof.
Section 2.2. Exchange of Certificates
(a)
Exchange Agent
. Promptly, and in no event later
than one business day, after the Effective Time, Point shall deposit with American Stock Transfer & Trust Company or an exchange agent designated by DARA and reasonably acceptable to Point (the
Exchange Agent
), for the
benefit of the former holders of shares of DARA Common Stock, DARA Series A Preferred Stock and DARA Series B Preferred Stock (excluding any shares described in Section 2.1(b)), for issuance and payment in accordance with this Article II
(i) the shares of Point Common Stock issuable pursuant to Section 2.1(a) and (ii) cash in an amount sufficient to make payment for
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fractional shares under Section 2.1(d) (such shares of Point Common Stock and cash being hereinafter referred to as the
Exchange
Fund
). Point shall cause the Exchange Agent, pursuant to irrevocable instructions, to deliver Point Common Stock (and cash for fractional shares) contemplated to be paid pursuant to Sections 2.1(a) and (d) out of the Exchange Fund.
The Exchange Fund shall not be used for any purpose other than as set forth in this Section 2.2(a).
(b)
Payment Procedures
. As
soon as reasonably practicable after the Effective Time, Point shall cause the Exchange Agent to mail to each record holder, as of the Effective Time, of an outstanding certificate or certificates (each a
Certificate
and
collectively, the
Certificates
) that immediately prior to the Effective Time evidenced outstanding shares of DARA Common Stock, DARA Series A Preferred Stock or DARA Series B Preferred Stock (excluding any shares described in
Section 2.1(b)): (i) a form letter of transmittal and (ii) instructions for use in effecting the surrender of the Certificates for payment therefor. Upon surrender to the Exchange Agent of a Certificate, together with such letter of
transmittal duly executed and any other required documents, the holder of such Certificate shall be entitled to receive in exchange therefor the applicable amount of Merger Consideration pursuant to Section 2.1(a) and Section 2.1(d) and
any dividends or other distributions to which such holder is entitled pursuant to Section 2.2(i), and such Certificate shall forthwith be canceled. In the event of a surrender of a Certificate representing shares of DARA Common Stock, DARA
Series A Preferred Stock and DARA Series B Preferred Stock which are not registered in the transfer records of DARA under the name of the Person surrendering such Certificate, a certificate representing the proper number of shares of Point Common
Stock may be issued to a Person other than the Person in whose name the Certificate so surrendered is registered if (x) such Certificate shall be properly endorsed or otherwise be in proper form for transfer to the Person surrendering such
Certificate and requesting such issuance, (y) such Person surrendering such Certificate and requesting such issuance shall pay any transfer or other Taxes required by reason of the issuance of shares of Point Common Stock to a Person other than
the registered holder of such Certificate or shall establish to the satisfaction of Point that such Taxes have been paid or are not applicable, and (z) such Person surrendering such Certificate shall, if required by Point, have such
Persons signature guaranteed by a bank, brokerage firm or other financial intermediary that is a member of a medallion guarantee program. Until surrendered in accordance with the provisions of this Section 2.2, each Certificate shall
represent for all purposes only the right to receive the applicable consideration set forth in Section 2.1, without any interest thereon.
(c)
No Further Rights in Stock
. All shares of Point Common Stock issued upon the surrender for exchange of Certificates in accordance with the terms of Sections 2.1 and 2.2 hereof (including any cash paid pursuant to this Article II)
shall be deemed to have been issued and paid in full satisfaction of all rights pertaining to the shares of DARA Common Stock, DARA Series A Preferred Stock or DARA Series B Preferred Stock theretofore represented by such Certificates, and there
shall be no further registration of transfer on the stock transfer books of the Surviving Corporation of the shares of DARA Common Stock, DARA Series A Preferred Stock or DARA Series B Preferred Stock represented by such Certificates which were
outstanding immediately prior to the Effective Time. If, after the Effective Time, any such Certificates are presented to Point, the Surviving Corporation or the Exchange Agent for any reason, they shall be canceled and exchanged as provided in this
Article II, except as otherwise provided by law.
(d)
Investment of Exchange Fund
. The Exchange Agent shall invest any cash included
in the Exchange Fund, as directed by DARA, on a daily basis. Any interest and other income resulting from such investments shall be paid to or as directed by DARA.
(e)
Termination of Exchange Fund
. Any portion of the Exchange Fund that remains undistributed to the holders of DARA Common Stock, DARA Series A Preferred Stock or DARA Series B Preferred Stock for one hundred
eighty (180) days after the Effective Time shall be delivered to Point, upon demand, and any holder of DARA Common Stock, DARA Series A Preferred Stock or DARA Series B Preferred Stock that have not theretofore complied with this Article II
shall thereafter look only to Point for the Merger Consideration to which such holder is entitled pursuant hereto.
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(f)
No Liability
. Neither Point nor the Surviving Corporation shall be liable to any holder of
shares of DARA Common Stock, DARA Series A Preferred Stock or DARA Series B Preferred Stock for any Point Common Stock or cash delivered to a public official pursuant to any applicable abandoned property, escheat or similar law.
(g)
Withholding of Tax
. Point or the Exchange Agent shall be entitled to deduct and withhold from the applicable amount of the Merger
Consideration otherwise issuable to, and any cash payment in lieu of fractional shares otherwise payable pursuant to this Agreement to, any former holder of DARA Common Stock, DARA Series A Preferred Stock or DARA Series B Preferred Stock such
amounts as Point (or any Affiliate thereof) or the Exchange Agent are required to deduct and withhold with respect to the making of such payment under the Code, or any provision of state, local or foreign Tax law. To the extent that amounts are so
withheld by Point (or any Affiliate thereof) or the Exchange Agent, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the former holder of DARA Common Stock, DARA Series A Preferred Stock or DARA Series
B Preferred Stock in respect of whom such deduction and withholding was made by Point (or any Affiliate thereof) or the Exchange Agent.
(h)
Lost, Stolen or Destroyed Certificates
. In the event any Certificate evidencing shares of DARA Common Stock, DARA Series A Preferred Stock or DARA Series B Preferred Stock shall have been lost, stolen or destroyed, upon the
making of an affidavit setting forth that fact by the Person claiming such lost, stolen or destroyed Certificate and, if required by Point the posting by such Person of a bond in such reasonable amount as Point may direct as indemnity against any
claim that may be made against Point, the Surviving Corporation or the Exchange Agent with respect to such Certificate, Point shall cause the Exchange Agent to pay to such Person the applicable amount of the Merger Consideration with respect to such
lost, stolen or destroyed Certificate.
(i)
Distributions With Respect To Unexchanged DARA Common Stock, DARA Series A Preferred Stock
or DARA Series B Preferred Stock
. No dividends or other distributions declared or made with respect to Point Common Stock with a record date after the Effective Time shall be paid to the holder of any unsurrendered Certificate with respect to
the shares of Point Common Stock such holder is entitled to receive pursuant to Section 2.1 until such holder shall surrender such Certificate. Subject to applicable law and the provisions of this Article II, following the surrender of any such
Certificate there shall be paid to the record holder of the shares of Point Common Stock issued in exchange for such Certificate, without interest, at the time of such surrender, the amount of dividends or other distributions with a record date
after the Effective Time theretofore paid with respect to such shares of Point Common Stock.
Section 2.3. Assumption Of Obligations To Issue Stock
(a)
DARA Options
. As of the Effective
Time, each outstanding option to purchase or acquire shares of DARA Common Stock (an
Option
) granted under DARAs Amended and Restated 2003 Employee, Director and Consultant Stock Plan (the
DARA Stock Plan
)
shall be converted into an option to acquire Point Common Stock as provided for in this Section 2.3(a). As of the Effective Time, each Option shall continue to have, and shall be subject to, the terms and conditions of each agreement pursuant
to which such Option was subject as of the Effective Time (including the terms and conditions of the DARA Stock Plan), except that (i) each Option shall be exercisable for that number of whole shares of Point Common Stock equal to the product,
rounded up to the nearest whole number, of (A) the aggregate number of shares of DARA Common Stock subject to such Option at the Effective Time multiplied by (B) the Exchange Ratio; and (ii) the exercise price per share of Point
Common Stock issuable pursuant to each Option shall be equal to the exercise price per share of DARA Common Stock under such Option at the Effective Time divided by the Exchange Ratio, rounded up to the nearest whole cent. Except for changes to the
Options expressly provided for in the DARA Stock Plan by reason of the consummation of the transactions contemplated hereby, the assumption and substitution of Options as provided herein shall not give the holders of such Options additional benefits
or additional (or accelerated) vesting rights which such holders did not have as of the Effective Time, or relieve the holders of such Options of any obligations or restrictions applicable to their Options or the shares obtainable upon exercise of
the Options.
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The adjustment provided for herein with respect to any Options that are incentive stock options (as defined in Section 422 of the Code)
shall be effected in a manner that is consistent with continued treatment of such Options as incentive stock options under Section 424(a) of the Code. The DARA Stock Plan shall be assumed by Point with respect to all outstanding
Options granted under the DARA Stock Plan, and no further options to purchase or acquire shares of DARA Common Stock or other awards or rights shall be granted under the DARA Stock Plan after the Effective Time. The duration and other terms of the
new options provided for in this Section 2.3(a) shall be the same as the original Options except that all references to DARA shall be references to Point. Point shall take all corporate action reasonably necessary to reserve for issuance a
sufficient number of shares of Point Common Stock for delivery upon the exercise of the Options.
(b)
DARA Warrants
. As of the
Effective Time, each outstanding warrant to purchase or acquire shares of DARA Common Stock (a
Warrant
) shall be converted into a warrant to acquire Point Common Stock as provided for in this Section 2.3(b). As of the
Effective Time, each Warrant shall continue to have, and shall be subject to, the terms and conditions of each agreement pursuant to which such Warrant was subject as of the Effective Time, except that (i) each Warrant shall be exercisable for
that number of whole shares of Point Common Stock equal to the product, rounded up to the nearest whole number, of (A) the aggregate number of shares of DARA Common Stock subject to such Warrant at the Effective Time multiplied by (B) the
Exchange Ratio; and (ii) the exercise price per share of Point Common Stock issuable pursuant to each Warrant shall be equal to the exercise price per share of DARA Common Stock under such Warrant at the Effective Time divided by the Exchange
Ratio, rounded up to the nearest whole cent. Except for changes to the Warrants expressly provided for in the agreement governing such Warrant by reason of the consummation of the transactions contemplated hereby, the assumption and substitution of
Warrants as provided herein shall not give the holders of such Warrants additional benefits or additional (or accelerated) rights which such holders did not have as of the Effective Time, or relieve the holders of such Warrants of any obligations or
restrictions applicable to their Warrants or the shares obtainable upon exercise of the Warrants. The duration and other terms of the new Warrants provided for in this Section 2.3(b) shall be the same as the original Warrants except that all
references to DARA shall be references to Point. Point shall take all corporate action reasonably necessary to reserve for issuance a sufficient number of shares of Point Common Stock for delivery upon the exercise of the Warrants.
Section 2.4. Transfer Books
At the Effective Time, the transfer books of DARA with respect to all
shares of capital stock and other securities of DARA shall be closed and no further registration of transfers of such shares of capital stock shall thereafter be made on the records of DARA. On or after the Effective Time, if any Certificates for
shares of DARA Common Stock, DARA Series A Preferred Stock or DARA Series B Preferred Stock (excluding any shares described in Section 2.1(b)) are presented to the Exchange Agent, the Surviving Corporation or Point for any reason, such
Certificates shall be canceled and exchanged as provided in this Article II, except as otherwise provided by law.
Section 2.5. Certain Adjustments
If between the date hereof and the Effective Time, the outstanding
shares of DARA Common Stock or of Point Common Stock shall be changed into a different number of shares by reason of any reclassification, recapitalization, split-up, combination or exchange of shares, or any dividend payable in stock or other
securities shall be declared thereon with a record date within such period, other than the Reverse Stock Split (as defined below) the Exchange Ratio (and any other references herein to a price per share of Point Common Stock) shall be adjusted
accordingly to provide the same economic effect as contemplated by this Agreement prior to such reclassification, recapitalization, split-up, combination, exchange or dividend.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF POINT
Point hereby represents and warrants to DARA, subject to the exceptions set forth in Points disclosure schedule (the
Point Disclosure
Schedule
) (which exceptions shall specifically identify a section, subsection or clause of a single section or subsection hereof, as applicable, to which such exception relates, it being understood and agreed that each such exception shall
be deemed to be disclosed both under such section, subsection or clause hereof and any other section, subsection or clause hereof to which such disclosure reasonably relates) that:
Section 3.1. Organization And Qualification; Subsidiaries
Each of Point and each Subsidiary (as
defined below) of Point (each a
Point Subsidiary
and collectively, the
Point Subsidiaries
) is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its
organization. Each of Point and each Point Subsidiary is duly qualified to conduct its business, and is in good standing, in each jurisdiction where the character of its properties owned, operated or leased or the nature of its activities makes such
qualification necessary, except for such failures which have not had and would not be reasonably likely to have a Material Adverse Effect on Point. Each of Point and each Point Subsidiary has the requisite corporate power and authority and any
necessary governmental authority, franchise, license or permit to own, operate, lease and otherwise to hold and operate its assets and properties and to carry on its businesses as now being conducted, except for such failures which have not had and
would not be reasonably likely to have a Material Adverse Effect on Point. Point has no Subsidiaries (as defined below) other than those listed in Schedule 3.1 of the Point Disclosure Schedule, each of which is wholly-owned by Point, or any direct
or indirect beneficial ownership of any securities, equity or other ownership interest in any Person other than those listed on Schedule 3.1 of the Point Disclosure Schedule.
Section 3.2. Certificate Of Incorporation And Bylaws
Point has heretofore delivered to DARA a
complete and correct copy of the certificate or articles of incorporation and the bylaws of Point and each Point Subsidiary, each as amended to the date of this Agreement. Each such certificate or articles of incorporation and bylaws is in full
force and effect. Except as disclosed on Schedule 3.2 of the Point Disclosure Schedule, neither Point nor any Point Subsidiary is in violation of any of the provisions of its respective certificate or articles of incorporation or bylaws.
Section 3.3. Capitalization
(a) The authorized capital stock of Point consists of Seventy-Five
Million (75,000,000) shares of Point Common Stock, par value $.0.01 per share, and One Million (1,000,000) shares of preferred stock, par value $.01 per share, of Point (
Point Preferred Stock
). As of August 31,
2007: (i) Thirty-Nine Million Three Hundred Eleven Thousand Five Hundred Eighty-Five (39,311,585) shares of Point Common Stock were issued and outstanding; (ii) all shares of Point Common Stock issuable upon the exercise of the
options under the plans set forth in Schedule 3.3(a) of the Point Disclosure Schedule (collectively, the
Point Stock Option Plan
) have been reserved for issuance; (iii) Two-Hundred Eighteen Thousand Five Hundred Forty-Five
(218,545) shares of Point Common Stock were held by Point in Points treasury; and (iv) no shares of Point Preferred Stock were issued or outstanding. Schedule 3.3(a) sets forth a complete and correct list, as of the date hereof, of
the number of shares of Point Common Stock subject to options, including, without limitation, those subject to employee stock options or other rights to purchase or receive Point Common Stock granted under the Point Stock Option Plan, in each case
including the dates of grant, exercise prices, vesting schedule and expiration dates for such options. Schedule 3.3(a) of the Point Disclosure Schedule sets forth a complete and correct list, as of the date hereof, of all convertible debt of Point,
including principal amount outstanding, interest rate, due date, conversion rate and redemption terms.
(b) All outstanding shares of
capital stock of Point are, and all shares which may be issued upon exercise of options under the Point Stock Option Plan will be, when issued, duly authorized, validly issued, fully paid and
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nonassessable and not subject to preemptive rights. Except as set forth in this Section 3.3 and on Schedule 3.3 of the Point Disclosure Schedule,
(i) there are not issued, reserved for issuance or outstanding (A) any shares of capital stock or other voting securities of Point, (B) any securities of Point or any Point Subsidiary convertible into or exchangeable or exercisable
for shares of capital stock or voting securities or ownership interests of Point or any Point Subsidiary, (C) any warrants, calls, options or other rights to acquire from Point or any Point Subsidiary, and any obligation of Point or any Point
Subsidiary to issue, any capital stock, voting securities or other ownership interests in, or securities convertible into or exchangeable or exercisable for capital stock or voting securities of, or other ownership interests in, Point or any Point
Subsidiary, (ii) except as set forth in Schedule 3.3(b) of the Point Disclosure Schedule, there are no outstanding obligations of Point or any Point Subsidiary to repurchase, redeem or otherwise acquire any such securities or to issue, deliver
or sell, or cause to be issued, delivered or sold, any such securities, including, without limitation, any offer, issuance or sale in such a manner that would constitute a public offering of securities under the Securities Act, and (iii) except
as contemplated in this Agreement and except as set forth in Schedule 3.3(b), Point is not presently under any obligation, has not agreed or committed, and has not granted rights, to register under the Securities Act or the Exchange Act, or
otherwise file any registration statement under any such statute covering, any of its currently outstanding capital stock or other securities or any of its capital stock or other securities that may be subsequently issued.
(c) Except for the option agreements under the Point Stock Option Plan and except as set forth on Schedule 3.3(c) of the Point Disclosure Schedule,
neither Point nor any Point Subsidiary is a party to any agreement restricting the purchase or transfer of, relating to the voting of or granting any preemptive or antidilutive rights with respect to, any securities of Point or any of the Point
Subsidiaries that are outstanding, or that may be subsequently issued upon the conversion or exercise of any instrument or otherwise. Point does not have a poison pill or similar stockholder rights plan.
(d) Point represents and warrants to DARA that on the Closing Date, the aggregate number of outstanding shares of Point Common Stock on a fully diluted
basis shall not exceed Forty-Six Million (46,000,000) shares.
Section 3.4. Authority
Point has the necessary corporate power and authority to enter into this
Agreement and, subject to obtaining the requisite approval of the issuance of the shares of Point Common Stock in the Merger and the adoption and approval of this Agreement by Points stockholders required by Delaware Law and Nasdaq rules
(
Point Stockholder Approval
), to perform its obligations hereunder and to consummate the transactions contemplated hereby. Except for Point Stockholder Approval, the execution and delivery of this Agreement by Point and the
consummation by Point of the transactions contemplated hereby have been duly and validly authorized by all necessary corporate action and no other corporate proceedings on the part of Point are necessary to authorize this Agreement or to consummate
the transactions contemplated hereby. This Agreement has been duly executed and delivered by Point and, assuming the due authorization, execution and delivery by DARA and Merger Sub, constitutes a legal, valid and binding obligation of Point,
enforceable in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws of general applicability relating to or affecting creditors rights generally
and by the application of general principles of equity. Point, as the sole stockholder of Merger Sub, has approved the Merger and this Agreement.
Section 3.5. No Conflict; Required Filings And Consents
(a) The execution and delivery of this
Agreement by Point do not, and the performance by Point of its obligations under this Agreement will not, (i) conflict with or violate the certificate or articles of incorporation or bylaws of Point or any Point Subsidiary, (ii) subject to
obtaining the approvals and compliance with the requirements set forth in Section 3.5(b), conflict with or violate any law, statute, ordinance, rule, regulation, order, judgment or decree applicable to Point or any Point Subsidiary or by which
any of their respective properties or assets is bound or affected, or (iii) except as set forth in Schedule 3.5 of the Point Disclosure
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Schedule, result in any breach of or constitute a default (or an event which with or without notice or lapse of time or both would become a default) under,
or give to others any rights of termination, amendment, acceleration or cancellation of, or result in the creation of an Encumbrance on any of the properties or assets of Point or any Point Subsidiary pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which Point or any Point Subsidiary is a party or by which Point, any Point Subsidiary or any of their respective properties or assets is bound or
affected, except, in the case of clauses (ii) and (iii) above, for any such conflicts, violations, breaches, defaults or other alterations or occurrences that (A) would not prevent or delay consummation of the Merger in any material
respect or otherwise prevent Point from performing its obligations under this Agreement in any material respect, and (B) have not had and would not be reasonably likely to have a Material Adverse Effect on Point or the Merger Sub.
(b) The execution and delivery of this Agreement by Point do not, and the performance of this Agreement by Point will not, require any consent,
approval, authorization or permit of, or filing with or notification to, any federal, state, local or foreign government, or any governmental or regulatory authority, domestic or foreign (each a
Governmental Entity
), by or with
respect to Point or any Point Subsidiary, except (i) for (A) applicable requirements, if any, of the Securities Exchange Act of 1934, as amended (the
Exchange Act
), the Securities Act of 1933, as amended (the
Securities Act
), state securities or blue sky laws (
Blue Sky Laws
), state takeover laws and the National Association of Securities Dealers Automated Quotation System/Capital Market System
(
Nasdaq
), (B) applicable requirements, if any, of the consents, approvals, authorizations or permits described in Schedule 3.5, and (C) filing and recordation of appropriate merger documents as required by Delaware Law,
and (ii) where failure to obtain such consents, approvals, authorizations or permits, or to make such filings or notifications, (A) would not prevent or delay consummation of the Merger in any material respect or otherwise prevent Point
from performing its obligations under this Agreement in any material respect, or (B) have not had and would not be reasonably likely to have a Material Adverse Effect on Point or the Surviving Corporation.
(c) Except as set forth on Schedule 3.5 of the Point Disclosure Schedule, the execution and delivery of this Agreement by Point does not, the performance
of this Agreement by Point will not, and the consummation of the transactions contemplated by this Agreement will not, (i) entitle any current or former employee or officer of Point or any ERISA Affiliate to severance pay, unemployment
compensation or any other payment, (ii) accelerate the time of payment or vesting, or increase the amount of compensation, due any such employee or officer, or (iii) accelerate the vesting of any stock option or of any shares of restricted
stock or other securities of Point.
Section 3.6. SEC Filings; Financial Statements
(a) Point has filed all forms, reports, statements
and other documents required to be filed with the Securities and Exchange Commission (the
SEC
) since March 19, 2002 (collectively, the
Point SEC Reports
). As of their respective filing dates, the Point SEC
Reports (x) complied as to form in all material respects with the requirements of the Exchange Act and the Securities Act, as applicable, and (y) did not at the time they were filed 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 the light of the circumstances under which they were made, not misleading.
(b) The audited consolidated financial statements and unaudited interim financial statements of Point included in the Point SEC Reports complied in all
material respects with applicable accounting requirements and with the published rules and regulations of the SEC with respect thereto. The financial statements, including all related notes and schedules, contained in the Point SEC Reports (or
incorporated by reference therein) present fairly in all material respects the consolidated financial position of Point and the Point Subsidiaries as at the respective dates thereof and the consolidated results of operations and cash flows of Point
and the Point Subsidiaries for the periods indicated, in accordance with generally accepted accounting principles in effect in
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the United States (
GAAP
) applied on a consistent basis throughout the periods involved (except as may be noted therein) and subject in the
case of interim financial statements to normal year-end adjustments and preparation of footnotes.
(c) As of the date of this Agreement,
the aggregate amount of (i) Points cash on hand, plus (ii) liquid investments of Point with a maturity of three years or less ((i) and (ii)
Current Cash Reserves
) is at least Two Million Two Hundred Thousand
Dollars ($2,200,000). Point owns all such Current Cash Reserves free and clear of all Encumbrances. As of the date of this Agreement, Point has no Indebtedness except as reflected in the audited consolidated financial statements of Point included in
Points Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2007, and except for Indebtedness incurred under the Loan and Security Agreement dated as of October 9, 2007 by and between Point and DARA (the
Loan
Agreement
).
(d) Except as disclosed on Schedule 3.6 of the Point Disclosure Schedule, Point has established and maintains
disclosure controls and procedures and internal controls over financial reporting (as such terms are defined in paragraphs (e) and (f), respectively, of Rule 13a-15 under the Exchange Act) as required by Rule 13a-15 under the Exchange Act.
Points disclosure controls and procedures are reasonably designed to ensure that all material information required to be disclosed by Point in the reports that it files or furnishes under the Exchange Act is recorded, processed, summarized and
reported within the time periods specified in the rules and forms of the SEC, and that all such material information is accumulated and communicated to Points management as appropriate to allow timely decisions regarding required disclosure
and to make the certifications required pursuant to SEC regulation.
(e) Point has disclosed, based on its evaluation for the fiscal year
ended December 31, 2006, to its outside auditors and the audit committee of its Board of Directors (i) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting (as defined
in Rule 13a-15(f) of the Exchange Act) that are reasonably likely to materially affect Points ability to record, process, summarize and report financial data and (ii) any fraud, whether or not material, known to management that involves
management or other employees who, in each case, have a significant role in Points internal control over financial reporting.
Section 3.7. No Undisclosed Liabilities
Except as contemplated by this Agreement, neither Point nor
any of the Point Subsidiaries has any liabilities or obligations of any nature, whether or not accrued, contingent or otherwise, except liabilities or obligations set forth in the Point SEC Reports or reflected in Schedule 3.7 of the Point
Disclosure Schedule.
Section 3.8. Absence Of Certain Changes Or Events
Except as contemplated by this Agreement or as set
forth in the Point SEC Reports, since December 31, 2006, Point and the Point Subsidiaries have conducted their businesses only in the ordinary course of business consistent with past practice, and except as set forth in the Point SEC Reports or
on Schedule 3.8 of the Point Disclosure Schedule, there has not been (a) any Material Adverse Effect on Point, (b) any declaration, setting aside or payment of any dividend or other distribution (whether in cash, stock or property) with
respect to any of Points capital stock, (c) any split, combination or reclassification of any of Points capital stock or any issuance or the authorization of any issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock, (d) (i) any granting by Point or any Point Subsidiary to any current or former director, officer or employee of Point or any of the Point Subsidiaries of any increase in compensation, bonus or
other benefits, (ii) any granting by Point or any of the Point Subsidiaries to any such current or former director, officer or employee of any increase in severance or termination pay, (iii) any entry by Point or any of the Point
Subsidiaries into, or any amendment of, any employment, deferred compensation, consulting, severance, termination or indemnification agreement with any such current or former director, officer or employee, or (iv) any amendment to, or
modification of, any option outstanding under the Point Stock Option Plan, (e) any damage, destruction or loss, whether or not covered by insurance, that would be reasonably likely to have a Material Adverse Effect on
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Point, (f) any change in accounting methods, principles or practices by Point materially affecting its assets, liabilities or businesses, except insofar
as may have been required by a change in GAAP, or (g) any Tax election that would be reasonably likely to have a Material Adverse Effect on Point or any of its tax attributes or any settlement or compromise of any material income tax liability.
Section 3.9. Absence Of Litigation
Except as set forth on Schedule 3.9 of the Point Disclosure
Schedule and except as set forth in the Point SEC Reports filed as of the date of this Agreement, there are (a) no claims, actions, suits, investigations, or proceedings pending or, to the knowledge of Point, threatened against Point or any
Point Subsidiary before any court, administrative, governmental, arbitral, mediation or regulatory authority or body, domestic or foreign, that would be reasonably likely to have a Material Adverse Effect on Point or that challenge or seek to
prevent, enjoin, alter or materially delay the transactions contemplated hereby, and (b) no judgments, decrees, injunctions or orders of any Governmental Entity or arbitrator outstanding against Point or any Point Subsidiary that would be
reasonably likely to have a Material Adverse Effect on Point.
Section 3.10. Licenses And Permits; Compliance With Laws
Point and the Point Subsidiaries hold all
permits, licenses, franchises, authorizations and approvals from all Governmental Entities (the
Point Permits
) which are necessary for the operation of the businesses of Point and the Point Subsidiaries as presently conducted and
for Point and the Point Subsidiaries to own, lease and operate their respective properties, except where the failure to have any such permits, licenses or approvals would not have a Material Adverse Effect on Point. Point and the Point Subsidiaries
are in compliance with the terms of the Point Permits and all applicable statutes, laws, ordinances, rules and regulations, except where the failure so to comply would not have a Material Adverse Effect on Point.
Section 3.11. Unlawful Payments
None of Point, any Point Subsidiary, or any officer, director,
employee, agent or representative of Point or any Point Subsidiary has made, directly or indirectly, any bribe or kickback, illegal political contribution, payment from corporate funds which was incorrectly recorded on the books and records of Point
or any Point Subsidiary, unlawful payment from corporate funds to governmental or municipal officials in their individual capacities for the purpose of affecting their action or the actions of the jurisdiction which they represent to obtain
favorable treatment in securing business or licenses or to obtain special concessions of any kind whatsoever, or illegal payment from corporate funds to obtain or retain any business.
Section 3.12. Taxes
(a) Except as set forth on Schedule 3.12 of the Point Disclosure Schedule, Point
and the Point Subsidiaries have prepared and filed on a timely basis with all appropriate Governmental Entities all material returns, reports, information statements and other documentation (including extensions) required to be filed by Point and
the Point Subsidiaries in respect of Taxes (the
Point Tax Returns
), and all such Point Tax Returns are correct and complete in all material respects. Point and the Point Subsidiaries have paid in full all Taxes due and, in the
case of Taxes accruing but not due, Point has made adequate provisions in its books and records and financial statements for such payments (other than Taxes, in each case, the failure of which to pay have not had and are not reasonably likely to
have a Material Adverse Effect on Point). Point and the Point Subsidiaries have withheld all amounts required by law to be withheld from payments made to their present or former employees, contractors, officers and directors or other third parties,
except where the liability for which would not have a Material Adverse Effect on Point, and have, where required, remitted such amounts within the applicable periods to the appropriate Governmental Entities. In addition, except as set forth on
Schedule 3.12 of the Point Disclosure Schedule: (i) there are no written assessments of, or written claims against, Point or the Point Subsidiaries with respect to Taxes that are outstanding; (ii) no Governmental Entity is conducting an
examination or audit of Point
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or any Point Subsidiary in respect of Taxes and neither Point nor any Point Subsidiary has received written notice of any such examination or audit from any
Governmental Entity; and (iii) neither Point nor any Point Subsidiary has executed or filed any written agreement extending the period of assessment or collection of any Taxes that remains outstanding and in effect.
(b) No Encumbrances exist for Taxes (other than Encumbrances for Taxes not yet due and payable or which are being contested in good faith) with respect
to any of the assets or properties of Point or any Point Subsidiary.
(c) Neither Point nor any Point Subsidiary is a party to or bound by
any tax-sharing agreement, tax indemnity obligation or similar agreement, arrangement or practice with respect to Taxes (including any advance pricing agreement, closing agreement or other agreement relating to Taxes with any Taxing Authority).
(d) Point will not be required to include in a taxable period ending after the Effective Time any taxable income attributable to income
that accrued in a prior taxable period but was not recognized in any prior taxable period as a result of the installment method of accounting, the long-term contract method of accounting, the cash method of accounting or Section 481 of the Code
or any comparable provision of state, local or foreign Tax law, or for any other reason.
(e) No power of attorney with respect to any
Taxes has been executed or filed with any Taxing Authority by or on behalf of Point other than in connection with the payment of Points payroll taxes by a third party hired by Point.
(f) As of the date of this Agreement, the total adjusted tax basis of the assets of Point equals or exceeds the sum of any liabilities of Point.
Section 3.13. Intellectual Property
(a) Point is either the sole assignee at the PTO or is the
exclusive licensee of each of the patents listed under the heading
U.S. Patents of Point
on Schedule 3.13 of the Point Disclosure Schedule (the
U.S. Patents
) and each of the patent applications listed under the
heading
U.S. Patent Applications of Point
on Schedule 3.13 of the Point Disclosure Schedule (the
U.S. Applications
), and the U.S. Patents and U.S. Applications include all United States and foreign patents and
patent applications owned by Point. Point owns or is the exclusive licensee of 21 issued U.S. Patents and 14 pending U.S. Applications. There are no claims by others (excluding the ownership claims of Tufts University a/k/a Trustees of Tufts College
(
Tufts
)) to the U.S. Patents or U.S. Applications whose WGS Reference Numbers as listed on Schedule 3.13 of the Point Disclosure Schedule begin with I0254 and the U.S. Governments march-in rights with respect to
U.S. Patents or U.S. Applications claiming inventions developed with federal funds) to any ownership interest or lien with respect to any of the U.S. Patents or U.S. Applications. None of the U.S. Patents is the subject of an interference,
reexamination, reissue examination or declaratory action. None of the U.S. Applications is the subject of an appeal or final rejection.
(b) Point is either the sole assignee at the appropriate foreign office or the exclusive licensee of each of the 68 foreign patents listed under the heading
Non-U.S. Patents of Point
on Schedule 3.13 of the Point
Disclosure Schedule (the
Non-U.S. Patents
) (collectively, the U.S. Patents and Non-U.S. Patents are referred to herein as the
Patents
) and each of the 54 foreign patent applications listed under the heading
Non-U.S. Patent Applications of Point
on Schedule 3.13 of the Point Disclosure Schedule (the
Non-U.S. Applications
) (collectively, the U.S. Applications and the Non-U.S. Applications are referred to herein as
the
Applications
). There are no claims by others (excluding the ownership claims of Tufts to the Non-U.S. Patents or Non-U.S. Applications whose WGS Reference Numbers as listed on Schedule 3.13 of the Point Disclosure Schedule
with I0254 and the U.S. Governments march-in rights with respect to Non-U.S. Patents or Non-U.S. Applications claiming inventions developed with federal funds) to any ownership interest or lien with respect to any of such Non-U.S.
Patents or Non-U.S. Applications. None of the Non-U.S. Patents is the subject of an
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opposition, national invalidation proceeding, or national court proceeding. None of the Non-U.S. Applications is the subject of an appeal or final rejection.
(c) Except as set forth on Schedule 3.13 of the Point Disclosure Schedule, Point does not lack or will be able to obtain rights to all
Intellectual Property necessary to the conduct of its business as now or proposed to be conducted by Point as described in the Point SEC Reports as of the date of this Agreement. There are no facts that (a) would preclude Point from having
clear title to the Patents and Applications whose WGS Reference Numbers as listed on Schedule 3.13 of the Point Disclosure Schedule begin with I0248, or (b) would lead Point to conclude that any of the Patents are invalid or unenforceable.
(d) There are no material defects of form in the preparation, filing or prosecution of the Applications on behalf of itself or Tufts, as
applicable. Point, Points patent counsel, and, to such counsels knowledge, the patent counsel of Tufts have complied with the PTO duty of candor and disclosure before the PTO for each of the U.S. Patents and U.S. Patent Applications.
(e) There is no pending or threatened notification, action, suit, proceeding or claim by governmental authorities or others that Point is
infringing or otherwise violating any patents, trademarks, trade secrets or other intellectual property that is not owned or licensed by Point.
(f) There is no pending or threatened action, suit, proceeding or claim by governmental authorities or others challenging the validity, enforceability or scope of the Applications or Patents, other than the patent application proceedings
themselves.
(g) There is no infringement on the part of others of the Patents, Applications or trademarks of Point or the misappropriation
on the part of others of any trade secrets, know-how or other proprietary rights of Point.
(h) Except as set forth on Schedule 3.13 of the
Point Disclosure Schedule, there are no United States, European Patent Convention or Japanese patent rights of others which are or would be infringed by Points products or applications of Points products.
Section 3.14. Material Contracts
(a) All of the agreements filed as an exhibit to the Point SEC
Reports which remain in full force and effect and all of the agreements that would have been required to be filed as an exhibit to the Point SEC Reports if any such agreements have been entered into as of the date of filing of any such Point SEC
Report (collectively
Point Material Contracts
) are valid and in full force and effect on the date hereof except to the extent they have previously expired in accordance with their terms, and neither Point nor any Point Subsidiary
has (or has any knowledge that any party thereto has) violated any provision of, or committed or failed to perform any act which with or without notice, lapse of time or both would constitute a default under the provisions of, any Point Material
Contract, except defaults which would not reasonably be expected to have a Material Adverse Effect on Point. True and complete copies of all Point Material Contracts have been made available to DARA.
(b) Except as disclosed on Schedule 3.14 of the Point Disclosure Schedule, neither Point nor any Point Subsidiary has entered into any agreement which
would have been required to be filed as an exhibit to the Point SEC Reports. Each of such agreements is valid and in full force and effect on the date hereof, and neither Point nor any Point Subsidiary has (or has any knowledge that any party
thereto has) violated any provision of, or committed or failed to perform any act which with or without notice, lapse of time or both would constitute a default under the provisions of, any such agreement, except defaults which would not reasonably
be expected to have a Material Adverse Effect on Point.
Section 3.15. Employee Benefit Plans
(a) Schedule 3.15 of the Point Disclosure Schedule sets forth a
list of all Point Benefit Plans (as defined below). Each Point Benefit Plan intended to be qualified within the meaning of Section 401(a) of the Code has
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been determined by the Internal Revenue Service (
IRS
) to be so qualified or has a document issued by the IRS confirming such
qualification, and no circumstances exist that could reasonably be expected by Point to result in the revocation of any such determination. Each Point Benefit Plan is in compliance with the applicable terms, if any, of the Employee Retirement Income
Security Act of 1974, as amended (
ERISA
) and the Code and any other applicable laws, rules and regulations, except where the breach or violation of which would not result in a Material Adverse Effect on Point.
(b) Neither Point nor any Point Controlled Common Entity has ever sponsored or contributed to a defined benefit pension plan that is subject to the
funding obligations of Title IV of ERISA.
(c) No Point Benefit Plan is or has been a multiemployer plan within the meaning of
Section 3(37) of ERISA (a
Multiemployer Plan
). Neither Point nor any Point Commonly Controlled Entity has completely or partially withdrawn from any Multiemployer Plan. No termination liability to the Pension Benefit Guaranty
Corporation or withdrawal liability to any Multiemployer Plan that is material in the aggregate has been or is reasonably expected to be incurred with respect to any Multiemployer Plan by Point or any Point Commonly Controlled Entity.
(d) Except as set forth in Schedule 3.15(d) of the Point Disclosure Schedule, no amount (whether in cash or property or the vesting of property) that
could be received by, or benefit provided to, any officer, director or employee of Point or any of its Affiliates who is a disqualified individual (as such term is defined in proposed Treasury Regulations Section 1.280G-1) under any
employment, severance or termination agreement, other compensation arrangement or Benefit Plan currently in effect would be an excess parachute payment (as such term is defined in Section 280G(b)(1) of the Code). Except as set forth
in Schedule 3.15(d) of the Point Disclosure Schedule, no such Person is entitled to receive any additional payment from Point, the Surviving Corporation or any other Person (a
Parachute Gross Up Payment
) in the event that the
excise tax of Section 4999(a) of the Code is imposed on such Person. Except as set forth in Schedule 3.15(d) of the Point Disclosure Schedule, the Board of Directors of Point has not granted to any officer, director or employee of Point or any
Point Subsidiary any right to receive any Parachute Gross Up Payment.
(e) (i) all required reports and descriptions, if any
(including Form 5500 Annual Reports, Summary Annual Reports and Summary Plan Descriptions), have been filed or distributed appropriately with respect to each Point Benefit Plan, and (ii) the requirements of Part 6 of Subtitle B of Title 1 of
ERISA and of Section 4980B of the Code (
Cobra
) and the Health Insurance Portability and Accountability Act of 1996 (
HIPAA
) have been met with respect to each Point Benefit Plan.
(f) No Point Benefit Plan is an ESOP or otherwise invests in employer securities (as such term is defined in Section 409(l) of the
Code).
(g) Point has made all contributions and other payments required by and due under the terms of each Point Benefit Plan and has
taken no action (including, without limitation, actions required by law) relating to any Point Benefit Plan that will increase Points or any Point Commonly Controlled Entitys obligation under any Point Benefit Plan.
(h) No Point Benefit Plan is a qualified foreign plan (as such term is defined in Section 404A of the Code), and no Point Benefit Plan
is subject to the laws of any jurisdiction other than the United States of America or one of its political subdivisions.
(i) No Point
Benefit Plan promises or provides post-retirement medical life insurance or other benefits due now or in the future to current, former or retired employees of Point or any Point Common Controlled Entity other than benefits required pursuant to
Cobra.
(j) No pension plan, as such term is defined in Section 3(2) of ERISA, maintained by Point or an Point Commonly
Controlled Entity, has been frozen or terminated in the last three (3) calendar years.
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(k) As used herein: (i)
Benefit Plans
means any pension, retirement,
profit-sharing, deferred compensation, stock option, employee stock ownership, severance pay, vacation or bonus plans or agreements or other incentive plans or agreements, all other employee programs, arrangements or agreements and all other
employee benefit plans or fringe benefit plans, including, without limitation, all employee benefit plans as that term is defined in Section 3(3) of ERISA; (ii)
Point Benefit Plans
mean the Benefit Plans
currently adopted, maintained by, sponsored in whole or in part by, or contributed to by Point or any Point Commonly Controlled Entity for the benefit of present or former employees or directors of Point and of each Point Subsidiary or their
beneficiaries, or providing benefits to such persons in respect of services provided to any such entity; (iii)
Point Commonly Controlled Entity
means an entity required to be aggregated with Point which is a member of the
controlled group of corporations which includes Point within the meaning of Section 414(b), (c) or (m) of the Code; and (iv)
Point ERISA Plan
means any Point Benefit Plan which is an employee
pension benefit plan, as that term is defined in Section 3(2) of ERISA.
Section 3.16. Properties; Assets
Except as disclosed in the Point SEC Reports or as described in
clause (c) below or as set forth on Schedule 3.16 of the Point Disclosure Schedule: (a) neither Point nor any Point Subsidiary owns or leases any real property; (b) each of Point and the Point Subsidiaries has good, valid and
marketable title to, or a valid leasehold interest in, as applicable, all real property owned or leased by Point or a Point Subsidiary (the
Point Real Property
) and all other properties and assets reflected in the consolidated
balance sheet of Point at December 31, 2006, included in Points Annual Report on Form 10-K for the fiscal year ended December 31, 2006; and (c) none of such properties or assets are subject to any Encumbrance, except for liens
for taxes not yet due and payable, and easements and restrictions of record, if any, which are not substantial in amount, do not materially detract from the value of the property or assets subject thereto and do not impair the operations of Point
and the Point Subsidiaries thereon.
Section 3.17. Labor Relations
Neither Point nor any Point Subsidiary is a party to any collective
bargaining agreement or other contract or agreement with any labor organization or other representative of any of the employees of Point or any Point Subsidiary. Point and each Point Subsidiary is in compliance with all laws relating to employment
or the workplace, including, without limitation, provisions relating to wages, hours, collective bargaining, safety and health, work authorization, equal employment opportunity, affirmative action plans, immigration and the withholding of income
taxes, unemployment compensation, workers compensation, employee privacy and right to know and social security contributions, except for any noncompliance which would not have a Material Adverse Effect on Point.
Section 3.18. Environmental Matters
(a) Except as disclosed on Schedule 3.18(a) of the Point
Disclosure Schedule: (i) Point and each Point Subsidiary are and have been at all times in compliance in all material respects with all applicable Environmental Laws (as defined below); (ii) neither Point nor any Point Subsidiary has
received any written communication that alleges that Point or any Point Subsidiary is not in compliance with applicable Environmental Laws; (iii) all material permits and other governmental authorizations currently held by Point and each Point
Subsidiary pursuant to the Environmental Laws that are required for the occupation of their facilities and the operations of their businesses (
Point Environmental Permits
) are in full force and effect, Point and each Point
Subsidiary are and have been at all times in compliance in all material respects with all of the terms of such Point Environmental Permits, and no other permits or other governmental authorizations are required by Point or any Point Subsidiary for
the conduct of their respective businesses, except where the failure to obtain such permits or government authorizations would not reasonably be expected to result in a Material Adverse Effect on Point; and (iv) the management, handling,
storage, transportation, treatment, and disposal by Point and each Point Subsidiary of any Hazardous Materials (as defined below) is and has been at all times in compliance in al material respects with all applicable Environmental Laws.
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(b) To the knowledge of Point, there is no Point Environmental Claim (as defined below) pending or, to
the knowledge of Point, threatened against or involving Point, any of the Point Subsidiaries or against any Person whose liability for any Environmental Claim Point or any of the Point Subsidiaries has or may have retained or assumed either
contractually or by operation of law.
(c) Except for matters which would not have a Material Adverse Effect on Point, to the knowledge of
Point, there are no past or present actions or activities by Point, any Point Subsidiary or any other Person involving the storage, treatment, release, emission, discharge, disposal or arrangement for disposal of any Hazardous Materials, that could
reasonably form the basis of any Point Environmental Claim against Point or any Point Subsidiary or against any Person whose liability for any Point Environmental Claim Point or any Point Subsidiary may have retained or assumed either contractually
or by operation of law.
(d) As used herein, these terms shall have the following meanings:
(i)
Point Environmental Claim
means any and all administrative, regulatory or judicial actions, suits, demands, demand
letters, directives, claims, liens, investigations, proceedings or notices of noncompliance or violation (written or oral) by any Person or Governmental Entity alleging any material liabilities or potential material liability arising out of, based
on or resulting from the presence, or release or threatened release into the environment of, or any exposure to, any Hazardous Materials at any property or location owned or leased by Point or any Point Subsidiary or other circumstances forming the
basis of any material violation or alleged material violation of any Environmental Law.
(ii)
Environmental
Laws
means all applicable foreign, federal, state and local laws (including the common law), rules, requirements and regulations relating to pollution, the environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata) or protection of human health as it relates to the environment including, without limitation, laws and regulations relating to releases of Hazardous Materials, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials or relating to management of asbestos in buildings.
(iii)
Hazardous Materials
means wastes, substances, or materials (whether solids, liquids or gases) that are deemed
hazardous, toxic, pollutants, or contaminants under any Environmental Laws, including, without limitation, substances defined as hazardous substances, toxic substances, radioactive materials, including sources of
ionizing and nonionizing radiation, petroleum products or wastes or other similar designations in, or otherwise subject to regulation under, any Environmental Law.
Section 3.19. Insurance
Except as disclosed on Schedule 3.19 of the Point Disclosure Schedule, Point
and the Point Subsidiaries maintain insurance policies which: (a) insure against such risks, and are in such amounts, as are appropriate and reasonable, in the judgment of Points management, considering Point and the Point
Subsidiaries properties, businesses and operations; (b) are in full force and effect; and (c) are valid, outstanding, and enforceable. Neither Point nor any of the Point Subsidiaries has received or given notice of cancellation with
respect to any such insurance policies which are currently in effect.
Section 3.20. Board Approval; Vote Required
The Board of Directors of Point has determined that the
transactions contemplated by this Agreement are advisable and in the best interests of Point and its stockholders and has resolved to recommend to such stockholders that they vote in favor of this Agreement, and approve the issuance of Point Common
Stock pursuant to this Agreement. The affirmative vote at the Point Stockholders Meeting of the holders of a majority of all outstanding shares of Point Common Stock (a) is a condition to the approval of the Point Common Stock to be issued
pursuant hereto for listing on the Nasdaq, the effectiveness of the Reverse Stock Split and the Name
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Change, and (b) is the only vote of the holders of any class or series of Points capital stock necessary to approve the Reverse Stock Split (as
defined herein), the Name Change (as defined herein) and the issuance of the Point Common Stock pursuant to the Merger.
Section 3.21. Brokers
No broker, finder or investment banker is entitled to any brokerage,
finders or other fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of Point.
Section 3.22. Tax Matters
Neither Point nor Merger Sub has taken or agreed to take any action that
would prevent the Merger from constituting a reorganization within the meaning of Section 368(a) of the Code, including, without limitation, any actions or transactions that would cause the Merger to fail to satisfy the continuity of business
enterprise or continuity of interest requirements set forth in Treasury Regulations Sections 1.368-1(d) and 1.368-1(e), respectively.
Section 3.23. Registration Statement; Joint Proxy Statement/Prospectus
The information supplied by
Point or required to be supplied by Point (except to the extent revised or superseded by amendments or supplements) for inclusion or incorporation by reference in the registration statement on Form S-4, or any amendment or supplement thereto,
pursuant to which the shares of Point Common Stock to be issued in the Merger will be registered under the Securities Act (including any amendments or supplements, the
Registration Statement
) shall not, at the time the
Registration Statement (including any amendments or supplements thereto) is filed with the SEC, is amended or supplemented or is declared effective by the SEC, contain any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The information supplied by Point or required to be supplied by Point (except to the extent
revised or superseded by amendments or supplements) for inclusion in the proxy statement relating to Point Stockholders Meeting and the DARA Stockholders Meeting (such joint proxy statement, together with the prospectus relating to the shares of
Point Common Stock to be issued in the Merger, in each case as amended or supplemented from time to time, the
Joint Proxy Statement/Prospectus
) shall not, on the date the Joint Proxy Statement/Prospectus (or any amendment or
supplement thereto) is first mailed to Points stockholders and DARAs stockholders, at the time of the Point Stockholders Meeting and the DARA Stockholders Meeting, or at the Effective Time, contain any statement which, at such time, is
false or misleading with respect to any material fact, or omit to state any material fact necessary in order to make the statements made therein, in light of the circumstances under which they are made, not false or misleading, or omit to state any
material fact necessary to correct any statement in any earlier communication with respect to the solicitation of proxies by or on behalf of Point for the Point Stockholders Meeting or by or on behalf of DARA for the DARA Stockholders Meeting which
has become false or misleading. The Joint Proxy Statement/Prospectus will comply in all material respects with the provisions of the Securities Act and the Exchange Act and the rules and regulations of the SEC thereunder. Notwithstanding the
foregoing, Point makes no representation, warranty or covenant with respect to any information supplied or required to be supplied solely by DARA which is contained in or omitted from any of the foregoing documents.
Section 3.24. Regulatory Compliance
(a) As to each product subject to the jurisdiction of the U.S.
Food and Drug Administration (the
FDA
) under the Federal Food, Drug and Cosmetic Act, as amended, and the regulations thereunder (
FDCA
), or the Public Health Services Act, as amended (
PHSA
),
and the regulations thereunder, and each product subject to the jurisdiction of the Drug Enforcement Administration (
DEA
) under the Controlled Substances Act, as
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amended, and Controlled Substances Import and Export Act, as amended (
CSA
), and the regulations under each of the foregoing (each such
product, a
Pharmaceutical Product
) that is or has been manufactured, packaged, labeled, sold, distributed, marketed, and/or tested by or on behalf of Point or any Point Subsidiary, such Pharmaceutical Product is being or was
manufactured, packaged, labeled, sold, distributed, marketed, and/or tested by Point or any Point Subsidiary in compliance with all applicable requirements under FDCA, PHSA, CSA, and similar laws, rules, regulations, and guidelines except where the
failure to be in compliance would not have a Material Adverse Effect on Point. Except as disclosed in the Point SEC Reports or as set forth in Schedule 3.24 of the Point Disclosure Schedule, none of Point or any Point Subsidiary has received any
notice, warning letter or other communication from the FDA, DEA, or any other Governmental Entity (i) contesting the premarket clearance, licensure, registration, approval, use, distribution, manufacturing, testing, sale, labeling, or promotion
of any Pharmaceutical Product described in this Section 3.24 or (ii) otherwise alleging any violation of any laws, rules, regulations, or guidelines by Point or any Point Subsidiary, and which would have a Material Adverse Effect on Point
or any Pharmaceutical Product.
(b) Except as set forth on Schedule 3.24 of the Point Disclosure Schedule, since January 1, 2004, no
Pharmaceutical Products of Point or any Point Subsidiary have been recalled, withdrawn, replaced, suspended or discontinued nor have any DEA registrations been terminated by Point or any Point Subsidiary in the United States or outside the United
States (whether voluntarily or otherwise) which would have a Material Adverse Effect on Point.
(c) Neither Point nor any Point Subsidiary,
nor any officer, employee or agent of Point or any Point Subsidiary has made any untrue statement of a material fact or fraudulent statement to the FDA or other Governmental Entity, failed to disclose a fact required to be disclosed to the FDA or
any other Governmental Entity, or committed an act, made a statement, or failed to make a statement that, at the time such disclosure was made, could reasonably be expected to provide a basis for the FDA or any other Governmental Entity to invoke
its policy respecting Fraud, Untrue Statements of Material Facts, Bribery, and Illegal Gratuities, set forth in 56 Fed. Reg. 46191 (September 10, 1991) or any similar policy. Neither Point nor any Point Subsidiary nor any officer,
employee or agent of Point or any Point Subsidiary has been convicted of any crime or engaged in any conduct for which debarment is mandated by 21 U.S.C. sec. 335a(a) or any similar law or authorized by 21 U.S.C. sec. 335a(b) or any similar law.
(d) Except as set forth on Schedule 3.24 of the Point Disclosure Schedule, since March 19, 2002, neither Point nor any Point
Subsidiary has received any written notice that the FDA or any other Governmental Entity has commenced, or threatened to initiate, any action, including lawsuits, arbitrations, or legal or administrative or regulatory proceedings, charges,
complaints, or investigations, nor are there any completed or pending efforts to withdraw its approval of, request the recall of, suspension of, seizure of, change the quotas for controlled substances, or change the controlled substances schedules
of any Pharmaceutical Product of Point or any Point Subsidiary, or commenced, or threatened to initiate, any action to impose a clinical hold on any clinical investigation by Point or any Point Subsidiary, withdraw advertising or sales promotion
materials, or any action to enjoin production at, or suspend or revoke the DEA registration or any facility of, or enter into a Consent Decree of Permanent Injunction with Point or any Point Subsidiary which would have a Material Adverse Effect on
Point.
(e) Point and each of the Point Subsidiaries are not in violation of and are in compliance with, all applicable laws, rules,
regulations, and guidelines regarding the conduct of pre-clinical and clinical investigations, including, but not limited to, the requirements provided in 21 C.F.R. Parts 50, 56, 58 and 312, except where the failure to be in compliance would not
have a Material Adverse Effect on Point. Each clinical trial with respect to Pharmaceutical Products of Point and each of the Point Subsidiaries has been conducted in accordance with its clinical trial protocol and Point or one of the Point
Subsidiaries has filed all required notices (and made available to DARA copies thereof) of adverse drug experiences, injuries or deaths relating to clinical trials of such Pharmaceutical Products, and Point or one of the Point Subsidiaries has filed
all required notices of any such occurrence, except where the failure to be in compliance with the protocol or relevant reporting requirements would not have a Material Adverse Effect on Point.
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(f) No person has filed a claim for loss or potential loss under any indemnity covering participants in
clinical trials of Pharmaceutical Products of Point or one of the Point Subsidiaries.
(g) Point has provided or made available to DARA all
documents in its possession or the possession of the Point Subsidiaries concerning communication to or from the FDA or DEA, or prepared by the FDA or DEA which bear in any material respect on compliance with FDA or DEA regulatory requirements,
including, but not limited to, any deficiency letter, warning letter, non-approvable letter/order, withdrawal letter/order, or similar communications.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF MERGER SUB
Merger Sub represents and warrants to DARA as follows:
Section 4.1. Organization And Qualification
Merger Sub is a corporation duly organized, validly
existing and in good standing under Delaware Law. Merger Sub was formed solely for the purpose of engaging in the transactions contemplated by this Agreement. As of the date of this Agreement, except for obligations or liabilities incurred in
connection with its incorporation and organization and otherwise in connection with the transactions contemplated by this Agreement, Merger Sub has not incurred, directly or indirectly, any obligations or liabilities or engaged in any business
activities of any type or kind whatsoever or entered into any agreements or arrangements with any Person.
Section 4.2. Certificate Of Incorporation And Bylaws
Merger Sub has heretofore made available to
DARA a complete and correct copy of the certificate of incorporation and the bylaws of Merger Sub, each as amended to date. Such certificate of incorporation and bylaws are in full force and effect. Merger Sub is not in violation of any of the
provisions of its certificate of incorporation or bylaws.
Section 4.3. Authority
Merger Sub has the necessary corporate power and authority to enter into this
Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. Merger Sub has the requisite corporate power and authority and any necessary governmental authority, franchise, license or permit to own,
operate, lease and otherwise to hold and operate its assets and properties and to carry on its business as now being conducted, except for such failures which have not had and would not reasonably be likely to have a Material Adverse Effect on
Merger Sub. The execution and delivery of this Agreement by Merger Sub and the consummation by Merger Sub of the transactions contemplated hereby have been duly and validly authorized by all necessary corporate action and no other corporate
proceedings on the part of Merger Sub are necessary to authorize this Agreement or to consummate the transactions contemplated hereby. This Agreement has been duly executed and delivered by Merger Sub and, assuming the due authorization, execution
and delivery of this Agreement by Point and DARA, constitutes a legal, valid and binding obligation of Merger Sub, enforceable in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium and other similar laws of general applicability relating to or affecting creditors rights generally and by the application of general principles of equity.
Section 4.4. No Conflict; Required Filings And Consents
(a) The execution and delivery of this
Agreement by Merger Sub do not, and the performance by Merger Sub of its obligations under this Agreement will not, (i) conflict with or violate the certificate of incorporation or bylaws of Merger Sub, (ii) subject to compliance with the
requirements set forth in Section 4.4(b) below, conflict
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with or violate any law, statute, ordinance, rule, regulation, order, judgment or decree applicable to Merger Sub or by which any of its properties or assets
is bound or affected, or (iii) result in any breach of or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of any Encumbrance on any of the properties or assets of Merger Sub pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation
to which Merger Sub is a party or by which Merger Sub or any of its properties or assets is bound or affected, except, in the case of clauses (ii) and (iii) above, for any such conflicts, violations, breaches, defaults or other alterations
or occurrences that would not prevent or delay consummation of the Merger in any material respect, or otherwise prevent Merger Sub from performing its obligations under this Agreement in any material respect.
(b) The execution and delivery of this Agreement by Merger Sub does not, and the performance of this Agreement by Merger Sub will not, require any
consent, approval, authorization or permit of, or filing with or notification to, any Governmental Entity, except (i) for (A) applicable requirements, if any, of the Exchange Act, Securities Act, state takeover laws, the Nasdaq and the
FDA, (B) applicable requirements, if any, of the consents, approvals, authorizations or permits described in Schedule 3.5 of the Point Disclosure Schedule, and (C) filing and recordation of appropriate merger documents as required by
Delaware Law, and (ii) where failure to obtain such consents, approvals, authorizations or permits, or to make such filings or notifications, would not prevent or delay consummation of the Merger in any material respect.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF DARA
DARA represents and warrants to Point and Merger Sub, subject to the exceptions set forth herein and in DARAs disclosure schedule (the
DARA Disclosure Schedule
) (which exceptions shall specifically identify a section, subsection or clause of a single section or subsection hereof, as applicable, to which such exception relates, it being understood and agreed that
each such exception shall be deemed to be disclosed both under such section, subsection or clause hereof and any other section, subsection or clause hereof to which such disclosure reasonably relates) that:
Section 5.1. Organization And Qualification; Subsidiaries
Each of DARA and each Subsidiary of DARA
(each a
DARA Subsidiary
and collectively, the
DARA Subsidiaries
) is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization. Each of DARA and
each DARA Subsidiary is duly qualified to conduct its business, and is in good standing, in each jurisdiction where the character of its properties owned, operated or leased or the nature of its activities makes such qualification necessary, except
for such failures which have not had and would not be reasonably likely to have a Material Adverse Effect on DARA. Each of DARA and each DARA Subsidiary has the requisite corporate power and authority and any necessary governmental authority,
franchise, license or permit to own, operate, lease and otherwise to hold and operate its assets and properties and to carry on its business as now being conducted, except for such failures which have not had and would not be reasonably likely to
have a Material Adverse Effect on DARA. DARA has no Subsidiaries other than those listed in Schedule 5.1 of the DARA Disclosure Schedule, each of which is wholly-owned by DARA, or any direct or indirect beneficial ownership of any securities, equity
or other ownership interest in any Person other than those listed on Schedule 5.1 of the DARA Disclosure Schedule.
Section 5.2. Certificate Of Incorporation And Bylaws
DARA has heretofore delivered to Point a
complete and correct copy of the certificate of incorporation and the bylaws of DARA and each DARA Subsidiary, each as amended to date. Each certificate of incorporation and bylaws is in full force and effect. Neither DARA nor any DARA Subsidiary is
in violation of any of the provisions of its certificate of incorporation or bylaws.
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Section 5.3. Capitalization
(a) The authorized capital stock of DARA consists of Forty Million
(40,000,000) shares of DARA Common Stock and Twenty-Five Million (25,000,000) shares of preferred stock, Five Million (5,000,000) of which have been designated as Series A preferred stock and Eight Million Five Hundred Thousand
(8,500,000) of which have been designated as Series B preferred stock. As of the date hereof: (i) Fourteen Million Eighty-Seven Thousand Eight Hundred Twenty-Four (14,087,824) shares of DARA Common Stock were issued and outstanding,
and Five Million (5,000,000) shares of DARA Series A Preferred Stock and Six Million Three Hundred Fifty Thousand Three Hundred Thirty-Three (6,350,333) shares of DARA Series B Preferred Stock were issued and outstanding; (ii) all
shares of DARA Common Stock issuable upon the exercise of outstanding employee stock options or other rights to purchase or receive DARA Common Stock granted under the DARA Stock Plan have been reserved for issuance; and (iii) no shares of DARA
Common Stock were held by DARA in DARAs treasury. Schedule 5.3 of the DARA Disclosure Schedule sets forth a complete and correct list, as of the date hereof, of the number of shares of DARA Common Stock subject to employee stock options or
other rights to purchase or receive DARA Common Stock granted under the DARA Plan, the dates of grant and exercise prices thereof.
(b) All
outstanding shares of capital stock of DARA are duly authorized, validly issued, fully paid and nonassessable and not subject to preemptive rights. Except as set forth in this Section 5.3 and except for changes resulting from the issuance of
shares of DARA Common Stock pursuant to the DARA Stock Plan or as expressly permitted by this Agreement, as of the date hereof (i) there are not issued, reserved for issuance or outstanding (A) any shares of capital stock or other voting
securities of DARA, (B) any securities of DARA or any DARA Subsidiary convertible into or exchangeable or exercisable for shares of capital stock or voting securities of or ownership interests in DARA or any DARA Subsidiary, (C) any
warrants, calls, options or other rights to acquire from DARA or any DARA Subsidiary, and any obligation of DARA or any DARA Subsidiary to issue, any capital stock, voting securities or other ownership interests in, or securities convertible into or
exchangeable or exercisable for capital stock or voting securities of or other ownership interests in, DARA or any DARA Subsidiary, except for warrants to purchase an aggregate of Five Hundred Seventy-Seven Thousand Two Hundred Seventy-Four
(577,274) shares of DARA Common Stock, the material terms of which are set forth in Schedule 5.3 of the DARA Disclosure Schedule, (ii) there are no outstanding obligations of DARA or any DARA Subsidiary to repurchase, redeem or otherwise
acquire any such securities or to issue, deliver or sell, or cause to be issued, delivered or sold, any such securities, including, without limitation, any offer, issuance or sale in such a manner that would constitute a public offering under the
Securities Act and (iii) except as contemplated in this Agreement, DARA is not presently under any obligation, has not agreed or committed, and has not granted rights, to register under the Securities Act or the Exchange Act, or otherwise file
any registration statement under any such statute covering, any of its currently outstanding capital stock or other securities or any of its capital stock or other securities that may be subsequently issued.
(c) Except as described in Schedule 5.3 of the DARA Disclosure Schedule, as of the date hereof, neither DARA nor any DARA Subsidiary is a party to any
agreement restricting the purchase or transfer of, relating to the voting of, or granting any preemptive or antidilutive rights with respect to, any securities of DARA or any DARA Subsidiary that are outstanding as of the date hereof, or that may be
subsequently issued upon the conversion or exercise of any instrument or otherwise. DARA does not have a poison pill or similar stockholders rights plan.
(d) DARA represents and warrants to Point that on the Closing Date, the aggregate number of outstanding shares of DARA Common Stock on a fully diluted basis shall not exceed Thirty Million Forty-Eight Thousand Six
Hundred Thirty-One (30,048,631) shares.
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Section 5.4. Authority
DARA has the necessary corporate power and authority to enter into this
Agreement and, subject to obtaining the requisite approval of the stockholders of DARA (the
DARA Stockholder Approval
) of the adoption and approval of this Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. Except for (i) the DARA Stockholder Approval, (ii) the approval of a majority of the shares of DARA Series A Preferred Stock to convert the shares of DARA Series A Preferred Stock to shares of DARA Common
Stock prior to the Effective Time, and (iii) the approval of a majority of the shares of DARA Series A Preferred Stock and the shares of DARA Series B Preferred Stock, voting as a single class, to convert the shares of DARA Series B Preferred
Stock to shares of DARA Common Stock prior to the Effective Time, the execution and delivery of this Agreement by DARA and the consummation by DARA of the transactions contemplated hereby have been duly and validly authorized by all necessary
corporate action and no other proceedings on the part of DARA are necessary to authorize this Agreement or to consummate the transactions contemplated hereby. This Agreement has been duly executed and delivered by DARA and, assuming the due
authorization, execution and delivery by Point, constitutes a legal, valid and binding obligation of DARA, enforceable in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium
and other similar laws of general applicability relating to or affecting creditors rights generally and by the application of general principles of equity.
Section 5.5. No Conflict; Required Filings And Consents
(a) The execution and delivery of this
Agreement by DARA do not, and the performance by DARA of its obligations under this Agreement will not, (i) conflict with or violate the certificate of incorporation or bylaws of DARA, (ii) subject to obtaining the approvals and compliance
with the requirements set forth in Section 5.5(b), conflict with or violate any law, statute, ordinance, rule, regulation, order, judgment or decree applicable to DARA or any DARA Subsidiary or by which any of their respective properties or
assets are bound or affected, or (iii) except as set forth in Schedule 5.5 of the DARA Disclosure Schedule, result in any breach of or constitute a default (or an event which with or without notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, or result in the creation of an Encumbrance on any of the properties or assets of DARA or any DARA Subsidiary pursuant to any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which DARA or any DARA Subsidiary is a party or by which DARA, any DARA Subsidiary or any of their respective properties or assets are
bound or affected, except, in the case of clauses (ii) and (iii) above, for any such conflicts, violations, breaches, defaults or other alterations or occurrences that (A) would not prevent or delay consummation of the Merger in any
material respect or otherwise prevent DARA from performing its obligations under this Agreement in any material respect, and (B) have not and would not be reasonably likely to have a Material Adverse Effect on DARA.
(b) The execution and delivery of this Agreement by DARA does not, and the performance of this Agreement by DARA will not, require any consent, approval,
authorization or permit of, or filing with or notification to, any Governmental Entity by or with respect to DARA, except (i) for (A) applicable requirements, if any, of the Securities Act, the Exchange Act and state takeover laws,
(B) applicable requirements, if any, of the consents, approvals, authorizations or permits described in Schedule 5.5 of the DARA Disclosure Schedule, and (C) filing and recordation of appropriate merger documents as required by Delaware
Law and (ii) where failure to obtain such consents, approvals, authorizations or permits, or to make such filings or notifications, (A) would not prevent or delay consummation of the Merger in any material respect, or otherwise prevent
DARA from performing its obligations under this Agreement in any material respect, and (B) have not had and would not be reasonably likely to have a Material Adverse Effect on DARA or the Surviving Corporation.
(c) Except as set forth on Schedule 3.5 of the DARA Disclosure Schedule, the execution and delivery of this Agreement by DARA does not, the performance
of this Agreement by DARA will not, and the consummation of the transactions contemplated by this Agreement will not, (i) entitle any current or former employee or officer of
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DARA or any ERISA Affiliate to severance pay, unemployment compensation or any other payment, (ii) accelerate the time of payment or vesting, or
increase the amount of compensation, due any such employee or officer, or (iii) accelerate the vesting of any stock option or of any shares of restricted stock or other securities of DARA.
Section 5.6. Financial Statements
DARA has provided to Point copies of its audited consolidated
financial statements for the two-year period ended December 31, 2006 and its unaudited interim financial statements for the six-month period ended June 30, 2007, which complied in all material respects with applicable accounting
requirements and present fairly in all material respects the consolidated financial position of DARA and the DARA Subsidiaries as at the respective dates thereof and the consolidated results of operations and cash flows of DARA and the DARA
Subsidiaries for the periods indicated, in accordance with GAAP applied on a consistent basis throughout the periods involved (except as may be noted therein), subject in the case of interim financial statements to normal year-end adjustments.
Section 5.7. No Undisclosed Liabilities
Neither DARA nor any of the DARA Subsidiaries has any
liabilities or obligations of any nature, whether or not accrued, contingent or otherwise, except liabilities or obligations reflected in the audited consolidated financial statements of DARA for the fiscal year ended December 31, 2006 or the
unaudited financial statements of DARA for the six months ended June 30, 2007 or on Schedule 5.7 of the DARA Disclosure Schedule.
Section 5.8. Absence Of Certain Changes Or Events
Since December 31, 2006, DARA and the DARA
Subsidiaries have conducted their businesses only in the ordinary course of business consistent with past practice, and except as set forth on Schedule 5.8 of the DARA Disclosure Schedule, there has not been (a) any Material Adverse Effect on
DARA, (b) any declaration, setting aside or payment of any dividend or other distribution (whether in cash, stock or property) with respect to any of DARAs capital stock, (c) any split, combination or reclassification of any of
DARAs capital stock or any issuance or the authorization of any issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital stock, (d) (i) any granting by DARA or any DARA Subsidiary to any
current or former director, officer or employee of DARA or any of the DARA Subsidiaries of any increase in compensation, bonus or other benefits, except for normal increases in cash compensation in the ordinary course of business consistent with
past practice, (ii) any granting by DARA or any of the DARA Subsidiaries to any such current or former director, officer or employee of any increase in severance or termination pay, (iii) any entry by DARA or any of the DARA Subsidiaries
into, or any amendment of, any employment, deferred compensation, consulting, severance, termination or indemnification agreement with any such current or former director, officer or employee or (iv) any amendment to, or modification of, any
option outstanding under the DARA Stock Plan, (e) any damage, destruction or loss, whether or not covered by insurance, that would be reasonably likely to have a Material Adverse Effect on DARA, (f) any change in accounting methods,
principles or practices by DARA materially affecting its assets, liabilities or businesses, except insofar as may have been required by a change in GAAP, or (g) any Tax election that would be reasonably likely to have a Material Adverse Effect
on DARA or any of its tax attributes or any settlement or compromise of any material income tax liability.
Section 5.9. Absence Of Litigation
Except as set forth on Schedule 5.9 of the DARA Disclosure
Schedule and except as set forth in DARAs financial statements for the fiscal year ended December 31, 2006 or DARAs unaudited financial statements at and as of June 30, 2007, there are (a) no claims, actions, suits,
investigations, or proceedings pending or, to DARAs knowledge, threatened against DARA or any DARA Subsidiary before any court, administrative, governmental, arbitral, mediation or regulatory authority or body, domestic or foreign, that would
be reasonably
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likely to have a Material Adverse Effect on DARA or that challenge or seek to prevent, enjoin, alter or materially delay the transactions contemplated
hereby, and (b) no judgments, decrees, injunctions or orders of any Governmental Entity or arbitrator outstanding against DARA or any DARA Subsidiary that would be reasonably likely to have a Material Adverse Effect on DARA.
Section 5.10. Licenses And Permits; Compliance With Laws
DARA and the DARA Subsidiaries hold all
permits, licenses, franchises, authorizations and approvals from Governmental Entities (the
DARA Permits
) which are necessary for the operation of the businesses of DARA and the DARA Subsidiaries as presently conducted and for
DARA and the DARA Subsidiaries to own, lease and operate their respective properties, except where the failure to have any such permits, licenses or approvals would not have a Material Adverse Effect on DARA. DARA and the DARA Subsidiaries are in
compliance with the terms of the DARA Permits and all applicable statutes, laws, ordinances, rules and regulations, except where the failure so to comply would not have a Material Adverse Effect on DARA.
Section 5.11. Unlawful Payments
None of DARA, any DARA Subsidiary, or any officer, director,
employee, agent or representative of DARA or any DARA Subsidiary has made, directly or indirectly, any bribe or kickback, illegal political contribution, payment from corporate funds which was incorrectly recorded on the books and records of DARA or
any DARA Subsidiary, unlawful payment from corporate funds to governmental or municipal officials in their individual capacities for the purpose of affecting their action or the actions of the jurisdiction which they represent to obtain favorable
treatment in securing business or licenses or to obtain special concessions of any kind whatsoever, or illegal payment from corporate funds to obtain or retain any business.
Section 5.12. Taxes
(a) DARA and the DARA Subsidiaries have prepared and filed on a timely basis
with all appropriate Governmental Entities all material returns, reports, information statements and other documentation (including extensions) required to be filed by DARA and the DARA Subsidiaries in respect of Taxes (the
DARA Tax
Returns
), and all such DARA Tax Returns are correct and complete in all material respects. DARA and the DARA Subsidiaries have paid in full all Taxes due and, in the case of Taxes accruing but not due, DARA has made adequate provision in
its books and records and financial statements for such payments (other than Taxes, in each case, the failure of which to pay have not had and are not reasonably likely to have a Material Adverse Effect on DARA). DARA and the DARA Subsidiaries have
withheld all amounts required by law to be withheld from payments made to their present or former employees, contractors, officers and directors, creditors or other third parties, except where the liability for which would not have a Material
Adverse Effect on DARA, and have, where required, remitted such amounts within the applicable periods to the appropriate Governmental Entities. In addition, except as set forth on Schedule 5.12 of the DARA Disclosure Schedule: (i) there are no
written assessments of, or written claims against, DARA or any DARA Subsidiaries with respect to Taxes that are outstanding; (ii) no Governmental Entity is conducting an examination or audit of DARA or any DARA Subsidiary in respect of Taxes
and neither DARA nor any DARA Subsidiary has received written notice of any such examination or audit from any Governmental Entity; and (iii) neither DARA nor any DARA Subsidiary has executed or filed any written agreement extending the period
of assessment or collection of any Taxes that remains outstanding and in effect.
(b) No Encumbrances exist for Taxes (other than
Encumbrances for Taxes not yet due and payable or which are being contested in good faith) with respect to any of the assets or properties of DARA or any DARA Subsidiary.
(c) Neither DARA nor any DARA Subsidiary is a party to or bound by any tax-sharing agreement, tax indemnity obligation or similar agreement, arrangement or practice with respect to Taxes (including any advance pricing
agreement, closing agreement or other agreement relating to Taxes with any Taxing Authority).
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(d) No power of attorney with respect to any Taxes has been executed or filed with any Taxing Authority
by or on behalf of DARA.
Section 5.13. Intellectual Property
(a) Except as, in the aggregate, would not reasonably be
expected to have a Material Adverse Effect on DARA and except as disclosed in Schedule 5.13 of the DARA Disclosure Schedule: (a) DARA and each DARA Subsidiary owns, or is licensed to use (in each case, free and clear of any Encumbrances), all
Intellectual Property used in or necessary for the conduct of its business as currently conducted; (b) to the knowledge of DARA, the use of any Intellectual Property by DARA and DARA Subsidiaries does not infringe on or otherwise violate the
rights of any Person and is in accordance with any applicable license pursuant to which DARA or any DARA Subsidiary acquired the right to use any Intellectual Property; (c) to the knowledge of DARA, no Person is challenging, infringing on or
otherwise violating any right of DARA or any DARA Subsidiary with respect to any Intellectual Property owned by and/or licensed to DARA or any DARA Subsidiary; and (d) neither DARA nor any DARA Subsidiary has received any written notice or
otherwise has knowledge of any pending claim, order or proceeding with respect to any Intellectual Property used by DARA and DARA Subsidiaries; and (e) to the knowledge of DARA, no Intellectual Property owned and/or licensed by DARA or DARA
Subsidiaries is being used or enforced in a manner that would reasonably be expected to result in the abandonment, cancellation or unenforceability of such Intellectual Property.
(b) Each item of Intellectual Property owned or used by DARA or a DARA Subsidiary immediately prior to the Closing hereunder will be owned or available
for use by DARA or a DARA Subsidiary, as the case may be, on identical terms and conditions immediately subsequent to the Closing hereunder. DARA and each DARA Subsidiary has taken all commercially reasonable actions to maintain and protect each
item of Intellectual Property that it owns or uses. Each agreement, instrument or arrangement to which DARA and each DARA Subsidiary is a party and which relates or pertain to Intellectual Property shall continue to be legal, valid, binding,
enforceable and in full force and effect on identical terms following the consummation of the transactions contemplated by this Agreement.
(c) All maintenance, registration and renewal fees necessary to preserve the rights of DARA and each DARA Subsidiary in connection with any Intellectual Property owned by it have been paid in a timely manner, and there are no actions that
must be taken by DARA or a DARA Subsidiary within sixty (60) days of the Closing Date, including the payment of any registration, maintenance or renewal fees or the filing with the United States Patent and Trademark Office or such other
appropriate U.S. or foreign office or similar administrative agency of documents, applications or certificates for the purposes of obtaining, maintaining, perfecting, preserving or renewing any rights in the registered or applied-for Intellectual
Property owned or registered by DARA or a DARA Subsidiary.
(d) DARA and each DARA Subsidiary have delivered to Point correct and complete
copies of all patents and patent applications, trademark registrations (whether federal or state), copyright registrations and other registrations (including, but not limited to, domain name registrations) that have been issued to DARA and each DARA
Subsidiary with respect to any Intellectual Property owned by DARA or a DARA Subsidiary.
(e) Neither DARA nor any DARA Subsidiary have
entered into any consents, judgments, orders, indemnifications, forbearances to sue, settlement agreements, licenses or other arrangements that: (i) restrict its right to use any Intellectual Property; (ii) restrict the business of it in
order to accommodate a third Persons Intellectual Property rights; (iii) permit third parties to use any of its Intellectual Property; or (iv) reasonably would be expected to provide any third party a defense to patent infringement
in connection with any of its Intellectual Property.
(f) All Intellectual Property developed by and belonging to DARA and each DARA
Subsidiary, which has not been patented but that which, in accordance with pharmaceutical industry standards, by its nature would be
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reasonably required to be kept confidential, including without limitation all trade secrets, has been kept confidential so as, among other things, all such
information may be deemed proprietary to DARA and each DARA Subsidiary, as the case may be. Each Person (including any current and former employee of or consultant to DARA and each DARA Subsidiary) who has contributed to or participated in research
and development activities of DARA or a DARA Subsidiary will not, after giving effect to the transactions contemplated by this Agreement, own or retain any rights to use any Intellectual Property owned by DARA or a DARA Subsidiary.
(g) DARA and each DARA Subsidiary has not utilized any Intellectual Property owned or invented by any of its employees (or people it currently intends to
hire, if any) made prior to their employment by DARA and each DARA Subsidiary.
(h) To the knowledge of DARA and each DARA Subsidiary, each
claim in a patent used or owned by DARA or a DARA Subsidiary (a
DARA Patent
): (i) is valid, subsisting and enforceable; (ii) there is no basis for a claim that any granted patent claim is not valid, subsisting and
enforceable; (iii) all maintenance fees have been paid, which are payable to date for each DARA Patent; and (iv) none of the DARA Patents have been abandoned. All assignment of rights necessary to vest full and complete ownership of the
DARA Patents in DARA or a DARA Subsidiary, as the case may be, have been executed by all inventors and correctly recorded in the United States Patent and Trademark Office. DARA and each DARA Subsidiary is not aware of any inventorship disputes
regarding any DARA Patent or patent applications.
Section 5.14. Material Contracts
Schedule 5.14 of the DARA Disclosure Schedule sets forth all of
DARAs material contracts (collectively, the
DARA Material Contracts
). All of the DARA Material Contracts remain in full force and effect and are valid and in full force and effect on the date hereof except to the extent they
have previously expired in accordance with their terms, and neither DARA nor any DARA Subsidiary has (or has any knowledge that any party thereto has) violated any provision of, or committed or failed to perform any act which with or without notice,
lapse of time or both would constitute a default under the provisions of, any DARA Material Contract, except defaults which would not reasonably be expected to have a Material Adverse Effect on DARA.
Section 5.15. Employee Benefit Plans
(a) Schedule 5.15 of the DARA Disclosure Schedule sets forth a
list of all DARA Benefit Plans (as defined below). Each DARA Benefit Plan intended to be qualified within the meaning of Section 401(a) of the Code has been determined by the Internal Revenue Service to be so qualified or has a
document issued by the IRS confirming such qualification, and no circumstances exist that could reasonably be expected by DARA to result in the revocation of any such determination. Each DARA Benefit Plan is in compliance with the applicable terms
of ERISA and the Code and any other applicable laws, rules and regulations, except where the breach or violation of which would not result in a Material Adverse Effect on DARA.
(b) Except as provided in Schedule 5.15(b) of the DARA Disclosure Schedule, no DARA ERISA Plan which is a defined benefit pension plan has any
unfunded current liability, as that term is defined in Section 302(d)(8)(A) of ERISA, and the present fair market value of the assets of any such plan equals or exceeds the plans benefit liabilities, as that term
is defined in Section 4001(a)(16) of ERISA, when determined under actuarial factors that would apply if the plan terminated in accordance with all applicable legal requirements and the assets of each such plan are sufficient to satisfy plan
liabilities on a termination basis.
(c) No DARA Benefit Plan is or has been a Multiemployer Plan. Neither DARA nor any DARA Commonly
Controlled Entity has completely or partially withdrawn from any Multiemployer Plan. No termination liability to the Pension Benefit Guaranty Corporation or withdrawal liability to any Multiemployer Plan that is material in the aggregate has been or
is reasonably expected to be incurred with respect to any Multiemployer Plan by DARA or any DARA Commonly Controlled Entity.
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(d) DARA has furnished or made available to Point complete copies, as of the date hereof, of all of DARA
Benefit Plans that have been reduced to writing, together with all documents establishing or constituting any related trust, annuity contract, insurance contract or other funding instrument, and copies of all employee benefit plans as
that term is defined in Section 3(3) of ERISA, including a summary of such plans that have not been reduced to writing. DARA has furnished or made available to Point complete copies of all existing current plan summaries, employee booklets,
personnel manuals and other material documents or written materials concerning DARA Benefit Plans. DARA has provided to Point a written summary of any DARA Benefit Plan that has not been reduced to writing.
(e) All required reports and descriptions, if any (including Form 5500 Annual Reports, Summary Annual Reports and Summary Plan Descriptions) have been
filed or distributed appropriately with respect to each DARA Benefit Plan. The requirements of Cobra and HIPAA have been met with respect to each DARA Benefit Plan.
(f) No DARA Benefit Plan is an ESOP or otherwise invests in employer securities (as such term is defined in Section 409(l) of the Code).
(g) DARA has made all contributions and other payments required by and due under the terms of each DARA Benefit Plan and has taken no action (including,
without limitation, actions required by law) relating to any DARA Benefit Plan that will increase DARAs or any DARA Commonly Controlled Entitys obligation under any DARA Benefit Plan.
(h) No DARA Benefit Plan is a qualified foreign plan (as such term is defined in Section 404A of the Code), and no DARA Benefit Plan is
subject to the laws of any jurisdiction other than the United States of America or one of its political subdivisions.
(i) No DARA Benefit
Plan promises or provides post-retirement medical life insurance or other benefits due now or in the future to current, former or retired employees of DARA or any DARA Common Controlled Entity other than benefits required pursuant to Cobra.
(j) No pension plans, as such term is defined in Section 3(2) of ERISA, maintained by DARA or an DARA Commonly Controlled
Entity, have been frozen or terminated in the last three (3) calendar years.
(k) As used herein: (i)
DARA Benefit
Plans
mean the Benefit Plans currently adopted, maintained by, sponsored in whole or in part by, or contributed to by DARA or any DARA Commonly Controlled Entity for the benefit of present or former employees or directors of DARA and of
each DARA Subsidiary or their beneficiaries, or providing benefits to such persons in respect of services provided to any such entity; (ii)
DARA Commonly Controlled Entity
means an entity required to be aggregated with DARA
which is a member of the controlled group of corporations which includes DARA within the meaning of Section 414(b), (c) or (m) of the Code; and (iii)
DARA ERISA Plan
means any DARA Benefit Plan
which is an employee pension benefit plan, as that term is defined in Section 3(2) of ERISA.
Section 5.16. Properties; Assets
Except as disclosed in the Schedule 5.16 of the DARA Disclosure
Schedule and as described in clause (c) below: (a) neither DARA nor any DARA Subsidiary owns or leases any real property; (b) each of DARA and the DARA Subsidiaries has good, valid and marketable title to, or a valid leasehold
interest in, as applicable, all real property owned or leased by DARA or a DARA Subsidiary (the
DARA Real Property
) and all other properties and assets reflected in the consolidated balance sheet of DARA at December 31, 2006;
and (c) none of such properties or assets are subject to any Encumbrance, except for liens for taxes not yet due and payable, and easements and restrictions of record, if any, which are not substantial in amount, do not materially detract from
the value of the property or assets subject thereto and do not impair the operations of DARA and the DARA Subsidiaries thereon. Except as set forth in Schedule 5.16 of the DARA Disclosure Schedule, DARA and the
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DARA Subsidiaries have obtained owners title insurance on all of the DARA Real Property owned by DARA or any DARA Subsidiary, in each case insuring
good and marketable fee simple title to such DARA Real Property, in an amount at least equal to the aggregate value of such DARA Real Property together with all improvements thereon as of the date of issuance of such title insurance policy.
Section 5.17. Labor Relations
Neither DARA nor any DARA Subsidiary is a party to any collective
bargaining agreement or other contract or agreement with any labor organization or other representative of any of the employees of DARA or any DARA Subsidiary. DARA and each DARA Subsidiary is in compliance in all material respects with all laws
relating to employment or the workplace, including without limitation, provisions relating to wages, hours, collective bargaining, safety and health, work authorization, equal employment opportunity, affirmative action plans, immigration and the
withholding of income taxes, unemployment compensation, workers compensation, employee privacy and right to know and social security contributions, except for any noncompliance which would not have a Material Adverse Effect on DARA.
Section 5.18. Environmental Matters
(a) Except as disclosed on Schedule 5.18(a) of the DARA
Disclosure Schedule: (i) DARA and each DARA Subsidiary are and have been at all times in compliance in all material respects with all applicable Environmental Laws; (ii) neither DARA nor any DARA Subsidiary has received any written
communication that alleges that DARA or any DARA Subsidiary is not in compliance with applicable Environmental Laws; (iii) all material permits and other governmental authorizations currently held by DARA and each DARA Subsidiary pursuant to
the Environmental Laws that are required for the occupation of their facilities and the operation of their businesses (
DARA Environmental Permits
) are in full force and effect, and DARA and each DARA Subsidiary are and have been
at all times in compliance in all material respects with all of the terms of such DARA Environmental Permits, and no other permits or other governmental authorizations are required by DARA or any DARA Subsidiary for the conduct of their respective
businesses except where the failure to obtain such permits or government authorizations would not reasonably be expected to result in a Material Adverse Effect on DARA; and (iv) the management, handling, storage, transportation, treatment, and
disposal by DARA and each DARA Subsidiary of any Hazardous Materials is and has been in compliance in all material respects with all applicable Environmental Laws.
(b) Except as disclosed on Schedule 5.18(b) of the DARA Disclosure Schedule, there is no DARA Environmental Claim (as defined below) pending or, to the knowledge of DARA, threatened against or involving DARA or any of
the DARA Subsidiaries or against any Person whose liability for any DARA Environmental Claim DARA or any of the DARA Subsidiaries has or may have retained or assumed either contractually or by operation of law.
(c) To the knowledge of DARA, there are no past or present actions or activities by DARA, any DARA Subsidiary or any other Person involving the storage,
treatment, release, emission, discharge, disposal or arrangement for disposal of any Hazardous Materials, that could reasonably form the basis of any DARA Environmental Claim against DARA or any DARA Subsidiary or against any Person whose liability
for any DARA Environmental Claim DARA or any DARA Subsidiary may have retained or assumed either contractually or by operation of law.
(d)
As used herein,
DARA Environmental Claim
means any and all administrative, regulatory or judicial actions, suits, demands, demand letters, directives, claims, liens, investigations, proceedings or notices of noncompliance or
violation (written or oral) by any Person or Governmental Entity alleging any material liability or potential material liability arising out of, based on or resulting from the presence, or release or threatened release into the environment of, or
any exposure to, any Hazardous Materials at any property or location owned or leased by DARA or any DARA Subsidiary or other circumstances forming the basis of any material violation or alleged material violation of any Environmental Law.
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Section 5.19. Insurance
DARA and the DARA Subsidiaries maintain insurance which: (a) insure
against such risks, and are in such amounts, as are appropriate and reasonable, in the judgment of DARAs Board of Directors, considering DARA and DARA Subsidiaries properties, businesses and operations; (b) are in full force and
effect; and (c) are valid, outstanding, and enforceable. Neither DARA nor any of the DARA Subsidiaries has received or given notice of cancellation with respect to any such insurance policies which are currently in effect.
Section 5.20. Board Approval; Vote Required
The Board of Directors of DARA has determined that the
transactions contemplated by this Agreement are advisable and in the best interests of DARA and its stockholders and has resolved to recommend to such stockholders that they adopt and approve this Agreement. The affirmative vote at the DARA
Stockholders Meeting of the holders of a majority of all outstanding shares of DARA Common Stock, DARA Series A Preferred Stock and DARA Series B Preferred Stock, voting as a single class on an as converted to DARA Common Stock basis, is the only
vote of the holders of any class or series of DARAs capital stock necessary to approve and adopt this Agreement and the transactions contemplated hereby, including the Merger.
Section 5.21. Brokers
No broker, finder or investment banker is entitled to any brokerage,
finders or other fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of DARA.
Section 5.22. Tax Matters
DARA has not taken or agreed to take any action that would prevent the
Merger from constituting a reorganization within the meaning of Section 368(a) of the Code, including, without limitation, any actions or transactions that would cause the Merger to fail to satisfy the continuity of business enterprise or
continuity of interest requirements set forth in Treasury Regulations Sections 1.368-1(d) and 1.368-1(e), respectively.
Section 5.23. Registration Statement; Joint Proxy Statement/Prospectus
The information supplied by
DARA or required to be supplied by DARA (except to the extent revised or superseded by amendments or supplements) for inclusion or incorporation by reference in the Registration Statement, or any amendment or supplement thereto, shall not, at the
time the Registration Statement (including any amendments or supplements thereto) is filed with the SEC, is amended or supplemented or is declared effective by the SEC, contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The information supplied by DARA or required to be supplied by DARA (except to the
extent revised or superseded by amendments or supplements) for inclusion in the Joint Proxy Statement/Prospectus shall not, on the date the Joint Proxy Statement/Prospectus (or any amendment or supplement thereto) is first mailed to Points
stockholders and DARAs stockholders, at the time of the Point Stockholders Meeting and the DARA Stockholders Meeting, or at the Effective Time, contain any statement which, at such time, is false or misleading with respect to any material
fact, or omit to state any material fact necessary in order to make the statements made therein, in light of the circumstances under which they are made, not false or misleading, or omit to state any material fact necessary to correct any statement
in any earlier communication with respect to the solicitation of proxies by or on behalf of Point for the Point Stockholders Meeting or by or on behalf of DARA for the DARA Stockholders Meeting which has become false or misleading. The
Registration Statement and Joint Proxy Statement/Prospectus will comply as to form in all material respects with the provisions of the Exchange Act and the Securities Act and the rules and regulations of the SEC thereunder. Notwithstanding the
foregoing, DARA makes no representation, warranty or covenant with
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respect to any information supplied or required to be supplied solely by Point or Merger Sub which is contained in or omitted from any of the foregoing
documents.
Section 5.24. Regulatory Compliance
(a) As to each Pharmaceutical Product that is or has been
manufactured, packaged, labeled, sold, marketed, distributed, and/or tested by or on behalf of DARA or any DARA Subsidiary, such Pharmaceutical Product is being or has been manufactured, packaged, labeled, sold, marketed, distributed, and/or tested
by DARA or any DARA Subsidiary in compliance with all applicable requirements under FDCA, PHSA, CSA, and similar laws, rules and regulations, except as set forth in Schedule 5.24 of the DARA Disclosure Schedule or where the failure to be in
compliance would not have a Material Adverse Effect on DARA. Except as set forth in Schedule 5.25 of the DARA Disclosure Schedule, none of DARA or any DARA Subsidiary has received any notice, warning letter, or other communication from the FDA, DEA,
or any other Governmental Entity (i) contesting the premarket clearance, licensure, registration, approval, use, distribution, manufacturing, testing, sale, labeling, or promotion of any Pharmaceutical Product described in this
Section 5.25 or (ii) otherwise alleging any violation of any laws, rules or regulations by DARA or any DARA Subsidiary, and which would have a Material Adverse Effect on DARA or any Pharmaceutical Product.
(b) Except as set forth on Schedule 5.24 of the DARA Disclosure Schedule, since January 1, 2002, no Pharmaceutical Products of DARA or any DARA
Subsidiary have been recalled, withdrawn, replaced, suspended or discontinued nor have any DEA registrations been terminated by DARA or any DARA Subsidiary in the United States or outside the United States (whether voluntarily or otherwise), which
would have a Material Adverse Effect on DARA.
(c) Neither DARA nor any DARA Subsidiary, nor any officer, employee or agent of DARA or any
DARA Subsidiary has made any untrue statement of a material fact or fraudulent statement to the FDA or other Governmental Entity, failed to disclose a fact required to be disclosed to the FDA or any other Governmental Entity, or committed an act,
made a statement, or failed to make a statement that, at the time such disclosure was made, could reasonably be expected to provide a basis for the FDA or any other Governmental Entity to invoke its policy respecting Fraud, Untrue Statements
of Material Facts, Bribery, and Illegal Gratuities, set forth in 56 Fed. Reg. 46191 (September 10, 1991) or any similar policy. Neither DARA nor any DARA Subsidiary nor any officer, employee or agent of DARA or any DARA Subsidiary has been
convicted of any crime or engaged in any conduct for which debarment is mandated by 21 U.S.C. sec. 335a(a) or any similar law or authorized by 21 U.S.C. sec. 335a(b) or any similar law.
(d) Except as set forth on Schedule 5.24 of the DARA Disclosure Schedule, since January 1, 2002, neither DARA nor any DARA Subsidiary has received
any written notice that the FDA or any other Governmental Entity has commenced, or threatened to initiate, any action, including lawsuits, arbitrations, or legal or administrative or regulatory proceedings, charges, complaints, or investigations,
nor are there any completed or pending efforts to withdraw its approval of, request the recall of, suspension or, seizure of, change the quotas for controlled substances, or change the controlled substances schedules of any Pharmaceutical Product of
DARA or any DARA Subsidiary, or commenced, or threatened to initiate, any action to impose a clinical hold on any clinical investigation by DARA or any DARA Subsidiary, withdraw advertising or sales promotion materials, or any action to enjoin
production at, or suspend or revoke the DEA registration or any facility of, or enter into a Consent Decree of Permanent Injunction with DARA or any DARA Subsidiary which would have a Material Adverse Effect on DARA.
(e) DARA and each of DARA Subsidiaries are not in violation of and are in compliance with, all applicable laws, rules and regulations regarding the
conduct of pre-clinical and clinical investigations, including, but not limited to, the requirements provided in 21 C.F.R. Parts 50, 56, 58 and 312, except where the failure to be in compliance would not have a Material Adverse Effect on DARA. Each
clinical trial with respect to Pharmaceutical Products of DARA and each of the DARA Subsidiaries has been conducted in accordance with
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its clinical trial protocol and DARA or one of the DARA Subsidiaries has filed all required notices (and made available to Point copies thereof) of adverse
drug experiences, injuries or deaths relating to clinical trials of such Pharmaceutical Products, and DARA or one of the DARA Subsidiaries has filed all required notices of any such occurrence, except where the failure to be in compliance with the
protocol or relevant reporting requirements would not have a Material Adverse Effect on DARA.
(f) No person has filed a claim for loss or
potential loss under any indemnity covering participants in clinical trials of Pharmaceutical Products of DARA or one of the DARA Subsidiaries.
(g) DARA has provided or made available to Point all documents in its possession or the possession of the DARA Subsidiaries concerning communication to or from FDA or DEA, or prepared by the FDA or DEA which bear in any material respect on
compliance with FDA or DEA regulatory requirements, including, but not limited to, any deficiency letter, warning letter, non-approvable letter/order, withdrawal letter/order or similar communications.
ARTICLE VI
COVENANTS
Section 6.1. Affirmative Covenants Of Point
(a) Point hereby covenants and agrees that, prior to the
Effective Time, unless otherwise expressly contemplated by this Agreement or consented to in writing by DARA, Point shall, and shall cause each Point Subsidiary to: (a) operate its business in the usual and ordinary course consistent with past
practices; (b) use its commercially reasonable efforts to preserve substantially intact its business organization, maintain its rights and franchises, retain the services of its respective officers, employees and consultants and maintain its
relationship with its respective customers, suppliers, licensors, licensees, distributors and others having business dealings with them with the intention that its goodwill and ongoing business shall be unimpaired in any material manner at the
Effective Time; (c) use its commercially reasonable efforts to maintain and keep its properties and assets in as good repair and condition as at present, ordinary wear and tear excepted; (d) use its commercially reasonable efforts to keep
in full force and effect insurance comparable in amount and scope of coverage to that currently maintained; (e) prepare and file all Point Tax Returns required to be filed in a timely manner, and in a manner consistent with past practices and
applicable laws and regulations; (f) timely file with the SEC all reports required to be filed under the Exchange Act, which reports (including the unaudited interim financial statements included in such reports) shall comply in all material
respects with the Exchange Act, the rules and regulations promulgated thereunder and all applicable accounting requirements; and (g) operate its business in accordance with the terms of its licenses and in all material respects with all
applicable laws, rules and regulations.
(b) Point hereby covenants and agrees that, as part of the transaction contemplated hereby, its
Board of Directors will approve and recommend to the Point stockholders (i) a reverse stock split to be effective immediately before the Effective Time in such amount agreed upon by Point and DARA shortly before the Effective Time (the
Reverse Stock Split
) to meet listing requirements in connection with a new listing application for the Point Common Stock on the Nasdaq Capital Market, and (ii) changing the name of Point to DARA BioSciences, Inc.
(the
Name Change
), to be effective immediately after the Effective Time. The Reverse Stock Split and the Name Change shall be presented to the Point stockholders for approval at the Point Stockholders Meeting (as defined below).
Section 6.2. Affirmative Covenants Of DARA
(a) DARA hereby covenants and agrees that, prior to the
Effective Time, unless otherwise expressly contemplated by this Agreement or consented to in writing by Point, DARA shall, and shall cause each DARA Subsidiary to: (a) operate its business in the usual and ordinary course consistent with past
practices; (b) use its
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commercially reasonable efforts to preserve substantially intact its business organization, maintain its rights and franchises, retain the services of its
respective officers and employees and maintain its relationship with its respective customers, suppliers, licensors, licensees, distributors and others having business dealings with them with the intention that its goodwill and ongoing business
shall be unimpaired in any material manner at the Effective Time; (c) use its commercially reasonable efforts to maintain and keep its properties and assets in as good repair and condition as at present, ordinary wear and tear excepted;
(d) use its commercially reasonable efforts to keep in full force and effect insurance comparable in amount and scope of coverage to that currently maintained; (e) prepare and file all DARA Tax Returns required to be filed in a timely
manner, and in a manner consistent with past practices and applicable laws and regulations; and (f) operate its business in accordance with the terms of its licenses and in all material respects with all applicable laws, rules and regulations.
(b) DARA hereby covenants and agrees that prior to the Closing, DARA shall formulate a mutually acceptable initial development plan and
budget (the
Initial Plan
) which, subject to amendment, will cover operations of the Surviving Corporation for the first year following the Merger. The Initial Plan shall consider, among other things, continued development of
Points current preclinical and clinical drug candidates.
(c) At and after the Closing Date, DARA shall cause to be paid the payments
set forth in Schedule 3.5 of the Point Disclosure Schedule to certain former officers of Point in the amounts and on the dates specified therein.
Section 6.3. Negative Covenants Of Point
Except as expressly contemplated by this Agreement or
otherwise consented to in writing by DARA or as set forth in Schedule 6.3 of the Point Disclosure Schedule, from the date hereof until the Closing Date, Point shall not, and shall cause each Point Subsidiary not to, do any of the following:
(a) declare or pay any dividend on, or make any other distribution in respect of, outstanding shares of its capital stock;
(b) (i) redeem, repurchase or otherwise reacquire any shares of its capital stock or other securities or any securities or obligations convertible
into or exchangeable for any share of its capital stock or other securities, or any options, warrants or conversion or other rights to acquire any shares of its capital stock or other securities or any such securities or obligations (except in
connection with the exercise of outstanding Options in accordance with their respective terms or pursuant to any redemption agreement which constitutes a Point Material Contract); (ii) effect any merger, consolidation, restructuring,
reorganization or recapitalization, or adopt a plan of complete or partial liquidation or dissolution; or (iii) adjust, split, combine or reclassify any of its capital stock or issue or authorize or propose the issuance of any other securities
in respect of, in lieu of, or in substitution for, shares of its capital stock or other securities;
(c) (i) issue, pledge, deliver,
award, grant or sell, or register under the Securities Act or the Exchange Act or otherwise file any registration statement under any statute covering, or authorize or propose the issuance, pledge, delivery, award, grant or sale of (including the
grant of any Encumbrances on) or registration of or filing of any registration statement covering any shares of any class of its capital stock or other securities, any securities convertible into or exercisable or exchangeable for any such shares or
other securities, or any rights, warrants or options to acquire any such shares or other securities; or (ii) amend or otherwise modify the terms of any such rights, warrants or options;
(d) (i) acquire or agree to acquire or enter into any negotiations to acquire, by merging or consolidating with, by purchasing an equity interest in
or a portion of the assets of, or by any other manner, any business or any corporation, partnership, association or other business organization or division (other than a wholly-owned Subsidiary of Point) thereof; (ii) make or commit to make any
capital expenditures other than capital expenditures not exceeding Five Thousand Dollars ($5,000) individually or Ten Thousand Dollars ($10,000) in the aggregate and which are solely for expenses related to intellectual property incurred in the
ordinary course of business consistent with past practices; or (iii) make or commit to make any loans, advances or capital contributions to, or investments in, any other Person.
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(e) except pursuant to the Loan Agreement, sell, lease, exchange, mortgage, pledge, transfer or otherwise
encumber or dispose of, or agree to sell, lease, exchange, mortgage, pledge, transfer or otherwise encumber or dispose of, any of its assets;
(f) except as required to comply with applicable law, (i) adopt, enter into, terminate or amend in any material respect (A) any Point Benefit Plan or (B) any other agreement, plan or policy involving Point or the Point
Subsidiaries, and one or more of its current or former directors, officers or employees; (ii) increase in any manner the compensation, bonus or fringe or other benefits of, or pay any bonus to, any current or former officer, director or
employee; (iii) pay any benefit or amount under any Point Benefit Plan or any other benefit plan or arrangement of Point or the Point Subsidiaries as in effect on the date of this Agreement; (iv) increase in any manner the severance or
termination pay of any current or former director, officer or employee; (v) enter into or amend any employment, deferred compensation, consulting, severance, termination or indemnification agreement, arrangement or understanding with any
current or former employee, officer or director; (vi) grant any awards under any bonus, incentive, performance or other compensation plan or arrangement or Benefit Plan (including the grant of stock options, phantom stock, stock
appreciation rights, phantom stock rights stock based or stock related awards, performance units or restricted stock or the removal of existing restrictions in any Point Benefit Plans or agreements or awards made thereunder);
(vii) amend or modify any Option; (viii) take any action to fund or in any other way secure the payment of compensation or benefits under any employee plan, agreement, contract or arrangement or Benefit Plan, other than in the ordinary
course of its business as currently conducted or pursuant to consulting agreements with former executive officers in effect on the date hereof; (ix) take any action to accelerate the vesting of payment of any compensation or benefit under any
Point Benefit Plan; or (x) materially change any actuarial or other assumption used to calculate funding obligations with respect to any pension plan or change the manner in which contributions to any pension plan are made or the basis on which
such contributions are determined;
(g) except as contemplated by this Agreement, propose or adopt any amendments to its certificate or
articles of incorporation or its bylaws;
(h) (i) make any change in any of its methods of accounting, (ii) make or rescind any
express or deemed election relating to Taxes, (iii) settle or compromise any claim, action, suit, litigation, proceeding, arbitration, investigation, audit or controversy relating to Taxes, or (iv) change any of its methods of reporting
income or deductions for federal income tax purposes from those employed in the preparation of the federal income tax returns for the taxable year ended December 31, 2006, except, in the case of clause (i) or clause (ii), as may be
required by law or GAAP;
(i) incur any Indebtedness, or prepay, before the scheduled maturity thereof, any debt;
(j) engage in any transaction with, or enter into any agreement, arrangement, or understanding with, directly or indirectly, any of such entitys
Affiliates which involves the transfer of consideration or has a financial impact on such entity;
(k) enter into any contract, agreement,
commitment, arrangement, lease (including with respect to personal property), policy or other instrument;
(l) terminate, or amend or waive
any provision of, any Point Material Contract;
(m) (i) pay, discharge, settle or satisfy any claims, liabilities, obligations or
litigation (absolute, accrued, asserted or unasserted, contingent or otherwise), other than the payment, discharge, settlement or satisfaction in the ordinary course of business consistent with past practice of claims for money damages which do not
exceed Five Thousand Dollars ($5,000) per claim or Ten Thousand Dollars ($10,000) in the aggregate for all such claims, or in accordance with their terms or liabilities disclosed, reflected or reserved against in the most recent consolidated
financial statements (or the notes thereto) of Point included in the Point SEC Reports; (ii) cancel
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any Indebtedness; (iii) waive or assign any claims or rights of material value; or (iv) waive any benefits of, or agree to modify in any respect
(A) any standstill or similar agreements to which Point or any of the Point Subsidiaries is a party or (B) other than in the ordinary course of business, any confidentiality or similar agreements to which Point or any of the Point
Subsidiaries is a party;
(n) transfer or license to any Person or otherwise extend, amend or modify any rights to Intellectual Property of
Point, except in the ordinary course of its business as currently conducted;
(o) take any action that is intended or would reasonably be
expected to result in any of its representations and warranties set forth in this Agreement being or becoming untrue in any material respect at any time prior to the Effective Time, or in any of the conditions to the Merger set forth in Article VIII
not being satisfied or in a violation of any provision of this Agreement;
(p) intentionally take or fail to take any action that would
reasonably be expected to materially delay the consummation of the Merger;
(q) take any action that would prevent the Merger from
qualifying as a reorganization under Section 368(a) of the Code; or
(r) agree in writing or otherwise to do any of the foregoing.
Section 6.4. Negative Covenants Of DARA
Except as expressly contemplated by this Agreement or
otherwise consented to in writing by Point or as set forth in Schedule 6.4 of the DARA Disclosure Schedule, from the date hereof until the Closing Date, DARA shall not, and shall cause each DARA Subsidiary not to, do any of the following:
(a) declare or pay any dividend on, or make any other distribution in respect of, outstanding shares of its capital stock;
(b) issue, pledge, deliver, award, grant or sell, or propose the issuance, pledge, delivery, award, grant or sale of (including the grant of any
Encumbrances on) any shares of any class of its capital stock or other securities, any securities convertible into or exercisable or exchangeable for any such shares or other securities, or any rights, warrants or options to acquire any such shares
or other securities; provided, that the foregoing shall not apply to (i) grants of stock options by DARA in the ordinary course of business consistent with past practices; and (ii) issuances of stock upon the exercise of stock options;
(c) acquire or agree to acquire or enter into any negotiations to acquire, by merging or consolidating with, by purchasing an equity
interest in or a portion of the assets of, or by any other manner any business or any corporation, partnership, association or other business organization or division (other than a wholly-owned Subsidiary of DARA);
(d) incur any new Indebtedness after the date of this Agreement except for such Indebtedness which does not exceed One Million Dollars ($1,000,000) in
the aggregate;
(e) propose or adopt any amendments to its certificate or articles of incorporation or its bylaws;
(f) make any material change in any of its methods of accounting, except as may be required by law or GAAP;
(g) take any action that is intended or would reasonably be expected to result in any of its representations and warranties set forth in this Agreement
being or becoming untrue in any material respect at any time prior to the Effective Time, or in any of the conditions to the Merger set forth in Article VIII not being satisfied or in a violation of any provision of this Agreement;
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(i) intentionally take or fail to take any action that would reasonably be expected to materially delay
the consummation of the Merger;
(j) take any action that would prevent the Merger from qualifying as a reorganization under
Section 368(a) of the Code; or
(k) agree in writing or otherwise to do any of the foregoing.
Section 6.5. Control Of Other Partys Business
Nothing contained in this Agreement shall give
DARA, directly or indirectly, the right to control or direct Points operations prior to the Effective Time. Nothing contained in this Agreement shall give Point, directly or indirectly, the right to control or direct DARAs operations
prior to the Effective Time. Prior to the Effective Time, each of Point and DARA shall exercise, consistent with the terms and conditions of this Agreement, complete control and supervision over its respective operations.
ARTICLE VII
ADDITIONAL AGREEMENTS
Section 7.1. Access And Information
During the period from the date hereof to the Effective Time
(the
Interim Period
), Point and DARA shall, and shall cause the Point Subsidiaries and the DARA Subsidiaries, respectively, to, afford to each other and their respective officers, employees, accountants, consultants, legal counsel
and other representatives reasonable access during normal business hours (and at such other times as the parties may mutually agree) to the properties, executive personnel and all information concerning the business, properties, contracts, records
and personnel of Point and the Point Subsidiaries or DARA and the DARA Subsidiaries, as the case may be, as such other party may reasonably request.
Section 7.2. Confidentiality
DARA and Point each acknowledge and agree that (a) all information
received by it (the
Receiving Party
) from or on behalf of the other party in connection with the transactions contemplated under this Agreement shall be deemed received pursuant to the confidentiality agreement dated July 16,
2007 between Point and DARA (the
Confidentiality Agreement
), (b) such Receiving Party shall, and shall cause its officers, directors, employees, Affiliates, financial advisors and agents to comply with the provisions of the
Confidentiality Agreement with respect to such information, and (c) the provisions of the Confidentiality Agreement is hereby incorporated herein by reference with the same effect as if fully set forth herein.
Section 7.3. Joint Proxy Statement/Prospectus And Registration Statement
(a) As soon as practicable
following the date of this Agreement, Point and DARA shall prepare and file with the SEC the Joint Proxy Statement/Prospectus, and Point shall prepare and file with the SEC the Registration Statement in which the Joint Proxy Statement/Prospectus
will be included as Points prospectus. Each of Point and DARA shall use its best efforts to have the Registration Statement declared effective under the Securities Act as promptly as practicable after such filing. Each of DARA and Point shall
use its best efforts to cause the Joint Proxy Statement/Prospectus to be mailed to their respective stockholders as promptly as practicable after the Registration Statement is declared effective under the Securities Act. Point also shall take any
action (other than qualifying to do business in any jurisdiction in which it is not now so qualified or filing a general consent to service of process) required to be taken under any applicable state securities laws in connection with the issuance
of Point Common Stock in the Merger, and Point shall furnish all information concerning Point and the holders
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of Point Common Stock as may be reasonably requested in connection with any such action. No filing of, or amendment or supplement to, the Registration
Statement or the Joint Proxy Statement/ Prospectus (including, without limitation, any periodic report to be filed under Section 13 of the Exchange Act which will be incorporated therein by reference) will be made by either DARA or Point
without the other partys prior consent (which shall not be unreasonably withheld, delayed or conditioned) and without providing the other party the opportunity to review and comment thereon. Point shall advise DARA, promptly after it receives
notice thereof, of the time when the Registration Statement has become effective or any supplement or amendment has been filed, the issuance of any stop order, the suspension of the qualification of Point Common Stock issuable in connection with the
Merger for offering or sale in any jurisdiction, or any request by the SEC for amendment of the Joint Proxy Statement/Prospectus or the Registration Statement or comments thereon and responses thereto or requests by the SEC for additional
information. Point shall advise DARA, promptly after it receives notice thereof, of any request by the SEC for amendment of the Joint Proxy Statement/Prospectus or comments thereon and responses thereto or requests by the SEC for additional
information. If at any time prior to the Effective Time any information relating to Point or DARA, or any of their respective Affiliates, officers or directors, should be discovered by Point or DARA which should be set forth in an amendment or
supplement to any of the Registration Statement or the Joint Proxy Statement/Prospectus, so that any of such documents would not include any misstatement 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, the party which discovers such information shall promptly notify the other parties hereto and, to the extent required by law, an appropriate amendment or supplement describing
such information shall be promptly filed with the SEC and disseminated to the stockholders of Point and DARA.
(b) Point shall, as promptly
as practicable after the Registration Statement is declared effective under the Securities Act, duly call, give notice of, convene and hold a meeting of its stockholders (the
Point Stockholders Meeting
) in accordance with Delaware
Law and its certificate of incorporation and bylaws for the purpose of obtaining the Point Stockholder Approval and shall, through its Board of Directors, recommend to its stockholders the Reverse Stock Split, the Name Change and the issuance of the
Point Common Stock in the Merger pursuant to this Agreement. Unless the Board of Directors of Point has withdrawn its recommendation of this Agreement in compliance herewith, Point shall use reasonable efforts to solicit from stockholders of Point
proxies in favor of the issuance of the Point Common Stock in the Merger pursuant to this Agreement, the Reverse Stock Split and the Name Change and to secure the vote or consent of stockholders required by Delaware Law and its certificate of
incorporation and bylaws to approve the issuance of the Point Common Stock in the Merger pursuant to this Agreement, the Reverse Stock Split and the Name Change.
(c) DARA shall, as promptly as practicable after the Registration Statement is declared effective under the Securities Act, (i) duly call, give notice of, convene and hold a meeting of its stockholders (the
DARA Stockholders Meeting
) in accordance with Delaware Law and its certificate of incorporation and bylaws for the purpose of obtaining the DARA Stockholder Approval and shall, through its Board of Directors, recommend to its
stockholders, and use reasonable efforts to solicit from its stockholders proxies in favor of, the adoption and approval of this Agreement, the Merger and the other transactions contemplated hereby, and (ii) seek the necessary consent of the
holders of DARA Series A Preferred Stock and DARA Series B Preferred Stock to the conversion of the DARA Series A Preferred Stock and the DARA Series B Preferred Stock to DARA Common Stock immediately prior to the Effective Time.
(d) Unless otherwise mutually agreed upon by the parties, the respective record dates and meeting dates for the Point Stockholder Meeting and for the
DARA Stockholder Meeting shall be the same.
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Section 7.4. Public Announcements
DARA and Point shall consult with each other and agree to any
disclosure before issuing any press release or otherwise making any public statements with respect to the transactions contemplated hereunder. Neither DARA nor Point shall issue any such press release or make any such public statement prior to such
consultation, except as may be required by law or any listing agreement. At or prior to the issuance of any such release or statement or any other press release, a copy of any such release shall be provided by facsimile or other electronic
transmission to the other party.
Section 7.5. Further Action; Commercially Reasonable Efforts
(a) Each of the parties hereto shall
use all commercially reasonable efforts to take, or cause to be taken, all appropriate action, and do, or cause to be done, all things necessary, proper or advisable under applicable laws or otherwise to (i) consummate and make effective the
transactions contemplated by this Agreement as promptly as practicable, and if possible by March 31, 2008, and (ii) perform its covenants contained in this Agreement, in each case including, without limitation, using all its commercially
reasonable efforts to obtain all licenses, permits, consents, approvals, authorizations, qualifications and orders of Governmental Entities and parties to contracts with Point, DARA or any Point Subsidiary or DARA Subsidiary as are necessary for the
transactions contemplated herein or the covenants contained herein. In case at any time after the Effective Time any further action is necessary or desirable to carry out the purposes of this Agreement, the proper officers and directors of each
party to this Agreement shall use all commercially reasonable efforts to take all such action.
(b) During the Interim Period, each of the
parties hereto shall promptly notify the other in writing of any pending or, to the knowledge of such party, threatened action, proceeding or investigation by any Governmental Entity or any other Person (i) challenging or seeking damages in
connection with the Merger or the conversion of Point Common Stock into the Merger Consideration pursuant to the Merger, or (ii) seeking to restrain or prohibit the consummation of the Merger or any of the transactions contemplated by this
Agreement or otherwise limit the right of DARA to own or operate all or any portion of the business or assets of Point.
(c) Each party
hereto shall use its commercially reasonable efforts to refrain from taking any action, or entering into any transaction, which would cause any of its representations or warranties contained in this Agreement to be untrue in any material effect or
which would result in a material breach of any covenant made by it in this Agreement.
Section 7.6. No Solicitation
(a) From the date of this Agreement until the Effective Time or the
termination of this Agreement pursuant to the terms of this Agreement, Point shall not and shall not permit any of its Subsidiaries, Affiliates, directors, officers, employees, agents or representatives, including, without limitation, any investment
banker, attorney or accountant of Point or any of its Subsidiaries (collectively,
Representatives
) directly or indirectly, to (i) initiate, solicit, encourage or otherwise facilitate (including by way of furnishing
information), any inquiries or the making of any proposal or offer that constitutes, or may reasonably be expected to lead to, an Acquisition Proposal (as defined below), (ii) enter into or maintain or continue discussions or negotiate with any
Person in furtherance of such inquiries or to obtain an Acquisition Proposal, or (iii) agree to, approve, recommend, or endorse any Acquisition Proposal, or authorize or permit any of its or their Subsidiaries or Representatives to take any
such action and, Point shall promptly notify DARA of any such inquiries and proposals received by Point or any of its Subsidiaries or Representatives, relating to any of such matters; provided, however, that the foregoing shall not prohibit the
Board of Directors or Representatives of Point from (A) furnishing information to, or engaging in discussions or negotiations with, any Person in response to an unsolicited bona fide written Acquisition Proposal; or (B) recommending such
an unsolicited bona fide written Acquisition Proposal to the stockholders of Point, if, and only to the extent that, (w) the Board of Directors of Point concludes in good faith (after consultation with its financial advisors) that such
Acquisition Proposal would reasonably be expected to constitute a Superior Proposal
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(as hereinafter defined), (x) the Board of Directors of Point determines in good faith (after consultation with outside legal counsel) that the failure
to take such action would reasonably be expected to result in a breach by the Board of Directors of Point of its fiduciary duties to Points stockholders under applicable law, (y) prior to furnishing such information to, or entering into
discussions or negotiations with, such Person Point provides prompt written notice to DARA to the effect that it is furnishing information to, or entering into discussions or negotiations with, such Person (which notice shall identify the nature and
material terms of the proposal), and (z) prior to providing any information or data to any Person in connection with an Acquisition Proposal by any such Person, the Board of Directors of Point receives from such Person an executed
confidentiality agreement with provisions no less favorable to Point than the Confidentiality Agreement. Point agrees that it will immediately cease and cause to be terminated any existing activities, discussions, or negotiations with any parties
regarding any Acquisition Proposal. Point shall promptly provide DARA with a copy of any written Acquisition Proposal received and a written statement with respect to any nonwritten Acquisition Proposal received, which statement shall include the
identity of the Person making the Acquisition Proposal and the material terms thereof. Point shall inform DARA promptly of any change in the price, structure, form of consideration or material terms and conditions regarding the Acquisition Proposal
and shall promptly provide to DARA all written materials received by Point with respect thereto. Point agrees to keep DARA fully and timely informed of the status of any discussions, negotiations, furnishing of non-public information, or other
activities relating to an Acquisition Proposal. Point shall promptly provide to DARA any non-public information concerning Point provided to any other person in connection with any Acquisition Proposal which was not previously provided to DARA.
(b) For purposes of this Agreement,
Acquisition Proposal
means an inquiry, offer or proposal regarding any of the
following (other than the transactions contemplated by this Agreement) involving Point or its Subsidiaries: (i) any merger, reorganization, consolidation, share exchange, recapitalization, business combination, liquidation, dissolution, or
other similar transaction involving, or, any sale, lease, exchange, mortgage, pledge, transfer or other disposition of, all or any significant portion of the assets or twenty-five percent (25%) or more of the equity securities of, Point or any
of its Subsidiaries, in a single transaction or series of related transactions; (ii) the acquisition by any Person (other than any beneficial owner of more than five percent (5%) of Point Common Stock as long as such beneficial owner is
eligible to make filings in respect thereof on Schedule 13G under applicable SEC rules and regulations) of beneficial ownership of ten percent (10%) or more of the outstanding shares of Point Common Stock (including Point Common Stock currently
beneficially owned by such Person); (iii) any tender offer or exchange offer for twenty percent (20%) or more of the outstanding shares of capital stock of Point or any Point Subsidiary or the filing of a registration statement under the
Securities Act in connection therewith; or (iv) any public announcement of a proposal, plan or intention to do any of the foregoing or any agreement to engage in any of the foregoing.
(c) For purposes of this Agreement,
Superior Proposal
means a bona fide Acquisition Proposal made by any Person that the Board of
Directors of Point determines in its good faith judgment to be more favorable to Points stockholders than the Merger and for which financing, to the extent required, is then committed or which, in the good faith judgment of the Board of
Directors of Point, is reasonably capable of being obtained by such Person.
(d) Nothing contained in this Section 7.6 shall prohibit
Point from taking and disclosing to its stockholders a position contemplated by Rule 14e-2 promulgated under the Exchange Act or from making any disclosure to Points stockholders which, in the good faith judgment of the Board of Directors of
Point based on the advice of outside counsel, is required under applicable law; provided that in any such cases Point does not withdraw or modify, or propose to withdraw or modify, its position with respect to the Merger or approve or recommend, or
propose to approve or recommend, an Acquisition Proposal unless Point and its Board of Directors have complied with all the provisions of this Section 7.6.
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Section 7.7. Nasdaq Listing
Except as disclosed in Schedule 7.7 to the Point Disclosure Schedule,
Point shall use reasonable efforts (i) to maintain the listing of the Point Common Stock on the Nasdaq, and (ii) to cause the Point Common Stock to be issued pursuant to Section 2.1(a) of this Agreement and the Point Common Stock
issuable upon exercise of options under the DARA Stock Plan to be approved for listing on Nasdaq, subject to official notice of issuance, prior to the Effective Time.
Section 7.8. Blue Sky
Point shall use reasonable efforts to obtain prior to the Effective Time any
necessary permits and approvals under all applicable Blue Sky Laws required to permit the distribution of the shares of Point Common Stock to be issued in accordance with the provisions of Section 2.1(a) of this Agreement.
Section 7.9. Event Notices
During the Interim Period, each party hereto will promptly notify the
other parties hereto of (a) the occurrence or nonoccurrence of any event the occurrence or nonoccurrence of which would be likely to cause any condition to the obligations of such party to effect the Merger and the other transactions
contemplated by this Agreement not to be satisfied and (b) the failure of such party to comply with any covenant or agreement to be complied with by it pursuant to this Agreement which would be likely to result in any condition to the
obligations of such party to effect the Merger and the other transactions contemplated by this Agreement not to be satisfied. No delivery of any notice pursuant to this Section 7.9 will cure any breach of any representation or warranty,
covenant, condition or agreement of such party contained in this Agreement or otherwise limit or affect the remedies available hereunder to the party receiving such notice.
Section 7.10. Tax Treatment
Each of DARA and Point shall use reasonable efforts to structure the
Merger to qualify as a reorganization under the provisions of Section 368 of the Code. Both prior to and after the Closing, each partys books and records shall be maintained, and all federal, state and local income tax returns and
schedules thereto shall be filed in a manner consistent with the Merger being qualified as a reverse triangular merger under Section 368(a)(2)(E) of the Code (and comparable provisions of any applicable state or local laws), except to the
extent the Merger is determined in a final administrative or judicial decision not to qualify as a reorganization within the meaning of Code Section 368(a).
ARTICLE VIII
CLOSING CONDITIONS
Section 8.1. Conditions To Obligations Of DARA, Merger Sub And Point To Effect The Merger
The
respective obligations of DARA, Merger Sub and Point to effect the Merger and the other transactions contemplated herein shall be subject to the satisfaction at or prior to the Effective Time of the following conditions, any or all of which may be
waived, in whole or in part, to the extent permitted by applicable law:
(a)
Stockholder Approval
. Each of the Point Stockholder
Approval and the DARA Stockholder Approval shall have been obtained. The conversion of the DARA Series A Preferred Stock and the DARA Series B Preferred Stock to DARA Common Stock shall have been approved by the required votes.
(b)
Effectiveness Of Registration Statement
. The Registration Statement shall have been declared effective by the SEC under the Securities Act
prior to the mailing of the Joint Proxy Statement/Prospectus by each of Point and DARA to their respective stockholders and no stop order suspending the effectiveness of such
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Registration Statement shall have been issued by the SEC and no proceedings for that purpose shall have been initiated or, to the knowledge of DARA or Point,
threatened by the SEC.
(c)
No Order.
No Governmental Entity or federal or state court of competent jurisdiction shall have enacted,
issued, promulgated, enforced or entered any law, statute, rule, ordinance, regulation, executive order, decree, judgment, stipulation, injunction or other order (whether temporary, preliminary or permanent) in any case which is in effect and which
prevents or prohibits consummation of the Merger or any other transactions contemplated in this Agreement; provided, however, that the parties shall use their reasonable efforts to cause any such decree, judgment, injunction or order to be vacated
or lifted.
(d)
Reverse Stock Split.
The Reverse Stock Split shall have been effected immediately prior to the Closing or will be
effective upon the filing of the Certificate of Merger.
Section 8.2. Additional Conditions To Obligations Of DARA
The obligations of DARA to effect the
Merger and the other transactions contemplated in this Agreement are also subject to the following conditions, any or all of which may be waived by DARA, in whole or in part, to the extent permitted by applicable law:
(a)
Representations And Warranties.
The representations and warranties of Point and Merger Sub made in this Agreement shall be true and correct in
all material respects when made and on and as of the Closing Date (except for representations and warranties that speak as of a specific date or time, which need only be true and correct in all material respects as of such date or time); provided,
however, that, notwithstanding the foregoing, the representations and warranties of Point set forth in Section 3.3(d) shall be true and correct in all respects when made and on and as of the Closing Date. DARA shall have received a certificate
of the President of Point to that effect.
(b)
Agreements And Covenants.
The agreements and covenants of Point and Merger Sub
required to be performed on or before the Effective Time shall have been performed in all material respects. DARA shall have received a certificate of the President of Point to that effect.
(c)
No Material Adverse Effect.
There shall have been no Material Adverse Effect on Point since the date of this Agreement.
(d)
No Litigation.
There shall not be pending or imminently threatened any suit, action, proceeding or investigation by any Governmental Entity:
(i) challenging or seeking to restrain or prohibit the consummation of the Merger or any of the other transactions contemplated by this Agreement; (ii) relating to the Merger and seeking to obtain from Point or any Point Subsidiary any
damages that may be material to Point; (iii) seeking to prohibit or limit in any material respect Points ability to vote, receive dividends with respect to or otherwise exercise ownership rights with respect to the stock of the Surviving
Corporation; or (iv) which would materially and adversely affect the right of the Surviving Corporation to own the assets or operate the business of DARA.
(e)
Consents Under Point Agreements.
Point shall have obtained the consent or approval of any Person whose consent or approval shall be required under any agreement or instrument in order to permit the
consummation of the transactions contemplated hereby, except those which the failure to obtain would not have a Material Adverse Effect on Point.
(f)
Director and Officer Resignation.
The directors and officers of Point shall have submitted their resignations to be effective at the Effective Time.
(g)
Insurance.
Point shall have purchased insurance coverage (i) extending for a period of five years on its directors and officers liability insurance coverage in effect as of the date of this Agreement,
and (ii) extending for
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any applicable statute of limitations on its product liability insurance coverage in effect as of the date of this Agreement, in each case covering past or
future claims with respect to periods prior to and including the Effective Time.
(h)
Name Change.
Point shall have executed and
delivered to counsel for DARA a certificate of amendment to effect the Name Change.
Section 8.3. Additional Conditions To Obligations Of Point and Merger Sub
The obligations of Point
and Merger Sub to effect the Merger and the other transactions contemplated in this Agreement are also subject to the following conditions any or all of which may be waived by Point, in whole or in part, to the extent permitted by applicable law:
(a)
Representations And Warranties.
The representations and warranties of DARA made in this Agreement shall be true and correct in
all material respects when made and on and as of the Closing Date (except for representations and warranties that speak as of a specific date or time, which need only be true and correct in all material respects as of such date and time). Point
shall have received a certificate of the Chief Executive Officer or Chief Financial Officer of DARA to such effect.
(b)
Agreements And
Covenants.
The agreements and covenants of DARA required to be performed on or before the Effective Time shall have been performed in all material respects. Point shall have received a certificate of the Chief Executive Officer or Chief
Financial Officer of DARA to such effect.
(c)
No Material Adverse Effect.
There shall have been no Material Adverse Effect on DARA
since the date of this Agreement.
(d)
No Litigation.
There shall not be pending or imminently threatened any suit, action,
proceeding or investigation by any Governmental Entity: (i) challenging or seeking to restrain or prohibit the consummation of the Merger or any of the other transactions contemplated by this Agreement; (ii) relating to the Merger and
seeking to obtain from DARA or any DARA Subsidiary any damages that may be material to DARA; (iii) seeking to prohibit or limit in any material respect Points ability to vote, receive dividends with respect to or otherwise exercise
ownership rights with respect to the stock of the Surviving Corporation; or (iv) which would materially and adversely affect the right of the Surviving Corporation to own the assets or operate the business of DARA.
(e)
Consents Under DARA Agreements.
DARA shall have obtained the consent or approval of any Person whose consent or approval shall be required
under any agreement or instrument in order to permit the consummation of the transactions contemplated hereby, except those which the failure to obtain would not have a Material Adverse Effect on DARA.
(f)
Non-Foreign Status.
On or before the Effective Time, DARA shall have provided Point with a certificate of DARAs non-foreign status as
set forth in Treasury Regulations Section 1.1445-2(b) in form and substance reasonably acceptable to Point.
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ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
Section 9.1. Termination
The right of any party hereto to terminate this Agreement pursuant to this
Section 9.1 shall remain operative and in full force and effect regardless of any investigation made by or on behalf of any party hereto, any Affiliate of such party or any of their respective officers, directors, representatives or agents,
whether prior to or after the execution of this Agreement. This Agreement may be terminated at any time prior to the Effective Time, whether before or after approval of this Agreement and the Merger by the stockholders of Point or DARA:
(a) by mutual consent of DARA and Point;
(b) by DARA, upon a breach of any covenant or agreement on the part of Point or Merger Subset forth in this Agreement, or if any representation or warranty of Point shall have become untrue, in either case such that the conditions set forth
in Section 8.2(a) or Section 8.2(b) would not be satisfied (a
Terminating Point Breach
); provided, that, if such Terminating Point Breach is curable by Point through the exercise of reasonable efforts and for so long as
Point continues to exercise such reasonable efforts (not to exceed 30 days), DARA may not terminate this Agreement under this Section 9.1(b);
(c) by Point, upon breach of any covenant or agreement on the part of DARA set forth in this Agreement, or if any representation or warranty of DARA shall have become untrue, in either case such that the conditions set forth in
Section 8.3(a) or Section 8.3(b) would not be satisfied (a
Terminating DARA Breach
); provided, that, if such Terminating DARA Breach is curable by DARA through the exercise of their reasonable efforts (not to exceed 30
days) and for so long as DARA continues to exercise such reasonable efforts, Point may not terminate this Agreement under this Section 9.1(c);
(d) by either DARA or Point, if there shall be any decree, permanent injunction, judgment, order or other action by any court of competent jurisdiction or any Governmental Entity which is final and nonappealable preventing the consummation
of the Merger; provided, that the party seeking to terminate this Agreement pursuant to this Section 9.1(d) shall have used reasonable efforts to cause any such decree, permanent injunction, judgment or other order to be vacated or lifted;
(e) by either DARA or Point, if the Merger shall not have been consummated on or before March 31, 2008; provided, further, that the
right to terminate this Agreement under this Section 9.1(e) shall not be available to any party whose failure to fulfill any obligation under this Agreement has been the cause of the failure of the Merger to occur on or before such date;
(f) by either DARA or Point, if the Point Stockholder Approval shall not have been obtained at the Point Stockholders Meeting (including
any adjournment or postponement thereof); provided, that the right to terminate this Agreement under this Section 9.1(f) shall not be available to Point if Point has not complied with its obligations under Section 7.3(b);
(g) by either Point or DARA, if the DARA Stockholder Approval shall not have been obtained at the DARA Stockholders Meeting (including any adjournment or
postponement thereof); provided, that the right to terminate this Agreement under this Section 9.1(g) shall not be available to DARA if DARA has not complied with its obligations under Section 7.3(c);
(h) by DARA, if (i) the Board of Directors of Point withdraws or modifies its recommendation of this Agreement or the Merger or shall have resolved
or publicly announced or disclosed to any third party its intention to do any of the foregoing or the Board of Directors of Point shall have recommended to the stockholders of Point any Acquisition Proposal or resolved to do so; or (ii) a
tender offer or exchange offer for
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twenty percent (20%) or more of the outstanding shares of Point Common Stock is commenced or a registration statement with respect thereto shall have
been filed and the Board of Directors of Point, within ten (10) Business Days after such tender offer or exchange offer is so commenced or such registration statement is so filed, either fails to recommend against acceptance of such tender or
exchange offer by its stockholders or takes no position with respect to the acceptance of such tender or exchange offer by its stockholders;
(i) by Point, if the Board of Directors of DARA withdraws or modifies its recommendation of this Agreement or the Merger or shall have resolved or publicly announced or disclosed to any third party its intention to do any of the foregoing;
(j) by Point, if the Board of Directors of Point shall have determined to recommend an Acquisition Proposal to its stockholders after
determining, pursuant to Section 7.6, that such Acquisition Proposal constitutes a Superior Proposal, and Point gives DARA at least three (3) Business Days prior notice of its intention to effect such termination pursuant to this
Section 9.1(j);
(k) by DARA, if any Person (other than DARA, any Affiliate of DARA or any beneficial owner of more than five percent
(5%) of Point Common Stock who is eligible to make filings in respect thereof on Schedule 13G under applicable SEC rules and regulations) shall have acquired beneficial ownership or the right to acquire beneficial ownership of, or any
group (as such term is defined under Section 13(d) of the Exchange Act and the regulations promulgated thereunder), shall have been formed which beneficially owns, or has the right to acquire beneficial ownership of, twenty percent
(20%) or more of the then outstanding shares of capital stock of Point;
(l) by DARA, if there shall have occurred one or more events
which shall have caused a Material Adverse Effect on Point which Material Adverse Effect shall have remained uncured (to the extent curable) for a period of thirty (30) days after written notice from DARA of its intention to terminate pursuant
to this Section 9.1(l);
(m) by Point, if there shall have occurred one or more events which shall have caused a Material Adverse
Effect on DARA which Material Adverse Effect shall have remained uncured (to the extent curable) for a period of thirty (30) days after written notice from Point of its intention to terminate pursuant to this Section 9.1(m).
Section 9.2. Effect Of Termination
Except as provided in Section 9.5 of this Agreement, in the
event of the termination of this Agreement pursuant to Section 9.1, this Agreement shall forthwith become void, there shall be no liability on the part of DARA or Point or any of their respective officers, directors, stockholders or Affiliates
to the other, and all rights and obligations of any party hereto shall cease, except that nothing herein shall relieve any party from liability for any willful breach by a party of any of its representations, warranties, covenants or agreements in
this Agreement; and provided that the provisions of Sections 7.2 and 9.5 of this Agreement will remain in full force and effect and survive any termination of this Agreement.
Section 9.3. Amendment
This Agreement may be amended by the parties hereto by action taken or
authorized by their respective Boards of Directors at any time prior to the Effective Time; provided, however, that, after approval of the Merger by the stockholders of Point or the stockholders of DARA no amendment may be made which by law or rule
of Nasdaq requires further approval by such stockholders without such further approval. This Agreement may not be amended except by an instrument in writing signed by each of the parties hereto.
Section 9.4. Extension; Waiver
At any time prior to the Effective Time, any party hereto may
(a) extend the time for the performance of any of the obligations or other acts of any other party hereto, (b) waive any inaccuracies in the representations and
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warranties of any other party contained herein or in any document delivered pursuant hereto or (c) waive compliance by any other party with any of the
agreements or conditions contained herein. Any such extension or waiver shall be valid only if set forth in an instrument in writing signed by the party or parties to be bound thereby.
Section 9.5. Expenses
(a) Except as otherwise set forth in this Agreement, all costs and expenses
incurred by the parties hereto shall be borne solely and entirely by the party which has incurred such costs and expenses, whether or not the Merger is consummated; provided, however, that DARA and Point shall share equally all costs and expenses
(other than attorneys and accountants fees and expenses) incurred in relation to printing and filing and, as applicable, mailing the Registration Statement and the Joint Proxy Statement/Prospectus and any amendments or supplements
thereto and all SEC and other regulatory filing fees incurred in connection with the Registration Statement and the Joint Proxy Statement/Prospectus.
(b) Up to an aggregate Four Hundred Thousand Dollars ($400,000) of expenses of Point related to the Merger may be borne by DARA as provided in Section 2.7 of the Loan Agreement.
(c) If DARA terminates this Agreement pursuant to Section 9.1(h) or Point terminates this Agreement pursuant to Section 9.1(j), then Point
shall pay all direct costs and expenses incurred by DARA in the negotiation of this Agreement and the pursuit of the transactions contemplated hereby.
ARTICLE X
GENERAL PROVISIONS
Section 10.1. Effectiveness Of Representations, Warranties And Agreements
None of the
representations and warranties, or any covenant to be performed prior to the Effective Time, contained in this Agreement shall survive the Effective Time. This Section 10.1 shall not limit the survival of any covenant or agreement of the
parties to this Agreement which, by its terms, contemplates performance, in whole or in part, after the Effective Time.
Section 10.2. Notices
All notices and other communications given or made pursuant hereto shall be
in writing and shall be deemed to have been duly delivered (i) four (4) Business Days after being sent by registered or certified mail (postage prepaid, return receipt requested), (ii) one (1) Business Day after being sent for
next Business Day delivery, fees prepaid, via a reputable nationwide overnight courier service, or (iii) on the date of confirmation of receipt (or the first Business Day following such receipt if the date of such receipt is not a Business Day)
of transmission by facsimile, in each case to the intended recipient at the following addresses (or at such other address for a party as shall be specified by like changes of address). A party electing to provide notice by electronic transmission as
provided herein shall also provide mailed copies of any such notice.
(a) If to DARA:
DARA BioSciences, Inc.
4505 Falls of the
Neuse Road
Raleigh, North Carolina 27609
Telecopier No.: (919) 861-0239
Attention: Richard A. Franco, Chief Executive Officer
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With a copy (which shall not constitute notice) to:
Wyrick Robbins Yates & Ponton LLP
4101 Lake Boone Trail
Suite 300
Raleigh, North Carolina 27607
Telecopier No.: (919) 781-4865
Attention: Donald R. Reynolds, Esq.
(b) If
to Point or Merger Sub:
Point Therapeutics, Inc.
70 Walnut Street
Wellesley Hills, Massachusetts 02481
Telecopier No.: 781-239-8005
Attention:
Secretary
With a copy (which shall not constitute notice) to:
Ropes & Gray LLP
One International Place
Boston, Massachusetts 02110-2624
Telecopier
No.: (617) 951-7050
Attention: Steven A. Wilcox, Esq.
Section 10.3. Certain Definitions
For purposes of this Agreement, the term:
Affiliate
of any Person means a Person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, the first mentioned Person and for purposes of this Agreement shall be deemed to include, without limitation, with respect to DARA and Point (i) each executive officer of either DARA or Point, respectively,
including the former executive officers of Point set forth in Exhibit A; (ii) each director of either DARA or Point, respectively; and (iii) each beneficial owner of more than five percent (5%) of DARA Common Stock or Point Common
Stock, respectively, other than any such beneficial owner who is eligible to make filings in respect thereof on Schedule 13G under applicable SEC rules and regulations.
beneficial owner
(including the terms beneficial ownership and beneficially own) means with respect to any shares of capital stock, a Person who shall be deemed to be the
beneficial owner or have beneficial ownership of such shares (i) which such Person or any of its Affiliates or associates beneficially owns, directly or indirectly, (ii) which such Person or any of its Affiliates or associates (as such
term is defined in Rule 12b-2 of the Exchange Act) has, directly or indirectly, (A) the right to acquire (whether such right is exercisable immediately or subject only to the passage of time), pursuant to any agreement, arrangement or
understanding or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise, or (B) the right to vote pursuant to any agreement, arrangement or understanding, (iii) which are beneficially owned, directly or
indirectly, by any other Person with whom such Person or any of its Affiliates or associates has any agreement, arrangement or understanding for the purpose of acquiring, holding voting or disposing of any such shares, or (iv) pursuant to
Section 13(d) of the Exchange Act and any rules or regulations promulgated thereunder;
Business Day
shall mean any
day other than a day on which banks in the State of New York are authorized or obligated to be closed;
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control
(including the terms controlled by and under common control
with) means the possession, directly or indirectly or as trustee or executor, of the power to direct or cause the direction of the management or policies of a Person, whether through the ownership of stock or as trustee or executor, by
contract or credit arrangement or otherwise;
Encumbrance
shall mean any lien, pledge, charge, security interest or
other encumbrance of any nature;
fully diluted
shall mean, as of the date in question, (i) all shares of capital
stock that are issued and outstanding, (ii) all shares of capital stock issuable upon the exercise of issued and outstanding options or warrants, and (iii) all shares of capital stock issuable upon conversion of existing rights to convert
outstanding debt or other outstanding rights.
Indebtedness
of a Person shall mean (i) indebtedness of such Person
for borrowed money whether short-term or long-term and whether secured or unsecured, (ii) indebtedness of such Person for the deferred purchase price of services or property, which purchase price (A) is due twelve (12) months or more
from the date of incurrence of the obligation in respect thereof or (B) customarily or actually is evidenced by a note or other written instrument (including, without limitation, any such indebtedness which is non-recourse to the credit of such
Person but is secured by assets of such Person); (iii) obligations of such Person under capital leases, (iv) obligations of such Person arising under acceptance facilities, (v) the undrawn face amount of, and unpaid reimbursement
obligations in respect of, all letters of credit issued for the account of such Person, (vi) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, (vii) all obligations of such Person upon which
interest charges are customarily paid, (viii) all obligations of such Person under conditional sale or other title retention agreements relating to property purchased by such Person (even though the rights and remedies of the seller or lender
under such agreement in the event of default are limited to repossession or sale of such property), (ix) obligations of such Person to purchase, redeem, retire, defease or otherwise acquire for value any capital stock of such Person or any
warrants, rights or options to acquire such capital stock (with redeemable preferred stock being valued at the greater of its voluntary or involuntary liquidation preference plus accrued and unpaid dividends), (x) all executory obligations of
such Person in respect of financial hedge contracts (including, without limitation, equity hedge contracts), (xi) all indebtedness of the types referred to in clauses (i) through (x) above for which such Person is obligated under a
contingent obligation, and (xii) renewals, extensions, refundings, deferrals, restructurings, amendments and modifications of any such indebtedness, obligation or guarantee;
Intellectual Property
means all (i) patents and patent applications, (ii) trademarks, service marks, trade dress, logos,
trade names, and corporate names and registrations and applications for registration thereof, (iii) copyrights and registrations and applications for registration thereof, (iv) computer software, data, and documentation, (v) trade
secrets and confidential business information (including formulas, compositions, inventions (whether patentable or unpatentable and whether or not reduced to practice), know-how, manufacturing and production processes and techniques, research and
development information, drawings, specifications, designs, plans, proposals, technical data, copyrightable works, financial, marketing, and business data, pricing and cost information, business and marketing plans, and customer and supplier lists
and information, (vi) Internet domain names and applications for domain names, (vii) other proprietary rights, and (viii) copies and tangible embodiments thereof (in whatever form or medium);
Material Adverse Effect
shall mean, with respect to a specified Person any change, event or effect that individually or in the
aggregate (taking into account all other such changes, events or effects) has had, or would be reasonably likely to have, a material adverse effect on the business, operations, earnings or condition (financial or otherwise) of such Person and its
Subsidiaries, if any, taken as a whole, except for such changes, events or effects as have been previously disclosed on the Point Disclosure Schedule or the DARA Disclosure Schedule;
Person
means an individual, corporation, partnership, association, trust, unincorporated organization, other entity or group,
including, without limitation, any entity or group as defined in Section 13(d) of the Exchange Act;
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reasonable efforts
shall mean, as to a party hereto, an undertaking by such party to
perform or satisfy an obligation or duty or otherwise act in a manner reasonably calculated to obtain the intended result by action or expenditure not disproportionate or unduly burdensome in the circumstances, which means, among other things, that
such party shall not be required to (i) expend funds other than for payment of the reasonable and customary costs and expenses of employees, counsel, consultants, representatives or agents of such party in connection with the performance or
satisfaction of such obligation or duty or other action or (ii) institute litigation or arbitration as a part of its reasonable efforts;
Subsidiary
of any Person means any corporation, partnership, joint venture or other legal entity of which such Person (either alone or through or together with any other Subsidiary of such Person) (i) owns, directly
or indirectly, fifty percent (50%) or more of the capital stock, partnership interests or other equity interests the holders of which are generally entitled to vote for the election of the board of directors or other governing body of such
corporation, partnership, joint venture or other legal entity, or (ii) possesses, directly or indirectly, control over the direction of management or policies of such corporation, partnership, joint venture or other legal entity (whether
through ownership of voting securities, by agreement or otherwise);
Tax
(including, with correlative meaning, the terms
Taxes
and
Taxable
) shall include, except where the context otherwise requires, all federal, state, local and foreign income, profits, franchise, gross receipts, payroll, sales, employment, use, property,
withholding, excise, occupancy and other taxes, duties or assessments or claims of any nature whatsoever, together with all interest, penalties and additions imposed with respect to such amounts; and
Taxing Authority
means any domestic, foreign, Federal, national, provincial, state, county or municipal or other local government or
court, any subdivision, agency, commission or authority thereof, or any quasi-governmental body exercising tax regulatory authority.
Section 10.4. Headings
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.
Section 10.5. Severability
If any term or other provision of this Agreement is invalid, illegal or
incapable of being enforced by any rule of law or public policy or other judgment, decree, injunction or order, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner to the end that transactions contemplated hereby are fulfilled to the extent possible.
Section 10.6. Entire Agreement
This Agreement (together with the Exhibits, the Disclosure Schedules
and the other documents delivered pursuant hereto), the Loan Agreement and the Confidentiality Agreement constitute the entire agreement of the parties and supersede all prior agreements and undertakings, both written and oral, between the parties,
or any of them, with respect to the subject matter hereof and, except as otherwise expressly provided herein, are not intended to confer upon any other Person any rights or remedies hereunder.
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Section 10.7. Enforcement
The parties agree that irreparable damage would occur in the event that
any of the provisions of this Agreement were not performed in accordance with their specific terms. It is accordingly agreed that the parties shall be entitled to specific performance of the terms hereof, this being in addition to any other remedy
to which they are entitled at law or in equity.
Section 10.8. Assignment
Neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by any of the parties hereto (whether by operation of law or otherwise) without the prior written consent of the other party. Subject to the preceding sentence, this Agreement shall be binding upon, inure to the benefit
of and be enforceable by the parties and their respective successors and permitted assigns.
Section 10.9. Third Party Beneficiaries
Subject to Section 10.8, this Agreement shall be
binding upon and inure solely to the benefit of each party hereto, and nothing in this Agreement, express or implied, is intended to or shall confer upon any other Person any right, benefit or remedy of any nature whatsoever under or by reason of
this Agreement.
Section 10.10. Governing Law
This Agreement shall be governed by, and construed in accordance with,
the laws of the State of Delaware, regardless of the laws that might otherwise govern under applicable principles of conflicts of law.
Section 10.11. Counterparts
This Agreement may be executed and delivered in one or more
counterparts, and by the different parties hereto in separate counterparts, each of which when executed and delivered shall be deemed to be an original but all of which taken together shall constitute one and the same agreement.
Section 10.12. Jurisdiction
Any action or proceeding seeking to enforce any provision of, or based
on any right arising out of, this Agreement or of the Merger shall be brought against any of the parties only in the courts of the State of Delaware or, if it has or can acquire jurisdiction, in the courts of the United States of America located in
New Castle County, Delaware, and each of the parties hereto consents to the exclusive jurisdiction of such courts (and of the appropriate appellate courts) in any such action or proceeding, waives any objection to venue laid therein and agrees not
to plead or claim in any such courts that such proceeding brought therein has been brought in any inconvenient forum.
Section 10.13. WAIVER OF JURY TRIAL
EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT
TO TRIAL BY JURY AND ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT, OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE ACTIONS OF ANY PARTY HERETO IN NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT
HEREOF.
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Section 10.14. Rules of Construction
The parties hereto agree that they have been
represented by counsel during the negotiation and execution of this Agreement and, therefore, waive the application of any law, regulation, holding or rule of construction providing that ambiguities in an agreement or other document will be
construed against the party drafting such agreement or document.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement and Plan of Merger to be executed and
delivered as of the date first written above.
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DARA BIOSCIENCES, INC.
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By:
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/s/ R
ICHARD
A.
F
RANCO
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Richard A. Franco
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Chief Executive Officer
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POINT THERAPEUTICS, INC.
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By:
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/s/ D
ONALD
R. K
IEPERT
,
J
R
.
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Donald R. Kiepert, Jr.
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President
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DP ACQUISITION CORP.
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By:
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/s/ M
ICHAEL
P.
D
UFFY
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Michael P. Duffy
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Secretary
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APPENDIX B
Section 262 of the Delaware General Corporation Law
Appraisal Rights
(a) Any stockholder of a corporation of this State who holds shares of stock on the date
of the making of a demand pursuant to subsection (d) of this section with respect to such shares, who continuously holds such shares through the effective date of the merger or consolidation, who has otherwise complied with subsection
(d) of this section and who has neither voted in favor of the merger or consolidation nor consented thereto in writing pursuant to § 228 of this title shall be entitled to an appraisal by the Court of Chancery of the fair value of the
stockholders shares of stock under the circumstances described in subsections (b) and (c) of this section. As used in this section, the word stockholder means a holder of record of stock in a stock corporation and also a
member of record of a nonstock corporation; the words stock and share mean and include what is ordinarily meant by those words and also membership or membership interest of a member of a nonstock corporation; and the words
depository receipt mean a receipt or other instrument issued by a depository representing an interest in one or more shares, or fractions thereof, solely of stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or series of stock of a constituent corporation in a merger or
consolidation to be effected pursuant to § 251 (other than a merger effected pursuant to § 251(g) of this title), § 252, § 254, § 257, § 258, § 263 or § 264 of this title:
(1) Provided, however, that no appraisal rights under this section shall be available for the shares of any class or series of stock,
which stock, or depository receipts in respect thereof, at the record date fixed to determine the stockholders entitled to receive notice of and to vote at the meeting of stockholders to act upon the agreement of merger or consolidation, were either
(i) listed on a national securities exchange or designated as a national market system security on an interdealer quotation system by the National Association of Securities Dealers, Inc. or (ii) held of record by more than 2,000 holders;
and further provided that no appraisal rights shall be available for any shares of stock of the constituent corporation surviving a merger if the merger did not require for its approval the vote of the stockholders of the surviving corporation as
provided in subsection (f) of § 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection,
appraisal rights under this section shall be available for the shares of any class or series of stock of a constituent corporation if the holders thereof are required by the terms of an agreement of merger or consolidation pursuant to §§
251, 252, 254, 257, 258, 263 and 264 of this title to accept for such stock anything except:
a. Shares of stock of the
corporation surviving or resulting from such merger or consolidation, or depository receipts in respect thereof;
b. Shares
of stock of any other corporation, or depository receipts in respect thereof, which shares of stock (or depository receipts in respect thereof) or depository receipts at the effective date of the merger or consolidation will be either listed on a
national securities exchange or designated as a national market system security on an interdealer quotation system by the National Association of Securities Dealers, Inc. or held of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts and cash in lieu of fractional shares or
fractional depository receipts described in the foregoing subparagraphs a., b. and c. of this paragraph.
(3) In the event
all of the stock of a subsidiary Delaware corporation party to a merger effected under § 253 of this title is not owned by the parent corporation immediately prior to the merger, appraisal rights shall be available for the shares of the
subsidiary Delaware corporation.
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(c) Any corporation may provide in its certificate of incorporation that appraisal rights under this
section shall be available for the shares of any class or series of its stock as a result of an amendment to its certificate of incorporation, any merger or consolidation in which the corporation is a constituent corporation or the sale of all or
substantially all of the assets of the corporation. If the certificate of incorporation contains such a provision, the procedures of this section, including those set forth in subsections (d) and (e) of this section, shall apply as nearly
as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights are provided under this section is to be submitted for approval at a
meeting of stockholders, the corporation, not less than 20 days prior to the meeting, shall notify each of its stockholders who was such on the record date for such meeting with respect to shares for which appraisal rights are available pursuant to
subsection (b) or (c) hereof that appraisal rights are available for any or all of the shares of the constituent corporations, and shall include in such notice a copy of this section. Each stockholder electing to demand the appraisal of
such stockholders shares shall deliver to the corporation, before the taking of the vote on the merger or consolidation, a written demand for appraisal of such stockholders shares. Such demand will be sufficient if it reasonably informs
the corporation of the identity of the stockholder and that the stockholder intends thereby to demand the appraisal of such stockholders shares. A proxy or vote against the merger or consolidation shall not constitute such a demand. A
stockholder electing to take such action must do so by a separate written demand as herein provided. Within 10 days after the effective date of such merger or consolidation, the surviving or resulting corporation shall notify each stockholder of
each constituent corporation who has complied with this subsection and has not voted in favor of or consented to the merger or consolidation of the date that the merger or consolidation has become effective; or
(2) If the merger or consolidation was approved pursuant to § 228 or § 253 of this title, then either a constituent corporation
before the effective date of the merger or consolidation or the surviving or resulting corporation within 10 days thereafter shall notify each of the holders of any class or series of stock of such constituent corporation who are entitled to
appraisal rights of the approval of the merger or consolidation and that appraisal rights are available for any or all shares of such class or series of stock of such constituent corporation, and shall include in such notice a copy of this section.
Such notice may, and, if given on or after the effective date of the merger or consolidation, shall, also notify such stockholders of the effective date of the merger or consolidation. Any stockholder entitled to appraisal rights may, within 20 days
after the date of mailing of such notice, demand in writing from the surviving or resulting corporation the appraisal of such holders shares. Such demand will be sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the appraisal of such holders shares. If such notice did not notify stockholders of the effective date of the merger or consolidation, either (1) each such constituent
corporation shall send a second notice before the effective date of the merger or consolidation notifying each of the holders of any class or series of stock of such constituent corporation that are entitled to appraisal rights of the effective date
of the merger or consolidation or (2) the surviving or resulting corporation shall send such a second notice to all such holders on or within 10 days after such effective date; provided, however, that if such second notice is sent more than 20
days following the sending of the first notice, such second notice need only be sent to each stockholder who is entitled to appraisal rights and who has demanded appraisal of such holders shares in accordance with this subsection. An affidavit
of the secretary or assistant secretary or of the transfer agent of the corporation that is required to give either notice that such notice has been given shall, in the absence of fraud, be prima facie evidence of the facts stated therein. For
purposes of determining the stockholders entitled to receive either notice, each constituent corporation may fix, in advance, a record date that shall be not more than 10 days prior to the date the notice is given, provided, that if the notice is
given on or after the effective date of the merger or consolidation, the record date shall be such effective date. If no record date is fixed and the notice is given prior to the effective date, the record date shall be the close of business on the
day next preceding the day on which the notice is given.
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(e) Within 120 days after the effective date of the merger or consolidation, the surviving or resulting
corporation or any stockholder who has complied with subsections (a) and (d) hereof and who is otherwise entitled to appraisal rights, may file a petition in the Court of Chancery demanding a determination of the value of the stock of all
such stockholders. Notwithstanding the foregoing, at any time within 60 days after the effective date of the merger or consolidation, any stockholder shall have the right to withdraw such stockholders demand for appraisal and to accept the
terms offered upon the merger or consolidation. Within 120 days after the effective date of the merger or consolidation, any stockholder who has complied with the requirements of subsections (a) and (d) hereof, upon written request, shall
be entitled to receive from the corporation surviving the merger or resulting from the consolidation a statement setting forth the aggregate number of shares not voted in favor of the merger or consolidation and with respect to which demands for
appraisal have been received and the aggregate number of holders of such shares. Such written statement shall be mailed to the stockholder within 10 days after such stockholders written request for such a statement is received by the surviving
or resulting corporation or within 10 days after expiration of the period for delivery of demands for appraisal under subsection (d) hereof, whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a copy thereof shall be made upon the surviving or resulting corporation, which shall within 20 days after such service file in the office of the
Register in Chancery in which the petition was filed a duly verified list containing the names and addresses of all stockholders who have demanded payment for their shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be filed by the surviving or resulting corporation, the petition shall be accompanied by such a duly verified list. The Register in Chancery, if so ordered by the Court, shall
give notice of the time and place fixed for the hearing of such petition by registered or certified mail to the surviving or resulting corporation and to the stockholders shown on the list at the addresses therein stated. Such notice shall also be
given by 1 or more publications at least 1 week before the day of the hearing, in a newspaper of general circulation published in the City of Wilmington, Delaware or such publication as the Court deems advisable. The forms of the notices by mail and
by publication shall be approved by the Court, and the costs thereof shall be borne by the surviving or resulting corporation.
(g) At the
hearing on such petition, the Court shall determine the stockholders who have complied with this section and who have become entitled to appraisal rights. The Court may require the stockholders who have demanded an appraisal for their shares and who
hold stock represented by certificates to submit their certificates of stock to the Register in Chancery for notation thereon of the pendency of the appraisal proceedings; and if any stockholder fails to comply with such direction, the Court may
dismiss the proceedings as to such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court shall appraise
the shares, determining their fair value exclusive of any element of value arising from the accomplishment or expectation of the merger or consolidation, together with a fair rate of interest, if any, to be paid upon the amount determined to be the
fair value. In determining such fair value, the Court shall take into account all relevant factors. In determining the fair rate of interest, the Court may consider all relevant factors, including the rate of interest which the surviving or
resulting corporation would have had to pay to borrow money during the pendency of the proceeding. Upon application by the surviving or resulting corporation or by any stockholder entitled to participate in the appraisal proceeding, the Court may,
in its discretion, permit discovery or other pretrial proceedings and may proceed to trial upon the appraisal prior to the final determination of the stockholder entitled to an appraisal. Any stockholder whose name appears on the list filed by the
surviving or resulting corporation pursuant to subsection (f) of this section and who has submitted such stockholders certificates of stock to the Register in Chancery, if such is required, may participate fully in all proceedings until
it is finally determined that such stockholder is not entitled to appraisal rights under this section.
(1) The Court shall direct the
payment of the fair value of the shares, together with interest, if any, by the surviving or resulting corporation to the stockholders entitled thereto. Interest may be simple or compound, as the Court may direct. Payment shall be so made to each
such stockholder, in the case of holders of uncertificated stock forthwith, and the case of holders of shares represented by certificates upon the surrender to the corporation
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of the certificates representing such stock. The Courts decree may be enforced as other decrees in the Court of Chancery may be enforced, whether such
surviving or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by
the Court and taxed upon the parties as the Court deems equitable in the circumstances. Upon application of a stockholder, the Court may order all or a portion of the expenses incurred by any stockholder in connection with the appraisal proceeding,
including, without limitation, reasonable attorneys fees and the fees and expenses of experts, to be charged pro rata against the value of all the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no stockholder who has demanded appraisal rights as provided in subsection
(d) of this section shall be entitled to vote such stock for any purpose or to receive payment of dividends or other distributions on the stock (except dividends or other distributions payable to stockholders of record at a date which is prior
to the effective date of the merger or consolidation); provided, however, that if no petition for an appraisal shall be filed within the time provided in subsection (e) of this section, or if such stockholder shall deliver to the surviving or
resulting corporation a written withdrawal of such stockholders demand for an appraisal and an acceptance of the merger or consolidation, either within 60 days after the effective date of the merger or consolidation as provided in subsection
(e) of this section or thereafter with the written approval of the corporation, then the right of such stockholder to an appraisal shall cease. Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery shall be dismissed
as to any stockholder without the approval of the Court, and such approval may be conditioned upon such terms as the Court deems just.
(l)
The shares of the surviving or resulting corporation to which the shares of such objecting stockholders would have been converted had they assented to the merger or consolidation shall have the status of authorized and unissued shares of the
surviving or resulting corporation.
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APPENDIX C
LOAN AND SECURITY AGREEMENT
POINT
THERAPEUTICS, INC.
and
DARA BIOSCIENCES, INC.
Dated as of October 9, 2007
Table of Contents
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Table of Contents
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LOAN AND SECURITY AGREEMENT
This Loan and Security Agreement (Agreement) is dated as of this
the 9th day of October 2007, by and between
Point Therapeutics, Inc.
, a Delaware corporation (Borrower), and
DARA Biosciences, Inc.
, a Delaware corporation (Lender).
BACKGROUND
WHEREAS, Borrower has
requested that Lender enter into a financing arrangement with Borrower pursuant to which Lender may make loans to Borrower;
WHEREAS,
Lender is willing to agree to make such loans to Borrower on the terms and conditions set forth herein; and
WHEREAS, this Agreement is
intended to aid the completion of the transactions contemplated by the Agreement and Plan of Merger dated as of October 9, 2007 by and among Borrower, Lender and DARA Acquisition Corp. (the Merger Agreement).
NOW, THEREFORE, in consideration of the mutual conditions and agreements set forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as follows:
SECTION I. DEFINITIONS AND INTERPRETATION
1.1.
Terms Defined
: As used in this Agreement, the following terms have the following respective meanings:
Advance(s)
Any monies advanced or credit extended to Borrower by Lender under the Loan, including, without limitation, cash advances.
Advance Request
Section 2.2(b).
Affiliate
With respect to any Person,
(a) any other Person which, directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with, such Person, or (b) any Person who is a director or officer (i) of such Person,
(ii) of any Subsidiary of such Person, or (iii) any Person described in clause (a) above. For purposes of this definition, control of a Person shall mean the power, directly or indirectly, (x) to vote 10% or more of the Capital
Stock having ordinary voting power for the election of directors (or comparable equivalent) of such Person, or (y) to direct or cause the direction of the management and policies of such Person whether by contract or otherwise. Control may be
by ownership, contract, or otherwise.
Agreement
This Loan and Security Agreement, as it may hereafter from time to time be
amended, modified, restated or replaced.
Anti-Terrorism Laws
Any statute, treaty, law (including common law), ordinance,
regulation, rule, order, opinion, release, injunction, writ, decree or award of any Governmental Authority relating to terrorism or money laundering, including Executive Order No. 13224 and the USA Patriot Act.
Asset Sale
The sale, transfer, lease, license or other disposition, by Borrower or by any Subsidiary of Borrower to any Person other than
Borrower of any Property now owned or hereafter acquired, of any nature whatsoever in any transaction or series of related transactions other than in the ordinary course of business. An Asset Sale includes, without limitation, a division.
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Authorized Officer
The President, Treasurer or Secretary of Borrower or any other officer (or
comparable equivalent) of Borrower authorized by specific resolution of Borrower to request Advances as set forth in the authorization certificate delivered to Lender substantially in the form of Exhibit A attached hereto.
Business Day
A day other than Saturday or Sunday when Lender is open for business in Philadelphia, Pennsylvania.
Capitalized Lease Obligations
Any Indebtedness represented by obligations under a lease that is required to be capitalized for financial
reporting purposes in accordance with GAAP, consistently applied.
Capital Expenditures
For any period, the aggregate of all
expenditures (including that portion of Capitalized Lease Obligations attributable to that period) made in respect of the purchase, construction or other acquisition of fixed or capital assets, determined in accordance with GAAP.
Capital Stock
Any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any
and all other ownership interests in a Person (other than a corporation), including, without limitation, all partnership interests of any kind in a partnership and all membership interests of any kind in a limited liability company, and any and all
warrants or options to purchase any of the foregoing.
Change of Control
With respect to Borrower, the result caused by the
occurrence of any event which results in the stockholders of Borrower owning (beneficially, legally or otherwise), in the aggregate, less than fifty-one (51%) of the Capital Stock of Borrower.
Closing
Section 4.6.
Closing Date
Section 4.6.
Collateral
All of the Property and interests in Property described in
Section 3.1 of this Agreement and all other interests in Property that now or hereafter secure payment of the Obligations and satisfaction by Borrower of all covenants and undertakings contained in this Agreement and the other Loan Documents.
Default
Any event, act, condition or occurrence which with notice, or lapse of time or both, would constitute an Event of
Default hereunder.
Disqualified Stock
Any Capital Stock which by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable) or upon the happening of any event (i) matures or is mandatorily redeemable for any reason, (ii) is convertible or exchangeable for Indebtedness or Capital Stock that meets the requirements of
clause (i), or (iii) is redeemable at the option of the holder thereof, in whole or in part, in each case on or prior to the Loan Maturity Date.
Distribution
a. Cash dividends or other cash distributions (including Permitted Tax
Distributions, if any) on any now or hereafter outstanding Capital Stock of Borrower;
b. The redemption, repurchase, defeasance or
acquisition of Capital Stock of Borrower or of warrants, rights or other options to purchase such Capital Stock; and
c. Any loans or
advances (other than salaries), to any shareholder(s), partner(s) or member(s) of Borrower.
Environmental Laws
Any and all
Federal, foreign, state, local or municipal laws, rules, orders, regulations, statutes, ordinances, codes, decrees and any and all common law requirements, rules and bases of liability
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regulating, relating to or imposing liability or standards of conduct concerning pollution, protection of the environment, or the impact of pollutants,
contaminants or toxic or Hazardous Substances on human health or the environment, as now or may at any time hereafter be in effect.
ERISA
The Employee Retirement Income Security Act of 1974, as the same may be amended, from time to time.
Event of
Default
Section 8.1.
Executive Order No. 13224
The Executive Order No. 13224 on Terrorist Financing,
effective September 24, 2001, as the same has been, or shall hereafter be, renewed, extended, amended or replaced.
Expenses
Section 9.6.
GAAP
Generally accepted accounting principles as in effect in the United
States, applied in a manner consistent with the most recent audited financial statements of Borrower.
Governmental
Authority
Any federal, state or local government or political subdivision, or any agency, authority, bureau, central bank, commission, department or instrumentality of either, or any court, tribunal, grand jury, or arbitration.
Hazardous Substances
Any substances defined or designated as hazardous or toxic waste, hazardous or toxic material, hazardous or toxic
substance or similar term, under any Environmental Law.
Indebtedness
Of any Person at any date, without duplication,
(i) all indebtedness of such Person for borrowed money (including with respect to Borrower, the Obligations) or for the deferred purchase price of property or services (other than current trade liabilities incurred in the ordinary course of
business and payable in accordance with customary practices), (ii) any other indebtedness of such Person which is evidenced by a note, bond, debenture or similar instrument, (iii) all Capitalized Lease Obligations of such Person,
(iv) the face amount of all letters of credit issued for the account of such Person and all drafts drawn thereunder, (v) all obligations of other Persons which such Person has guaranteed, (vi) Disqualified Stock, (vii) all
Obligations of such Person under Hedging Agreements, and (viii) all liabilities secured by any Lien on any property owned by such Person even though such Person has not assumed or otherwise become liable for the payment thereof.
IRS
Internal Revenue Service.
Lien
Any interest of any kind or nature in property securing an obligation owed to, or a claim of any kind or nature in property by, a Person other than the owner of the Property, whether such interest is based on the common
law, statute, regulation or contract, and including, but not limited to, a security interest or lien arising from a mortgage, encumbrance, pledge, conditional sale or trust receipt, a financing lease, consignment or bailment for security purposes, a
trust, or an assignment. For the purposes of this Agreement, Borrower shall be deemed to be the owner of any Property which it has acquired or holds subject to a conditional sale agreement or other arrangement pursuant to which title to the Property
has been retained by or vested in some other Person for security purposes.
Loan
Section 2.1(a).
Loan Documents
Collectively, this Agreement, the Note, any and all Subordination Agreements and all agreements, instruments and documents
executed and/or delivered in connection therewith, all as may be supplemented, restated, superseded, amended or replaced from time to time. The Loan Documents shall not include the Merger Agreement.
Loan Maturity Date
The earlier of (i) the date of commencement of any bankruptcy, insolvency or similar proceeding with respect to
Borrower, (ii) the date on which the Merger Agreement is terminated pursuant to
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Section 9.1(a), 9.1(b), 9.1(d), 9.1(e) (other than failure of the Merger to timely occur as a result of DARAs failure to fulfill any obligation
under the Merger Agreement), 9.1(f), 9.1(h), 9.1(j), 9.1(k) or 9.1(l) of the Merger Agreement, and (iii) March 31, 2008 or such later date as the parties hereto mutually agree.
Material Adverse Effect
A material adverse effect with respect to (a) the business, assets, properties, financial condition, contingent
liabilities, material agreements (including the Merger Agreement) or results of operations of Borrower taken as a whole, or (b) the validity or enforceability of this Agreement or any of the other Loan Documents or the rights and remedies of
Lender hereunder or thereunder, provided that it is expressly acknowledged hereunder that a Material Adverse Effect shall not include any fact disclosed in the Merger Agreement or the Disclosure Schedules thereto.
Maximum Loan Amount
The sum of Four Hundred Thousand Dollars ($400,000) of principal.
Merger Agreement
Preamble.
Note
Section 2.1(b).
Obligations
All existing and future debts, liabilities and obligations owing by
Borrower to Lender or any other subsidiary or Affiliate of Lender under the Loan Documents.
Overadvance
Section 2.1(a).
PBGC
The Pension Benefit Guaranty Corporation.
Permitted Indebtedness
(a) Indebtedness to Lender in connection with the Loan or otherwise pursuant to the Loan Documents; (b) trade payables incurred in the ordinary course of Borrowers
business; (c) indebtedness existing on the Closing Date that is identified and described on Schedule 1.1(a) attached hereto and made part hereof, and (d) Subordinated Debt.
Permitted Investments
investments and advances existing on the Closing Date that are disclosed on Schedule 5.10(a).
Permitted Liens
(a) Liens securing taxes, assessments or governmental charges or levies or the claims or demands of materialmen,
mechanics, carriers, warehousemen, and other like persons not yet due; (b) Liens incurred or deposits made in the ordinary course of business in connection with workers compensation, unemployment insurance, social security and other like
laws; and (c) Liens existing on the Closing Date and shown on Schedule 1.1(b) attached hereto and made part hereof.
Person
An individual, partnership, corporation, trust, limited liability company, limited liability partnership, unincorporated association or organization, joint venture or any other entity.
Property
Any interest of Borrower in any kind of property or asset, whether real, personal or mixed, or tangible or intangible.
Regulation D
Regulation D of the Board of Governors of the Federal Reserve System comprising Part 204 of Title 12, Code of Federal
Regulations, as amended, and any successor thereto.
Subordinated Debt
Indebtedness of Borrower subject to payment terms and
subordination provisions (including payment and enforcement standstills) acceptable to Lender in its sole discretion, as evidenced by the prior written consent and/or execution of an acceptable Subordination Agreement by Lender.
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Subordination Agreement
Any Subordination Agreement executed by any subordinated creditor of
Borrower with respect to the Subordinated Debt owing to such subordinated creditor from Borrower, in form and substance satisfactory to Lender, which shall be executed by each such subordinated creditor prior to or concurrently with the incurrence
by Borrower of such Subordinated Debt.
Subsidiary
With respect to any Person at any time, (i) any corporation more than
fifty percent (50%) of whose voting stock is legally and beneficially owned by such Person or owned by a corporation more than fifty percent (50%) of whose voting stock is legally and beneficially owned by such Person; (ii) any trust
of which a majority of the beneficial interest is at such time owned directly or indirectly, beneficially or of record, by such Person or one or more Subsidiaries of such Person; and (iii) any partnership, joint venture, limited liability
company or other entity of which ownership interests either having ordinary voting power to elect a majority of the board of directors or other Persons performing similar functions for such entity or having direct control over the operations and/or
management of such entity are at such time owned directly or indirectly, beneficially or of record, by, or which is otherwise controlled directly, indirectly or through one or more intermediaries by, such Person or one or more Subsidiaries of such
Person.
Other Capitalized Terms
Any other capitalized terms used without further definition herein shall have the respective
meaning set forth in the UCC.
1.2.
Accounting Principles
: Where the character or amount of any asset or liability or item of income or expense is required to be determined or any consolidation or other accounting computation is required to be
made for the purposes of this Agreement, this shall be done in accordance with GAAP, consistently applied, to the extent applicable, except as otherwise expressly provided in this Agreement.
1.3.
Construction
: No doctrine of construction of ambiguities in agreements or instruments against the interests of the party controlling the drafting shall apply to any Loan Documents.
SECTION II. THE LOAN
2.1.
LoanDescription
:
a. Subject to the terms and conditions of this Agreement,
Lender hereby establishes for the benefit of Borrower a credit facility (collectively, the Loan) which shall include cash Advances extended by Lender to or for the benefit of Borrower from time to time hereunder. The aggregate principal
amount of unpaid cash Advances shall not at any time exceed the Maximum Loan Amount. Subject to such limitation, the outstanding balance of Advances under the Loan may be increased by future Advances which may be made by Lender, to or for the
benefit of Borrower, and, subject to the provisions of Section 8 below, shall be due and payable on the Loan Maturity Date. If the aggregate principal amount of unpaid cash Advances at any time exceeds the Maximum Loan Amount (such excess
referred to as Overadvance), Borrower, upon notice of such Overadvance from Lender to Borrower, shall repay the Overadvance in full within three (3) Business Days.
b. At Closing, Borrower shall execute and deliver a promissory note to Lender for the Maximum Loan Amount (as it may hereafter from time
to time be amended, modified, restated or replaced, Note). The Note shall evidence Borrowers unconditional obligation to repay Lender for all Advances made under the Loan, with interest as herein provided. Each Advance under the
Loan shall be deemed evidenced by the Note, which is deemed incorporated herein by reference and made part hereof. The Note shall be in form and substance satisfactory to Lender.
c. The term of the Loan shall expire on the Loan Maturity Date. On such date, unless having been sooner accelerated by Lender pursuant to
the terms hereof, all sums owing under the Loan shall be due and payable in full, and as of and after such date Borrower shall not request and Lender shall not make any further Advances under the Loan.
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2.2.
Advances and Payments
:
a. Except to the extent otherwise set forth in this
Agreement, all payments of principal and of interest on the Loan and all Expenses, fees, indemnification obligations and all other charges and any other Obligations of Borrower, shall be made to Lender at its office at 4505 Falls of the Neuse Road,
Raleigh, North Carolina 27609, or such other payment address as Lender may from time to time direct. Any payments received prior to 2:00 p.m. Eastern time on any Business Day shall be deemed received on such Business Day. Any payments (including any
payment in full of the Obligations), received after 2:00 p.m. Eastern time on any Business Day shall be deemed received on the immediately following Business Day.
b. All cash Advances under the Loan must be requested by 11:00 A.M., Eastern time, two Business Days prior to the date such cash Advance
is to be made. All requests for an Advance are to be in writing pursuant to a written request executed by an Authorized Officer in the form of Exhibit B (Advance Request) attached hereto and made part hereof. Such request may
be sent by facsimile transmission provided that Lender shall have the right to require that receipt of such request not be effective unless confirmed via telephone with Lender.
c. Upon receiving a request for an Advance in accordance with subparagraph (b) above, and subject to the conditions set forth in this
Agreement, Lender shall make the requested Advance available to Borrower by wire transfer as soon as is reasonably practicable thereafter on the day the requested Advance is to be made.
2.3.
Interest
: The unpaid principal balance of cash Advances under the Loan shall bear interest, subject to the terms hereof, at the per annum rate equal to five percent (5%) per annum. Interest shall be
payable on the Loan Maturity Date.
2.4.
Additional Interest Provisions
:
a. Interest on the Loan shall be calculated on the
basis of a year of three hundred sixty (360) days but charged for the actual number of days elapsed.
b. After the
occurrence and during the continuance of an Event of Default hereunder, the per annum effective rate of interest on all outstanding principal under the Loan, shall be increased by two hundred (200) basis points. All such increases may be
applied retroactively to the date of the occurrence of the Event of Default. Borrower agrees that the default rate payable to Lender is a reasonable estimate of Lenders damages and is not a penalty.
c. Borrower shall not request and Lender shall not make, any Loan while an Event of Default exists.
d. All contractual rates of interest chargeable on outstanding principal under the Loan shall continue to accrue and be paid even after an
Event of Default, maturity, acceleration, judgment, bankruptcy, insolvency proceedings of any kind or the happening of any event or occurrence similar or dissimilar.
e. In no contingency or event whatsoever shall the aggregate of all amounts deemed interest hereunder and charged or collected pursuant to
the terms of this Agreement exceed the highest rate permissible under any law which a court of competent jurisdiction shall, in a final determination, deem applicable hereto. In the event that such court determines Lender has charged or received
interest hereunder in excess of the highest applicable rate, Lender shall apply, in its sole discretion, and set off such excess interest received by Lender against other Obligations due or to become due and such rate shall automatically be reduced
to the maximum rate permitted by such law.
2.5.
Prepayments
: Borrower may prepay the Loan without premium or penalty in whole or in part at any time or from time to time. Any partial payment shall first be applied to accrued and unpaid interest on the
Loan being prepaid and then to the principal balance of the Loan.
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2.6.
Use of Proceeds
: The extensions of credit under and proceeds of the Loan shall be used for professional and other fees and expenses and other transaction costs incurred by Borrower in connection with the
negotiation, documentation, execution and consummation of the transactions contemplated in the Merger Agreement, and the Advance Request shall state the specific uses for such Advance.
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Forgiveness
: The Loan and any accrued and unpaid interest thereon shall be forgiven and Borrower shall be released from all Obligations hereunder in the following events:
a. The consummation of the transactions contemplated in the Merger Agreement;
b. A Terminating DARA Breach (as such term is defined in the Merger Agreement) shall occur giving rise to a right of Borrower to terminate
the Merger Agreement and Borrower so terminates the Merger Agreement.
c. The Merger Agreement is terminated pursuant to
Sections 9.1(g) or 9.1(m); or
d. The Merger Agreement is terminated by Lender by reason of the occurrence of any event or
circumstances arising directly out of any fact that has been expressly disclosed in Borrowers disclosure schedule delivered to Lender pursuant to the Merger Agreement.
SECTION III. COLLATERAL
3.1.
Collateral
: As security for the payment of the Obligations, and satisfaction by Borrower of all covenants and undertakings contained in this Agreement and the other Loan Documents:
a.
Personal Property
: Borrower hereby assigns and grants to Lender, a continuing Lien on and security interest in, upon and to all
assets of Borrower and all subsidiaries of Borrower, including but not limited to the following Property, all whether now owned or hereafter acquired, created or arising and wherever located:
i.
Accounts
All Accounts;
ii.
Chattel Paper
All Chattel Paper;
iii.
Documents
All Documents;
iv.
Instruments
All Instruments;
v.
Inventory
All Inventory;
vi.
General Intangibles
All General Intangibles;
vii.
Equipment
All
Equipment,
viii.
Fixtures
All Fixtures;
ix.
Deposit Accounts
All Deposit Accounts;
x.
Goods
All Goods;
xi.
Letter of Credit Rights
All Letter of Credit Rights;
xii.
Supporting
Obligations
All Supporting Obligations;
xiii.
Investment Property
All Investment Property;
xiv.
Commercial Tort Claims
All Commercial Tort Claims identified and described on Schedule 5.7 (as amended or supplemented
from time to time);
xv.
Property in Lenders Possession
All Property of Borrower, now or hereafter in
Lenders possession; and
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xvi.
Proceeds
The Proceeds (including, without limitation, insurance
proceeds), whether cash or non-cash, of all of the foregoing property described in clauses (i) through (viii).
3.2.
Lien Documents
: At Closing and thereafter as Lender reasonably deems necessary, Borrower shall execute and/or deliver to Lender, or have executed and delivered (all in form and substance reasonably
satisfactory to Lender and its counsel):
a. Financing statements pursuant to the UCC, which Lender may file in the
jurisdiction where Borrower is organized and in any other jurisdiction that Lender deems appropriate; and
b. Any other
agreements, documents, instruments and writings, including, without limitation, intellectual property security agreements, required by Lender to evidence, perfect or protect the Liens and security interests in the Collateral or as Lender may
reasonably request from time to time.
3.3.
Other Actions
:
a. In addition to the foregoing, Borrower shall do anything
further that may be reasonably required by Lender to secure Lender and effectuate the intentions and objects of this Agreement, including, without limitation, the execution and delivery of security agreements, contracts and any other documents
required hereunder. At Lenders reasonable request, Borrower shall also immediately deliver (with execution by Borrower of all necessary documents or forms to reflect, implement or enforce the Liens described herein), or cause to be delivered
to Lender all items for which Lender must receive possession to obtain a perfected security interest, including without limitation, all Deposit Accounts and all notes, stock powers, letters of credit, certificates and documents of title, Chattel
Paper, Warehouse Receipts, Instruments, and any other similar instruments constituting Collateral.
b. Lender is hereby
authorized to file financing statements and amendments to financing statements without Borrowers signature, in accordance with the UCC. Borrower hereby authorizes Lender to file all such financing statements and amendments to financing
statements describing the Collateral in any filing office as Lender, in its sole discretion may determine, including financing statements listing All Assets in the collateral description therein. Borrower agrees to comply with the
requests of Lender in order for Lender to have and maintain a valid and perfected security interest in the Collateral.
3.4.
Searches, Certificates
:
a. Lender may, as Lender reasonably determines from time
to time, at Lenders expense, obtain the following searches (the results of which are to be consistent with the warranties made by Borrower in this Agreement):
i. UCC searches with the Secretary of State and local filing office of each state where Borrower is organized, maintains its executive
office, a place of business, or assets; and
ii. Judgment, state and federal tax lien and corporate tax lien searches, in
all applicable filing offices of each state searched under subparagraph (i) above.
3.5.
Filing Security Agreement
: A carbon, photographic or other reproduction or other copy of this Agreement or of a financing statement is sufficient as and may be filed in lieu of a financing statement.
3.6.
Power of Attorney
: Each of the officers of Lender is hereby irrevocably made, constituted and appointed the true and lawful attorney for Borrower (without requiring any of them to act as such) with full
power of substitution to do the following: (a) during the continuance of an Event of Default, endorse the name of Borrower upon any and all checks, drafts, money orders and other instruments for the payment of monies that are payable to
Borrower and constitute collections on Borrowers Accounts or proceeds of other Collateral; (b) execute and/or file in the name of Borrower any financing statements, schedules, assignments, instruments, documents and statements that
Borrower is obligated to give Lender hereunder or is necessary to perfect (or continue or evidence
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the perfection of such security interest or Lien) Lenders security interest or Lien in the Collateral; and (c) during the continuance of an Event
of Default, do such other and further acts and deeds in the name of Borrower that Lender may reasonably deem necessary or desirable to enforce any Account or other Collateral.
SECTION IV. CLOSING AND CONDITIONS PRECEDENT TO ADVANCES
Closing under this Agreement is subject to the
following conditions precedent (all instruments, documents and agreements to be in form and substance reasonably satisfactory to Lender and Lenders counsel):
4.1.
Resolutions, Opinions, and Other Documents
: Borrower shall have delivered, or caused to be delivered to Lender the following:
a. this Agreement, the Note and each of the other Loan Documents, all properly executed;
b. each of the other documents to be executed and/or delivered by Borrower or any other Person pursuant to this Agreement;
c. certified copies of (a) (i) resolutions of Borrower authorizing the execution, delivery and performance of this Agreement,
the Note to be issued hereunder and each of the other Loan Documents required to be delivered by any Section hereof and (ii) Borrowers certificate of incorporation and bylaws;
d. an incumbency certificate for Borrower identifying all Authorized Officers, with
specimen signatures;
e. good standing certificates concerning Borrower from the state of Delaware and each other state in
which Borrower conducts business; and
f. such other documents reasonably required by Lender.
4.2.
Absence of Certain Events
: At the Closing Date, no Default or Event of Default hereunder shall have occurred and be continuing.
4.3.
Warranties and Representations at Closing
: The warranties and representations contained in Section 5 as well as any other Section of this Agreement shall be true and correct in all material respects on
the Closing Date with the same effect as though made on and as of that date.
4.4.
Compliance with this Agreement
: Borrower shall have performed and complied in all material respects with all agreements, covenants and conditions contained herein including, without limitation, the
provisions of Sections 6 and 7 hereof, which are required to be performed or complied with by Borrower before or at the Closing Date.
4.5.
Closing
: Subject to the conditions of this Section, the Note shall be entered into on such date (the Closing Date) and at such time as may be mutually agreeable to the parties
(Closing) at the offices of Wyrick Robbins Yates & Ponton LLP, 4101 Lake Boone Trail, Suite 300, Raleigh, North Carolina.
4.6.
Waiver of Rights
: By completing the Closing hereunder, or by making Advances hereunder, Lender does not thereby waive a breach of any warranty or representation made by Borrower hereunder or under any
agreement, document, or instrument delivered to Lender or otherwise referred to herein, and any claims and rights of Lender resulting from any breach or misrepresentation by Borrower are specifically reserved by Lender.
4.7.
Conditions for Future Advances
: The making of Advances under the Loan in any form following the Closing Date is subject to the following conditions precedent (all instruments, documents and agreements to be
in form and substance reasonably satisfactory to Lender and its counsel) following the Closing Date:
a. This Agreement and
each of the other Loan Documents shall be effective;
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b. No Material Adverse Effect shall have occurred and be continuing immediately prior to,
or would exist immediately after, the making of the Advance;
c. The Merger Agreement has not been terminated;
d. No Event of Default then exists or would exist immediately after giving effect to the making of the Advance;
e. Each Advance is within and complies with the terms and conditions of this Agreement including, without limitation, the notice
provisions contained in Section 2.2 hereof; and
f. Each representation and warranty made by Borrower set forth in
Section 5 (other than Section 5.5) and/or in any other Loan Document in effect at such time (as amended or modified from time to time) is then true and correct in all material respects as if made on and as of such date except to the extent
such representations and warranties are made only as of a specific earlier date.
SECTION V. REPRESENTATIONS AND WARRANTIES
To induce Lender to complete the Closing and make the initial
Advances under the Loan and additional Advances under the Loan to Borrower, Borrower warrants and represents to Lender that except as disclosed in the Merger Agreement or the Disclosure Schedules thereto:
5.1.
Validity
:
a. The making and performance of this Agreement and the other Loan
Documents will not violate any law, government rule or regulation, court or administrative order or other such order, or the charter or bylaw provisions of Borrower, or of Borrowers operating agreement or partnership agreement, as applicable,
or breach or result in a default (immediately or with the passage of time) under any contract, agreement or instrument to which Borrower is a party, or by which Borrower is bound. Borrower is not in violation of any term of any agreement or
instrument to which it is a party or by which it may be bound which violation has or could reasonably be expected to have a Material Adverse Effect, or of its charter or bylaw provisions, or of Borrowers operating agreement or partnership
agreement, as applicable.
b. Borrower has all requisite power and authority to enter into and perform this Agreement and to
incur the obligations herein provided for, and has taken all proper and necessary action to authorize the execution, delivery and performance of this Agreement, and the other Loan Documents as applicable.
c. This Agreement, the Note to be issued hereunder, and all of the other Loan Documents, when delivered, will be valid and binding upon
Borrower, and enforceable in accordance with their respective terms except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium and similar laws affecting the enforcement of creditors rights
generally and by general equitable principles.
5.2.
Places of Business
: The only places of business of Borrower, and the places where Borrower keeps and intends to keep its Property, are at the addresses existing as of the date hereof shown on Schedule 5.2
attached hereto and made part hereof and any new business locations established after the Closing Date of which Borrower has given notice to Lender in accordance with Section 6.13.
5.3.
Government Regulations
: The use of the proceeds of and Borrowers issuance of the Note will not directly or indirectly violate or result in a violation of Section 7 of the Securities Exchange Act
of 1934, as amended, or any regulations issued pursuant thereto, including, without limitation, Regulations U, T and X of the Board of Governors of the Federal Reserve System, 12 C.F.R., Chapter II. Borrower does not own or intend to carry
or purchase any margin stock within the meaning of said Regulation U.
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5.4.
Names
: Within five (5) years prior to the Closing Date, Borrower has not conducted business under or used any other name (whether corporate or assumed) except for the names shown on Schedule 5.4
attached hereto and made part hereof. Borrower is the sole owner of all names listed on such Schedule 5.4 and any and all business done and all invoices issued in such trade names are Borrowers sales, business and invoices. Each trade name of
Borrower represents a division or trading style of Borrower and not a separate Subsidiary or Affiliate or independent entity.
5.5.
Solvency
: As of the date of this Agreement, after giving effect to the transactions contemplated under this Agreement, Borrower is solvent, is able to pay its debts as they become due, and has capital
sufficient to carry on its business as currently conducted. Borrower will not be rendered insolvent by the execution and delivery of this Agreement or any of the other Loan Documents executed in connection with this Agreement.
5.6
Perfection and Priority
: This Agreement and the other Loan Documents are effective to create in favor of Lender legal, valid and enforceable Liens in all right, title and interest of Borrower in the
Collateral, and when (i) financing statements have been filed in the offices of the jurisdictions shown on Schedule 5.6, attached hereto and made part hereof under Borrowers name, (ii) a control agreement has been executed among
Borrower, Lender and any financial institution in which a Deposit Account of Borrower is held, and (iii) Borrower has delivered to Lender any certificates representing its ownership rights in Borrowers subsidiaries, Borrower will have
granted to Lender, and Lender will have perfected Liens in the Collateral, superior in right to any and all other Liens (other than Permitted Liens), existing or future.
5.7.
Commercial Tort Claims
: As of the Closing Date, Borrower is not, to the knowledge of Borrower, a party to any Commercial Tort Claims, except as shown on Schedule 5.7 attached hereto and made part hereof.
5.8.
Deposit Accounts
: All Deposit Accounts of Borrower are shown on Schedule 5.8, attached hereto and made part hereof.
5.9.
Anti-Terrorism Laws
:
a.
General
. Neither Borrower nor any Affiliate of
Borrower is in violation of any Anti-Terrorism Law or engages in or conspires to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in any
Anti-Terrorism Law.
b.
Executive Order No. 13224
. Neither Borrower nor any Affiliate of Borrower, or to
Borrowers knowledge, any of its respective agents acting or benefiting in any capacity in connection with the Loan, Letters of Credit or other transactions hereunder, is any of the following (each a Blocked Person):
i. a Person that is listed in the annex to, or is otherwise subject to the provisions of, the Executive Order No. 13224;
ii. a Person owned or controlled by, or acting for or on behalf of, any Person that is listed in the annex to, or is otherwise subject
to the provisions of, the Executive Order No. 13224;
iii. a Person with which Lender is prohibited from dealing or
otherwise engaging in any transaction by any Anti-Terrorism Law;
iv. a Person that commits, threatens or conspires to
commit or supports terrorism as defined in the Executive Order No. 13224;
v. a Person that is named as a
specially designated national on the most current list published by the U.S. Treasury Department Office of Foreign Asset Control at its official website or any replacement website or other replacement official publication of such list;
or
vi. a Person who is affiliated with a Person listed above.
5.10.
Letter of Credit Rights
: As of the Closing Date, Borrower has no Letter of Credit Rights, except as shown on Schedule 5.10, attached hereto and made part hereof.
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SECTION VI. BORROWERS AFFIRMATIVE COVENANTS
Borrower covenants that until all of the Obligations
are paid and satisfied in full and the Loan has been terminated, that:
6.1
Payment of Taxes and Claims
: Borrower shall pay, before they become delinquent, all taxes, assessments and governmental charges, or levies imposed upon it, or upon Borrowers Property, and all claims or
demands of materialmen, mechanics, carriers, warehousemen, landlords and other Persons, entitled to the benefit of statutory or common law Liens which, in any case, if unpaid, would result in the imposition of a Lien upon its Property; provided
however, that Borrower shall not be required to pay any such tax, assessment, charge, levy, claim or demand if the amount, applicability or validity thereof, shall at the time, be contested in good faith and by appropriate proceedings by Borrower,
and if Borrower shall have set aside on its books adequate reserves in respect thereof, if so required in accordance with GAAP; which deferment of payment is permissible so long as no Lien other than a Permitted Lien has been entered and
Borrowers title to, and its right to use, its Property are not materially adversely affected thereby.
6.2
Maintenance of Properties and Corporate Existence
:
a.
Property
Borrower shall pay all rentals when due for all real estate leased by Borrower.
b.
Financial
Records
Borrower shall keep current and accurate books of records and accounts in which full and correct entries will be made of all of its business transactions, and will reflect in its financial statements adequate accruals and
appropriations to reserves, all in accordance with GAAP (provided that all such financial statements may, prior to the end of each fiscal year of Borrower, be subject to normal year end adjustments and may omit footnotes). Borrower shall not change
its fiscal year end date without the prior written consent of Lender.
c.
Existence and Rights
Borrower shall do
(or cause to be done) all things necessary to preserve and keep in full force and effect its existence, good standing, rights and franchises.
d.
Compliance with Laws
Borrower (x) shall be in compliance with any and all laws, ordinances, governmental rules and regulations, and court or administrative orders or decrees to which it is subject,
whether federal, state or local, (including, without limitation, Environmental Laws and government procurement regulations) and (y) shall obtain any and all licenses, permits, franchises or other governmental authorizations necessary to the
ownership of its Property or to the conduct of its businesses, in either case (x) or (y) except to the extent that any such noncompliance, violation or failure to obtain would not cause or could not reasonably be expected to cause a
Material Adverse Effect. Borrower shall timely satisfy all assessments, fines, costs and penalties imposed (after exhaustion of all appeals, provided a stay has been put in effect during such appeal) by any Governmental Authority against Borrower or
any Property of Borrower.
e.
Property Insurance, Public and Products Liability Insurance
Borrower shall
maintain hazard, workmens compensation, public liability and product liability insurance, in each case in such amounts, with such deductibles and with such insurers as are customarily used by companies operating in the same industry as
Borrower. In the event Borrower fails to procure or cause to be procured any such insurance or to timely pay or cause to be paid the premium(s) on any such insurance, Lender may do so for Borrower, but Borrower shall continue to be liable for the
same. The policies of all such casualty insurance shall contain standard lender loss payable clause (and, with respect to liability and interruption insurance, additional insured clauses) issued in favor of Lender under which all losses thereunder
shall be paid to Lender as Lenders interest may appear. Such policies shall expressly provide that the requisite insurance cannot be altered or canceled without thirty (30) days prior written notice to Lender and shall insure Lender
notwithstanding the act or neglect of Borrower. Borrower hereby appoints Lender as Borrowers attorney-in-fact, exercisable at Lenders option after and during the continuance of an Event of Default, to endorse any check which may be
payable to Borrower in order to collect the proceeds of such insurance after and during the continuance of an Event of Default and any amount or amounts collected by Lender
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pursuant to the provisions of this Section may be applied by Lender, in its sole discretion, to any Obligations or to repair, reconstruct or replace the loss
of or damage to Collateral as Lender in its discretion may from time to time determine. Borrower further covenants that all insurance premiums owing under its current policies have been paid. Borrower shall notify Lender, immediately, upon
Borrowers receipt of a notice of termination, cancellation, or non-renewal from its insurance company of any such policy.
6.3
Business Conducted
: Borrower shall not engage, directly or indirectly, in any material respect in any line of business substantially different from the business conducted by Borrower immediately prior to the
Closing Date.
6.4
Litigation
: Borrower shall give prompt notice to Lender of any litigation claiming in excess of Ten Thousand Dollars ($10,000) from Borrower.
6.5
Issue Taxes
: Borrower shall pay all taxes (other than taxes based upon or measured by any Lenders income or revenues or any personal property tax), if any, in connection with the issuance of the Note.
The obligations of Borrower hereunder shall survive the payment of Borrowers Obligations hereunder and the termination of this Agreement.
6.6
Financial and Business Information
: Borrower shall deliver or cause to be delivered to Lender the following:
a.
Financial Statements and Collateral Reports
: such data, reports, statements and information, financial or otherwise, as Lender may reasonably request.
b.
Notice of Event of Default
promptly upon becoming aware of the existence of any condition or event which constitutes a
Default or an Event of Default under this Agreement, a written notice specifying the nature and period of existence thereof and what action Borrower is taking (and proposes to take) with respect thereto; and
c.
Notice of Claimed Default
promptly upon receipt by Borrower, notice of default, oral or written, given to Borrower by any
creditor for Indebtedness for borrowed money.
6.7
Audits and Inspection
: Borrower shall permit any of Lenders officers or other representatives to visit and inspect upon reasonable notice during business hours any of the locations of Borrower, to
examine all of Borrowers books of account, records, reports and other papers, to make copies and extracts therefrom and to discuss its affairs, finances and accounts with its officers, employees and independent certified public accountants all
at Lenders expense.
6.8
Information to Participant
: Subject to Section 9.22 hereof, Lender may divulge to any director, officer or advisor of Lender, all information contained in, and furnish to such Person copies, of any
reports, financial statements, certificates, and documents obtained under any provision of this Agreement, or related agreements and documents, provided, however, that any such director, officer or advisor of Lender agrees to keep all non-public
information obtained under any provision of this Agreement confidential.
6.9
Material Adverse Developments
: Borrower agrees that promptly upon becoming aware of any development or other information outside the ordinary course of business which would reasonably be expected to have a
Material Adverse Effect (including, without limitation, the institution or threatening of any litigation against Borrower or any investigations (civil or criminal) or Federal or state regulatory agency proceedings against Borrower, which in any such
case, would reasonably be expected to have such a Material Adverse Effect), but excluding matters of a general economic, financial or political nature, it shall give to Lender prompt notice specifying the nature of such development or information
and such anticipated effect. In addition, any verbal communication shall be confirmed by written notice thereof to Lender on the same day such verbal communication is made or the next Business Day thereafter.
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6.10
Places of Business
: Borrower shall give thirty (30) days prior written notice to Lender of (x) any changes in the location of any of its respective places of business, or the establishment of
any new, or the discontinuance of any existing place of business and (y) the entry by Borrower into any new leases for real or personal Property and such written notice shall include an updated version of Schedule 5.2, as applicable;
provided that
Borrower may not establish any place of business outside of the United States.
6.11
Commercial Tort Claims
: Borrower will promptly notify Lender in writing in the event that Borrower becomes a party to or obtains any rights with respect to any Commercial Tort Claim. Such notification shall
include information sufficient to describe such Commercial Tort Claim, including, but not limited to, the parties to the claim, the court in which the claim was commenced, the docket number assigned to such claim, if any, and a detailed explanation
of the events that gave rise to the claim. Borrower shall execute and deliver to Lender all documents and/or agreements reasonably necessary to grant Lender a security interest in such Commercial Tort Claim to secure the Obligations. Borrower
authorizes Lender to file (without Borrowers signature) initial financing statements or amendments, as Lender deems necessary to perfect its security interest in the Commercial Tort Claim.
6.12
Letter of Credit Rights
: Borrower shall provide Lender with written notice of any letters of credit for which Borrower is the beneficiary. Borrower shall execute and deliver (or cause to be executed or
delivered) to Lender, all documents and agreements as Lender may require in order to obtain and perfect its security interest in such Letter of Credit Rights.
SECTION VII. BORROWERS NEGATIVE COVENANTS:
Borrower covenants that, except as contemplated in the
Merger Agreement, until all of the Obligations are paid and satisfied in full and the Loan has been terminated, that:
7.1.
Merger, Consolidation, Dissolution or Liquidation
:
a. Borrower shall not engage
in any Asset Sale other than equipment that is replaced by other equipment of comparable or superior quality and value within ninety (90) days of such Asset Sale.
b. Except for the Merger, Borrower shall not merge or consolidate with any other Person or engage in a division, conversion, dissolution
or liquidation.
7.2.
Acquisitions
: Borrower shall not acquire all or a material portion of the Capital Stock or assets of any Person in any transaction or in any series of related transactions or enter into any sale and
leaseback transaction without Lenders prior written consent, which will not be unreasonably withheld.
7.3.
Liens and Encumbrances
: Borrower shall not: (i) execute a negative pledge agreement with any Person covering any of its Property, or (ii) cause or permit, or agree or consent to cause or permit in
the future (upon the happening of a contingency or otherwise), its Property, whether now owned or hereafter acquired, to be subject to a Lien or be subject to any claim, except for Permitted Liens.
7.4.
Transactions With Affiliates or Subsidiaries
: Except as set forth on Schedule 7.4(a) hereto and made a part hereof, Borrower shall not enter into any transaction with any Subsidiary or other Affiliate,
including, without limitation, the purchase, sale, or exchange of Property, or the loaning or giving of funds to any Affiliate or any Subsidiary unless: (i) such Subsidiary or Affiliate is engaged in a business substantially related to the business
conducted by Borrower, is a Borrower hereunder and the transaction is in the ordinary course of and pursuant to the reasonable requirements of Borrowers business and upon terms substantially the same and no less favorable to Borrower as it
would obtain in a comparable arms length transaction with any Person not an Affiliate or a Subsidiary, and so long as such transaction is not prohibited hereunder; or (ii) such transaction is intended for incidental administrative purposes.
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7.5.
Guarantees
: Excepting the endorsement in the ordinary course of business of negotiable instruments for deposit or collection, Borrower shall not become or be liable, directly or indirectly, primary or
secondary, matured or contingent, in any manner, whether as guarantor, surety, accommodation maker, or otherwise, for the existing or future Indebtedness of any kind of any Person.
7.6.
Distributions, Bonuses and Other Indebtedness
: Borrower shall not: (a) upon the occurrence and continuation of an Event of Default beyond any applicable grace or cure period, declare or pay or make any
forms of Distribution to holders of Borrowers Capital Stock; (b) declare or pay any bonus compensation to its officers if an Event of Default exists or would result from the payment thereof; (c) hereafter incur or become liable for
any Indebtedness other than Permitted Indebtedness; (d) make any prepayments on any existing or future Indebtedness (other than the Obligations); or (e) make any payments on any Subordinated Debt that may from time to time exist in
violation of the subordination provisions thereof and/or the Subordination Agreement relating thereto.
7.7.
Loans and Investments
: Borrower shall not make or have outstanding loans, advances, extensions of credit or capital contributions to, or investments in, any Person other than Permitted Investments.
7.8.
Use of Lenders Name
: Borrower shall not use Lenders name in connection with any of its business operations. Nothing herein contained is intended to permit or authorize Borrower to make any
contract on behalf of Lender.
7.9.
Miscellaneous Covenants
:
a. Borrower shall not become or be a party to any
contract or agreement which at the time of becoming a party to such contract or agreement materially impairs Borrowers ability to perform under this Agreement, or under any other material instrument, agreement or document to which Borrower is
a party or by which it is or may be bound.
b. Borrower shall not carry or purchase any margin stock within the
meaning of Regulations U, T or X of the Board of Governors of the Federal Reserve System, 12 C.F.R., Chapter II.
7.10.
Jurisdiction of Organization
: If a Registered Organization (as defined in Article 9 of the Uniform Commercial Code), Borrower shall not change its jurisdiction of organization, without giving thirty
(30) days prior written notice to Lender.
7.11.
Management Fees
: Without Lenders prior written consent, make any payment of any management fee or other payment under any management agreement other than pursuant to and in compliance with outstanding
consulting agreements with certain of Borrowers former senior management team.
SECTION VIII. DEFAULT
8.1.
Events of Default
: Each of the following events shall constitute an event of default (Event of Default):
a.
Payments
if Borrower fails to make any payment of principal or interest under the Obligations within five (5) Business
Days after the date such payment is due and payable; or
b.
Particular Covenant Defaults
if Borrower fails to
perform, comply with or observe any covenant or undertaking contained in this Agreement and (other than with respect to the covenants contained in Section 7, for which no cure period shall exist), such failure continues for thirty
(30) days after the occurrence thereof; or
c.
Financial Information
if any statement, report, financial
statement, or certificate made or delivered by any of Borrower or any of its directors, officers, employees or agents, to Lender is not true and correct, in all material respects, when made; or
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d.
Warranties or Representations
if any warranty, representation or other
statement by or on behalf of Borrower contained in or pursuant to this Agreement, the other Loan Documents or in any document, agreement or instrument furnished in compliance with, relating to, or in reference to this Agreement, is false, erroneous,
or misleading in any material respect when made; or
e.
Assignment for Benefit of Creditors, etc
.if Borrower
makes or proposes in writing, an assignment for the benefit of creditors generally, offers a composition or extension to creditors, or makes or sends notice of an intended bulk sale of any business or assets now or hereafter owned or conducted by
Borrower; or
f.
Bankruptcy, Dissolution, etc
.the commencement of any action for the dissolution or liquidation
of Borrower, or the commencement of any proceeding to avoid any transaction entered into by Borrower, or the commencement of any case or proceeding for reorganization or liquidation of Borrowers debts under the Bankruptcy Code of the United
States (11 U.S.C. § 100 et seq.) or any other state or federal law, now or hereafter enacted for the relief of debtors, whether instituted by or against Borrower;
provided
however
, that Borrower shall have sixty (60) days to
obtain the dismissal or discharge of involuntary proceedings filed against it under the Bankruptcy Code of the United States or any other action or proceeding described in this paragraph, it being understood that during such sixty (60) day
period, Lender shall not be obligated to make Advances hereunder and Lender may seek adequate protection in any bankruptcy proceeding; or
g.
Receiver
upon the appointment of a receiver, liquidator, custodian, trustee or similar official or fiduciary for Borrower or for Borrowers Property; or
h.
Execution Process, etc
.the issuance of any execution or distraint process against any Property of Borrower; or
i.
Pension Benefits, etc
.if Borrower fails to comply with ERISA so that proceedings are commenced to appoint a trustee
under ERISA to administer Borrowers Pension Plans or the PBGC institutes proceedings to appoint a trustee to administer such plan(s), or a Lien is entered to secure any deficiency or claim or a reportable event as defined under
ERISA occurs; or
j.
Other Loan Documents
if any other Person (other than Lender) party to a Loan Document
breaches or violates any term, provision or condition of such Loan Document; or
k.
Uninsured Loss
if there
shall occur any uninsured damage to or loss, theft, or destruction in excess of Ten Thousand Dollars ($10,000) in the aggregate with respect to any portion of any property of borrower; or
l.
Judgments
if any final judgment for the payment of money in excess of Ten Thousand Dollars ($10,000) in the aggregate
(i) which is not fully and unconditionally covered by insurance subject to customary deductibles or (ii) for which Borrower has not established a cash or cash equivalent reserve in the full amount of such judgment, shall be rendered by a
court of record against Borrower and such judgment shall continue unsatisfied and in effect for a period of sixty (60) consecutive days and without being vacated, discharged, satisfied or bonded pending appeal; or
m.
Agreements with Others
(i) if Borrower shall default beyond any grace period in the payment of principal or interest
of any Indebtedness of Borrower in excess of Ten Thousand Dollars ($10,000) in the aggregate; or (ii) if Borrower otherwise defaults under the terms of any such Indebtedness if the effect of such default is to enable the holder of such
Indebtedness to accelerate the payment of Borrowers obligations, which are the subject thereof, prior to the maturity date or prior to the regularly scheduled date of payment; or
n.
Material Adverse Effect
if there is any event that constitutes a Material Adverse Effect.
8.2.
Cure
: Nothing contained in this Agreement or the Loan Documents shall be deemed to compel Lender to accept a cure of any Event of Default hereunder (provided, that the foregoing shall not be interpreted or
construed in any way and/or under any circumstances to limit or contradict the express provisions hereof which provide for any cure period that must expire before any particular Event of Default shall occur).
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8.3.
Rights and Remedies on Default
:
a. In addition to all other rights, options and
remedies granted or available to Lender under this Agreement or the Loan Documents (each of which is also then exercisable by Lender), or otherwise available at law or in equity, upon or at any time after the occurrence and during the continuance of
a Default or an Event of Default, Lender may, in its discretion, withhold or cease making Advances under the Loan.
b. In
addition to all other rights, options and remedies granted or available to Lender under this Agreement or the Loan Documents (each of which is also then exercisable by Lender), or otherwise available at law or in equity, upon or at any time after
the occurrence and during the continuance of an Event of Default Lender may, in its discretion, terminate the Loan and declare the Obligations immediately due and payable, all without demand, notice, presentment or protest or further action of any
kind (it also being understood that the occurrence of any of the events or conditions set forth in Sections 8.1(e),(f) or (g) shall automatically cause an acceleration of the Obligations).
c. In addition to all other rights, options and remedies granted or available to Lender under this Agreement or the Loan Documents (each
of which is also then exercisable by Lender), or otherwise available at law or in equity, upon or at any time after the acceleration of the Obligations following the occurrence of an Event of Default (other than the rights with respect to clause
(i) below which Lender may exercise at any time after an Event of Default and regardless of whether there is an acceleration), Lender may, in its discretion, exercise all rights under any applicable law or in equity, and under all Loan
Documents permitted to be exercised after the occurrence of an Event of Default, including the following rights and remedies (which list is given by way of example and is not intended to be an exhaustive list of all such rights and remedies):
1. The right to modify the terms and conditions upon which Lender may be willing to consider making Advances under the Loan
or to take reserves against the Loan; or
2. The right to take possession of, send notices regarding and collect directly
the Collateral, with or without judicial process (including without limitation the right to notify the United States postal authorities to redirect mail addressed to Borrower to an address designated by Lender); or
3. By its own means or with judicial assistance, enter Borrowers premises and take possession of the Collateral, or render it
unusable, or dispose of the Collateral on such premises in compliance with subsection (e) below, without any liability for rent, storage, utilities or other sums, and Borrower shall not resist or interfere with such action.
b. Borrower hereby agrees that a notice received by it at least ten (10) days before the time of any intended public sale or of the
time after which any private sale or other disposition of the Collateral is to be made, shall be deemed to be reasonable notice of such sale or other disposition. If permitted by applicable law, any perishable inventory or Collateral which threatens
to speedily decline in value or which is sold on a recognized market may be sold immediately by Lender without prior notice to Borrower. Borrower covenants and agrees not to interfere with or impose any obstacle to Lenders exercise of its
rights and remedies with respect to the Collateral, after the occurrence of an Event of Default hereunder. Lender shall have no obligation to clean up or prepare the Collateral for sale. If Lender sells any of the Collateral upon credit, Borrower
will only be credited with payments actually made by the purchaser thereof, that are received by Lender. Lender may, in connection with any sale of the Collateral specifically disclaim any warranties of title or the like.
8.4.
Nature of Remedies
: All rights and remedies granted Lender hereunder and under the Loan Documents, or otherwise available at law or in equity, shall be deemed concurrent and cumulative, and not alternative
remedies, and Lender may proceed with any number of remedies at the same time until all Obligations are satisfied in full. The exercise of any one right or remedy shall not be deemed a waiver or release of any other right or remedy, and Lender, upon
or at any time after the occurrence of an Event of Default, may proceed against Borrower, at any time, under any agreement, with any available remedy and in any order.
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SECTION XI. MISCELLANEOUS
9.1.
Governing Law
: THIS AGREEMENT, AND ALL RELATED AGREEMENTS AND DOCUMENTS, AND ALL MATTERS RELATED HERETO OR ARISING HEREUNDER (WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE), SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE STATE OF DELAWARE. THE PROVISIONS OF THIS AGREEMENT AND ALL OTHER AGREEMENTS AND DOCUMENTS REFERRED TO HEREIN ARE TO BE DEEMED SEVERABLE, AND THE INVALIDITY OR UNENFORCEABILITY OF ANY
PROVISION SHALL NOT AFFECT OR IMPAIR THE REMAINING PROVISIONS WHICH SHALL CONTINUE IN FULL FORCE AND EFFECT.
9.2.
Integrated Agreement
: The Note, the other Loan Documents, all related agreements, and this Agreement shall be construed as integrated and complementary of each other, and as augmenting and not restricting
Lenders rights and remedies. If, after applying the foregoing, an inconsistency still exists, the provisions of this Agreement shall constitute an amendment thereto and shall control.
9.3.
Waiver
: No omission or delay by Lender in exercising any right or power under this Agreement or any related agreements and documents will impair such right or power or be construed to be a waiver of any
Default, or Event of Default or an acquiescence therein, and any single or partial exercise of any such right or power will not preclude other or further exercise thereof or the exercise of any other right, and as to Borrower no waiver will be valid
unless in writing and signed by Lender and then only to the extent specified.
9.4.
Indemnity
:
a. In the event Borrower or Lender terminates the Merger Agreement
such that the Loan is not forgiven pursuant to Section 2.7 hereof, Borrower releases and shall indemnify, defend and hold harmless Lender and its respective officers, employees and agents, of and from any claims, demands, liabilities,
obligations, judgments, injuries, losses, damages and costs and expenses (including, without limitation, reasonable legal fees) resulting from any claim by any other creditor of Borrower against Lender arising out of any transaction whether
hereunder or in any way related to the Loan Documents and all costs, expenses, fines, penalties or other damages resulting therefrom, unless resulting solely from acts or conduct of Lender constituting willful misconduct or gross negligence. Such
indemnification shall not exceed the maximum amount of all Advances made under the Loan.
b. Promptly after receipt by an
indemnified party under subsection (a) above of notice of the commencement of any action by a third party, such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party under such subsection, notify
the indemnifying party in writing of the commencement thereof. The omission so to notify the indemnifying party shall relieve the indemnifying party from any liability which it may have to any indemnified party under such subsection only if the
indemnifying party is unable to defend such actions or is materially prejudiced as a result of such failure to so notify. In case any such action shall be brought against any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it shall wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel satisfactory to
such indemnified party (who shall not, except with the consent of the indemnified party, be counsel to the indemnified party), and, after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof,
the indemnifying party shall not be liable to such indemnified party under such subsection for any legal expenses of other counsel or any other expenses, in each case subsequently incurred by such indemnified party, in connection with the defense
thereof other than reasonable costs of investigation.
9.5.
Time
: Whenever Borrower shall be required to make any payment, or perform any act, on a day which is not a Business Day, such payment may be made, or such act may be performed, on the next succeeding
Business Day. Time is of the essence in Borrowers performance under all provisions of this Agreement and all related agreements and documents.
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9.6.
Expenses of Lender
: Provided that the Loan has not been forgiven pursuant to Section 2.7 hereof, Borrower will pay upon demand of Lender all reasonable costs, fees and expenses of Lender in connection
with (i) the enforcement of Lenders rights hereunder, or the collection of any payments owing from, Borrower under this Agreement and/or the other Loan Documents or the protection, preservation or defense of the rights of Lender hereunder
and under the other Loan Documents, and (ii) any refinancing or restructuring of the credit arrangements provided under this Agreement and other Loan Documents in the nature of a work-out or of any insolvency or bankruptcy
proceedings, or otherwise (including the reasonable fees and disbursements of counsel for Lender) (collectively, the Expenses).
9.7.
Brokerage
: This transaction was brought about and entered into by Lender and Borrower acting as principals and without any brokers, agents or finders being the effective procuring cause hereof. Borrower
represents that it has not committed Lender to the payment of any brokerage fee, commission or charge in connection with this transaction. If any such claim is made on Lender by any broker, finder or agent or other person, Borrower hereby
indemnifies, defends and saves such party harmless against such claim and further will defend, with counsel satisfactory to Lender, any action or actions to recover on such claim, at Borrowers own cost and expense, including such partys
reasonable counsel fees. Borrower further agrees that until any such claim or demand is adjudicated in such partys favor, the amount demanded shall be deemed an Obligation of Borrower under this Agreement.
9.8.
Notices
:
a. All notices and other communications given or made pursuant hereto
shall be in writing and shall be deemed to have been duly delivered (i) four (4) Business Days after being sent by registered or certified mail (postage prepaid, return receipt requested), (ii) one (1) Business Day after being
sent for next Business Day delivery, fees prepaid, via a reputable nationwide overnight courier service, or (iii) on the date of confirmation of receipt (or the first Business Day following such receipt if the date of such receipt is not a
Business Day) of transmission by facsimile, in each case to the intended recipient at the following addresses (or at such other address for a party as shall be specified by like changes of address). A party electing to provide notice by electronic
transmission as provided herein shall also provide mailed copies of any such notice.
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(i)
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If to DARA or Merger Sub:
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DARA BioSciences, Inc.
4505 Falls of the Neuse Road
Raleigh, North Carolina 27609
Telecopier No.: (919) 861-0239
Attention: Richard A. Franco, Chief Executive Officer
With
a copy (which shall not constitute notice) to:
Wyrick Robbins Yates & Ponton LLP
4101 Lake Boone Trail
Suite 300
Raleigh, North Carolina 27607
Telecopier No.: (919) 781-4865
Attention: Donald R. Reynolds, Esq.
Point Therapeutics, Inc.
70 Walnut Street
Wellesley Hills,
Massachusetts 02481
Telecopier No.: (781) 239-8005
Attention: Secretary
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With a copy (which shall not constitute notice) to:
Ropes & Gray
One International
Place
Boston, Massachusetts 02110-2624
Telecopier No.: (617) 951-7050
Attention: Steven A. Wilcox, Esq.
b. Lender shall be fully entitled to rely upon any facsimile transmission or other writing purported to be sent by any Authorized Officer
(whether requesting an Advance or otherwise) as being genuine and authorized.
9.9.
Headings
: The headings of any paragraph or Section of this Agreement are for convenience only and shall not be used to interpret any provision of this Agreement.
9.10.
Survival
: All warranties, representations, and covenants made by Borrower herein, or in any agreement referred to herein or on any certificate, document or other instrument delivered by it or on its behalf
under this Agreement, shall be considered to have been relied upon by Lender, and shall survive the delivery to Lender of the Note, regardless of any investigation made by Lender or on its behalf. All statements in any such certificate or other
instrument prepared and/or delivered for the benefit of Lender shall constitute warranties and representations by Borrower hereunder. Except as otherwise expressly provided herein, all covenants made by Borrower hereunder or under any other
agreement or instrument shall be deemed continuing until all Obligations are satisfied in full. All indemnification obligations under this Agreement shall survive the termination of this Agreement and payment of the Obligations for a period of one
(1) year.
9.11.
Successors and Assigns
: This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties. Borrower may not transfer, assign or delegate any of its duties or
obligations hereunder. Borrower acknowledges and agrees that Lender may at any time, and from time to time, sell, transfer, or assign the Loan and Lenders rights hereunder, to any one or more banks or financial institutions, subject (as to
Lenders rights under this clause (b)) to Borrowers written consent, which consent shall not be unreasonably withheld; provided that, no consent under this clause (b) shall be required if an Event of Default exists at the time of
such sale, transfer or assignment.
9.12.
Duplicate Originals
: Two or more duplicate originals of this Agreement may be signed by the parties, each of which shall be an original but all of which together shall constitute one and the same
instrument.
9.13.
Modification
: No modification hereof or any agreement referred to herein shall be binding or enforceable unless in writing and signed by Borrower and Lender.
9.14.
Signatories
: Each individual signatory hereto represents and warrants that he is duly authorized to execute this Agreement on behalf of his principal and that he executes the Agreement in such capacity and
not as a party.
9.15.
Third Parties
: No rights are intended to be created hereunder, or under any related agreements or documents for the benefit of any third party donee, creditor or incidental beneficiary of Borrower. Nothing
contained in this Agreement shall be construed as a delegation to Lender of Borrowers duty of performance, including, without limitation, Borrowers duties under any account or contract with any other Person.
9.16.
Discharge of Taxes, Borrowers Obligations, Etc
.: Lender, in its sole discretion, shall have the right at any time, and from time to time, with at least ten (10) days prior notice to Borrower if
Borrower fail to do so, to: (a) pay for the performance of any of Borrowers obligations hereunder, and (b) discharge taxes or Liens (other than Permitted Liens), at any time levied or placed on Borrowers Property in violation
of this Agreement unless Borrower is in good faith with due diligence by appropriate proceedings contesting such taxes or Liens and
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maintaining proper reserves therefor in accordance with GAAP. Expenses and advances shall be added to the Loan, and bear interest at the rate applicable to
the Loan, until reimbursed to Lender. Such payments and advances made by Lender shall not be construed as a waiver by Lender of a Default or Event of Default under this Agreement.
9.17.
Withholding and Other Tax Liabilities
: Lender shall have the right to refuse to make any Advances from time to time unless Borrower shall, at Lenders request, have given to Lender evidence, reasonably
satisfactory to Lender, that Borrower has properly deposited or paid, as required by law, all withholding taxes and all federal, state, city, county or other taxes due up to and including the date of the requested Advance. Copies of deposit slips
showing payment shall constitute satisfactory evidence for such purpose. In the event that any Lien, assessment or tax liability against Borrower shall arise in favor of any taxing authority, whether or not notice thereof shall be filed or recorded
as may be required by law, Lender shall have the right (but shall not be obligated, nor shall Lender hereby assume the duty) to pay any such Lien, assessment or tax liability by virtue of which such charge shall have arisen; provided, however, that
Lender shall not pay any such tax, assessment or Lien if the amount, applicability or validity thereof is being contested in good faith and by appropriate proceedings by Borrower and proper reserves are maintained therefor in accordance with GAAP.
In order to pay any such Lien, assessment or tax liability, Lender shall not be obliged to wait until such lien, assessment or tax liability is filed before taking such action as hereinabove set forth. Any sum or sums which Lender shall have paid
for the discharge of any such Lien shall be added to the Loan and shall be paid by Borrower to Lender with interest thereon at the rate applicable to the Loan, upon demand, and Lender shall be subrogated to all rights of such taxing authority
against Borrower.
9.18.
Consent to Jurisdiction
: Borrower and Lender each hereby irrevocably consent to the non-exclusive jurisdiction of the Courts of the State of Delaware or any Federal Court located in the State of Delaware in
any and all actions and proceedings whether arising hereunder or under any other agreement or undertaking. Borrower waives any objection which Borrower may have based upon lack of personal jurisdiction, improper venue or forum non conveniens.
Borrower irrevocably agrees to service of process by certified mail, return receipt requested to the address of the appropriate party set forth herein.
9.19.
Additional Documentation
: Borrower shall execute and/or re-execute, and cause any other Person party to any Loan Document, to execute and/or re-execute and to deliver to Lender or Lenders counsel, as
may be deemed reasonably appropriate, any document or instrument signed in connection with this Agreement which was incorrectly drafted and/or signed, as well as any document or instrument which should have been signed at or prior to the Closing,
but which was not so signed and delivered. Borrower agrees to comply with any written request by Lender within ten (10) days after receipt by Borrower of such request.
9.20.
Waiver of Jury Trial
: BORROWER AND LENDER EACH HEREBY WAIVE ANY AND ALL RIGHTS IT MAY HAVE TO A JURY TRIAL IN CONNECTION WITH ANY LITIGATION, PROCEEDING OR COUNTERCLAIM ARISING WITH RESPECT TO RIGHTS AND
OBLIGATIONS OF THE PARTIES HERETO OR UNDER THE LOAN DOCUMENTS OR WITH RESPECT TO ANY CLAIMS ARISING OUT OF ANY DISCUSSIONS, NEGOTIATIONS OR COMMUNICATIONS INVOLVING OR RELATED TO ANY PROPOSED RENEWAL, EXTENSION, AMENDMENT, MODIFICATION, RESTRUCTURE,
FORBEARANCE, WORKOUT, OR ENFORCEMENT OF THE TRANSACTIONS CONTEMPLATED BY THE LOAN DOCUMENTS.
9.21.
Consequential Damages
: Neither Lender nor agent or attorney of Lender, shall be liable for any consequential damages arising from any breach of contract, tort or other wrong relating to the establishment,
administration or collection of the Obligations.
9.22.
Confidentiality
: Lender shall hold all non-public information obtained pursuant to the requirements of this Agreement which has been identified as confidential by Borrower in accordance with Lenders
customary procedures for handling confidential information of this nature and in accordance with its usual practices, it being
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understood and agreed by Borrower that in any event Lender may make disclosures (i) to Affiliates of Lender, provided such Affiliates agree to the
confidentiality provisions of this Section 9.22, or disclosures reasonably required by any bona fide assignee, transferee or participant (or potential assignee, transferee or participant) in connection with the contemplated assignment or
transfer by Lender of any participations herein, provided any such assignee, transferee or participant agrees to the confidentiality provisions of this Section 9.22, or (ii) disclosures required or requested by any governmental or
regulatory agency or representative thereof or pursuant to legal process; provided that, unless specifically prohibited by applicable law or court order, Lender shall notify Borrower of any request by any governmental or regulatory agency or
representative thereof (other than any such request in connection with any examination of the financial condition of Lender by such governmental or regulatory agency) for disclosure of any such non-public information prior to disclosure of such
information.
[Remainder of Page Left Intentionally Blank]
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WITNESS
the due execution of this Loan and Security Agreement as a document under seal as of the
date first written above.
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POINT THERAPEUTICS, INC.
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By:
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/s/ D
ONALD
R. K
IEPERT
,
J
R
.
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Name:
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Donald R. Kiepert, Jr.
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Title:
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President
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DARA BIOSCIENCES, INC.
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By:
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/s/ R
ICHARD
A.
F
RANCO
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Name:
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Richard A. Franco
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Title:
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Chief Executive Officer
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