Filed by the
Registrant ☒ Filed by a Party other than the
Registrant ☐
PROPOSAL NO. 3: THE ASSET SALE
The following discussion is a summary of the material terms of the Asset Sale. We encourage you to read carefully and in its entirety the
Asset Purchase Agreement, which is attached to this proxy statement as
Annex A
for a more complete understanding of the Asset Sale, as it is the legal document that governs the Asset Sale.
General Description of the Asset Sale
The authorization of the sale (the
Asset Sale
) by the Company to Vertex Pharmaceuticals (Europe) Limited
(
Vertex
), a U.K. limited company and wholly-owned subsidiary of Vertex Pharmaceuticals Incorporated, a Massachusetts corporation (
Parent
), of the clinical candidate
CTP-656
and other assets related to the treatment of cystic fibrosis (the
CF Enterprise
) pursuant to the terms of the related Asset Purchase Agreement, dated as of March 3, 2017, by and
among the Company, Vertex and Parent, as Guarantor (the
Asset Purchase Agreement
), for an aggregate of $160 million in cash upon closing of the transaction (the
Closing
), and an aggregate of up to
$90 million following the Closing upon the achievement of certain milestone events (the
Asset Sale Proposal
). Completion of the Asset Sale is subject to closing conditions including, but not limited to, various regulatory
approvals and the approval of the transaction by Stockholders, as further described below and under
Proposal: Asset SaleThe Asset Purchase AgreementConsideration to be Received by the Company
beginning on page 70 of
this proxy statement.
Parties to the Asset Sale
Concert Pharmaceuticals, Inc
.
99 Hayden
Avenue, Suite 500
Lexington, MA 02421
(781)
860-0045
47
Incorporated under the laws of the State of Delaware on April 12, 2006, Concert
Pharmaceuticals, Inc., is a clinical stage biopharmaceutical company applying our extensive knowledge of deuterium chemistry to discover and develop novel small molecule drugs. Selective incorporation of deuterium into known molecules has the
potential, on a
case-by-case
basis, to provide better pharmacokinetic or metabolic properties, thereby enhancing their clinical safety, tolerability or efficacy. Our
approach typically starts with approved drugs that may be improved with deuterium substitution. Our technology provides the opportunity to develop products that may compete with the
non-deuterated
drug in
existing markets or to leverage the known activity of approved drugs to expand into new indications. Our deuterated chemical entity platform, or DCE Platform
®
, has broad potential across
numerous therapeutic areas. The following table summarizes our clinical pipeline of product candidates. All of these candidates are small molecules being developed for oral administration.
Our principal executive offices are located at 99 Hayden Avenue, Suite 500, Lexington, Massachusetts,
02421, and our telephone number is
(781) 860-0045.
Additional information about the Company can be found on our website at http://www.concertpharma.com. The information provided on the Companys
website is not a part of this proxy statement and is not incorporated herein by reference.
Our common stock is traded on the NASDAQ
Global Market under the symbol CNCE. We file annual reports on
Form 10-K,
quarterly reports on
Form 10-Q,
and current reports on
Form 8-K
with the SEC. These reports, any amendments to these reports, proxy and information statements and certain other documents are filed with the SEC and are available through the SECs website at
www.sec.gov or free of charge on our website as soon as reasonably practicable after we file the documents with the SEC. The public may also read and copy these reports and any other materials we file with the SEC at the SECs Public Reference
Room at 100 F Street, NE, Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at
1-800-SEC-0330.
48
Vertex Pharmaceuticals (Europe) Limited (Vertex)
50 Northern Avenue
Boston, MA 02110
Vertex is a limited liability company organized under the laws of England and Wales, and is a wholly-owned subsidiary of Parent.
Vertex Pharmaceuticals Incorporated (Parent)
50 Northern Avenue
Boston, MA 02110
(617)
341-6100
Parent is a global biotechnology company that aims to discover, develop and commercialize innovative medicines so people with serious diseases
can lead better lives. In addition to its clinical development programs focused on cystic fibrosis, Parent has a number of ongoing research programs aimed at other serious and life-threatening diseases. Founded in 1989 in Cambridge, Mass., Parent
today has research and development sites and commercial offices in the United States, Europe, Canada and Australia.
Parents common
stock is traded on the NASDAQ Global Select Market under the symbol VRTX. Parent files annual reports on Form
10-K,
quarterly reports on Form
10-Q,
and
current reports on Form
8-K
with the SEC. For additional information and the latest updates from the company, please visit www.vrtx.com
.
Parents principal executive offices are located at
50 Northern Avenue, Boston, Massachusetts and its telephone number is (617)
341-6100.
Background of the
Asset Sale
The following chronology summarizes certain key events and contacts that led to the execution of the Asset Purchase
Agreement. It does not purport to catalogue every conversation among the Board, members of Concerts management or their respective representatives, and other parties.
Concert is a clinical stage biopharmaceutical company focused on applying its DCE
Platform
®
(deuterated chemical entity platform) to create novel medicines designed to address unmet patient needs. Concert selects pipeline candidates based on approved drugs that may be
improved with deuterium substitution. Concerts technology provides the opportunity to develop products that may compete with the
non-deuterated
drug in existing markets or to leverage the known activity
of approved drugs to expand into new indications. Concert has entered into several collaborative arrangements with companies to develop deuterium-modified versions of their marketed products. Concerts pipeline of drugs includes multiple
clinical candidates and additional research compounds. The most advanced clinical candidates are:
AVP-786
in Phase 3 clinical trials being developed by Avanir for Alzheimers agitation;
CTP-656
in Phase 2 for cystic fibrosis and
CTP-543
which is poised to enter Phase 2 for alopecia areata. The Asset Purchase Agreement only relates to
CTP-656
and other nonclinical cystic fibrosis assets.
Cystic fibrosis is a rare, life-threatening
genetic disease affecting approximately 70,000 people worldwide. There is no known cure for cystic fibrosis. Cystic fibrosis patients typically require lifelong treatment that includes multiple daily medications, hospitalization in many cases due to
lung infections, and potential lung transplantation. Ivacaftor is a CFTR potentiator drug marketed by Parent under the brand name Kalydeco
®
and approved for a small subset of patients with
cystic fibrosis comprising approximately
5-7%
of the cystic fibrosis patient population. Kalydeco is required to be taken every 12 hours with
fat-containing
food. The
majority of cystic fibrosis patients cannot be effectively treated with a CFTR potentiator alone. The Vertex product Orkambi
®
, which is approved for a larger cystic fibrosis population,
comprising approximately 40% of the population, is a combination of ivacaftor and a CFTR corrector called lumacaftor.
CTP-656
is a small molecule drug candidate that may offer once-daily dosing without regard to the fat content of the food with which it is taken.
CTP-656
was developed by
Concerts novel application of deuterium
49
chemistry to modify ivacaftor. Concert is developing
CTP-656
as a potential monotherapy treatment for the subpopulation of cystic fibrosis patients having
gating mutations. Concert sought collaboration partners for developing combination therapies that would be suitable for treating a broader cystic fibrosis patient population.
The Concert Board and management regularly review and evaluate potential collaborations and other strategic opportunities to advance the
clinical development of
CTP-656
and other product candidates and preclinical programs, finance Concerts clinical development efforts, expand the range of financial resources available for product
candidates and enhance value for Concerts Stockholders. Members of Concert management keep the Board apprised of potential product development and other strategic opportunities at regularly scheduled Board meetings and through informal updates
with individual directors.
On March 12, 2015, Concert announced that it had initiated a Phase 1 clinical trial for
CTP-656,
and in September 2015, Concert announced positive data from the Phase 1 trial showing that
CTP-656
achieved higher plasma levels and a longer half-life than Kalydeco.
In connection with these events, Concert contacted, and received interest from, certain biopharmaceutical companies that were interested in discussing potential strategic relationships with Concert regarding
CTP-656.
Concert entered into confidentiality agreements (none of which contained standstill provisions) with seven of these parties in connection with such discussions. Concert maintained ongoing discussions
with four of the parties that executed confidentiality agreements (referred to as
Party A
,
Party B
,
Party C
and
Party D
). As described below, discussions with these parties
were preliminary in nature and did not lead to specific proposals with terms that were attractive to Concert.
From October 2015 through
October 2016, representatives of Concert had periodic and preliminary ongoing discussions with Parties A, B, C and D and with Vertex as described below. Concerts interest at the time was primarily focused on potential
non-exclusive
collaborations regarding
CTP-656.
However, Party A expressed an interest in a potential strategic transaction involving Concerts DCE Platform, and Party A
engaged in a due diligence review of the DCE Platform business, as well as
CTP-656
and
CTP-543.
On March 29, 2016, Vertexs chief financial officer contacted Concerts chief executive officer and indicated that Vertex was
interested in discussing a potential relationship between the parties regarding
CTP-656.
During this discussion, Concerts chief executive officer indicated that Concert was primarily focused on pursuing
potential
non-exclusive
collaboration arrangements for
CTP-656.
On May 9, 2016, Concert and Vertex entered into a mutual confidentiality agreement (which did not contain a standstill provision) to
facilitate the discussions between the parties and permit Concert to share certain
non-public
information with Vertex. Thereafter, Vertex and Concert executed a material transfer agreement to allow Vertex to
perform certain in vitro assays involving
CTP-656.
Following completion of that work, Vertex informed Concerts representatives that Vertex was interested in exploring a relationship that provided
exclusive access to
CTP-656.
The parties amended their confidentiality agreement on August 5, 2016 to permit the parties to share confidential information with their outside advisors.
Between April and August 2016, members of Concerts management and members of Vertexs management had multiple discussions. During
these meetings, Concert and Vertex expressed mutual interest in evaluating a potential relationship between the parties regarding
CTP-656.
Concerts interest at the time was primarily focused on a
non-exclusive
license arrangement with Vertex.
In May and June 2016, members of Concerts
management had brief and preliminary discussion with representatives of Party C regarding a potential partnership involving
CTP-656.
These discussions did not result in any specific proposals.
On August 29, 2016, members of Concerts management and representatives of Vertex had a discussion during which Vertexs
management requested that Concert provide Vertex a proposal for a potential transaction regarding
CTP-656.
50
On September 9, 2016, Concert sent Vertex a
non-binding
preliminary written proposal as a basis for initiating discussions regarding terms for a potential transaction involving
CTP-656.
The proposal indicated that
Concert would be willing to exclusively license
CTP-656
to Vertex for upfront consideration of $150 million in cash, plus payments of $25 million in each of the first three years following Closing
Date, plus potential double-digit, tiered royalty payments based on products that contained
CTP-656.
In October 2016, Party A informed Concert that it no longer had an interest in pursuing a strategic transaction with Concert.
On October 19, 2016, a Vertex representative contacted a Concert representative and indicated that Vertex was not interested in a
collaboration on the terms provided in Concerts September 9 proposal. The Vertex representative indicated that Vertex would be interested in expanding the discussions with Concert to include discussing a potential acquisition of Concert
or an acquisition of
CTP-656.
Following this discussion and through early November 2016,
representatives of Concert and Vertex continued discussions regarding the structure of a potential strategic transaction between the parties. Discussions were also held between the parties respective outside tax advisors to analyze the tax
impact of various potential transaction structures. The parties did not negotiate price or any other terms for a possible strategic transaction during these meetings.
On November 2, 2016, Vertexs chief financial officer contacted Concerts chief executive officer and indicated that Vertex was
interested in having an
in-person
meeting to present the terms of a potential strategic transaction with Concert. The next day, after discussion with members of Concert management, Concerts chief
executive officer informed Vertexs chief financial officer that Concert preferred to receive any proposal for a strategic transaction from Vertex in writing, and that Concert would review and consider any appropriately-valued proposal.
On November 15, 2016, Vertexs chief financial officer called Concerts chief executive officer and indicated that he planned
to send a proposal the next day that would outline Vertexs proposed terms of an acquisition of Concert. The parties did not negotiate the price or any other terms for a possible strategic transaction during this call.
On November 16, 2016, Concert received a written,
non-binding
proposal from Vertex to acquire all
of the outstanding shares of common stock of Concert for upfront consideration of $11.50 per share in cash plus potential payments under contingent value rights in an amount to be mutually agreed to by the parties. On November 16, 2016, the
closing price of Concerts common stock was $9.92. The proposal was subject to completion of due diligence, negotiation of a definitive merger agreement, and receipt of all necessary internal approvals by Vertex. In the letter, Vertex requested
a response from Concert by November 25, 2016. Concerts chief executive officer informed the Board of the receipt of the Vertex proposal.
On November 18, 2016, the Board held a meeting to consider, among other things, Vertexs November 16 proposal. Members of
Concert management, and representatives of Concerts outside legal counsel, Goodwin Procter LLP (
Goodwin
), were in attendance. Representatives of Goodwin discussed with the Board their fiduciary duties in the context of
evaluating Vertexs November 16 proposal. Goodwin also discussed the Boards discretion in determining whether and how to pursue any potential transaction. Concert management provided an overview of the status of the discussions with
Vertex, their limited diligence efforts to date and their perceived level of interest. The Board engaged in a discussion of the terms of Vertexs November 16 proposal and concluded that Vertexs November 16 proposal substantially
undervalued the Company as a whole. While the Board concluded to reject Vertexs November 16 proposal, it was also discussed that based on Vertexs
51
perceived level of interest and the parties discussions to date, there was potential for the parties to continue discussions regarding an asset purchase of
CTP-656.
At the direction of the Board, following the meeting, Concerts chief executive officer contacted Vertexs chief executive officer and chief financial officer and conveyed that Vertexs
November 16 proposal was insufficient to warrant further discussions or diligence.
On December 8, 2016, the Board held a
regularly scheduled meeting. During this meeting, Concert management provided its regular update on the status of discussions with various parties regarding their perceived level of interest in a transaction involving
CTP-656
and diligence efforts to date.
Following the Board meeting, members of Concert
management, including the chief financial officer, discussed with Concerts chief executive officer and the chairman of the Board the potential opportunity of enhancing value for Concert Stockholders through an asset sale of
CTP-656
to Vertex at a price approximate to or greater than the valuation of
CTP-656
that Concert perceived was implied in Vertexs November 16 proposal, following
which the Concert Stockholders would retain value from the operations of the remainder of the Company.
On December 14, 2016,
Concerts chief financial officer, acting at the direction of Concerts chief executive officer and the chairman of the Board, contacted representatives of Vertex and indicated that Concert would review and consider a proposal to acquire
CTP-656
in an asset sale that provided Concert with greater value for
CTP-656
that what Concert perceived was implied in Vertexs November 16 proposal.
On December 16, 2016, Vertexs chief financial officer contacted the chairman of the Board to discuss Vertexs continued
interest in pursuing a transaction, requesting guidance as to Concerts view on the structure of a potential transaction and the process for further discussions.
On December 19, 2016, following discussion with Concerts chief executive officer and chief financial officer, the chairman of the
Board contacted Vertexs chief financial officer to discuss Concerts interest in possibly selling
CTP-656
to Vertex, during which discussion the chairman of the Board indicated that Concert would be
sending a proposal to Vertex.
On December 20, 2016, Concert sent Vertex a
non-binding
written proposal indicating that it would be willing to sell
CTP-656
to Vertex for upfront consideration of $200 million in cash plus potential single-digit, tiered royalty payments based on net sales of
CTP-656
as a monotherapy or as part of a combination regimen. The proposal also included a termination fee of $50 million by Vertex to Concert if the proposed transaction did not close following signing of a
definitive agreement.
On December 21, 2016, Concert announced the initiation of a U.S.-based Phase 2 clinical trial evaluating
CTP-656
in patients who have gating mutations, including the G551D mutation.
By December 2016, Party B,
with whom Concert had periodic and preliminary ongoing discussions since 2015 regarding a potential
non-exclusive
collaboration partnership for
CTP-656,
appeared to be
no longer interested in pursuing such a partnership with Concert as communications from Party B waned. Concerts discussions with Party B did not result in any specific proposals.
On January 6, 2017, Vertex sent Concert a
non-binding
written proposal to acquire
CTP-656
for upfront consideration of $210 million with no royalty payments or other potential post-Closing payments. In its proposal, Vertex indicated that the calculation of royalties in combination regimens
is highly complex and that they believed it would unnecessarily lengthen the already protracted discussions between the parties. As an alternative, Vertex indicated that it was prepared to buy
CTP-656
for an
amount in excess of Concerts last proposed upfront payment, provided there were not post-Closing royalty payments. The proposal was subject to completion of due diligence, negotiation of a definitive merger agreement, and receipt of all
necessary internal approvals by Vertex.
On January 8, 2017, Concerts chief financial officer had a discussion with a
representative of Vertex regarding Vertexs January 6 proposal, including a discussion of post-Closing payments. The Vertex representative confirmed Vertexs position that it would not agree to utilize royalty payments as a form of
post-
52
Closing consideration. Concerts chief financial officer indicated Concerts belief that some form of post-Closing consideration was appropriate in the context of the proposed
transaction and that Concert intended to submit a proposal to Vertex that included a milestone payment structure.
During the week of
January 9, 2017, at the J.P. Morgan healthcare conference in San Francisco, representatives of Party C informed Concerts representatives that it was interested in furthering its discussions with Concert. Concerts representatives
informed Party Cs representatives that Party C needed to move quickly, noting that Concert was in discussions with a third party regarding a potential transaction involving
CTP-656.
On January 25,
2017, Concert and Party C executed a confidentiality agreement (which did not include a standstill provision) and Party C began a due diligence review regarding
CTP-656.
On January 10, 2017, acting at the direction of Concerts chief executive officer and the chairman of the Board, Concert sent Vertex
a
non-binding
written proposal indicating that it would be willing to sell
CTP-656
to Vertex for upfront consideration of $210 million in cash plus milestone
payments totaling $40 million due upon approval of a product containing
CTP-656.
The proposal indicated that Concert would be willing to consider dividing the milestone amount into two payments based upon
approval in the U.S. and Europe. The proposal also included a termination fee of $50 million to Concert if the transaction did not close following signing of a definitive agreement.
On January 12, 2017, representatives of Vertex contacted Concerts chief financial officer to discuss Concerts January 10
proposal. The Vertex representatives indicated that Vertex was prepared to acquire
CTP-656
for the amount of upfront consideration and milestone payments specified in Concerts January 10 proposal,
and that Vertex would likely prefer to split the milestone payments based on U.S. and European approval. The Vertex representatives indicated that Vertex would not agree to the proposed $50 million termination fee payable by Vertex to Concert.
The Vertex representatives indicated that Vertex was prepared to move expeditiously to complete due diligence and negotiate a definitive asset purchase agreement.
On January 17, 2017, Concert announced that subsequent to the initiation of the Phase 2 trial to evaluate
CTP-656,
the U.S. Food and Drug Administration (the
FDA
) informed Concert that it may proceed with the Phase 2 trial; however, in order to support dose selection for Phase 3, an adequate
washout period, in which Kalydeco treatment is withheld, would be required in addition to a placebo-control. Concerts Phase 2 trial did not include a washout period. Concert discussed the requirement for a washout period with clinical
consultants and study sites who expressed concern that the washout period would result in undue risk to patients. As a result, Concert concluded that the trial would not be feasible with a washout period. Concert decided to continue its ongoing
Phase 2 trial as originally designed and intended to further discuss the washout requirement with FDA.
On January 18, 2017,
representatives of Vertex, representatives of Concert, White & Case, LLP, counsel to Vertex (
White
& Case
), and Goodwin had a call to discuss certain matters regarding the proposed structure for the
transaction and the expected timetable for negotiating a definitive asset purchase agreement. During the call, Vertexs representatives indicated that Vertex expected that approval of the asset sale by the Concert Stockholders would be a
condition to Closing. Concerts representatives indicated that they did not view a potential sale of
CTP-656
as being a sale of all or substantially all of Concerts assets requiring
Stockholders approval under Delaware law.
On January 19, 2017, Concert granted Vertex access to an electronic due diligence data
room, and from this time forward, representatives of Concert and Vertex engaged in various due diligence discussions concerning
CTP-656,
including numerous meetings and teleconferences held between the
representatives and legal advisors to the respective companies.
On January 20, 2017, Concert announced that the FDA granted orphan
drug designation for
CTP-656.
On January 24, 2017, representatives of White & Case
and Goodwin discussed the analysis of whether approval by Concerts Stockholders would be required under Delaware law. Representatives of White & Case stated that regardless of Concerts view, Vertex was not willing to take any
risk that Delaware law may require
53
approval of the transaction by Concerts Stockholders. Following this discussion, Goodwin communicated to White & Case that Concerts Delaware counsel agreed with
Concerts assessment that the sale of
CTP-656
did not constitute a sale of all or substantially all of Concerts assets requiring the approval of Concerts Stockholders under
Delaware law.
On February 3, 2017, representatives of Vertex contacted representatives of Concert and indicated that Vertex would be
providing a draft asset purchase agreement to Concert with a revised upfront consideration amount of $160 million and a revised aggregate milestone amount of $90 million, for an aggregate potential transaction value of $250 million,
the same as previously proposed by Vertex. The Vertex representatives indicated that the reallocation of a portion of the upfront consideration to the milestone payments was due to the results of Vertexs due diligence review. In these
discussions, Vertex indicated that this would be their best and final offer on the amount and allocation of the transaction consideration.
Later on February 3, 2017, representatives of White & Case circulated a first draft of the Asset Purchase Agreement to Goodwin
and Concert management. The draft Asset Purchase Agreement structured the transaction as an acquisition of Concerts cystic fibrosis assets, including
CTP-656,
by Vertex in exchange for upfront
consideration of $160 million and two potential milestone payments of up to an aggregate of $90 million. One milestone payment of $50 million was contingent on FDA approval of once daily combination treatment containing
CTP-656.
The second milestone payment of $40 million was contingent on both (i) marketing approval from the European Medicines Agency of a once daily combination treatment containing
CTP-656
and (ii) completion of a pricing reimbursement agreement with respect to such treatment in the first of the United Kingdom, Germany or France. The draft Asset Purchase Agreement provided for
$48 million (or 30%) of the upfront consideration to be placed in escrow at the Closing for a period of 24 months to be available for indemnification by Concert for breaches of its representations and warranties. However, indemnification for
certain fundamental representations and warranties, including those relating to intellectual property, would not be limited to the escrow amount. The draft Asset Purchase Agreement provided that approval of the transaction by Concerts
Stockholders was condition to Closing. The draft Asset Purchase Agreement also provided, among other things, for the payment by Concert of a termination fee equal to $6.4 million (or 4% of upfront consideration) if, among other circumstances,
(i) the Asset Purchase Agreement was terminated following a specified outside date, or as a result of a material breach by Concert, and (ii) Concert entered into an alternative transaction within an
12-month
period following termination. The draft Asset Purchase Agreement also provided for the reimbursement by Concert of Vertexs transaction expenses up to $1 million if the Asset Purchase
Agreement was terminated due to the failure to obtain the authorization of the Asset Purchase Agreement by an affirmative vote of Stockholders holding a majority of the outstanding shares of the Companys common stock (the
Requisite
Vote
). The draft Asset Purchase Agreement did not provide Concert the ability to terminate the agreement to accept a superior offer for
CTP-656
or the entire Company upon the payment of a termination
fee or otherwise, nor did it provide for a termination fee payable by Vertex to Concert in the event the transaction did not close because of the failure to obtain certain regulatory approvals.
On February 6, 2017, representatives of White & Case and Goodwin, with the assistance of Delaware counsel, again discussed the
analysis of whether approval by Concerts Stockholders would be required under Delaware law. Representatives of White & Case reiterated that regardless of Concerts view, Vertex would not take any risk in this regard and therefore
would require approval of the transaction by Concerts Stockholders.
Between February 6, 2017 and March 3, 2017, the
parties negotiated the Asset Purchase Agreement, related documents and various issues via conference calls, and several drafts of the Asset Purchase Agreement and related documents were exchanged between the parties. The parties discussed,
negotiated and resolved various issues, including without limitation, the scope of the representations and warranties, the parties respective conditions to Closing, the $50 million milestone payment that would be contingent on approval
from FDA of a combination therapy treatment regimen without regard to dosing frequency, the $40 million milestone payment that would be contingent on completion of a pricing reimbursement agreement in the United Kingdom, Germany or France with
respect to a combination treatment without regard to dosing frequency, and indemnification for breaches of Concerts general representations and warranties, including regarding intellectual property, that
54
would be limited to an escrow amount of $16 million (or 10%) of the upfront consideration to be held for a period of 18 months following the Closing. The parties agreed that the Asset
Purchase Agreement would contain a condition requiring approval of the Asset Sale by Concerts Stockholders, provide Concert the ability to terminate the agreement to accept a superior offer for
CTP-656
or the entire Company upon the payment of the Termination Fee, provide a $500,000 expense reimbursement payable by Vertex to Concert in the event the transaction did not close because of failure to obtain certain regulatory approvals and provide a
$500,000 expense reimbursement payable by Concert to Vertex in the event the transaction is not approved by Concerts Stockholders (see
The Asset Purchase Agreement
beginning on page 68 of this proxy statement for
further detail). During this time period, Concerts chief executive officer and chief financial officer had periodic informal discussions with the chairman of the Board regarding Concerts discussions with Vertex.
On February 9, 2017, Party C requested that Concert provide further diligence information to Party C and its collaborator. On that day,
Concert responded and granted Party C and its collaborator access to an electronic due diligence data room, which was terminated on March 3, 2017.
On February 14, 2017, Concert and Party C had discussions regarding a potential transaction involving
CTP-656.
Concert informed Party C that Concert was expected imminently to execute an agreement for a strategic transaction regarding
CTP-656
with a third party and that
timing was of the essence. Although Party C indicated that it might have interest in considering a potential strategic transaction for
CTP-656,
it did not appear to Concert that Party C would be able to
expedite its efforts regarding its stated interest and discussions between Concert and Party C ceased on March 3, 2017.
On
February 15, 2017, a representative of Party D informed a representative of Concert that Party D, with whom Concert had periodic discussions since late 2015 regarding a potential
non-exclusive
license
arrangement for
CTP-656,
decided not to pursue such an arrangement as it was not a strategic fit for Party D at that time.
On February 15, 2017, Concerts chief financial officer, following discussions with members of Concert management and certain
Concert directors, discussed with a representative of Aquilo Partners, L.P. (
Aquilo Partners
) the potential engagement of Aquilo Partners to render an opinion regarding the fairness, from a financial point of view, of the
consideration to be received by Concert in the potential transaction with Vertex. Concert contacted Aquilo Partners with respect to this potential engagement due to that firms qualifications and knowledge of the industry in which Concert
operates and Aquilo Partners experience in similar situations. Aquilo Partners indicated that it did not have any ongoing or past engagements with Vertex in the past two years. Accordingly, on February 27, 2017, following further
discussions among Concert management and certain directors, Concert entered into an engagement letter with Aquilo Partners to render a fairness opinion.
On March 3, 2017, after the stock market closed, the Board held a meeting to discuss the final terms of the proposed transaction with
Vertex. Members of Concerts management, and representatives of Aquilo Partners and Goodwin were in attendance. Representatives of Goodwin reviewed the fiduciary duties of the Board in connection with a potential sale of Concerts cystic
fibrosis assets including
CTP-656.
Representatives of Goodwin provided an overview of the negotiation process to date with Vertexs representatives, as well as a presentation regarding the terms of the
Asset Purchase Agreement and related agreements. The Board also reviewed certain financial projections regarding
CTP-656
for the fiscal years 2017-2030 prepared by Concert management (see
Certain Prospective Financial Information
on beginning on page 65 of this proxy statement for further detail). Aquilo Partners reviewed its financial analysis of the proposed transaction and delivered to the Board its oral
opinion, which was confirmed by delivery of a written opinion dated March 3, 2017, to the effect that, as of such date and based upon and subject to the factors and assumptions set forth in its opinion, the consideration to be received by
Concert pursuant to the Asset Purchase Agreement was fair to Concert from a financial point of view.
The Board asked questions and
discussed the Asset Purchase Agreement provisions and related matters. After discussion in which the Board considered the factors discussed further in
Recommendation of the Board; Reasons for the Asset Sale
beginning on page 56 of this proxy statement, the members of the Board
55
present at the meeting unanimously approved the Asset Purchase Agreement and the transactions contemplated by the Asset Purchase Agreement. The Board also deemed it advisable, and in the best
interests of Concert and its Stockholders, to consummate the Asset Sale and the other transactions contemplated by the Asset Purchase Agreement, on the terms and subject to the conditions set forth in the Asset Purchase Agreement, and to recommend
that Concerts Stockholders approve the Asset Sale.
Later on March 3, 2017, the parties finalized and executed the Asset
Purchase Agreement.
On March 6, 2017, before the stock market opened, Concert and Vertex each announced the execution of the Asset
Purchase Agreement.
Reasons for the Asset Sale
In arriving at its determination that the Asset Sale is advisable to, and in the best interests of, Concert and its Stockholders, the Board
consulted with Concerts management, as well as outside legal and financial advisors, reviewed a significant amount of information and considered a number of factors. These factors included, but are not limited to, the following factors which
the Board viewed as supporting its determination:
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the Boards and Concert managements belief that there was a limited market for
CTP-656
as a monotherapy, especially if combination approaches were successful, and there
was substantial expense and uncertain regulatory approval pathways in the U.S. and Europe for developing
CTP-656
as a monotherapy;
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the Boards and Concert managements belief that there was uncertainty of finding another collaboration partner to develop
CTP-656
in a combination therapy to treat the
majority of cystic fibrosis patients, and that without a suitable collaboration partner to develop
CTP-656
in a combination therapy, Concerts market might be limited to a small subpopulation of CF
patients with gating mutations, and that potentially more effective treatments in the future, including combination therapies, may impact the potential of
CTP-656
even in the patient subpopulation;
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the alternatives available if Concert did not sell
CTP-656,
including continued development towards U.S. approval, particularly in view of the FDA letter informing Concert that
the ongoing Phase 2 study would not support dose selection for Phase 3, involve meaningful risks, financial commitments and uncertainties, none of which, in the view of the Board, were as favorable to Concert and its Stockholders as, nor more
favorable to Concert and its Stockholders than, the Asset Sale;
|
|
|
|
the upfront cash consideration of $160 million to be paid by Vertex at Closing to acquire
CTP-656
exceeded the enterprise value of Concert (determined as market
capitalization less cash) of approximately $117 million based on the closing stock price on March 3, 2017, the date on which the Asset Purchase Agreement and the transactions contemplated thereby were approved by the Board;
|
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|
the extensive experience and resources of Vertex in developing, and obtaining FDA and other approvals for commercializing clinical stage biopharmaceutical product candidates and its global cystic fibrosis focused
commercial capabilities, particularly as such development, experience and resources relate to the ability to address unmet patient needs and potential achievement of the milestones set forth in the Asset Purchase Agreement;
|
|
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|
the proceeds from the Asset Sale would enable Concert to fund its future business activities, including its development of
CTP-543,
and potentially its preclinical pipeline;
|
|
|
|
the financial analysis reviewed and discussed with the Board by representatives of Aquilo Partners, as well as the opinion of Aquilo Partners delivered to the Board on March 3, 2017 to the effect that, as of that
date and based on and subject to the assumptions made, procedures followed, factors considered and limitations on the review undertaken by Aquilo Partners as described in Aquilo Partners opinion, the consideration to be received by Concert
pursuant to the Asset Purchase Agreement was fair to Concert from a financial point of view;
|
56
|
|
|
that Concert conducted an extensive review process for
CTP-656
collaboration partners that did not result in any alternative actionable proposals and that, in the Boards
view, the terms of the Vertex proposal in the aggregate and taking into account the assets to be acquired and the liabilities to be assumed by Vertex, were more favorable than Concerts continued development of
CTP-656
on a stand-alone basis;
|
|
|
|
the terms and conditions of the Asset Purchase Agreement, in particular that:
|
|
|
|
Concert may terminate the Asset Purchase Agreement in the event that our Stockholders do not authorize the Asset Sale and thereafter accept an unsolicited Superior Proposal (as described below in the section entitled
Proposal No.
3: The Asset SaleThe Asset Purchase AgreementNo Solicitation/Change of Recommendation
beginning on page 74 of this proxy statement), and the Board may otherwise change its recommendation
to act in a manner consistent with its fiduciary duties (which may require the payment to Vertex of the cash termination fee of $6.4 million (the
Termination Fee
));
|
|
|
|
Vertexs obligation to consummate the Asset Sale is not conditioned on Vertexs obtaining financing;
|
|
|
|
Vertex agreed to assume certain obligations and liabilities, including with respect to certain contracts related to
CTP-656;
|
|
|
|
the cash form of the consideration to be received in connection with the Asset Sale, in particular the certainty of value and liquidity of such cash consideration;
|
|
|
|
the guarantee by Parent of the obligations of Vertex, as buyer under the Asset Purchase Agreement;
|
|
|
|
the Boards expectation that structuring the transaction as a sale of assets will allow Concert to offset the gain that we anticipate we will realize on the Asset Sale for income tax purposes, in whole or in
substantial part, by our tax attributes, which will limit the taxes payable as a result of the Asset Sale;
|
|
|
|
Our Stockholders will continue to own stock in Concert and participate in our potential future earnings and growth generated by our ongoing business activities, including
CTP-543
and our Partnered Programs, and any other future business activities;
|
|
|
|
the cash consideration to be received in connection with the Asset Sale will alleviate the immediate need for Concert to fund its operations by raising additional capital with potentially dilutive impact to existing
Stockholders; and
|
|
|
|
the Asset Purchase Agreement requires that the Asset Sale be authorized by the Requisite Vote, which ensures that the Board will not be taking action without the support of a significant portion of our Stockholders.
|
The Board also considered certain risks, uncertainties and potentially adverse factors in making its determination and
recommendation, including, but not limited to, the following:
|
|
|
the risks and contingencies relating to the announcement and pendency of the Asset Sale and the risks and costs to Concert if the Asset Sale is not completed, including the effect of an announcement of termination of
the Asset Purchase Agreement on the trading price of our common stock, our business and our relationships with partners and employees;
|
|
|
|
Concerts ability to attract and retain key personnel and the risk of diverting managements focus and attention and employee resources from operational matters during the pendency of the Asset Sale;
|
|
|
|
the incurrence of significant costs and expenses in connection with completing the Asset Sale, including legal, accounting and other costs;
|
57
|
|
|
that the Asset Purchase Agreement obligates Concert to indemnify Vertex and certain of its related parties against certain damages;
|
|
|
|
the requirement that we must pay Vertex the Termination Fee equal to $6.4 million (or 4% of the upfront consideration) if Vertex terminates the Asset Purchase Agreement under certain circumstances, including if
(i) the Board withdraws or modifies or changes its recommendation that our Stockholders authorize the Asset Sale, (ii) we breach our
non-solicitation
covenant or Stockholder meeting covenant, or
(iii) we do not obtain the Requisite Vote and consummate an alternative transaction within twelve months after the termination of the Asset Purchase Agreement;
|
|
|
|
the terms of the Asset Purchase Agreement that place restrictions on our ability to consider an Alternative Proposal and to terminate the Asset Purchase Agreement and accept a Superior Proposal;
|
|
|
|
the restrictions on the conduct of our business prior to the completion of the Asset Sale that require Concert to conduct operations regarding
CTP-656
in the ordinary course,
which could delay or prevent Concert from undertaking business opportunities that may arise pending completion of the Asset Sale, and the length of time between signing and Closing when these restrictions are in place; and
|
|
|
|
that, under Delaware law, appraisal rights are not provided to Stockholders in connection with the Asset Sale.
|
The foregoing discussion of the factors considered by the Board is not intended to be exhaustive, but rather includes material factors
considered by the directors. The Board also considered other factors, including those described in the section entitled
Risk Factors Regarding Asset Sale
beginning on page 45 of this proxy statement, in deciding to
approve, and unanimously recommending that our Stockholders authorize, the Asset Sale. In reaching its decision and recommendation to our Stockholders, the Board did not quantify or assign any relative weights to the factors considered and
individual directors may have given different weights to different factors. In addition, the Board did not undertake to make any specific determination as to whether any particular factor, or any aspect of any particular factor, was favorable or
unfavorable to its ultimate determination, but rather conducted an overall analysis of the factors described above.
Opinion of the Companys
Financial Advisor
Our Board requested that Aquilo Partners evaluate the fairness, from a financial point of view, of the consideration
to be received by Concert for all of Concerts right, title and interest in the CF Enterprise in accordance with the terms of the Asset Purchase Agreement. On March 3, 2017, Aquilo Partners delivered its oral opinion, subsequently
confirmed in writing, to the Board to the effect that, as of the date of its opinion and based upon and subject to the qualifications, limitations and assumptions set forth therein, the consideration to be received by Concert for the CF Enterprise
in accordance with the Asset Purchase Agreement is fair, from a financial point of view, to Concert.
The summary of the written opinion
of Aquilo Partners in this proxy statement is qualified in its entirety by reference to the full text of the written opinion of Aquilo Partners, dated March 3, 2017, attached to this proxy statement as
Annex
B
. You are urged to, and should, read the written opinion of Aquilo Partners carefully and in its entirety.
The opinion of Aquilo Partners addresses only the fairness, from a financial point of view, to Concert of the consideration to be received by
Concert for the CF Enterprise in accordance with the terms of the Asset Purchase Agreement and does not address any other aspect or implication of the Asset Sale, including, but not limited to, any other aspect of Concerts business unrelated
to the CF Enterprise or any other asset of Concert or than the CF Enterprise, or any other agreement, arrangement or understanding entered into in connection with the Asset Sale or otherwise. Aquilo Partners has not been requested to opine as to,
and its opinion does not in any manner address, Concerts underlying business decision to proceed with or effect the Asset Sale, or any other aspect of
58
Concerts business or any of its other assets. In addition, Aquilo Partners expresses no opinion on, and its opinion does not in any manner address, the likelihood or probability of the
achievement or satisfaction of the Milestone Events (as defined below).
In arriving at its opinion, Aquilo Partners reviewed and
analyzed, among other things:
|
|
|
the Asset Purchase Agreement;
|
|
|
|
certain annual and interim reports to stockholders on Form
10-K
and
10-Q
of Concert and Vertex;
|
|
|
|
certain other publicly available business and financial information relating to Concert, the CF Enterprise and Vertex it deemed relevant;
|
|
|
|
certain other financial information relating to Concert, including financial forecasts, relating to Concert, which Concert provided; (see
Certain Prospective Financial Information
beginning on page 65 of this proxy statement for further detail);
|
|
|
|
certain business and financial information, including financial forecasts, relating to the CF Enterprise separately, which Concert provided;
|
|
|
|
publicly available financial terms of certain transactions involving companies Aquilo Partners deemed relevant and the consideration paid for such companies or their asset(s) and comparisons of these terms with the
proposed financial terms of the Asset Purchase Agreement; and
|
|
|
|
certain publicly available business and financial information concerning certain other companies and certain of their assets Aquilo Partners deemed relevant and comparisons of this business and financial information to
that of the CF Enterprise.
|
In addition, Aquilo Partners had discussions with Concerts management regarding the
business, operations, financial condition and prospects of Concert, both with and without the CF Enterprise, including managements views regarding operational and financial risks and uncertainties associated with continuing to develop
CTP-656
itself.
In connection with its review, Aquilo Partners has not assumed any responsibility for
independent verification of any of the information and have, with Concerts consent, relied on such information being complete and accurate in all material respects. With respect to the financial forecasts for Concert and the CF Enterprise,
respectively, Concerts management has advised Aquilo Partners, and Aquilo Partners has assumed with Concerts consent, that such forecasts have been reasonably prepared on bases reflecting the best currently available estimates and
judgments of Concerts management as to the future financial performance of Concert and the CF Enterprise, respectively. In addition, Aquilo Partners has not been requested to make, and has not made, an independent evaluation or appraisal of
the assets or liabilities (contingent or otherwise) of Concert, whether with or without the CF Enterprise, nor have we been furnished with any such evaluations or appraisals. Furthermore, Aquilo Partners has not been requested to make, and has not
made, any physical inspection of the CF Enterprise.
In preparing its opinion, Aquilo Partners performed a number of financial and
comparative analyses. The preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. Aquilo Partners believes that its analyses must be considered as a whole and that
selecting portions of its analyses and of the factors considered by it, without considering all analyses and factors, could create a misleading view of the processes underlying its opinion. No company, transaction or lead product candidate used in
the analyses performed by Aquilo Partners as a comparison is identical to Concert or the CF Enterprise. In addition, Aquilo Partners may have given some analyses more or less weight than other analyses, and may have deemed various assumptions more
or less probable than other assumptions, so the range of valuation resulting from any particular analysis described below should not be taken to be Aquilo Partners view of the actual value of the CF Enterprise. The analyses performed by Aquilo
Partners are not necessarily indicative of actual values or actual future results, which may be significantly more or less favorable than
59
suggested by such analyses. In addition, analyses relating to the value of businesses or assets do not purport to be appraisals or to necessarily reflect the prices at which businesses or assets
may actually be sold. The analyses performed were prepared solely as part of Aquilo Partners analysis of the fairness, from a financial point of view, of the consideration to be received by Concert for the CF Enterprise in accordance with the
terms of the Asset Purchase Agreement and does not address any other aspect or implication of the Asset Sale, including, but not limited to, any other aspect of Concerts business unrelated to the CF Enterprise or any other asset of Concert
other than the CF Enterprise, or any other agreement, arrangement or understanding entered into in connection with the Asset Sale or otherwise.
At a meeting of the Board held on March 3, 2017, Aquilo Partners presented certain financial analyses accompanied by delivery of its
written materials in connection with the delivery of its oral opinion. Immediately thereafter, Aquilo Partners delivered to the Board its written opinion. The following is a summary of the material financial analyses performed by Aquilo Partners in
arriving at its opinion. Certain of the following summaries of financial analyses include information presented in tabular format. In order to understand fully the material financial analyses that were performed by Aquilo Partners, the tables should
be read together with the text of each summary. The tables alone do not constitute a complete description of the material financial analyses.
Equity Value.
Aquilo
Partners reviewed and analyzed Concerts current equity value based on the treasury method. Aquilo
Partners calculated Concerts current equity value based on the price per share of $9.51 as of March 1, 2017 and Concerts shares outstanding using the treasury method including 22.3 million of primary shares outstanding and
0.5 million of treasury shares outstanding to derive a current equity value of $217 million.
Enterprise Value.
Aquilo
Partners then reviewed and analyzed Concerts current enterprise value based on the current equity value and managements guidance of Concerts cash of $96 million and no debt, or net cash of $96 million, as of
December 31, 2016. The result of the analysis set out a current enterprise value for Concert of $121 million.
Calculation of
Value of Upfront Consideration for the CF Enterprise.
Aquilo Partners calculated an implied present value of the upfront consideration for the CF Enterprise of $158 million, based on managements guidance that there is not
expected to be any tax expense related to the upfront consideration of $160 million and Aquilo Partners assumption and managements guidance of a 5% probability of claims against the $16 million escrow amount over the 18 month
escrow period. Aquilo Partners used a 5% discount rate based on the time value associated with the remaining escrow amount, reflecting the fact that the escrow amount had been adjusted by a probability of claims.
Calculation of Value of Contingent Consideration for
the CF Enterprise.
Aquilo Partners also calculated an implied
probability-adjusted present value of the contingent consideration for the CF Enterprise if the Milestone Events were achieved. The following table sets forth, for the periods indicated, estimates made by management with respect to the timing and
probabilities of achieving the Milestone Events.
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Milestone Event
|
|
Amount
|
|
|
Year of
Achievement
|
|
|
Probability of
Achievement
|
|
Milestone Event 1: Receipt of marketing approval from FDA of a combination treatment regimen for
the treatment of patients with cystic fibrosis that contains
CTP-656
|
|
$
|
50 million
|
|
|
|
2021
|
|
|
|
32.5
|
%
|
|
|
|
|
Milestone Event 2 (and, together with Milestone Event 1, the
Milestone Events
):
First pricing and reimbursement in the first of the United Kingdom, Germany or France with respect to a combination treatment regimen for the treatment of patients with cystic fibrosis that contains
CTP-656
|
|
$
|
40 million
|
|
|
|
2021
|
|
|
|
32.5
|
%
|
Based on these estimates as to the probability of achieving the Milestone Events, Aquilo Partners calculated
the implied
tax-adjusted,
probability-adjusted present value of the contingent consideration to be $11 million,
60
based on a 35% corporate tax rate, which assumes that there are no NOLs remaining to offset the taxes associated with the contingent consideration received, and discounting the resulting
tax-adjusted,
probability-adjusted contingent consideration value using a 12.5% discount rate. Aquilo Partners used a 12.5% discount rate based on the risk and time value associated with the contingent consideration
based on the fact that the contingent consideration amounts had been probability adjusted. Aquilo Partners added the implied
tax-adjusted,
probability-adjusted present value for the contingent consideration of
$11 million to $158 million to derive an implied total value of the upfront consideration and contingent consideration of $169 million.
Sum of the Parts to Enterprise Value Analysis.
Aquilo Partners reviewed, analyzed and compared Concerts current enterprise value
to the sum of implied values for the different assets of Concert. For this analysis, Aquilo Partners assumed that the current enterprise value was comprised equally of the CF Enterprise,
CTP-543,
and
Concerts Partnered Programs. Based on the current enterprise value of $121 million, this assumption implied a value of $40 million each for
CTP-543
and Concerts Partnered Programs,
including
AVP-786,
partnered with Avanir Pharmaceuticals;
JZP-386,
partnered with Jazz Pharmaceuticals; and
CTP-730,
partnered
with Celgene, or, collectively, the
Partnered Programs
. When added to the implied present value of the upfront consideration of $158 million and the implied present value of the contingent consideration of $11 million,
the total value of the upfront consideration and contingent consideration, plus the value of
CTP-543
and Concerts Partnered Programs equaled $250 million. Aquilo compared this value to the current
enterprise value of $121 million. Aquilo Partners also compared the implied present value of the upfront consideration of $158 million and the implied present value of the upfront and contingent consideration of $169 million to the
current enterprise value of $121 million.
|
|
|
|
|
Sum of the Parts
|
|
Value
|
|
Implied Premium to Enterprise Value
|
Upfront consideration
|
|
$158 million
|
|
30%
|
|
|
|
Upfront consideration and contingent consideration
|
|
$169 million
|
|
40%
|
|
|
|
Upfront consideration and contingent consideration, plus
CTP-543
and Concerts Partnered Programs
|
|
$250 million
|
|
106%
|
The following table sets forth the implied premiums to Concerts implied enterprise value.
Sum of the Parts to Equity Value Analysis.
Aquilo Partners reviewed, analyzed and compared Concerts current equity value of
$217 million to the implied total present value of the upfront consideration and contingent consideration, plus Concerts net cash, for a total of $266 million, and the implied total present value of the upfront consideration and
contingent consideration, plus Concerts net cash, plus the value of
CTP-543
and Concerts Partnered Programs, for a total of $346 million. The following table sets forth the implied premiums to
Concerts current equity value.
|
|
|
|
|
Sum of the Parts
|
|
Value
|
|
Implied Premium to Equity Value
|
Upfront consideration and contingent consideration, plus net cash
|
|
$266 million
|
|
22%
|
|
|
|
Upfront consideration and contingent consideration, plus net cash, plus
CTP-543
and Concerts Partnered Programs
|
|
$346 million
|
|
59%
|
61
Comparable Public Company Analysis.
Aquilo Partners reviewed, analyzed and compared
CTP-656
to corresponding publicly available financial information for 20 publicly-traded biotechnology companies in which the companys lead product candidate was in a similar stage of clinical development as
CTP-656.
In selecting these companies, Aquilo Partners identified companies that had a lead product candidate in Phase 2, across all therapeutic areas. The following list sets forth the comparable companies selected
by Aquilo Partners.
|
|
|
Company
|
|
Enterprise Value (
$ millions
)
|
Affimed N.V.
|
|
$ 29
|
Akari Therapeutics, Plc
|
|
$ 25
|
aTyr Pharma, Inc.
|
|
$ 21
|
Bio-Path
Holdings, Inc.
|
|
$ 85
|
Calithera Biosciences, Inc.
|
|
$144
|
Capricor Therapeutics, Inc.
|
|
$ 52
|
Conatus Pharmaceuticals, Inc.
|
|
$ 61
|
Corbus Pharmaceuticals Holdings, Inc.
|
|
$391
|
GeNeuro SA
|
|
$106
|
Innate Immunotherapeutics Limited
|
|
$ 96
|
Leap Therapeutics, Inc.
|
|
$ 64
|
MyoKardia, Inc.
|
|
$229
|
Neuralstem, Inc.
|
|
$ 30
|
Neurotrope, Inc.
|
|
$104
|
ProQR Therapeutics N.V.
|
|
$ 26
|
Protagonist Therapeutics, Inc.
|
|
$148
|
Syros Pharmaceuticals, Inc.
|
|
$175
|
Verona Pharma plc
|
|
$ 42
|
Viralytics Limited
|
|
$143
|
Zynerba Pharmaceuticals, Inc.
|
|
$190
|
Aquilo Partners reviewed the median and mean enterprise values of the selected companies. The result of the
analysis set out an implied enterprise value for the comparable companies in a range of $91 to $108 million.
No company used in any
analysis as a comparison had a lead product candidate identical to
CTP-656
and they all differ in material ways. Accordingly, an analysis of the results described below is not mathematical; rather it involves
complex considerations and judgments concerning differences in financial and operating characteristics of the companies and other factors that could affect the public trading value of the selected companies to which they are being compared. This
analysis yielded a range of enterprise values, and therefore, such implied enterprise value ranges developed from these analyses were viewed by Aquilo Partners collectively and not individually.
62
Comparable Biotechnology Transaction Analysis.
Aquilo Partners reviewed publicly available
information to identify asset purchases and business combinations of biotechnology companies that had its lead product candidate in Phase 2, and were announced since January 1, 2014 across all therapeutic areas. Aquilo Partners utilized this
selection criteria to gather data for a sufficient sample size of transactions that were within the relevant industry and with targets that had a comparable lead asset profile. The following list sets forth the acquirers and targets acquired from
the beginning of 2014 which we refer to as comparable transactions:
|
|
|
|
|
|
|
|
|
Date Announced
|
|
Acquirer
|
|
Target
|
|
Upfront
Value
($ millions)
|
|
11/21/16
|
|
Chiesi Farmaceutici S.p.A.
|
|
Atopix Therapeutics Limited
|
|
|
ND
|
|
11/2/16
|
|
Medivir AB
|
|
TetraLogic Pharmaceuticals Corporation
(1)
|
|
$
|
12
|
|
9/6/16
|
|
Allergan plc
|
|
RetroSense Therapeutics, LLC
(1)
|
|
$
|
60
|
|
8/1/16
|
|
Pfizer Inc.
|
|
Bamboo Therapeutics, Inc.
|
|
$
|
192
|
|
7/5/16
|
|
Bristol-Myers Squibb Company
|
|
Cormorant Pharmaceuticals AB
|
|
$
|
35
|
|
1/11/16
|
|
Roche Holding AG
|
|
Tensha Therapeutics, Inc.
|
|
$
|
115
|
|
1/7/16
|
|
Allergan plc
|
|
Anterios, Inc.
|
|
$
|
90
|
|
11/2/15
|
|
Bristol-Myers Squibb Company
|
|
Cardioxyl Pharmaceuticals, Inc.
|
|
$
|
200
|
|
10/9/15
|
|
Roche Holding AG
|
|
Adheron Therapeutics, Inc.
|
|
$
|
105
|
|
9/8/15
|
|
Purdue Pharma L.P.
|
|
VM Pharma, LLC
(1)
|
|
|
ND
|
|
3/17/15
|
|
Ignyta, Inc.
|
|
Teva Pharmaceutical Industries Limited
(1)
|
|
$
|
15
|
|
1/6/15
|
|
Gilead Sciences, Inc.
|
|
Phenex Pharmaceuticals AG
(1)
|
|
|
ND
|
|
12/18/14
|
|
Merck & Co., Inc.
|
|
OncoEthix SA
|
|
$
|
110
|
|
8/13/14
|
|
Allergan, Inc.
|
|
TARIS Holdings, LLC
(1)
|
|
$
|
68
|
|
6/3/14
|
|
Teva Pharmaceutical Industries Limited
|
|
Labrys Biologics, Inc.
|
|
$
|
200
|
|
5/12/14
|
|
Shire plc
|
|
Lumena Pharmaceuticals, Inc.
|
|
$
|
300
|
|
Aquilo Partners reviewed the range of upfront equity considerations paid to the
target within the comparable transactions set. The result of the analysis set out an implied upfront equity value for the comparable transactions in a range of $105 to $116 million.
Aquilo Partners also reviewed the range of upfront equity considerations paid to the target plus the adjusted milestone consideration paid to
the target or its stockholders within the comparable transactions set. Aquilo Partners assumed a 10% and 20% adjustment factor to the milestone payments associated with each transaction, and added the median upfront equity value to the median
adjusted milestone payments at a 10% and 20% adjustment factor to derive an implied total present deal value for the comparable transactions in a range of $137 to $172 million. The 10% and 20% adjustment factors account for the probability of
success of each milestone achievement based on milestone packages that contain various combinations of development, regulatory, and sales milestones, the present value of the milestone payments, and unknown tax implications when the milestones are
achieved.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ millions)
|
|
|
|
|
|
|
|
|
|
|
Upfront
|
|
Milestones
|
|
10% Adj.
Milestones
|
|
20% Adj.
Milestones
|
|
10% Adj. Total
Deal Value
|
|
20% Adj. Total
Deal Value
|
Median
|
|
$105
|
|
$475
|
|
$48
|
|
$95
|
|
$137
|
|
$172
|
Although the transactions were used for comparison purposes, none of these transactions is directly comparable
to the Asset Sale, and none of the companies in those transactions is directly comparable to Concert or Vertex and none had a lead product candidate directly comparable to
CTP-656.
Accordingly, an analysis of
the
63
results of such a comparison is not purely mathematical, but instead involves complex considerations and judgments concerning differences in historical financial and operating characteristics of
the companies involved and other factors that could affect the acquisition value of such companies or the company to which they are being compared.
CF Enterprise Discounted Cash Flow Analysis.
Aquilo Partners used the financial projections and estimates provided by
Concerts management (see
Certain Prospective Financial Information
beginning on page 65 of this proxy statement for further detail) to perform a discounted cash flow analysis to calculate a range of implied present
values for the CF Enterprise. In conducting this analysis, Aquilo Partners assumed that the CF Enterprise would perform in accordance with these forecasts. Aquilo Partners based its discounted cash flow analysis on various operating assumptions
provided by Concerts management, including assumptions relating to, among other items, revenue, research and development costs, other operating costs, taxes and working capital. Aquilo Partners had conversations with Concerts management
to discuss these projections over the course of its engagement to understand these assumptions underlying the projections. Aquilo Partners analyzed the discounted cash flow analysis from a probability adjusted and unadjusted basis. Based on these
projections, Aquilo Partners calculated the present value of the unlevered free cash flows for the relevant projection period.
The
non-probability
adjusted analysis assumes successfully partnering
CTP-656
Combo Therapy. To date, Concert has not been able to enter into such a partnership. Aquilo Partners
discounted the
non-probability
adjusted free cash flows by a discount rate range of 25% to 30% based on the risk and time value associated with the
non-probability
adjusted projections. This implied a net present value range of $102 million to $167 million.
The probability-adjusted analysis
also assumes successfully partnering
CTP-656
Combo Therapy, although, as noted above, to date, Concert has not been able to enter into such a partnership. Aquilo Partners discounted the probability-adjusted
free cash flows by a discount rate range of 12.5% to 15% based on the risk and time value associated with the probability-adjusted projections. This implied a net present value range of $137 million to $178 million.
Aquilo Partners also analyzed the discounted cash flows assuming no partner for
CTP-656
Combo Therapy.
The following table sets forth the net present value ranges for the
non-probability
and probability-adjusted discounted cash flow analyses.
|
|
|
|
|
Discounted Cash Flow Analysis
|
|
Discount Rate
|
|
Implied Net Present Value
|
Non-probability
adjusted
|
|
25% 30%
|
|
($1) million $18 million
|
|
|
|
Probability-adjusted
|
|
12.5% 15%
|
|
$24 million $38 million
|
Aquilo Partners Relationship
. Aquilo Partners opinion and presentation to the Board was one of
many factors taken into consideration by the Board in deciding to enter into the Asset Purchase Agreement. Consequently, the analyses described above should not be viewed as determinative of the Boards opinion, or that of Concerts
management, with respect to whether the Board would have been willing to agree to different consideration for the CF Enterprise to be received by Concert.
Pursuant to an engagement letter dated as of February 27, 2017, the Board engaged Aquilo Partners to render an opinion to the Board that
the consideration to be received by Concert for the CF Enterprise in accordance with the Asset Purchase Agreement is fair, from a financial point of view to Concert. Aquilo Partners was selected by Concert based on Aquilo Partners
qualifications, expertise and reputation. Pursuant to the terms of the engagement letter, Concert agreed to pay Aquilo Partners a fee of $400,000 upon the delivery of the opinion. In addition, Concert agreed to reimburse Aquilo Partners upon request
for its reasonable
out-of-pocket
expenses, including legal fees, incurred in connection with its engagement and has agreed to indemnify Aquilo Partners for certain
liabilities and expenses arising out of or in conjunction with its rendering its opinion as to the fairness, from a financial point of view, to Concert of the consideration to be received by Concert for all of
64
Concerts right, title and interest in the CF Enterprise. During the two year period prior to March 3, 2017, no material relationship existed between Aquilo Partners or any of its
affiliates and Concert or Vertex pursuant to which compensation was received by Aquilo Partners or any of its affiliates.
Aquilo
Partners, as part of its investment banking business, is continuously engaged in the valuation of businesses and securities in connection with mergers and acquisitions, private placements and valuations for corporate and other purposes.
Certain Prospective Financial Information
The Company does not as a matter of course publicly disclose long-term forecasts or internal projections as to future performance, revenues,
earnings, financial condition or other results due to, among other reasons, the uncertainty of the underlying assumptions and estimates. However, in connection with the Boards consideration of the potential Asset Sale, Company management
prepared unaudited prospective financial information for the CF Enterprise on a stand-alone,
pre-Asset
Sale basis. The Company is electing to provide the unaudited prospective financial information in this
proxy statement to provide the Companys stockholders with access to certain
non-public
unaudited prospective financial information that was made available to the Companys financial advisor in
connection with the Asset Sale. The unaudited prospective financial information was not prepared with a view toward public disclosure and the inclusion of this information should not be regarded as an indication that the Company or any other
recipient of this information considered, or now considers, it to be necessarily predictive of actual future results for the CF Enterprise. Neither the Company nor any of its affiliates assumes any responsibility for the accuracy of this
information. Readers of this proxy statement are cautioned not to place undue reliance on the unaudited prospective financial information. No one has made or makes any representation to any Company stockholder regarding the information included in
the unaudited prospective financial information or the ultimate performance of the Company compared to the information included in the unaudited prospective financial information. This unaudited prospective financial information was not provided to
Vertex.
The unaudited prospective financial information was not prepared with a view toward complying with U.S. generally accepted
accounting principles (
GAAP
), the published guidelines of the SEC regarding projections or the guidelines established by the American Institute of Certified Public Accountants with respect to the preparation or presentation of
prospective financial information. Certain of the unaudited prospective financial information presents financial metrics that were not prepared in accordance with GAAP. These
non-GAAP
financial measures may be
different from
non-GAAP
financial measures used by other companies. The Company has not prepared, and neither our Board nor Aquilo Partners have considered, a reconciliation of these
non-GAAP
financial measures to applicable GAAP financial measures.
There can be no assurance that the
assumptions made in preparing such information will prove accurate or that the projected results reflected therein will be realized. Neither the Companys independent registered public accounting firm, nor any other independent accountants,
have compiled, examined or performed any procedures with respect to the unaudited prospective financial information contained herein, nor have they expressed any opinion or any other form of assurance on such information or its achievability, and
assume no responsibility for the unaudited prospective financial information and disclaim any association with, the prospective financial information. Furthermore, the unaudited prospective financial information does not take into account any
circumstance or event occurring after the date it was prepared or which may occur in the future, and, in particular, does not take into account any revised prospects of the Company or the CF Enterprise, changes in general business, regulatory or
economic conditions, competition or any other transaction or event that has occurred since the date on which such information was prepared or which may occur in the future.
While presented with numeric specificity, the unaudited prospective financial information reflects numerous estimates and assumptions made by
Company management with respect to industry performance and competition, general business, economic, market and financial conditions and matters specific to the Company and the CF Enterprise, all of which are difficult to predict and many of which
are beyond the Companys control.
65
As a result, the unaudited prospective financial information reflects numerous assumptions and estimates as to future events and there can be no assurance that these assumptions will accurately
reflect future conditions, that the unaudited prospective financial information will be realized or that actual results will not be significantly higher or lower than estimated. The unaudited prospective financial information also reflect
assumptions as to certain business decisions that are subject to change, including but not limited to the assumption of successfully partnering
CTP-656
for development as a combination therapy treatment, which
the Company has not yet achieved. In fact, since the date of the preparation of the unaudited prospective financial information, the Company has conducted numerous discussions with potential partners for a combination therapy related to
CTP-656.
To date, all of those discussions have been unsuccessful in generating interest for such a partnership. Since the unaudited prospective financial information covers multiple years, such information by its
nature becomes less predictive with each successive year.
The Companys management prepared unaudited prospective financial
information under two cases reflecting alternative business scenarios, reflected below as the
Non-POS
adjusted Forecast and the
POS-adjusted
Forecast. The Board
considered both of the forecasts in reaching its judgment to accept the proposal from Vertex, and concluded that both forecasts were subject to risk and uncertainty. For example, both of the forecasts assume with 100% certainty that the Company will
successfully partner
CTP-656
for development as a combination therapy treatment. The forecasts do not apply any kind of discount or probability weighting to that assumption. As described above, all discussions
to date with potential partners for a combination therapy related to
CTP-656
have been unsuccessful in generating interest. As a result, the Board recognized that there could be no assurance that the unaudited
prospective financial information will be realized.
The following table presents a summary of the material unaudited prospective
financial information of the CF Enterprise contained in the
Non-POS
adjusted Forecast:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
December (Est.)
|
|
2017
(1)
|
|
|
2018
|
|
|
2019
|
|
|
2020
|
|
|
2021
|
|
|
2022
|
|
|
2023
|
|
|
2024
|
|
|
2025
|
|
|
2026
|
|
|
2027
|
|
|
2028
|
|
|
2029
|
|
|
2030
|
|
Total Net Revenue
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
84
|
|
|
$
|
205
|
|
|
$
|
289
|
|
|
$
|
357
|
|
|
$
|
443
|
|
|
$
|
513
|
|
|
$
|
568
|
|
|
$
|
606
|
|
|
$
|
661
|
|
EBIT
(2)
|
|
($
|
15
|
)
|
|
($
|
29
|
)
|
|
($
|
30
|
)
|
|
($
|
23
|
)
|
|
($
|
5
|
)
|
|
$
|
61
|
|
|
$
|
173
|
|
|
$
|
245
|
|
|
$
|
300
|
|
|
$
|
374
|
|
|
$
|
431
|
|
|
$
|
484
|
|
|
$
|
520
|
|
|
$
|
574
|
|
Tax Expense
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
(73
|
)
|
|
|
(105
|
)
|
|
|
(131
|
)
|
|
|
(151
|
)
|
|
|
(169
|
)
|
|
|
(182
|
)
|
|
|
(201
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax-Adj.
EBIT
|
|
($
|
15
|
)
|
|
($
|
29
|
)
|
|
($
|
30
|
)
|
|
($
|
23
|
)
|
|
($
|
5
|
)
|
|
$
|
61
|
|
|
$
|
173
|
|
|
$
|
172
|
|
|
$
|
195
|
|
|
$
|
243
|
|
|
$
|
280
|
|
|
$
|
315
|
|
|
$
|
338
|
|
|
$
|
373
|
|
Less: Change in Working Capital
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
(7
|
)
|
|
|
(7
|
)
|
|
|
(6
|
)
|
|
|
(5
|
)
|
|
|
(6
|
)
|
|
|
(5
|
)
|
|
|
(3
|
)
|
|
|
(2
|
)
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unlevered Free Cash Flow
(3)
|
|
($
|
15
|
)
|
|
($
|
29
|
)
|
|
($
|
30
|
)
|
|
($
|
23
|
)
|
|
($
|
5
|
)
|
|
$
|
54
|
|
|
$
|
165
|
|
|
$
|
166
|
|
|
$
|
190
|
|
|
$
|
237
|
|
|
$
|
275
|
|
|
$
|
312
|
|
|
$
|
336
|
|
|
$
|
370
|
|
Discounted Cash Flow
|
|
($
|
13
|
)
|
|
($
|
20
|
)
|
|
($
|
16
|
)
|
|
($
|
9
|
)
|
|
($
|
2
|
)
|
|
$
|
13
|
|
|
$
|
30
|
|
|
$
|
23
|
|
|
$
|
20
|
|
|
$
|
20
|
|
|
$
|
17
|
|
|
$
|
15
|
|
|
$
|
13
|
|
|
$
|
11
|
|
The following table presents a summary of the material unaudited prospective financial information of the CF
Enterprise contained in the
POS-adjusted
Forecast:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
December (Est.)
|
|
2017
(1)
|
|
|
2018
|
|
|
2019
|
|
|
2020
|
|
|
2021
|
|
|
2022
|
|
|
2023
|
|
|
2024
|
|
|
2025
|
|
|
2026
|
|
|
2027
|
|
|
2028
|
|
|
2029
|
|
|
2030
|
|
Total Net Revenue
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
27
|
|
|
$
|
67
|
|
|
$
|
94
|
|
|
$
|
116
|
|
|
$
|
144
|
|
|
$
|
167
|
|
|
$
|
185
|
|
|
$
|
197
|
|
|
$
|
215
|
|
EBIT
(2)
|
|
($
|
15
|
)
|
|
($
|
15
|
)
|
|
($
|
15
|
)
|
|
($
|
11
|
)
|
|
($
|
2
|
)
|
|
$
|
20
|
|
|
$
|
56
|
|
|
$
|
79
|
|
|
$
|
98
|
|
|
$
|
121
|
|
|
$
|
140
|
|
|
$
|
157
|
|
|
$
|
169
|
|
|
$
|
186
|
|
Tax Expense
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
(10
|
)
|
|
|
(42
|
)
|
|
|
(49
|
)
|
|
|
(55
|
)
|
|
|
(59
|
)
|
|
|
(65
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax-Adj.
EBIT
|
|
($
|
15
|
)
|
|
($
|
15
|
)
|
|
($
|
15
|
)
|
|
($
|
11
|
)
|
|
($
|
2
|
)
|
|
$
|
20
|
|
|
$
|
56
|
|
|
$
|
79
|
|
|
$
|
88
|
|
|
$
|
79
|
|
|
$
|
91
|
|
|
$
|
102
|
|
|
$
|
110
|
|
|
$
|
121
|
|
Less: Change in Working
Capital
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
(2
|
)
|
|
|
(2
|
)
|
|
|
(2
|
)
|
|
|
(2
|
)
|
|
|
(2
|
)
|
|
|
(2
|
)
|
|
|
(1
|
)
|
|
|
(1
|
)
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unlevered Free Cash Flow
(3)
|
|
($
|
15
|
)
|
|
($
|
15
|
)
|
|
($
|
15
|
)
|
|
($
|
11
|
)
|
|
($
|
2
|
)
|
|
$
|
18
|
|
|
$
|
54
|
|
|
$
|
78
|
|
|
$
|
86
|
|
|
$
|
77
|
|
|
$
|
89
|
|
|
$
|
101
|
|
|
$
|
109
|
|
|
$
|
120
|
|
Discounted Cash Flow
|
|
($
|
14
|
)
|
|
($
|
12
|
)
|
|
($
|
11
|
)
|
|
($
|
7
|
)
|
|
($
|
1
|
)
|
|
$
|
8
|
|
|
$
|
22
|
|
|
$
|
27
|
|
|
$
|
26
|
|
|
$
|
20
|
|
|
$
|
21
|
|
|
$
|
20
|
|
|
$
|
19
|
|
|
$
|
18
|
|
66
(1)
|
2017 estimated unaudited financial information includes forecasts from July 1, 2017 through December 31, 2017, assuming a Closing Date of June 30, 2017.
|
(2)
|
We define EBIT as earnings (or losses) before interest and income taxes. EBIT is a
non-GAAP
measure. The Companys management included EBITDA in the unaudited prospective
financial information because management believed such measure could be useful in evaluating the Asset Sale and other strategic alternatives available to the Company.
Non-GAAP
financial measures should not be
considered in isolation from, or as a substitute for, financial information presented in accordance with GAAP. The Companys calculation of
non-GAAP
measures may differ from others in its industry and
EBIT is not necessarily comparable with similar titles used by other companies.
|
(3)
|
Unlevered free cash flow was derived by Aquilo Partners for purposes of its discounted cash flow analysis from the unaudited prospective financial information as EBIT minus tax expense, as adjusted for estimated
utilization of net operating losses (NOLs), plus depreciation and amortization, minus capital expenditures, and plus or minus, as applicable, changes in working capital. Aquilo Partners assumed the Companys net operating loss
(
NOL
) tax benefit based on the Companys projections that were also used in its analyses, which assumed that $152 million of NOLs as of December 31, 2016 may be applied to the CF Enterprise.
|
Activities of the Company Following the Asset Sale
If the Asset Sale is completed, substantially all of the assets, the goodwill and ongoing business comprising the CF Enterprise will be sold to
Vertex. We will retain all of our other assets, including the assets related to our
CTP-543
business, our Partnered Programs and future product development , whose growth we intend to focus on following the
Asset Sale. We will also retain all debts and liabilities of the Company not assumed by Vertex pursuant to the Asset Purchase Agreement. We intend to use the net proceeds from the Asset Sale for certain expenses incurred due to the Asset Sale for
general working capital purposes.
Certain U.S. Federal Income Tax Considerations of the Asset Sale
The following discussion is a general summary of the anticipated U.S. federal income tax consequences of the Asset Sale. This summary is based
upon the U.S. Internal Revenue Code, its legislative history, currently applicable and proposed Treasury regulations under the Code and published rulings and decisions, all as currently in effect as of the date of this proxy statement, and all of
which are subject to differing interpretations or change, possibly with retroactive effect. No ruling has been sought from the Internal Revenue Service (the
IRS
) with respect to any U.S. federal income tax consequences described
below, and there can be no assurance that the IRS or a court will not take a contrary position. In addition, this summary does not discuss any
non-U.S.,
alternative minimum tax, state or local tax
considerations.
The proposed Asset Sale by us is entirely a corporate action. Our U.S. Stockholders will not realize any gain or loss for
U.S. federal income tax purposes as a result of the Asset Sale. The proposed Asset Sale will be treated as a sale of corporate assets in exchange for cash. The proposed Asset Sale is a taxable transaction for U.S. federal income tax purposes, and we
anticipate that we will recognize a gain for U.S. federal income tax purposes as a result of the Asset Sale. However, if we recognize any gain as a result of the Asset Sale, we currently expect that our tax attributes, including any available net
operating loss carry forwards, will be available to offset all or a portion of our U.S. federal income tax liability resulting from such gain. The determination of whether we will recognize gain or loss on the Asset Sale and whether and to what
extent our tax attributes will be available is complex and is based in part upon facts that will not be known until the completion of the Asset Sale. Therefore, it is possible that we will incur a U.S. federal income tax liability as a result of the
proposed Asset Sale.
Accounting Treatment of the Asset Sale
The Asset Sale will be accounted for as a sale by the Company, as that term is used under generally accepted accounting principles,
for accounting and financial reporting purposes.
No Appraisal or Dissenters Rights
Stockholders may vote against the authorization of the Asset Sale Proposal, but under Delaware law, appraisal or dissenters rights are
not provided to Stockholders in connection with the Asset Sale.
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Interests of Certain Persons in the Asset Sale
The Asset Sale will not constitute a change of control pursuant to certain outstanding employment agreements and our outstanding equity
incentive plan. Accordingly, none of the Companys officers, directors or employees have any interest in, or will receive any special benefit from, the Asset Sale.
Regulatory Matters
Under the HSR Act and
the rules promulgated under that Act by the Federal Trade Commission (the
FTC
), the Asset Sale may not be completed until notifications have been given to the United States Department of Justice (which we refer to as the
Antitrust Division) and the FTC and until the specified waiting period has been terminated or has expired. The initial waiting period is 30 days, but this period may be shortened if the reviewing agency grants early
termination of the waiting period, or it may be lengthened if the reviewing agency determines that further investigation is required and issues a formal request, or second request, for additional information and documentary
material. The Company and Vertex each filed a Premerger Notification and Report Form with the U.S. antitrust authorities pursuant to the HSR Act on March 17, 2017 and requested early termination of the waiting period.
The Asset Purchase Agreement
Below and
elsewhere in this proxy statement is a summary of the material terms of the Asset Purchase Agreement, a copy of which is attached to this proxy statement as
Annex A
and which we incorporate by reference into this proxy statement. We
encourage you to carefully read the Asset Purchase Agreement in its entirety as the summaries contained herein may not contain all of the information about the Asset Purchase Agreement that is important to you.
The Asset Purchase Agreement has been included to provide you with information regarding its terms, and we recommend that you carefully
read the Asset Purchase Agreement in its entirety. Except for its status as a contractual document that establishes and governs the legal relations among the parties thereto with respect to the Asset Sale, we do not intend for its text to be a
source of factual, business or operational information about us. The Asset Purchase Agreement contains representations, warranties and covenants that are qualified and limited, including by information in the disclosure letter referenced in the
Asset Purchase Agreement that the parties delivered in connection with the execution of the Asset Purchase Agreement. Representations and warranties may be used as a tool to allocate risks between the respective parties to the Asset Purchase
Agreement, including where the parties do not have complete knowledge of all facts, instead of establishing such matters as facts. Furthermore, the representations and warranties may be subject to different standards of materiality applicable to the
contracting parties, which may differ from what may be viewed as material to Stockholders. These representations may or may not have been accurate as of any specific date and do not purport to be accurate as of the date of this proxy statement.
Moreover, information concerning the subject matter of the representations and warranties may have changed since the date of the Asset Purchase Agreement and subsequent developments or new information qualifying a representation or warranty may have
been included in this proxy statement. You should not rely on its representations, warranties or covenants as characterizations of the actual state of facts or condition of the Company or any of our affiliates.
The Asset Sale
Acquired Assets
Upon the terms and subject to the conditions of the Asset Purchase Agreement, including the satisfaction of the closing conditions, Vertex will
purchase from the Company the assets related to the synthesis, research and development of compounds as potential therapeutic products for treating cystic fibrosis, including the compound
CTP-656,
which is
referred to as the CF Enterprise. The assets of the Company to be acquired by Vertex pursuant to the Asset Purchase Agreement are referred collectively as the acquired assets, and include:
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all rights to develop, manufacture and commercialize the Transferred Products (as defined below);
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all Intellectual Property related to the Transferred Products that exists now or as of the Closing anywhere in the world (the
Transferred IP
);
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all documentation or other tangible embodiments that comprise, embody, disclose or describe the Transferred IP, except as provided in the Asset Purchase Agreement;
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all rights, title and interest in the contracts relating to the Transferred Products or Transferred IP;
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any and all regulatory approvals granted or issued by, or applied for to any government entity;
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all qualifications, permits, registrations, clearances, applications, submissions, variances, exemptions, filings, approvals and authorizations which relate primarily to the Transferred Products;
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copies of all customer and supplier lists, marketing studies, consultant reports, books and records (financial, laboratory and otherwise), files, invoices, and other materials related to the Transferred Products and
under the Companys control as of the date of the Closing;
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all other records and data related to the Transferred Products and under the Companys control as of the date of the Closing;
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all third-party warranties, indemnities and guarantees relating to any of the acquired assets or the assumed liabilities;
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all claims, defenses and rights of offset or counterclaim relating to any of the acquired assets or the assumed liabilities;
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all of our goodwill associated with or relating to the acquired assets;
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all inventory of Transferred Products and related materials, ingredients and any other raw materials, work in progress materials, packaging and related materials, supplies and other inventories used in the manufacturing
or production of any Transferred Products, except as provided in the Asset Purchase Agreement; and
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deuterated ivacaftor and any other compounds used, planned for use or held for use, in each case, in the ownership, operation or conduct of the CF Enterprise as of the date of the Asset Purchase Agreement and the date
of the Closing; except as provided in the Asset Purchase Agreement (the
Transferred Products
).
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Excluded Assets
Vertex will not purchase, and the Company will retain, all assets, properties,
know-how
and rights of the Company, other than the acquired assets.
License to Certain
Know-How
The Company will grant to Vertex a
non-exclusive,
perpetual, irrevocable, sublicensable, royalty-free
license to the Companys deuterated chemical entity platform, or DCE Platform
®
, for use in the development, manufacture and commercialization of the Transferred Products and other
therapeutic products. However, the Company is only required to disclose to Vertex know-how of the DCE Platform
®
necessary or useful for the ownership, development, manufacture and
commercialization of the Transferred Products.
Assumed Liabilities
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Other than the following specified liabilities related to the acquired assets, referred to in this proxy statement as the assumed liabilities, the Asset Purchase Agreement expressly provides that Vertex will not assume
any other of our liabilities. The assumed liabilities are:
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all liabilities relating to, arising out of, based upon or resulting from the use, ownership, possession or operation of the acquired assets by Vertex or its affiliates after the Closing;
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our liabilities and obligations under certain assumed contracts and permits and arising and to be performed only on or after the Closing Date; and
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all liabilities for taxes attributable to (i) a tax period that begins after the Closing Date and (ii) the portion of a taxable period that begins before the Closing Date and ends after the Closing Date that
begins after the Closing Date.
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Excluded Liabilities
We will retain all liabilities other than the assumed liabilities, including the following specified liabilities:
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liabilities identified as excluded liabilities in the seller disclosure letter;
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any indebtedness of us or any of our affiliates;
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any expenses incurred by, or for the benefit of, us or any of our affiliates in connection with the negotiation and preparation of the Asset Purchase Agreement and the consummation and performance of the related
transactions, including legal and accounting and other professional fees and expenses; and
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any liability incurred in connection with the previously planned open-label Phase 2 clinical trial of
CTP-656
in Europe.
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Consideration to be Received by the Company
At the Closing, Vertex will pay a cash payment to us of $160 million (less $16 million to be held in escrow for eighteen months to
satisfy potential indemnification claims). After the Closing, Vertex will be required to make contingent cash payments of up to $90 million in connection with, and upon the completion of, certain milestone events related to (A) receipt of
marketing approval from the FDA of a combination treatment regimen for the treatment of patients with cystic fibrosis that contains
CTP-656
and (B) completion of a pricing and reimbursement agreement in
the first of the United Kingdom, Germany or France with respect to a combination treatment regimen for the treatment of patients with cystic fibrosis that contains
CTP-656.
Vertex has no obligations under the
Asset Purchase Agreement to undertake any efforts to achieve these milestone events.
Indemnification of Vertex
Pursuant to the Asset Purchase Agreement, we will indemnify Vertex and its affiliates, and their respective officers, directors, affiliates,
stockholders, members, partners and each of the heirs, executors, successors and assigns of any of the foregoing, collectively referred to in this proxy statement as Vertex indemnified parties, against any and all claims, actions, causes of action,
judgments, awards, penalties, liabilities, losses, costs or damages, including reasonable fees and expenses of attorneys, accountants and other professional advisors, collectively referred to in this proxy statement as damages, resulting from or
arising out of:
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any breach of any warranty or representation made by us in the Asset Purchase Agreement or in our certificate delivered at the Closing;
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any breach or failure by us to perform any of our obligations, agreements or covenants in the Asset Purchase Agreement or in any other related transaction document;
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any failure by us to pay, satisfy or perform the excluded liabilities;
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any failure by us in connection with certain specified tax obligations;
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any failure by us, or claim by any of our creditors that we have failed to comply with the provisions of any applicable bulk sales, bulk transfer or similar laws; or
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any liability, including product liability, associated with the open-label Phase 2 clinical trial of
CTP-656
in Europe, including all costs associated with any termination of such
clinical trial.
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Generally, our maximum aggregate liability for indemnification claims for breaches of our
representations, other than for breaches of certain fundamental representations, intentional misrepresentations, fraud or willful misconduct, is limited to the escrow amount. Under the Asset Purchase Agreement, we will not be obligated to indemnify
Vertex indemnified parties for breaches of our representations and warranties, other than for certain fundamental representations, intentional misrepresentations, fraud or willful misconduct, until the individual amount of damages suffered by a
indemnified party with respect to an individual claim exceeds $50,000 and the aggregate amount of damages suffered by such Vertex indemnified party exceeds $1.6 million, whereupon the Vertex indemnified party will be indemnified for all
damages, including all amounts up to the $1.6 million threshold). Our maximum aggregate liability for all other indemnification claims (including claims for breaches of our fundamental representations), other than for breaches of fraud or
willful misconduct, is limited to the sum of $160 million and any contingent payment made pursuant to the Asset Purchase Agreement. Under the Asset Purchase Agreement, determinations of any inaccuracy in or breach of certain of our
representations and warranties for purposes of indemnification claims shall generally be made as if those representations and warranties were not qualified by the term Seller Material Adverse Effect or other materiality threshold or
qualifier. Except for claims alleging fraud or intentional or willful misconduct, and except for any rights Vertex may have for specific performance or other equitable remedies, after the Closing of the Asset Sale, indemnification pursuant to the
Asset Purchase Agreement shall be the sole and exclusive remedy with respect to any and all claims relating to the Asset Purchase Agreement.
Our indemnification obligations for breaches of representations or warranties under the Asset Purchase Agreement generally terminate 18 months
following the Closing Date, except for claims alleging a misrepresentation or breach of certain fundamental representations, which survive until 60 days following the applicable statute of limitations.
Under the Asset Purchase Agreement, Vertex may offset any claim for indemnification made by a Vertex indemnified party against the contingent
payments then or in the future payable by Vertex to us.
Indemnification of the Company
Pursuant to the Asset Purchase Agreement, Vertex will indemnify us and our affiliates, and our respective stockholders, officers, directors,
employees, agents, representatives, successors and permitted assignees, collectively referred to in this proxy statement as the Company indemnified parties, any and all damages resulting from or arising out of:
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any breach of any warranty or representation made by Vertex in the Asset Purchase Agreement or in Vertexs certificate delivered at the Closing;
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any breach or failure by Vertex to perform any of its obligations, agreements or covenants in the Asset Purchase Agreement or in any other related transaction document;
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any failure by Vertex to pay, satisfy or perform the assumed liabilities; or
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any failure by Vertex in connection with certain specified tax obligations.
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Vertexs
indemnification obligations for breaches of representations or warranties under the Asset Purchase Agreement generally terminate 18 months following the Closing Date.
Representations and Warranties
The Asset
Purchase Agreement contains certain representations and warranties made by us to Vertex regarding, among other things:
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corporate existence, qualification and good standing;
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title to the acquired assets and freedom of the acquired assets from encumbrances;
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corporate power and authority to enter into and perform the Asset Sale and the execution, delivery and enforceability of the Asset Purchase Agreement and other related transaction documents;
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required consents or approvals;
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binding effect of the Asset Purchase Agreement and other related transaction documents;
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absence of conflicts with or defaults under organizational documents, other contracts and applicable law or acceleration of material obligations;
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requirement of no other Stockholder vote;
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absence of need to file or obtain any clearance or exemption from any governmental entity related to acquired assets;
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absence of certain material adverse changes or events affecting the CF Enterprise since January 1, 2016;
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intellectual property, including certain representations and warranties related to registered intellectual property, and the absence of infringements and third party license grants;
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absence of certain litigation;
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FDA and regulatory matters;
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product liability, including an absence of design defects;
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compliance with applicable laws;
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absence of adverse impact on governmental permits;
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compliance with anti-bribery laws;
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maintenance of books, records and accounts;
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brokers or finders fees, and other fees;
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sufficiency of the acquired assets for the operation of the CF Enterprise;
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Board approval of the Asset Purchase Agreement and the Asset Sale and recommendation to the Stockholders to approve the Asset Sale;
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accuracy of information supplied by the Company for inclusion in the proxy statement; and
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absence of misrepresentations.
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In addition, Vertex made representations and warranties to us
regarding, among other things:
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corporate existence, qualification and good standing;
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corporate power and authority to enter into and perform the Asset Sale and the execution, delivery and enforceability of the Asset Purchase Agreement and other related transaction documents;
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required consents or approvals;
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binding effect of the Asset Purchase Agreement and other related transaction documents;
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absence of conflicts with or defaults under organizational documents, other contracts and applicable law or acceleration of material obligations;
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absence of need to file or obtain any clearance or exemption from any governmental entity related to acquired assets;
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brokers or finders fees, and other fees;
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absence of certain litigation;
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sufficiency of funds to perform all obligations under the Asset Purchase Agreement;
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solvency of Vertex; and
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accuracy of information supplied by Vertex for inclusion in the proxy statement.
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Some of our
representations and warranties contained in the Asset Purchase Agreement are qualified by materiality or possess a Seller Material Adverse Effect standard. For purposes of our representations and warranties in the Asset Purchase Agreement,
Seller Material Adverse Effect
means any effect that is materially adverse to the ability of the Company to consummate the transactions contemplated by the Asset Purchase Agreement or the condition or ownership, operation or
development of the acquired assets, taken as a whole, other than (i) the announcement, pendency or consummation of the Asset Purchase Agreement or the transactions contemplated hereby; (ii) any action taken by the Company with
Vertexs written consent, or the failure of the Company to take an action prohibited by the Asset Purchase Agreement; (iii) any event generally affecting the industries in which the Company operates relating to the acquired assets or in
the economy generally or other general business, financial or market conditions; (iv) changes affecting the national or international general economic, political, legal or regulatory conditions; (v) changes in laws after the date hereof
applicable to the acquired assets; or (vi) national or international political conditions or instability, except, in each of clauses (iii), (iv), (v), or (vi) above, to the extent such effects have a disproportionate impact on the acquired
assets and the assumed liabilities, taken as a whole, relative to other persons owning assets similar to the acquired assets, in the industry or markets in which the Company operates.
Certain of Vertexs representations and warranties contained in the Asset Purchase Agreement are qualified by materiality or possess a
Material Adverse Effect standard. For purposes of Vertexs representations and warranties in the Asset Purchase Agreement,
Buyer Material Adverse Effect
means any effect that is materially adverse to the ability of Vertex to
consummate the transactions contemplated by the Asset Purchase Agreement.
Covenants Relating to the Conduct of the Business
We have agreed that until the Closing of the Asset Sale, we will use commercially reasonable efforts to preserve the CF Enterprise and operate
the acquired assets in the ordinary course consistent with past practice and we will refrain from taking certain actions, including, among other things:
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materially deviating from the planned
re-stocking
of transferred inventory, unless such deviation is the result of a circumstance outside of the Companys control;
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selling, leasing, abandoning or otherwise disposing of, or permitting any
non-permitted
encumbrance on, any acquired asset, other than inventory in the ordinary course of
business;
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acquiring any properties or assets that constitute acquired assets, either tangible or intangible, other than in the ordinary course of business;
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settling or commencing any claim, complaint, action, suit, proceeding, hearing or investigation, or waiving any claims or rights, in either case in a manner that would constitute an assumed liability or with respect to
the acquired assets, subject to certain exceptions;
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failing to pay in the ordinary course of business all payables and other liabilities that would constitute assumed liabilities, when due;
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entering into, extending, modifying, amending, terminating or renewing or waiving any right or remedy under any assigned contract (or any contract that would be an assigned contract if entered into prior to the date of
the Asset Purchase Agreement) or knowingly taking, or failing to take, any action that would constitute a breach, violate the terms of, or result in a default under, or give to others any rights of termination, amendment, acceleration or
cancellation of any assigned contract;
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terminating or materially modifying any ongoing clinical trial with respect to the Transferred Products, except as otherwise permitted or required under the Asset Purchase Agreement;
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taking any action which would reasonably be likely to impair Vertexs rights in the acquired assets;
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failing to maintain material insurance policies currently maintained by or on behalf of the Company or covering the acquired assets or the assumed liabilities unless comparable replacement policies with substantially
similar coverage areas and amounts are procured;
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failing to comply with all laws applicable to the acquired assets and the assumed liabilities in all material respects;
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terminating or failing to maintain or renew any transferred permits;
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disposing of or permitting to lapse any Transferred IP; or
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entering into any agreement, or otherwise becoming obligated, to do any of the foregoing actions.
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We may, however, take any of the above prohibited actions with Vertexs written consent.
We have also agreed to take certain actions, including, among other things, to:
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keep Vertex informed of all material developments relevant to the ownership, development, manufacture, commercialization and operation of the acquired assets and its ability to consummate the Asset Sale; and
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provide Vertex with reasonable access to premises, properties, financial and accounting records, employees, contracts, and other records and documents, of or pertaining to the CF Enterprise, the acquired assets and the
assumed liabilities.
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Both we and Vertex have agreed to take certain actions, including, among other things, to:
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promptly notify the other party after gaining knowledge of certain material events provided in the Asset Purchase Agreement;
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make all necessary, and reasonably cooperate with and provide assistance and information to the other party in connection with making, regulatory filings;
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inform the other party about any material communication concerning any regulatory filings; and
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not acquire or agree to acquire any business or assets which could reasonably be expected to increase the risk of not obtaining the applicable consent, clearance, approval, authorization or waiver under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
HSR Act
) or any other antitrust law in connection with the Asset Purchase Agreement.
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No Solicitation/Change of Recommendation
Until the earlier to occur of the Closing or the termination of the Asset Purchase Agreement, we have agreed that we will not, and we will
cause our subsidiaries, officers, directors, employees, consultants, advisors and any other persons acting on our behalf not to, directly or indirectly, encourage, solicit, initiate, knowingly encourage
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or knowingly facilitate, or furnish or disclose
non-public
information in furtherance of, any inquiries that would reasonably be expected to lead to, or
the making of any proposal or offer to implement, any Alternative Transaction, or negotiate or otherwise engage in discussions with, or provide any information to, any third party concerning an Alternative Transaction. Under the Asset Purchase
Agreement, an Alternative Transaction is defined to mean (i) any sale, lease, contribution or other disposition, directly or indirectly, to any third party of acquired assets (other than sales, dispositions or transfers in the ordinary course),
or beneficial ownership of 15% or more of the combined voting securities of the Company (excluding voting securities acquired in open market purchases), or (ii) any issuance, sale or other disposition, directly or indirectly, to any third party
of securities (or options, rights or warrants to purchase, or securities convertible into or exchangeable for, such securities) representing 15% or more of the combined voting securities of the Company (excluding voting securities acquired in open
market purchases), in each case other than transactions contemplated by the Asset Purchase Agreement.
We are required to notify Vertex
within 24 hours of any inquiries, proposals or offers received by, or any discussions or negotiations sought to be initiated with the Company or any of its representatives concerning any Alternative Transaction. However, at any time prior to
obtaining the Requisite Vote, we may furnish or make available any information or data pertaining to us or the CF Enterprise to, or enter into or participate in discussions or negotiations with, any party that makes a bona fide written proposal
relating to an Alternative Transaction that was not solicited after the date of the Asset Purchase Agreement; provided (i) that such proposal did not result from a breach of our
non-solicitation
covenants
and (ii) our Board, after consultation with its outside legal counsel determines in good faith that the Alternative Transaction constitutes, or would reasonably be expected to lead to, a Superior Proposal, and that the failure to furnish or
make available information or data or enter into or participate in discussions or negotiations would be reasonably likely to be inconsistent with our Boards fiduciary duties. Prior to furnishing or making available any such
non-public
information to the party, we must receive from the party an executed confidentiality agreement. The Company must keep Vertex reasonably informed, on a reasonably prompt basis, of the status and material
terms of any such proposals or offers (including any material developments) in respect of any discussions or negotiations with such party.
Under the Asset Purchase Agreement, a Superior Proposal means any bona fide written proposal made to the Company by any third party not
resulting from a breach of the Companys nonsolicitation obligations with respect to any Alternative Transaction or any purchase or acquisition (i) involving the acquired assets or more than 50% of the voting power of the Companys
common stock, (ii) that is on terms that our Board determines in good faith (after consultation with its financial advisors and outside legal counsel) would, if consummated, result in a transaction financially more favorable to our Stockholders
than the transactions contemplated by the Asset Purchase Agreement (taking into account any proposal by Vertex to amend the terms of the Asset Purchase Agreement); (iii) with respect to which the cash consideration and other amounts (including costs
associated with the proposed acquisition) payable at the Closing are subject to fully committed financing from recognized financial institutions; and (iv) that is reasonably likely to receive all required governmental approvals on a timely
basis and otherwise reasonably capable of being completed within a reasonable period of time on the terms proposed, taking into account all financial, regulatory, legal and other aspects of such proposal.
We are required to (i) include in this proxy statement our Boards recommendation that our Stockholders authorize the Asset Sale,
(ii) use our reasonable best efforts to solicit and obtain the Requisite Vote at the Annual Meeting, and (iii) not withhold, withdraw, amend, modify or qualify (or publicly propose to or publicly state that we intend to withdraw, amend,
modify or quantify) in any manner adverse to our Boards recommendation that our Stockholders authorize the Asset Sale (collectively, a
Change of Recommendation
).
However, at any time prior to obtaining the Requisite Vote, our Board may make a Change of Recommendation and terminate the Asset Purchase
Agreement following receipt of an unsolicited bona fide written proposal for an Alternative Transaction after the date of the Asset Purchase Agreement, which our Board determines in good faith by resolution duly adopted after consultation with its
outside legal counsel is a Superior Proposal, if our Board determines in good faith after consultation with its outside legal counsel that such action
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would be reasonably likely to be inconsistent with its fiduciary duties and the Company has complied in all material respects with its
non-solicitation
obligations.
In order for our Board to exercise its right to make a Change of Recommendation and terminate the Asset Purchase Agreement,
we must have (i) complied with our non-solicitation obligations, (ii) provided to Vertex five business days prior written notice of our Boards intentions, specifying their reasons and summarizing the material terms and
conditions of the Alternative Transaction and the identity of the person proposing the Alternative Transaction, and (iii) provided to Vertex all materials and information provided to the party making the Superior Proposal. To the extent Vertex
wants to negotiate, we are also required to negotiate in good faith with Vertex during the five business days notice period to enable Vertex to propose revisions to the terms of the Asset Purchase Agreement to cause the Alternative Transaction
to no longer constitute a Superior Proposal. If the person proposing the Alternative Transaction proposes any material amendment to the proposals terms, we must provide Vertex with another five business days prior written notice and an
additional three business day period to negotiate with us.
Additionally, at any time prior to obtaining the Requisite Vote, our Board may
make a Seller Change of Recommendation in response to a material event that (i) affects or would reasonably be expected to affect the acquired assets taken as a whole, (ii) was not known to our Board prior to the date of the Asset Purchase
Agreement (and which could not have become known through any further reasonable investigation, discussion, inquiry or negotiation with respect to any event, fact, circumstance, development or occurrence known to the Company as of the date of the
Asset Purchase Agreement), (iii) becomes known to our Board, (iv) does not relate to or involve an Alternative Transaction and (v) is not a result of a material breach of this Agreement by the Company (such event, a
Seller
Intervening Event
) if our Board determines in good faith after consultation with its outside legal counsel that such action would be reasonably likely to be inconsistent with its fiduciary duties and the Company has complied in all
material respects with its
non-solicitation
obligations.
In order for our Board to exercise its
right to make a Change of Recommendation in connection with a Seller Intervening Event, we must have provided to Vertex five business days prior written notice of our Boards intention, specifying the material facts and circumstances
relating to such Seller Intervening Event. To the extent Vertex wants to negotiate, we are also required to negotiate in good faith with Vertex during the five business days notice period to enable Vertex to propose revisions to the terms of
the Asset Purchase Agreement in a manner that obviates the need to effect a Change of Recommendation. If there is any change to the material facts or circumstances relating to a Seller Intervening Event, we must provide Vertex with another five
business days prior written notice and an additional three business day period to negotiate with us.
Stockholders Meeting
We have agreed to convene and hold the Annual Meeting as promptly as reasonably practicable following the date of the Asset Purchase Agreement.
We, through our Board, are required to recommend that our Stockholders authorize the Asset Sale pursuant to the Asset Purchase Agreement and include the recommendation in this proxy statement.
Restrictive Covenants
We have agreed,
for a period of five years following the Closing, not to directly or indirectly anywhere in the world, acquire or develop, manufacture or commercialize any compound or product or file any intellectual property related thereto, in each case with the
intention of treating cystic fibrosis, and will not control, advise, enable, provide services to, fund or guarantee the obligations of, any third party engaged in, or planning to engage in, any of the foregoing; provided that we will be permitted to
continue to develop, manufacture, and commercialize certain products which include compounds that are solely intended for use as a treatment of antibacterial infections in patients with cystic fibrosis. Both the Company and Vertex have also agreed
not to, directly or indirectly, solicit for employment or employ or cause to leave the employ of the other party or any of its affiliates, any employee of the other party or its affiliates, without obtaining the prior written consent of the other
party, for a period of twelve months after the earlier of (i) the termination of the Asset Purchase Agreement and (ii) the Closing.
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Filings, Consents and Regulatory Approvals
We and Vertex have agreed to use commercially reasonable efforts to obtain all necessary consents, waivers, authorizations and approvals of all
governmental and regulatory authorities and other parties, required in connection with the Asset Sale, and prepare and file any documents required to be submitted to governmental and regulatory authorities to obtain any consents or approvals that
may be required.
We and Vertex have agreed to cooperate and coordinate in all respects in the making of regulatory filings and in
connection with resolving any investigation, request or other inquiry of any governmental entity with respect to any such filing.
Vertex
may not extend any waiting period under the HSR Act or any other antitrust laws or enter into any agreement with the FTC, the U.S. Department of Justice or any other governmental entity not to consummate the transactions contemplated by the Asset
Purchase Agreement, except with our prior written consent.
Vertex is not required to agree to any terms or conditions as a condition to,
or in connection with, obtaining any antitrust approval that would (i) impose any limitations on Vertexs ownership or operation of all or any portion of the acquired assets or all or any portion of its or its subsidiaries,
businesses or assets, or compel Vertex or any of its subsidiaries to dispose of or hold separate all or any portion of the acquired assets or any portion of its or its subsidiaries, businesses or assets, (ii) impose any limitations on
Vertexs ability to acquire or hold or to exercise full rights of ownership of the acquired assets, (iii) impose any obligations on Vertex or any of its subsidiaries in respect of or relating to Vertexs or any of its
subsidiaries facilities, operations, places of business, employment levels, products or businesses, (iv) require Vertex or any of its subsidiaries to make any payments or (v) impose any other obligation, restriction, limitation,
qualification or other condition on Vertex or any of its subsidiaries (other than, with respect to clauses (iii), (iv) and (v), such terms or conditions as are reasonable and relate to the ordinary course and that are imposed by a governmental
entity with power and authority to grant antitrust approvals, and which, individually or in the aggregate, do not competitively disadvantage Vertex or any of its subsidiaries) (any such term or condition in (i) through (v), a
Burdensome Term or Condition
).
Neither the Company nor any of our subsidiaries may agree to any obligation,
restriction, requirement, limitation, qualification, condition, remedy or other action relating to antitrust approvals without Vertexs prior written consent, provided that (i) any failure by us to agree to any such obligation,
restriction, requirement, limitation, qualification, condition, remedy or other action by reason of Vertex withholding its written consent from us to do so will not constitute a breach of the regulatory covenant and (ii) Vertex will be required
to provide its written consent to us agreeing to any such obligation, restriction, requirement, limitation, qualification, condition, remedy or other action to the extent it would not, individually, or together with any other such obligation,
restriction, requirement, limitation, qualification, condition, remedy or other action, impose a Burdensome Term or Condition.
Use of Names
At or promptly following the Closing, we are required to cease to use
CTP-656
and any name confusingly
similar thereto (collectively, the
Restricted Names
) and any trademarks, trade names, trade dress, service marks and logos that use or incorporate any Restricted Name.
Expenses
Each party has agreed to pay
its own expenses relating to the Asset Sale and the other transactions contemplated by the Asset Purchase Agreement, including, the fees and expenses of their respective counsel and financial advisors.
77
Conditions to the Asset Sale
Our obligation to effect the Asset Sale is subject to the satisfaction or waiver of certain conditions, including:
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(i) Vertexs fundamental representations and warranties in the Asset Purchase Agreement are true and correct (disregarding all qualifications and exceptions as to materiality or Buyer Material Adverse Effect
contained in such representations or warranties) in all material respects on and as of the date of the Asset Purchase Agreement and on and as of the Closing Date (except that the accuracy of Vertexs representations and warranties that speak as
of a specified date will be determined as of that date), and (ii) all of Vertexs other representations and warranties in the Asset Purchase Agreement are true and correct (disregarding all qualifications and exceptions as to materiality
or Buyer Material Adverse Effect contained in such representations or warranties) on and as of the date of the Asset Purchase Agreement and on and as of the Closing Date (except that the accuracy of Vertexs representations and warranties that
speak as of a specified date will be determined as of that date), except for failures of such representations and warranties to be true and correct as to matters that would not reasonably be expected to have a Buyer Material Adverse Effect;
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no order, stipulation or injunction by any governmental entity is in effect which prevents, makes illegal, or limits the consummation of any of the transactions contemplated by the Asset Purchase Agreement, and no
action, suit or proceeding is pending by or before any governmental entity seeking an order, stipulation or injunction seeking to enjoin, restrain or otherwise prevent or prohibit the consummation of, or limit, any of the transactions contemplated
by the Asset Purchase Agreement;
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no law has been enacted, promulgated or deemed applicable to the transactions contemplated by the Asset Purchase Agreement by any governmental entity that prevents the consummation of such transactions or has the effect
of making such consummation illegal or otherwise prohibiting, restraining or enjoining such consummation;
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all waiting periods under the HSR Act and any other applicable antitrust laws have been terminated or have expired;
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Vertex has performed and complied in all material respects with all agreements and covenants required by the Asset Purchase Agreement to be
performed or complied with by it prior to or at the Closing;
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our Stockholders must have authorized the Asset Sale; and
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Vertex has executed and delivered certain transaction documents required under the Asset Purchase Agreement.
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The obligation of Vertex to effect the Asset Sale is subject to the satisfaction or waiver of certain conditions, including:
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(i) each of our fundamental representations and warranties in the Asset Purchase Agreement are true and correct (disregarding all qualifications and exceptions as to materiality or Seller Material Adverse Effect
contained in such representations or warranties) in all material respects on and as of the date of the Asset Purchase Agreement and on and as of the Closing Date (except that the accuracy of our representations and warranties that speak as of a
specified date will be determined as of that date), and (ii) that all of our other representations and warranties in the Asset Purchase Agreement are true and correct (disregarding all qualifications and exceptions as to materiality or Seller
Material Adverse Effect contained in such representations and warranties) on and as of the date of the Asset Purchase Agreement and on and as of the Closing Date (except that the accuracy of our representations and warranties that speak as of a
specified date will be determined as of that date), except for failures of such representations and warranties to be true and correct as to matters that would not reasonably be expected to have a Seller Material Adverse Effect;
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no order, stipulation or injunction by any governmental entity is in effect which prevents, makes illegal, or
limits the consummation of any of the transactions contemplated by the Asset Purchase
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Agreement, and no action, suit or proceeding is pending by or before any governmental entity seeking an order, stipulation or injunction seeking to enjoin, restrain or otherwise prevent or
prohibit the consummation of, or limit, any of the transactions contemplated by the Asset Purchase Agreement;
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no law has been enacted, promulgated or deemed applicable to the transactions contemplated by the Asset Purchase Agreement by any governmental entity that prevents the consummation of such transactions or has the effect
of making such consummation illegal or otherwise prohibiting, restraining or enjoining such consummation;
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all waiting periods under the HSR Act and any other applicable antitrust laws have been terminated or have expired;
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we must have performed and complied in all material respects with all agreements and covenants required by the Asset Purchase Agreement to be performed or complied with by us prior to or at the Closing;
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our Stockholders must have authorized the Asset Sale;
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we must have obtained certain specified third party consents;
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we must have executed and delivered certain transaction documents required under the Asset Purchase Agreement;
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since the date of the Asset Purchase Agreement there shall not have occurred any Seller Material Adverse Effect;
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no antitrust approval may, individual or in the aggregate, impose any Burdensome Term or Condition; and
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we must have a minimum quantity of certain transferred inventory.
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Termination
The Asset Purchase Agreement may be terminated by Vertex under certain circumstances, including:
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if the Closing does not occur by October 31, 2017, except that Vertex may not terminate the Asset Purchase Agreement under these circumstances if Vertex has materially breached any representation, warranty,
covenant or other obligation under the Asset Purchase Agreement in any manner that has caused or proximately contributed to the failure to consummate the Asset Sale by that date;
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due to the
non-satisfaction
of the Closing condition requiring that (i) no order, stipulation or injunction by any governmental entity may be in effect which prevents, makes
illegal, or limits the consummation of any of the transactions contemplated by the Asset Purchase Agreement, and such order, stipulation or injunction, or (ii) no law has been enacted, promulgated or deemed applicable to the transactions
contemplated by the Asset Purchase Agreement by any governmental entity that prevents the consummation of such transactions or has the effect of making such consummation illegal or otherwise prohibiting, restraining or enjoining such consummation,
in each case, under clauses (i) and (ii), has become final and
non-appealable,
except that Vertex may not terminate the Asset Purchase Agreement under these circumstances if Vertex has materially breached
its obligations under the Asset Purchase Agreement in any manner that has caused or proximately contributed to such order, stipulation or injunction (or the failure of such order, stipulation or injunction to be lifted);
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if we have breached in any material respect any representation, warranty, covenant or agreement in the Asset Purchase Agreement which breach would cause certain of the conditions to Vertexs obligation to
consummate the Asset Sale not to be satisfied and cannot be or has not been cured within 30 days after the delivery of notice of such breach to us, except that Vertex may not terminate the Asset Purchase Agreement under these circumstances if, at
the time of termination, Vertex is in material breach of any of its representations, warranties, covenants or agreements under the Asset Purchase Agreement;
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within five business days following the
30-day
cure period referenced immediately above, upon Vertexs receipt of a supplement or amendment to the seller disclosure letter,
if such supplement or amendment gives rise to a breach that is not cured within the cure period;
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if our Board fails to recommend that our Stockholders vote in favor of the Asset Sale; effects a Change of Recommendation, authorizes, approves or recommends to our Stockholders, or otherwise authorizes, approves or
publicly recommends, an Alternative Transaction; or fails to publicly recommend that our Stockholders vote in favor of the Asset Sale within ten days after a written request by Vertex that we so recommend following our receipt of an Alternative
Transaction;
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if we materially breach the
non-solicitation
covenant or the Stockholder meeting covenant; or
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if we do not obtain the Requisite Vote at the Annual Meeting.
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The Asset Purchase Agreement
may also be terminated by us under certain circumstances, including:
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if the Closing does not occur by October 31, 2017, except that we may not terminate the Asset Purchase Agreement under these circumstances if we have materially breached any representation, warranty, covenant or
other obligation under the Asset Purchase Agreement in any manner that has caused or proximately contributed to the failure to consummate the Asset Sale by that date;
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due to the
non-satisfaction
of the Closing condition requiring that (i) no order, stipulation or injunction by any governmental entity may be in effect which prevents, makes
illegal, or limits the consummation of any of the transactions contemplated by the Asset Purchase Agreement, and such order, stipulation or injunction, or (ii) no law has been enacted, promulgated or deemed applicable to the transactions
contemplated by the Asset Purchase Agreement by any governmental entity that prevents the consummation of such transactions or has the effect of making such consummation illegal or otherwise prohibiting, restraining or enjoining such consummation,
in each case, under clauses (i) and (ii), has become final and
non-appealable,
except that we may not terminate the Asset Purchase Agreement under these circumstances if we have materially breached our
obligations under the Asset Purchase Agreement in any manner that has caused or proximately contributed to such order, stipulation or injunction (or the failure of such order, stipulation or injunction to be lifted);
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if Vertex has breached in any material respect any representation, warranty, covenant or agreement in the Asset Purchase Agreement which breach would cause certain of the conditions to our obligation to consummate the
Asset Sale not to be satisfied and cannot be or has not been cured within 30 days after the delivery of notice of such breach to Vertex, except that we may not terminate the Asset Purchase Agreement under these circumstances if, at the time of
termination, we are in material breach of any of its representations, warranties, covenants or agreements under the Asset Purchase Agreement;
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provided that we have complied with our
non-solicitation
covenant and Stockholder meeting covenant, at any time prior to obtaining the Requisite Vote at the Annual Meeting or at
any adjournment or postponement of the Annual Meeting, in order to concurrently enter into a binding agreement for an Alternative Transaction that constitutes a Superior Proposal, if prior to or concurrently with such termination, we pay the
Termination Fee (discussed below); or
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if we do not obtain the Requisite Vote at the Annual Meeting.
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Vertex and the Company may also
terminate the Asset Purchase Agreement by their mutual written consent.
Termination Fee
If the Asset Purchase Agreement is terminated, it will be of no further force or effect without liability of any party to each other party to
the Asset Purchase Agreement, except as described below. No such termination will relieve any party of any liability for fraud or willful or intentional misconduct.
80
If the Asset Purchase Agreement is terminated:
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by Vertex because (1) our Board fails to recommend that our Stockholders vote in favor of the Asset Sale; effects a Change of Recommendation, authorizes, approves or recommends to our Stockholders, or otherwise
authorizes, approves or publicly recommends, an Alternative Transaction; or fails to publicly recommend that our Stockholders vote in favor of the Asset Sale within ten days after a written request by Vertex that we do so following our receipt of an
Alternative Transaction; or (2) we breach our
non-solicitation
covenant and Stockholder meeting covenant; then the Company will pay Vertex within two business days following the termination of the Asset
Purchase Agreement the Termination Fee;
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(1) by Vertex or the Company because the Closing has not occurred by October 31, 2017, (2) the vote to obtain the Requisite Vote at the Annual Meeting has not occurred, (3) after the date of the Asset Purchase
Agreement and prior to the date of the termination of the Asset Purchase Agreement, an acquisition proposal will have been announced or otherwise made publicly known and not withdrawn; and (4) within 12 months after the date of such
termination, the Company consummates an Alternative Transaction, provided, that each reference to 15% in the definition of Alternative Transaction will be replaced with 50%; then the Company will pay Vertex, simultaneously with the consummation of
such Alternative Transaction, the Termination Fee.
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(1)(a) by Vertex because of our breach in any material respect of any representation, warranty, covenant or agreement in the Asset Purchase Agreement which breach would cause certain of the conditions to Vertexs
obligation to consummate the Asset Sale not to be satisfied and cannot be or has not been cured within 30 days after the delivery of notice of such breach to us, or (b) by Vertex or the Company because we do not obtain the Requisite Vote at the
Annual Meeting or at any adjournment or postponement of the Annual Meeting, (2) after the date of the Asset Purchase Agreement and prior to the time of the date of the Annual Meeting, an acquisition proposal will have been announced, or
otherwise made publicly known, and not withdrawn or abandoned and (3) within 12 months after the date of such termination, the Company consummates an Alternative Transaction, provided, that each reference to 20% in the definition of Alternative
Transaction will be replaced with 50%, then the Company will pay to Vertex, simultaneously with the consummation of such Alternative Transaction, the Termination Fee; or
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By us, provided we have complied with our
non-solicitation
covenant and Stockholder meeting covenant, at any time prior to obtaining the Requisite Vote at the Annual Meeting or at
any adjournment or postponement of the Annual Meeting, in order to concurrently enter into a binding agreement for an Alternative Transaction that constitutes a Superior Proposal, then the Company will pay to Vertex the Termination Fee on the
termination date of the Asset Purchase Agreement; or
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The Company and Vertex acknowledged in the Asset Purchase Agreement
that the covenants and obligations contained in the provisions regarding the Termination Fee are an integral part of the transactions contemplated by the Asset Purchase Agreement and that, without those covenants and obligations, the parties would
not have entered into the Asset Purchase Agreement. Vertex acknowledged in the Asset Purchase Agreement that the Termination Fee will be payable by the Company on only one occasion.
Expense Reimbursement
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If the Company or Vertex terminate the Asset Purchase Agreement because the Requisite Vote has not been obtained at the Annual Meeting or at any adjournment or postponement thereof, in each case at which a vote on such
approval was taken, then Company will reimburse Vertex for its reasonable, documented out of pocket expenses incurred in connection with the Asset Purchase Agreement and the transactions contemplated thereby, up to $500,000.
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If the Company or Vertex terminate the Asset Purchase Agreement because of the
(i) non-occurrence
of the Closing by October 31, 2017, and at the time of such termination the closing conditions
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regarding the absence of any order preventing, restricting or prohibiting the Asset Sale or the absence of any law, which has the effect of making the Asset Sale illegal or otherwise prohibits,
restrains or enjoins the consummation of the Asset Sale (under the conditions attributable to one or more antitrust laws) or the Closing condition that all waiting periods under the HSR Act and any other applicable antitrust laws have been
terminated or expired, have not been satisfied or waived, or (ii)
non-satisfaction
of the closing conditions attributable to one or more antitrust laws requiring that no final and
non-appealable
order, stipulation or injunction by any governmental entity is in effect, which prevents, makes illegal, or limits the consummation of any of the transactions contemplated by the Asset Purchase
Agreement, or any final and
non-appealable
law has been enacted, promulgated or deemed applicable to the Asset Sale, which has the effect of making the Asset Sale illegal or otherwise prohibits, restrains or
enjoins the consummation of the Asset Sale, and at the time of such termination under either clauses (i) or (ii), all other closing conditions have been satisfied or waived by the party or parties then entitled to give such waiver as of the
Closing other than those attributable to antitrust laws, then Vertex will reimburse the Company for its reasonable, documented out of pocket expenses incurred in connection with the Asset Purchase Agreement and the transactions contemplated thereby,
up to $500,000.
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Amendment and Waiver
We and Vertex may mutually amend or waive any provision of the Asset Purchase Agreement at any time in writing signed by us and Vertex.
82
OTHER MATTERS
Our Board does not know of any other matters to be brought before the Annual Meeting. If any other matters not mentioned in this proxy
statement are properly brought before the meeting, the individuals named in the enclosed proxy intend to use their discretionary voting authority under the proxy to vote the proxy in accordance with their best judgment on those matters.
87
Annex A
EXECUTION COPY
Asset Purchase Agreement
Dated as of March 3, 2017
between
Concert
Pharmaceuticals, Inc.,
as Seller
and
Vertex Pharmaceuticals
(Europe) Limited,
as Buyer
and, solely for purposes of
Section 10.14
herein,
Vertex Pharmaceuticals Incorporated,
as Guarantor
The Asset Purchase Agreement
(the Agreement) contains representations, warranties and covenants that were made only for purposes of the Agreement and as of specific dates; were solely for the benefit of the parties to the Agreement; may be subject to limitations
agreed upon by the parties, including being qualified by confidential disclosures made for the purposes of allocating contractual risk between the parties to the Agreement instead of establishing these matters as facts; and may be subject to
standards of materiality applicable to the contracting parties that differ from those applicable to investors. Investors should not rely on the representations, warranties and covenants or any description thereof as characterizations of the actual
state of facts or condition of the contracting parties, or any of their respective subsidiaries or affiliates. Moreover, information concerning the subject matter of the representations, warranties and covenants may change after the date of the
Agreement, which subsequent information may or may not be fully reflected in public disclosures by the contracting parties
.
Table of Contents
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Page
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ARTICLE I
ASSET PURCHASE
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A-1
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Section 1.01
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Sale of Assets; Assumption of Liabilities
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A-1
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Section 1.02
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Consideration
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A-4
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Section 1.03
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The Closing
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A-4
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Section 1.04
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Consents to Assignment
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A-5
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Section 1.05
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Further Assurances
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A-5
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ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
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A-6
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Section 2.01
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Organization, Qualification and Corporate Power
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A-6
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Section 2.02
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Title to Assets
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A-6
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Section 2.03
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Authority
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A-6
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Section 2.04
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No Subsidiaries.
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A-7
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Section 2.05
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Non-Contravention;
Consents
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A-7
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Section 2.06
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Vote Required
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A-7
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Section 2.07
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Absence of Certain Changes
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A-7
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Section 2.08
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Real Property
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A-8
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Section 2.09
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Intellectual Property
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A-8
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Section 2.10
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Contracts
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A-10
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Section 2.11
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Litigation
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A-11
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Section 2.12
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Regulatory Matters
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A-11
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Section 2.13
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Transferred Inventory.
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A-12
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Section 2.14
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Product Liability.
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A-12
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Section 2.15
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Compliance with Laws
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A-13
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Section 2.16
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Compliance with Anti-Bribery Laws
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A-13
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Section 2.17
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Brokers Fees
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A-14
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Section 2.18
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Sufficiency of Assets
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A-14
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Section 2.19
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Solvency
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A-14
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Section 2.20
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Board Approval
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A-14
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Section 2.21
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Information Supplied.
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A-14
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Section 2.22
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No Misrepresentation.
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A-15
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Section 2.23
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Disclaimer
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A-15
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER
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A-15
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Section 3.01
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Organization
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A-15
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Section 3.02
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Authorization of Transaction
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A-15
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Section 3.03
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Noncontravention; Consents
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A-15
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Section 3.04
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Brokers Fees
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A-16
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Section 3.05
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Litigation
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A-16
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Section 3.06
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Sufficiency of Funds
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A-16
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Section 3.07
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Information Supplied
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A-16
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Section 3.08
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Solvency.
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A-17
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Section 3.09
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Limited Representations.
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A-17
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ARTICLE IV
PRE-CLOSING
COVENANTS
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A-17
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Section 4.01
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Operation of Business
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A-17
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Section 4.02
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Access
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A-18
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Section 4.03
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Governmental Approvals and Consents
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A-18
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Section 4.04
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Notices of Certain Events
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A-21
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Section 4.05
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Release of Encumbrances
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A-22
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Section 4.06
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No Solicitation by Seller; Seller Board Recommendation
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A-22
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Section 4.07
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Preparation of the Proxy Statement; Seller Stockholders Meeting
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A-23
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A-i
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Page
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ARTICLE V
CONDITIONS PRECEDENT TO CLOSING
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A-25
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Section 5.01
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Conditions to the Obligations of Each Party
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A-25
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Section 5.02
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Conditions to Obligations of Buyer
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A-25
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Section 5.03
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Conditions to Obligations of Seller
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A-26
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ARTICLE VI
INDEMNIFICATION
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A-27
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Section 6.01
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Survival
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A-27
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Section 6.02
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Indemnification by Seller
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A-28
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Section 6.03
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Indemnification by Buyer
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A-28
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Section 6.04
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Claims for Indemnification
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A-29
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Section 6.05
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Limitations
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A-30
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Section 6.06
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Manner of Payment.
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A-32
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Section 6.07
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Right of Setoff
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A-32
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Section 6.08
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Adjustment to Purchase Price
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A-32
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Section 6.09
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Release of the Escrow Account.
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A-32
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ARTICLE VII
TERMINATION
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A-32
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Section 7.01
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Termination of Agreement
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A-32
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Section 7.02
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Effect of Termination
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A-33
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ARTICLE VIII
TAX MATTERS
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A-35
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Section 8.01
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Certain Tax Matters
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A-35
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Section 8.02
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Withholding Taxes
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A-35
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ARTICLE IX
FURTHER AGREEMENTS
|
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A-35
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Section 9.01
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Post-Closing
Information
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A-35
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Section 9.02
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Wrong Pockets.
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Section 9.03
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Use of Names
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Section 9.04
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Confidentiality.
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A-36
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Section 9.05
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Restrictive Covenants
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A-37
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Section 9.06
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FDA Letters
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ARTICLE X
MISCELLANEOUS
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Section 10.01
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Certain Definitions
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Section 10.02
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Terms Defined Elsewhere
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A-45
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Section 10.03
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Press Releases and Announcements
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Section 10.04
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No Third Party Beneficiaries
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A-46
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Section 10.05
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Entire Agreement
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A-47
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Section 10.06
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Succession and Assignment
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Section 10.07
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Counterparts
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A-47
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Section 10.08
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Notices
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A-47
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Section 10.09
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Governing Law; Jurisdiction
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A-48
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Section 10.10
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Amendments and Waivers
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A-49
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Section 10.11
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Severability
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A-49
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Section 10.12
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Expenses
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A-49
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Section 10.13
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Specific Performance
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A-49
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Section 10.14
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Guaranty
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A-50
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Section 10.15
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Construction
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A-50
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Section 10.16
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Waiver of Jury Trial
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A-50
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A-ii
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Page
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EXHIBITS
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Exhibit A
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Form of Assumption Agreement
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Exhibit B
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Form of Bill of Sale
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Exhibit C
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Form of IP Assignment Agreement
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Exhibit D
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Form of Transition Services Agreement
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Exhibit E-1
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Form of Seller FDA Letter
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Exhibit E-2
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Form of Seller Orphan Designation Letter
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Exhibit F-1
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Form of Buyer FDA Letter
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Exhibit F-2
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Form of Buyer Orphan Designation Letter
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Exhibit G
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Form of Escrow Agreement
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A-iii
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (this
Agreement
) is entered into as of March 3, 2017 between Concert Pharmaceuticals,
Inc., a Delaware corporation (
Seller
), Vertex Pharmaceuticals (Europe) Limited, a U.K. limited company (
Buyer
), and, solely for purposes of
Section 10.14
herein, Vertex Pharmaceuticals Incorporated,
a Massachusetts corporation (
Guarantor
). Seller and Buyer are sometimes referred to herein individually as a
Party
and together as the
Parties
.
WHEREAS, Seller is a biopharmaceutical company engaged in the synthesis, research and development of compounds as potential therapeutic
products for treating cystic fibrosis, including the generation of Intellectual Property associated therewith (the
CF Enterprise
).
WHEREAS, upon the terms and subject to the conditions set forth in this Agreement, Seller desires to sell, convey, assign, transfer and
deliver to Buyer, and Buyer desires to purchase, acquire and accept from Seller, the Acquired Assets (as defined below), and assume, pay, perform and discharge from Seller certain Liabilities (as defined below) related to the Acquired Assets, upon
the terms and subject to the conditions set forth herein.
WHEREAS, Guarantor desires to guaranty certain obligations of Buyer hereunder.
WHEREAS, concurrently with the execution and delivery of this Agreement, Seller and Buyer are entering into that certain Research and
Testing Agreement (the
Research and Testing Agreement
) dated as of the date hereof.
NOW, THEREFORE, in consideration
of the respective representations, warranties, covenants and agreements herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound, hereby agree as
follows:
ARTICLE I
ASSET PURCHASE
Section 1.01
Sale of Assets; Assumption of Liabilities
.
(a)
Transfer of Assets
. On the terms and subject to the conditions of this Agreement, at the Closing, Seller shall sell, convey,
assign, transfer and deliver to Buyer and its assignees under
Section 10.06
hereof (collectively, the
Buyer Group
), and Buyer shall, or shall cause the applicable member of the Buyer Group to, purchase, acquire and
accept assignment from Seller, all of Sellers right, title and interest in and to those assets used, planned for use or held for use, in each case, in the ownership, operation or conduct of the CF Enterprise as currently, and currently
expected to be, owned, operated and conducted (collectively, the
Acquired Assets
), free and clear of all Encumbrances (other than Permitted Encumbrances), including the following:
(i) all rights to Develop, Manufacture and Commercialize the Transferred Products, including all rights and claims to all
clinical study data, reports and analyses to the extent related to the Transferred Products, including those identified on
Section 1.01(a)(i)
of the Seller Disclosure Letter;
(ii) all Intellectual Property related to the Transferred Products that exists now or as of the Closing anywhere in the world,
including: (A) all Intellectual Property claiming any aspect of, or relating to Sellers Development, Manufacturing, and/or Commercialization activities in respect of the Transferred Products on or before the Closing Date, including
Transferred Know-How; (B) any rights which an employee, consultant, agent, inventor, author or third party is obligated by contract, statute or otherwise to assign to Seller; (C) all rights of action arising from the foregoing, including
all claims for damages by reason of present, past and future infringement, misappropriation, violation misuse or
A-1
breach of contract in respect of the foregoing; (D) present, past and future rights to sue and collect damages or seek injunctive relief for any such infringement, misappropriation,
violation, misuse or breach; and (E) all income, royalties and any other payments now and hereafter due and/or payable to Seller in respect of the foregoing (collectively, the
Transferred IP
);
(iii) all documentation or other tangible embodiments that comprise, embody, disclose or describe the Transferred IP, including
engineering drawings, technical documentation, databases, spreadsheets, business records, inventors notebooks, invention disclosures, digital files, software code and patent, trademark and copyright prosecution files, including any such files
in the custody of outside legal counsel (collectively, the
Transferred IP Documentation
);
provided
,
however
, that (A) freedom-to-operate opinions of counsel related to the Intellectual Property of Buyer,
(B) minutes, consents, resolutions and other materials prepared for or by the Seller Board and (C) documentation and other tangible embodiments covered by the attorney-client privilege associated with the Acquired Assets, including the
transactions contemplated by this Agreement, shall each be deemed an Excluded Asset and shall remain with Seller;
(iv) all
rights, title and interest in the Contracts relating to the Transferred Products or Transferred IP, including all Contracts that contain any grant to Seller of any right relating to or under Intellectual Property rights of any Person that is used or
held for use by Seller in connection with the Transferred Products, each of which is identified on
Section 1.01(a)(iv)
of the Seller Disclosure Letter (the
Assigned IP Contracts
), and each other Contract related to the
Transferred Products, each of which is identified on
Section 1.01(a)(iv)
of the Seller Disclosure Letter (together with the Assigned IP Contracts, the
Assigned Contracts
);
(v) the Transferred Registrations related to the Transferred Products;
(vi) other than the Transferred Registrations, all qualifications, permits, registrations, clearances, applications,
submissions, variances, exemptions, filings, approvals and authorizations which relate primarily to the Transferred Products (collectively,
Permits
), including those identified on
Section 1.01(a)(vi)
of the Seller
Disclosure Letter (the
Transferred Permits
);
(vii) copies of all customer and supplier lists, marketing
studies, consultant reports, books and records (financial, laboratory and otherwise), files, invoices, billing records, distribution lists, manuals (in all cases, in any form or medium), but excluding Tax Returns other than Tax Returns solely
related to the Acquired Assets, patient support and market research programs and related databases, and all complaint files and adverse event files, in each case, to the extent (1) related to the Transferred Products and (2) in
Sellers or any of its Affiliates possession or under its control as of the Closing Date;
(viii) all
Transferred Product Records, including Acquired Assets Regulatory Filings, to the extent not covered by any of the foregoing;
(ix) all third-party warranties, indemnities and guarantees relating to any of the Acquired Assets or the Assumed Liabilities;
(x) all claims, defenses and rights of offset or counterclaim (at any time or in any manner arising or existing, whether
choate or inchoate, known or unknown, contingent or non-contingent) relating to any of the Acquired Assets or the Assumed Liabilities;
(xi) all goodwill arising from, associated with or relating to the Acquired Assets, including rights under any confidentiality
Contracts executed by any third party for the benefit of Seller in connection with the Acquired Assets;
(xii) all
Transferred Inventory; and
(xiii) the Transferred Products.
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Notwithstanding anything to the contrary in this Agreement, the Acquired Assets shall not include any Excluded
Assets.
(b)
Excluded Assets
. It is expressly understood and agreed that
Excluded Assets
means all assets,
properties and rights of Seller other than the Acquired Assets, including, but not limited to, those set forth on
Section 1.01(b)
of the Seller Disclosure Letter, the DCE Platform Know-How and the Excluded Therapeutic Products. For the
avoidance of doubt, all Transferred Products shall be included in the Acquired Assets.
In the event of any inconsistency or conflict that may arise in
the application or interpretation of this definition or the definition of Acquired Assets, for purposes of determining what is and is not an Excluded Asset or an Acquired Asset, the explicit inclusion of an item on
Section 1.01(b)
of the Seller Disclosure Letter shall take priority over any textual provision of this definition that would otherwise operate to exclude such asset from the definition of Excluded Assets or include such asset
in the definition of Acquired Assets, as applicable.
(c)
DCE Platform Know-How and Non-Exclusive License
. Seller
hereby grants to Buyer, effective as of the Closing Date, a world-wide, non-exclusive, perpetual, irrevocable, sublicensable, royalty-free, fully-paid license to DCE Platform Know-How for the use in the Development, Manufacture and Commercialization
of the Transferred Products and other therapeutic products. Seller shall disclose to Buyer DCE Platform Know-How that is necessary or useful for the ownership, Development, Manufacture and Commercialization of the Transferred Products, and shall
have no further disclosure obligation under this Agreement with respect to DCE Platform Know-How.
(d)
Assumed Liabilities
. On the
Closing Date, Buyer shall, or shall cause the applicable member of the Buyer Group to, deliver to Seller one or more assumption agreements in the form attached hereto as
Exhibit A
(the
Assumption Agreements
), pursuant to
which Buyer, or the applicable member of the Buyer Group, on and as of the Closing Date, shall, among other things, assume and agree to pay, perform and discharge when due only the following Liabilities primarily relating to the Acquired Assets (the
Assumed Liabilities
), and Buyer does not hereby assume or become obligated to pay or perform any other Liabilities of Seller that arise out of or in respect of any of its operations on or prior to the Closing, except for the
following:
(i) all Liabilities relating to, arising out of, based upon or resulting from the use, ownership, possession or
operation of the Acquired Assets by Buyer or its Affiliates after the Closing;
(ii) all Liabilities identified on
Section 1.01(d)
of the Seller Disclosure Letter;
(iii) all Liabilities under the Assigned Contracts first
arising in respect of the period after the Closing (other than any Liability arising out of or relating to a default or breach existing at, prior to, or as a consequence of the Closing); and
(iv) all Liabilities for Taxes attributable to a Post-Closing Tax Period.
(e)
Excluded Liabilities
. It is expressly understood and agreed that, notwithstanding anything to the contrary in this Agreement, Buyer
shall not assume, or cause to be assumed, or be deemed to have assumed or be liable or responsible for any Liabilities (whether now existing or arising after the date hereof) of Seller or any of its Affiliates relating to, arising out of, based upon
or resulting from the use, ownership, possession or operation of the Acquired Assets by Seller or its Affiliates on or prior to the Closing, including (i) those Liabilities set forth on
Section 1.01(e)
of the Seller Disclosure
Letter, (ii) any Indebtedness of Seller or any of its Affiliates, (iii) any expenses incurred by, or for the benefit of, Seller or any of its Affiliates in connection with the preparation, execution or consummation or performance of the
transactions contemplated by this Agreement and the Related Agreements, including all legal, accounting, Tax advisory, investment banking and other professional fees and expenses, and (iv) any Liability incurred in connection with the
open-label Phase 2 clinical trial of CTP-656 in Europe (such Liabilities not assumed hereunder, the
Excluded Liabilities
) and the Excluded Liabilities shall remain the sole obligation and responsibility of Seller.
A-3
In the event of any inconsistency or conflict that may arise in the application or interpretation of this
definition or the definition of Assumed Liabilities, for purposes of determining what is and is not an Excluded Liability or an Assumed Liability, the explicit inclusion of an item on
Section 1.01(d)
of the Seller Disclosure
Letter shall take priority over any textual provision of this definition that would otherwise operate to exclude such Liability from the definition of Excluded Liabilities or include such Liability in the definition of Assumed
Liabilities, as applicable.
Section 1.02
Consideration
.
(a)
Upfront Consideration
. On the terms, and subject to the conditions, set forth in this Agreement, as partial consideration for the
Acquired Assets, and subject to the terms and conditions of this Agreement, at the Closing, Buyer shall, or shall cause the applicable member of the Buyer Group to, (i) assume the Assumed Liabilities, (ii) pay to Seller, by wire transfer
of immediately available funds, the Base Purchase Price, less the Escrow Amount, and (iii) pay to the Escrow Agent the Escrow Amount.
(b)
Contingent Consideration
. As additional consideration for the Acquired Assets, Buyer shall pay to Seller, pursuant to this
Section 1.02(b)
, the contingent payment (each a
Contingent Payment
) set forth below based on the achievement by or on behalf of Buyer or its Affiliates, licensees, sublicensees or transferees of the corresponding
Milestone Event set forth below. For the avoidance of doubt, notwithstanding anything to the contrary in this Agreement, a Contingent Payment shall be due and payable only once (and only one Contingent Payment shall be payable with respect to each
Milestone Event) and shall be paid by Buyer to Seller promptly, but in no event later than
forty-five
(45) calendar days following the occurrence of the applicable Milestone Event by wire transfer of
immediately available funds to the account designated in writing by Seller to Buyer.
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Milestone Event
|
|
Contingent
Payment
|
|
Receipt of marketing approval from the FDA of a combination treatment regimen for the treatment of
patients with cystic fibrosis that contains CTP-656
|
|
$
|
50,000,000
|
|
Completion of a pricing and reimbursement agreement in the United Kingdom, Germany or France with
respect to a combination treatment regimen for the treatment of patients with cystic fibrosis that contains CTP-656
|
|
$
|
40,000,000
|
|
(c)
No Diligence Obligation
. From and after the Closing, Buyer shall, in its sole and absolute
discretion, make all decisions with respect to the Development, Manufacture and Commercialization of the Acquired Assets and shall have no obligation to undertake any efforts to achieve the Milestone Events.
Section 1.03
The Closing
.
(a)
Time and Location
. The closing of the transactions contemplated by this Agreement (the
Closing
) shall take place
at 9:00 a.m., New York City Time, at the offices of White & Case LLP, 1155 Avenue of the Americas, New York, New York 10036-2787 as soon as possible but in no event later than the third (3rd) Business Day following the satisfaction or
waiver of the last of the conditions set forth in
Article V
to be satisfied or (to the extent permitted) waived (other than any such conditions that by their nature are to be satisfied at the Closing, but subject to the satisfaction or (to
the extent permitted) waiver of such conditions at Closing), unless another time, date or place is agreed to in writing by Seller and Buyer. The date on which the Closing actually occurs will be the
Closing Date
.
(b)
Actions at the Closing
. At the Closing:
(i) Seller shall deliver (or cause to be delivered) to Buyer the various certificates, instruments and documents required to be
delivered under
Section 5.02
not otherwise listed in this
Section 1.03(b)
;
(ii) Buyer shall
deliver (or cause to be delivered) to Seller the various certificates, instruments and documents required to be delivered under
Section 5.03
not otherwise listed in this
Section 1.03(b)
;
A-4
(iii) Seller shall deliver (or cause to be delivered) to Buyer one or more
executed Bills of Sale in substantially the form attached hereto as
Exhibit B
(collectively, the
Bill of Sale
);
(iv) Seller shall deliver (or cause to be delivered) to Buyer executed Intellectual Property Assignment Agreements, in
substantially the form attached hereto as
Exhibit C
(the
IP Assignment Agreements
);
(v) Seller
and Buyer shall deliver (or cause to be delivered) to the other one or more executed Assumption Agreements and such other instruments as Seller may reasonably request in order to effect the assignment to, and assumption by, Buyer of certain of the
Acquired Assets and the Assumed Liabilities;
(vi) Seller shall deliver (or cause to be delivered) to Buyer the Transferred
Product Records;
(vii) Seller and Buyer shall deliver (or cause to be delivered) to the other an executed Transition
Services Agreement in substantially the form attached hereto as
Exhibit D
(the
Transition Services Agreement
);
(viii) Seller shall deliver (or cause to be delivered) such other certificates, documents, instruments and writings as shall be
reasonably requested by Buyer to effectively vest in Buyer title in and to the Acquired Assets, free and clear of all Encumbrances (other than Permitted Encumbrances), in accordance with the provisions of this Agreement; and
(ix) Buyer shall pay (or cause to be paid) (A) to Seller, the Base Purchase Price, less the Escrow Amount and (B) to
the Escrow Agent, the Escrow Amount, in each case in accordance with
Section 1.02(a)
.
Section 1.04
Consents to
Assignment
.
Notwithstanding anything to the contrary contained in this Agreement, if the sale, assignment, transfer, conveyance or delivery or attempted sale, assignment, transfer, conveyance or delivery to Buyer of any asset that
would be an Acquired Asset is (a) prohibited by any applicable Law or (b) would require any authorizations, approvals, consents or waivers from a Third Party or Governmental Entity and such authorizations, approvals, consents or waivers
shall not have been obtained prior to the Closing, then in either case the Closing shall proceed without the sale, assignment, transfer, conveyance or delivery of such asset and this Agreement shall not constitute an agreement for the sale,
assignment, transfer, conveyance or delivery of such asset;
provided
, that nothing in this
Section 1.04
shall be deemed to waive the rights of Buyer not to consummate the transactions contemplated by this Agreement if the
conditions to its obligations set forth in
Article V
have not been satisfied. In the event that the Closing proceeds without the sale, assignment, transfer, conveyance or delivery of any such asset, then following the Closing, Seller shall
use commercially reasonable efforts to obtain promptly such authorizations, approvals, consents or waivers. Pending such authorization, approval, consent or waiver, (i) Seller will comply with the terms of, and will not amend, transfer, let
lapse or terminate, its rights with respect to the applicable asset without Buyers written consent, such consent not to be unreasonably withheld, conditioned or delayed and (ii) the Parties shall cooperate with each other in any mutually
agreeable, reasonable and lawful arrangements designed to provide to Buyer the benefits of use of such asset, and to Seller the benefits, including any indemnities, that, in each case, it would have obtained had the asset been conveyed to Buyer at
the Closing. To the extent that Buyer is provided the benefits pursuant to this
Section 1.04
of any Contract, Buyer shall (x) perform for the benefit of the other parties thereto the obligations of Seller or any affiliate of Seller
thereunder and (y) satisfy any related Liabilities with respect to such Contract that, but for the lack of an authorization, approval, consent or waiver to assign such obligations or Liabilities to Buyer, would be Assumed Liabilities. Once
authorization, approval, consent or waiver for the sale, assignment, transfer, conveyance or delivery of any such asset not sold, assigned, transferred, conveyed or delivered at the Closing is obtained, Seller shall promptly assign, transfer, convey
and deliver such asset to Buyer at no additional cost to Buyer.
Section 1.05
Further Assurances
.
Subject to the
terms and conditions hereof, each of the Parties agrees to use commercially reasonable efforts to execute and deliver, or cause to be executed and delivered, all documents
A-5
and to take, or cause to be taken, all actions that may be reasonably necessary or appropriate to effectuate the provisions of this Agreement,
provided
, that all such actions are in
accordance with applicable Law. From time to time, whether at or after the Closing, (i) Seller shall execute and deliver such further documents or instruments of conveyance, transfer and assignment and take all such other action as Buyer may
reasonably require to more effectively convey, transfer and assign to Buyer any and all ownership, right, title and interest in and to the Acquired Assets, including executing documents or instruments necessary to permit Buyer to record the
transfer, conveyance and/or assignment of any and all Transferred IP with any Governmental Entity and (ii) Buyer, and any other member of the Buyer Group, will execute and deliver such further instruments and take all such other action as
Seller may reasonably require for such member of the Buyer Group to assume the Assumed Liabilities.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
Except as set forth in the disclosure schedule provided by Seller to Buyer prior to the date hereof (the
Seller Disclosure
Letter
), Seller hereby represents and warrants to Buyer as of the date hereof and as of the Closing Date as follows. The Seller Disclosure Letter shall be arranged in sections corresponding to the Sections contained in this
Article
II
. The disclosures in any section of the Seller Disclosure Letter shall qualify other Sections in this
Article II
only to the extent it is reasonably clear from a reading of the disclosure that such disclosure is applicable to other
Sections.
Section 2.01
Organization, Qualification and Corporate Power
.
Seller is a corporation duly organized,
validly existing and in good standing under the Laws of the State of Delaware, with all requisite power and authority to own, lease and operate its properties as presently owned, leased and operated and to carry on its business as presently
conducted. Seller is duly qualified to do business and is in good standing as a foreign corporation in each jurisdiction where the nature of the properties owned, leased or operated by it and the businesses transacted by it require such licensing or
qualification.
Section 2.01
of the Seller Disclosure Letter lists, as of the date hereof, all jurisdictions in which the property owned, leased or operated by Seller, or the nature of the business conducted by Seller makes such
qualification necessary to the extent such qualification relates to any Acquired Asset, except for such failures to be so qualified that would not, individually or in the aggregate, have a Seller Material Adverse Effect. Seller has made available to
Buyer prior to the date hereof copies of its organizational documents, in each case, as amended and in full force and effect as of the date hereof.
Section 2.02
Title to Assets
.
Except as set forth on
Section 2.02
of the Seller Disclosure Letter,
Seller has good, valid and marketable title to the Acquired Assets, free and clear of any Encumbrances (other than Permitted Encumbrances). Upon the sale, conveyance, transfer, assignment and delivery of the Acquired Assets in accordance with this
Agreement, Buyer will acquire good, valid and marketable title to the Acquired Assets, free and clear of any Encumbrances (other than Permitted Encumbrances). Seller has timely paid over to the appropriate Governmental Entity all amounts required to
be paid over under all escheat and unclaimed property Laws and has substantially complied with all escheat and unclaimed property Laws.
Section 2.03
Authority
.
Seller has all requisite corporate power and authority to execute and deliver (or cause to
be executed and delivered) this Agreement, the Bill of Sale, the IP Assignment Agreements, the Transition Services Agreement, the Research and Testing Agreement, the Seller FDA Letter, the Seller Orphan Designation Letter and any other agreements,
certificates or documents to which Seller is (or will be as of the Closing) a party (collectively, the
Related Agreements
) and to perform its obligations hereunder and under each of the Related Agreements to which it is (or will
be as of the Closing) a party. The execution and delivery by Seller of this Agreement and each of the Related Agreements to which it is (or will be as of the Closing) a party and the performance by Seller of this Agreement and its obligations
hereunder and thereunder, and the consummation by Seller of the transactions contemplated hereby and thereby have been duly and validly authorized by all necessary corporate action on the part of Seller and, other than the Seller Stockholder
Approval,
A-6
no other corporate or other proceedings or actions on the part of Seller, its board of directors (the
Seller
Board
) or stockholders are necessary therefor. There are no
appraisal or dissenters rights under applicable Law that are applicable to the execution, delivery and performance of this Agreement or the consummation of the transactions contemplated hereby by Seller. This Agreement has been, and each
Related Agreement to which it is (or will be at Closing) a party will be, duly and validly executed and delivered by Seller and
(assuming this Agreement
and each of the Related Agreements to which Buyer is (or will be at Closing) a party, constitutes the valid and binding obligation of Buyer) constitutes (or will constitute) a valid and binding obligation of Seller, enforceable against Seller in
accordance with their respective terms, except as enforceability may be limited by bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or other similar Laws relating to or affecting the rights of creditors generally and by
general principles of equity.
Section 2.04
No Subsidiaries
.
Except for Concert Pharmaceuticals
Securities Corporation and Concert Pharma U.K. Ltd., Seller has no Subsidiaries.
Section 2.05
Non-Contravention;
Consents
.
Neither the execution, delivery or performance of this Agreement by Seller or any of the Related Agreements to which Seller is (or will be at Closing) a party,
nor the consummation by Seller of the transactions contemplated hereby or by the Related Agreements, will (with or without the giving of notice or the lapse of time, or both):
(a) conflict with or violate any provision of the charter or bylaws or other organizational documents of Seller;
(b) create any Encumbrance (other than a Permitted Encumbrance) upon any of the Acquired Assets;
(c) require on the part of Seller any filing with, notice to, exemption from, or any Permit, authorization, consent or approval of, any
Governmental Entity with respect to the Acquired Assets, except for (i) compliance by Seller with the applicable requirements of the
Hart-Scott-Rodino
Antitrust
Improvements Act of 1976 (the
HSR Act
) and any other applicable Antitrust Laws, (ii) the Seller Orphan Designation Letter, (iii) the Seller FDA Letter and (iv) the filing of the Proxy Statement with the SEC in
preliminary and definitive forms;
(d) subject to obtaining the Third Party consents or providing the notices set forth on
Section 5.02(h)
of the Seller Disclosure Letter, conflict with, violate or result in a breach of, constitute a default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify or cancel,
require any notice, right of first offer or refusal, consent or waiver under, or result in the loss of any right or privilege under, any Assigned Contract, or other instrument to which Seller is a party or by which any of the Acquired Assets are
bound; or
(e) conflict with or violate any Order or Law or other restriction of any Governmental Entity applicable to Seller, any of the
Acquired Assets or any of the Assumed Liabilities,
except, in the case of clauses
(b)
through
(e)
above, for such conflicts,
breaches, defaults, consents, approvals, authorizations, declarations, filings or notices which would not reasonably be expected to have a Seller Material Adverse Effect.
Section 2.06
Vote Required
.
The Seller Stockholder Approval is the only vote of the holders of any class or series
of Sellers capital stock necessary to consummate the transactions contemplated hereby.
Section 2.07
Absence of Certain
Changes
.
Since January 1, 2016, (a) Seller has owned, developed and operated the Acquired Assets in the Ordinary Course of the CF Enterprise, (b) there has not been any material damage, destruction or other casualty
loss with respect to any Acquired Asset, whether or not covered by insurance and (c) there has not been any Effect that has had, or would reasonably be expected to have, individually or in the aggregate, a Seller Material Adverse Effect.
Without limiting the generality of the foregoing, except for the transactions contemplated hereby, and except as set forth in
Section 4.01(b)
of the
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Seller Disclosure Letter, since January 1, 2016, Seller has not taken any action that, had it been taken after the date of this Agreement, would be prohibited by the terms hereof.
Section 2.08
Real Property
.
The Acquired Assets do not include any owned or leased real property.
Section 2.09
Intellectual Property
.
(a)
Section 2.09(a)(i)
of the Seller Disclosure Letter sets forth a
complete and correct list of all issued or registered Transferred IP and applications for registration of Transferred IP owned by Seller (
Registered Business IP
) and, specifying as to each such item, as applicable, the owner(s),
jurisdiction of registration or application, the registration and/or application number and the date of registration and/or application.
(b) The Assigned IP Contracts represent all of the Contracts to which Seller is party and that are related to the Transferred IP and no
additional Contracts are necessary or useful for the ownership, Development, Manufacture, Commercialization and operation of the Acquired Assets as currently conducted.
(c) Except as set forth on
Section 2.09(c)
of the Seller Disclosure Letter, Seller is the sole owner of all the rights, title and
interest in the Transferred IP, free and clear of any and all claims, any requirement of any past (if outstanding), present or future royalty, milestone or other contingent payments, or Encumbrances (other than Permitted Encumbrances) to the
Transferred IP. Seller has not transferred ownership of, or granted any license or right to use, or authorized the retention of any right or ownership interest in any Transferred IP to any Person. No Third Party IP is included in or required to
exploit the Transferred IP as currently conducted or contemplated by Seller. Seller does not hold any trademarks related to the Transferred Products and, to the knowledge of Seller, there will be no impediment to Buyers use of the name
CTP-656. Seller is entitled to grant all rights that it purports to grant with respect to the DCE Platform Know-How in
Section 1.01(c)
.
(d) The Transferred IP is sufficient for the conduct of the Development, Manufacture and Commercialization of CTP-656 after the Closing in
substantially the same manner as conducted prior to the Closing and constitutes all the rights, property and assets necessary to conduct in all material respects the Development, Manufacturing and Commercialization activities as currently conducted
or contemplated by Seller.
(e) The execution, delivery and performance of this Agreement and the consummation of the transactions
contemplated hereby will not result in the loss, forfeiture, termination, license, or impairment of, or give rise to any obligation to transfer or to create, change or abolish, or limit, terminate, or consent to the continued use by Buyer of any
rights in any Transferred IP or material Third Party IP.
(f) Except as set forth on
Section 2.09(f)
of the Seller Disclosure
Letter, neither the use or practice of the Transferred IP relating to CTP-656 as currently used or practiced in the Ordinary Course of the ownership, Development and operation of the Acquired Assets infringes or misappropriates or otherwise
violates, nor the use or practice of the Transferred IP relating to CTP-656 as used or practiced in the Ordinary Course infringed or misappropriated or otherwise violated any rights, other than rights that would be infringed, misappropriated or
otherwise violated if ivacaftor were used or practiced in the same manner as CTP-656, in Intellectual Property of any Third Party (
Third Party IP
).
(g) Except as set forth on
Section 2.09(g)
of the Seller Disclosure Letter, (i) the use, Manufacture or Commercialization of
CTP-656 does not and will not, infringe, misappropriate or otherwise violate or conflict with any Third Party IP, and (ii) no claim, action, investigation or proceeding by or before any Governmental Entity is pending or, has been threatened
claiming that the Manufacture or Commercialization of the Transferred Products does or will infringe, misappropriate or otherwise violate or conflict with Third Party IP.
(h) Except as set forth on
Section 2.09(h)
of the Seller Disclosure Letter, no claim has been asserted in writing to or is pending
against Seller or any of its Affiliates and, to the knowledge of Seller, there have not been any threatened claims or demands against Seller alleging that any aspect of the use or practice of the Transferred IP or the ownership, Development,
Manufacture, Commercialization and operation of the Acquired Assets as currently
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conducted infringes or misappropriates or would infringe the rights of others in or to any Third Party IP, or challenging the validity, enforceability, right to use or ownership of any
Transferred IP.
(i) Seller has not granted to any Third Party any license, ownership interest or right or option to or for the use of or
under the Transferred IP.
(j) Except as set forth on
Section 2.09(j)
of the Seller Disclosure Letter, there are no
settlements, governmental consents or governmental contracts, judgments or governmental orders entered into by Seller or imposed upon Seller that restrict Sellers rights to own or use any Transferred IP or permit any Third Parties to use any
Transferred IP.
(k) Except as set forth on
Section 2.09(k)
of the Seller Disclosure Letter, no Transferred IP was developed,
in whole or in part (i) pursuant to or in connection with the development of any professional, technical or industry standard, (ii) under contract with or using the funding or resources of any Governmental Entity, academic institution or
other entity or (iii) under any grants or other funding arrangements with Third Parties, including the Cystic Fibrosis Foundation Therapeutics Incorporated. Except as set forth on
Section 2.09(k)
of the Seller Disclosure Letter, no
current or former employee, consultant or independent contractor of the Seller who was involved in, or who contributed to, the creation or development of any Transferred IP, has performed services for the government, a university, college, or other
educational institution, or a research center, during a period of time during which such employee, consultant or independent contractor was also performing services for Seller.
(l) To the knowledge of Seller, there is no, nor has there been any, infringement, misappropriation, or other violations by any Third Party of
any Transferred IP, and no such claims are pending or threatened by Seller against any Person with respect to the Transferred IP.
(m)
Seller has taken commercially reasonable steps and precautions to protect and maintain the Transferred IP, including to establish and preserve the confidentiality, secrecy and ownership of all of the Transferred IP for which it would be commercially
reasonable to do so. No such Transferred IP has been disclosed to any Person other than Sellers Representatives who are bound by confidentiality provisions and no employee, officer, director, consultant or advisor of Seller is in violation of
any material term of any employment contract or any other Contract, or any restrictive covenant, relating to the right to use confidential information of others.
(n) Except as indicated in
Section 2.09(n)
of the Seller Disclosure Letter, all Registered Business IP (i) has been duly
maintained and has not been cancelled, allowed to expire, surrendered, or abandoned, and payment of all applicable maintenance fees for such Registered Business IP has been made and is current, (ii) is registered and/or recorded in the name of
Seller, is in full force, has been duly applied for, prosecuted and registered in accordance with applicable Laws (including disclosure to the United States Patent and Trademark Office of all material prior art references); (iii) has no
filings, payments or similar actions that must be taken within 120 days of the date hereof for the purposes of obtaining, maintaining, perfecting or renewing such registration of Registered Business IP; (iv) has no unsatisfied past or
outstanding maintenance or renewal obligation; and (v) has not been and is not involved in any inter partes review, opposition, cancellation, interference, reissue, reexamination or other similar proceeding. All Registered Business IP is
subsisting and, except for any Registered Business IP that is a pending patent application, valid and enforceable.
(o) Except as set
forth on
Section 2.09(o)
of the Seller Disclosure Letter, each Person who has or had access to any trade secrets or confidential information contained in the Transferred IP is subject to a valid and binding written agreement requiring
such Person to keep such information confidential. Each Person who has developed or is or was involved in the development of any Transferred IP owned or purported to be owned by Seller has signed a valid and binding agreement confirming that Seller
owns such owned Transferred IP.
(p) Except as set forth on
Section 2.09(p)
of the Seller Disclosure Letter, Seller has
secured valid written present assignments from all consultants and employees who contributed to the creation or development of any Transferred IP owned or purported to be owned by Seller and of the rights to such contributions.
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(q)
Section 2.09(q)
of the Seller Disclosure Letter sets forth a list of the
Transferred Products and the Development status of each such Transferred Product.
Section 2.10
Contracts
.
(a)
Section 2.10(a)
of the Seller Disclosure Letter sets forth a complete and correct list of each Contract to which Seller or any of its Affiliates is a party that relates to the Acquired Assets and that is (each, a
Material
Contract
):
(i) a Contract providing for payments by or to any Person in excess of $100,000 over any twelve
(12) month period;
(ii) a Contract relating to any partnership, commercial collaboration or joint venture or other
agreement involving a sharing of profits, losses, costs or Liabilities by Seller or any of its Affiliates with any other Person;
(iii) a Contract with any Governmental Entity, other than any MTAs or CTAs;
(iv) a Contract relating to the acquisition or disposition of any assets outside the Ordinary Course, including any securities
purchase agreements, asset purchase agreements, merger agreements, business combination agreements and any
earn-out
or agreement for the deferred payment of purchase price entered into in connection therewith;
(v) an Assigned Contract;
(vi) a Contract relating to the manufacture, storage, distribution or commercialization of the Transferred Products;
(vii) a Contract relating to the research or development of the Transferred Products, excluding any NDAs, MTAs and CTAs;
(viii) a Contract that is a confidentiality or
non-disclosure
agreement, other than
those related to business development activities (
NDAs
), material transfer (or other similar research) agreement (
MTAs
) or clinical trial agreement (
CTAs
);
(ix) a Contract relating to the testing, auditing or controlling of the Transferred Products, including any pharmacovigilance
Contracts and quality Contracts;
(x) a Contract that: (A) contains a covenant by Seller not to compete or otherwise
limits the freedom of Seller from engaging in the research, ownership, operation, development, manufacture, distribution or commercialization of the Transferred Products; (B) grants any rights of exclusivity to any Person; (C) grants any
right of first refusal, first offer, first negotiation or similar preferential right; (D) grants any most favored customer, most favored supplier or similar rights to any Person; or (E) contains a
requirements obligation requiring Seller to purchase a designated portion of any type of material; or
(xi) a
Contract that is otherwise material to the Acquired Assets.
(b) Each of the Material Contracts is in full force and effect and
constitutes a legal, valid and binding agreement of Seller, and to the knowledge of Seller, each other party thereto, enforceable in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or
similar Laws of general application affecting or relating to the enforcement of creditors rights generally, and subject to general principles of equity. Neither Seller, nor, to the knowledge of Seller, any other party thereto is (with or
without notice or lapse of time, or both) in material breach or default in the performance, observance or fulfillment of any obligation or covenant contained in any Material Contract, nor does there exist any condition which upon the passage of time
or the giving of notice or both, would reasonably be expected to cause such material violation of or material default under or permit the termination or modification of, or acceleration of any obligation under, any Material Contract. Seller has not
given or received written or, to the knowledge of Seller, oral notice to or from any Person relating to any such actual or alleged, breach or default. Seller has not received any written or,
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to the knowledge of Seller, oral notice from a Third Party stating that such Third Party intends to terminate any Material Contract and Seller has not waived any right under the Material
Contracts. True and complete copies of all Material Contracts including all schedules, exhibits, appendices, amendments, modifications and waivers relating thereto have been made available to Buyer, except to the extent such Material Contracts have
been redacted to (i) enable compliance with Laws relating to antitrust or the safeguarding of data privacy; (ii) comply with confidentiality obligations owed to Third Parties; or (iii) exclude information not related to the Acquired
Assets.
Section 2.11
Litigation
.
There is not, and has never been, a claim, complaint, action, suit,
proceeding, hearing or investigation initiated or, to the knowledge of Seller, threatened, before any Governmental Entity or arbitral body relating to the Acquired Assets, Assumed Liabilities, the CF Enterprise, this Agreement or the transactions
contemplated hereby (but excluding any claim, complaint, action, suit, proceeding, hearing or investigation solely relating to any Excluded Assets and any sealed qui tam cases). There are no outstanding Orders of any Governmental Entity or arbitral
body affecting the Acquired Assets, Assumed Liabilities, the CF Enterprise, this Agreement or the transactions contemplated hereby. No product liability claims have been received in writing by Seller and, to the knowledge of Seller, no such claims
have been threatened, in each case, with respect to the Transferred Products.
Section 2.12
Regulatory Matters
.
(a) Seller holds all Permits required under the Federal Food, Drug and Cosmetic Act of 1938, as amended (the
FDCA
), the Public Health Service Act of 1944, as amended (the
PHSA
), and the regulations of the
United States Food and Drug Administration (the
FDA
) promulgated thereunder, and similar Laws of any other similar Governmental Entity (each a
Regulatory Authority
) required in connection with the Acquired
Assets, including but not limited to the Sellers Development, Manufacture, storage, distribution, import, and export of the Transferred Products (the
Acquired Assets Permits
). Seller is in compliance in all material respects
with the terms of the Acquired Assets Permits. Seller has timely filed all material regulatory reports, schedules, statements, documents, filings, submissions, forms, registrations, notices and other documents, together with any amendments required
to be made with respect thereto, that each was required to file with any Regulatory Authority related to the Acquired Assets (
Acquired Assets Regulatory Filings
), and has timely paid all Taxes, fees and assessments due and payable
in connection therewith. All such Acquired Assets Regulatory Filings complied in all material respects with applicable Law. All such Acquired Assets Regulatory Filings are included within the Acquired Assets.
(b) All preclinical and clinical studies or tests conducted by or on behalf of Seller related to the Acquired Assets have been conducted in
compliance with applicable Law, rules, Regulatory Authority guidance, including the provisions of the FDAs current good clinical practices regulations at 21 C.F.R. Parts 50, 54, 56 and 312 and the FDAs current good laboratory practice
regulations at 21 C.F.R. Part 58 and Laws and guidance restricting the use and disclosure of personal information, including but not limited to, individually identifiable health information. No clinical trial conducted by or on behalf of Seller has
been terminated or suspended prior to completion for safety or other non-business reasons. Neither Seller nor, to the knowledge of Seller, any Third Party on behalf of Seller, has received any notices (whether in writing or otherwise) or other
correspondence (including any warning letter, untitled letter, 483 observations or similar notices) from the FDA, any other Regulatory Authority or any institutional review board or ethics committee (i) requiring the termination, suspension or
material modification of any clinical or pre-clinical studies or tests relating to the Transferred Products, or (ii) claiming that the ownership, operation, research, development, manufacture or use of the Acquired Assets is not in compliance
with all applicable Laws, and, there is no action, proceeding or suit pending or, to the knowledge of Seller, threatened in writing (including any prosecution, injunction, seizure, civil fine, suspension or recall) relating to the foregoing. Seller
has informed Buyer of all serious adverse drug reactions known to Seller and its Affiliates relating to the Transferred Products or their use.
(c) Seller has not (i) made an untrue statement of a material fact or fraudulent statement to the FDA or any other Regulatory Authority,
(ii) failed to disclose a material fact required to be disclosed to the FDA or any other Regulatory Authority or (iii) committed any other act, made any statement or failed to make any statement,
A-11
that (in any such case) establishes a reasonable basis for the FDA to invoke its Fraud, Untrue Statements of Material Facts, Bribery, and Illegal Gratuities Final Policy as set forth in
Compliance Policy Guide Sec. 120.100, in each case, related to the Acquired Assets. As of the date of this Agreement, Seller is not the subject of any pending or threatened investigation related to the Acquired Assets by the (x) FDA pursuant to
its Fraud, Untrue Statements of Material Facts, Bribery, and Illegal Gratuities Final Policy, or (y) any other Regulatory Authority. None of Seller or any of its officers, employees, agents or clinical investigators has been suspended or
debarred or convicted of any crime or engaged in any conduct that would reasonably be expected to result in (A) debarment under 21 U.S.C. § 335a or any similar Law or (B) exclusion under 42 U.S.C. § 1320a-7 or any similar Law, in
each case, in connection with activities related to the Acquired Assets.
(d) Sellers Development, Manufacture, storage,
distribution, import, and export of the Transferred Products is, and at all times has been, in compliance in all material respects with all applicable Laws. There has not been any replacement, dear doctor letter, investigator
notice, safety notice, warning letter, untitled letter, inspectional observation or other written notice of action relating to an alleged lack of safety, efficacy, or regulatory compliance of the Transferred Products (
Safety
Notice
) conducted by or on behalf of Seller or, to the knowledge of Seller, any Safety Notice conducted by or on behalf of any Third Party. To the knowledge of Seller, no event has occurred or circumstance exists that (with or without
notice or lapse of time) is reasonably likely to give rise to any material actual, alleged, possible or potential action to enjoin Development, Manufacture, storage, distribution, import or export of any Transferred Products. Seller has made
available to Buyer copies of material complaints and notices of alleged defect or adverse reaction with respect to the Transferred Products that have been received in writing by Seller.
(e) Seller is not a party to any corporate integrity agreements, monitoring agreements, consent decrees, settlement orders, or other similar
written agreements, in each case, entered into with or imposed by any Regulatory Authority and related to the Acquired Assets.
(f) Seller
is, and has been, in compliance with (i) all federal, state and local fraud and abuse laws, including the federal Anti-Kickback Statute (42 U.S.C. § 1320a-7(b)), the civil False Claims Act (31 U.S.C. § 3729 et seq.) and the
regulations promulgated pursuant to such statutes; (ii) the FDCA, (iii) the Clinical Laboratory Improvement Amendments of 1988; (iv) the Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information
and Technology for Economic and Clinical Health Act, and the regulations promulgated pursuant thereto; (v) the PHSA and the regulations of the FDA promulgated thereunder; (vi) laws which are cause for exclusion from any federal health care
program; and (vii) applicable requirements under any Permit or Laws, including applicable statutes and implementing regulations administered or enforced by the FDA or other Regulatory Authority, including provisions of the FDAs current
good manufacturing practice regulations at 21 C.F.R. Parts 210-211 and those relating to investigational use, premarket approval and applications or abbreviated applications to market the Acquired Assets.
(g) All reports, documents, claims and notices required to be filed, maintained or furnished to the FDA or any other similar Regulatory
Authority by Seller with respect to the Transferred Products have been so filed, maintained or furnished and were complete and correct in all material respects on the date filed (or were corrected in or supplemented by a subsequent filing), except
as would not, individually or in the aggregate, reasonably be expected to materially and adversely affect the Acquired Assets, taken together as a whole.
Section 2.13
Transferred Inventory
.
The Transferred Inventory has been manufactured, handled, maintained, packaged
and stored, as applicable, at all times in compliance in all material respects with applicable Law.
Section 2.13
of the Seller Disclosure Letter contains a complete and accurate list of the Transferred Inventory, including the quantity
of each component, and sets forth the applicable shelf life for any active ingredients, and other raw materials included in Transferred Inventory that have a shelf life.
Section 2.14
Product Liability
.
To the knowledge of Seller, there are no (i) defects in design of CTP-656 which
would reasonably be expected to adversely affect performance or create a material risk of injury to persons
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or property or (ii) citations, decisions, adjudications or statements by any Governmental Entity or consent decrees stating that CTP-656 is defective or unsafe or fail to meet any standards
promulgated by any such Governmental Entity.
Section 2.15
Compliance with Laws
.
(a) Seller is, and has
been, with respect to the CF Enterprise, Acquired Assets and Assumed Liabilities, in compliance in all material respects with all applicable Laws. Seller is not a party to, nor is subject to,
non-compliance
proceedings or the provisions of any material Order of any Governmental Entity. No notice, citation, summons or order has been issued to Seller or any of its Affiliates, no complaint has been filed and served, no penalty has been assessed and notice
thereof given, and, to the knowledge of Seller, no investigation or review is pending or, to the knowledge of Seller, threatened against Seller by any Governmental Entity with respect to any alleged, actual, possible or potential violation, or
failure to comply with by Seller of any Law applicable to the CF Enterprise, Acquired Assets or Assumed Liabilities.
(b) Set forth on
Section 2.15(b)
of the Seller Disclosure Letter are all Permits held by Seller that are required in connection with the ownership, operation or Development of the Acquired Assets as currently owned, operated and Developed, each of which
is valid and in full force and effect, and none of such Permits will lapse, terminate, expire or otherwise be impaired as a result of the execution or delivery of this Agreement or the Related Agreements by Seller or the consummation of the
transactions contemplated hereby and thereby. Except for the Transferred Permits, there are no Permits, whether written or oral, necessary or required in connection with the ownership, operation or Development of the Acquired Assets as currently
owned, operated and Developed. No notice, citation, summons or order has been issued, no complaint has been filed and served, no penalty has been assessed and notice thereof given, and no investigation or review is pending or, to the knowledge of
Seller, threatened against Seller by any Governmental Entity with respect to any alleged, actual, possible or potential violation, failure to comply with, or failure to have, any Permit required in connection with the Acquired Assets. No event has
occurred or circumstance exists that (with or without notice or lapse of time) is reasonably likely to give rise to the loss of or refusal to renew the Transferred Permits.
Section 2.16
Compliance with Anti-Bribery Laws
(a) Neither Seller nor any its Representatives or Affiliates, or any other Person acting on behalf of Seller, has:
(i) made, authorized, offered or promised to make any payment, gift or transfer of anything of value, directly, indirectly or
through a third party, to or for the use or benefit of any Official for the purpose of (a) unlawfully influencing any act, decision, or failure to act by an Official in his or her official capacity; or (b) inducing such Official to use
unlawfully his or her influence with any Governmental Entity to affect any act or decision of the Governmental Entity in order to obtain, retain, or direct business or secure an improper advantage, in each case related to the Acquired Assets;
(ii) made, authorized, offered or promised to make any payment, gift or transfer of anything of value, directly, indirectly or
through a third party, to another individual in exchange for (or as a reward for) improper performance of a relevant function or activity related to the Acquired Assets;
(iii) requested, accepted or agreed to accept a financial or other advantage, either directly or through a third party, in
exchange for (or as a reward for) improper performance of a relevant function or activity related to the Acquired Assets; or
(iv) made, authorized, offered or promised to make any unlawful bribe, rebate, payoff, influence payment or kickback or has
taken any other action related to the Acquired Assets that would violate any Anti-Bribery Law binding on such Person or in effect in any jurisdiction in which such action is taken.
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(b) Seller maintains books, records, and accounts that, in reasonable detail, accurately and
fairly reflect in all material respects its transactions and dispositions of its assets, and maintains a system of internal accounting controls sufficient to provide reasonable assurances that:
(i) its transactions related to the Acquired Assets are executed and its funds are expended in accordance with its
managements authorization;
(ii) its transactions related to the Acquired Assets are recorded as necessary to permit
preparation of its financial statements in conformity with GAAP; and
(iii) access to the Acquired Assets is permitted in
accordance with its managements authorization.
(c) The ownership, Development, Manufacture, Commercialization and operation of the
Acquired Assets has been in compliance with all Anti-Bribery Laws to which the ownership, Development, Manufacture, Commercialization and operation of the Acquired Assets are subject, as applicable, and Seller has engaged only in lawful business
practices, in each case, in all material respects.
Section 2.17
Brokers Fees
.
No agent, broker, finder or
investment banker other than Aquilo Partners, L.P. is entitled to any brokerage, finders or other similar fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by, or on behalf of,
Seller. Seller is solely responsible for the fees and expenses of any such agent, broker, finder or investment banker.
Section 2.18
Sufficiency of Assets
.
The Acquired Assets constitute a conveyance to Buyer, free and clear of any
Encumbrance, other than Permitted Encumbrances, of all of the rights, property and assets that are owned, licensed or controlled by Seller or any of its Affiliates as of the Closing Date and that are necessary or useful for the ownership,
Development, Manufacture, Commercialization and operation of the CF Enterprise. None of the Excluded Assets (including those set forth in
Section 1.01(b)
of the Seller Disclosure Letter), other than the DCE Platform Know-How, are
necessary or useful for the ownership, Development, Manufacture, Commercialization and operation of the CF Enterprise. Immediately after the Closing, no Person shall have any right, title or interest in or right to use any of the Acquired Assets,
other than Buyer. Immediately after the Closing, Buyer will own all assets that are used, held for use or necessary or useful for the ownership, Development, Manufacture, Commercialization and operation of the CF Enterprise, free and clear of any
Encumbrance, other than Permitted Encumbrances.
Section 2.19
Solvency
.
Assuming satisfaction of the conditions
to this Agreement and after giving effect to the transactions contemplated hereby, the assumption or retention (as applicable) of the Excluded Liabilities by Seller and its Affiliates, payment of all amounts required to be paid in connection with
the consummation of the transactions contemplated hereby, and payment of all related fees and expenses, Seller and its Affiliates (on a consolidated basis) are not insolvent as of the Closing Date and the consummation of the transactions
contemplated hereby shall not render Seller insolvent. As used herein, insolvent means the sum of Sellers debts and other probable Liabilities exceeds the present fair saleable value of Sellers assets. Seller has no current
plans to file and prosecute a petition for relief under Chapter 11 or 7 of the United States Bankruptcy Code.
Section 2.20
Board Approval
.
The Seller Board, by resolutions duly adopted at a meeting duly called and held and not subsequently rescinded or modified in any way (the
Seller Board Approval
), has (i) declared that this
Agreement and the transactions contemplated hereby are advisable and in the best interests of Seller and the stockholders of Seller, (ii) approved this Agreement and the transactions contemplated hereby, (iii) recommended that the
stockholders of Seller approve this Agreement and the transactions contemplated hereby and (iv) directed that this Agreement and the transactions contemplated hereunder be submitted to Sellers stockholders for their approval. No member of
the Seller Board has voted against any of the foregoing.
Section 2.21
Information Supplied
.
The information
supplied by Seller for inclusion in the Proxy Statement will not, as of the date the Proxy Statement is first mailed to the stockholders of Seller, and at the time
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of the Seller Special Meeting, contain any untrue statement of a material fact, or omit to state any material fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not misleading. Notwithstanding the foregoing sentence, Seller makes no representation or warranty with respect to any information supplied by Buyer or any of its Representatives for
inclusion in the Proxy Statement. The Proxy Statement, when filed, will comply in all material respects with the applicable requirements of the Securities Act and the Exchange Act.
Section 2.22
No Misrepresentation
.
To the knowledge of Seller, no representation or warranty or other statement made
by Seller in this Agreement, the Seller Disclosure Letter, the certificates or documents delivered pursuant to Section 1.03(b) or otherwise in connection with the contemplated transactions contains any untrue statement or omits to state a
material fact necessary to make any of them, in light of the circumstances in which it was made, not misleading. Seller does not have any knowledge of any fact related to the Acquired Assets that would reasonably be expected to materially adversely
affect the assets, business, financial condition, or results of operations of the CF Enterprise that has not been set forth in this Agreement or the Seller Disclosure Letter.
Section 2.23
Disclaimer
.
Neither Seller nor any of its Affiliates or their respective Representatives has made, or
shall be deemed to have made, any representation or warranty, express or implied, at law or in equity, in respect of Seller, the CF Enterprise, the Acquired Assets or the Assumed Liabilities, other than those expressly made by seller in this
Article II
, the certificate delivered pursuant to
Section 5.02(c)
or in one of the Related Agreements.
ARTICLE
III
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as of the date hereof and as of the Closing Date that:
Section 3.01
Organization
.
Buyer is a corporation duly organized, validly existing and in good standing under the
Laws of the jurisdiction of its incorporation.
Section 3.02
Authorization of Transaction
.
Buyer has all
requisite corporate power and authority to execute and deliver (or cause to be executed and delivered) this Agreement and each of the Related Agreements to which Buyer is (or will be as of the Closing) a party and to perform its obligations
hereunder and under each of the Related Agreements to which it is (or will be as of the Closing) a party. The execution and delivery by Buyer of this Agreement and each of the Related Agreements to which it is (or will be as of the Closing) a party
and the performance by Buyer of this Agreement and its obligations hereunder and thereunder, and the consummation by Buyer of the transactions contemplated hereby and thereby have been duly and validly authorized by all necessary corporate action on
the part of Buyer and no other corporate or other proceedings or actions on the part of Buyer, its board of directors or stockholders are necessary therefor. This Agreement has been, and each Related Agreement to which it is (or will be at Closing)
a party will be, duly and validly executed and delivered by Buyer and (assuming this Agreement and each of the Related Agreements to which Seller is (or will be at Closing) a party, constitutes the valid and binding obligation of Seller) constitutes
(or will constitute) a valid and binding obligation of Buyer, enforceable against Buyer in accordance with their respective terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, fraudulent transfer, moratorium or
other similar Laws relating to or affecting the rights of creditors generally and by general principles of equity.
Section 3.03
Noncontravention; Consents
.
Neither the execution, delivery or performance of this Agreement by Buyer or any of the Related Agreements to which Buyer is (or will be at Closing) a party, nor the
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consummation by Buyer of the transactions contemplated hereby or by the Related Agreements, will (with or without the giving of notice or the lapse of time, or both):
(a) conflict with or violate any provision of the charter or bylaws or other organizational documents of Buyer;
(b) require on the part of Buyer any filing with, notice to, exemption from, or any Permit, authorization, consent or approval of, any
Governmental Entity with respect to the Acquired Assets, except for (i) compliance by Buyer with the applicable requirements of the HSR Act and any other applicable Antitrust Laws, (ii) the Buyer Orphan Designation Letter, and
(iii) the Buyer FDA Letter;
(c) conflict with, violate or result in a breach of, constitute a default under, result in the
acceleration of, create in any party any right to accelerate, terminate, modify or cancel, require any notice, right of first offer or refusal, consent or waiver under, or result in the loss of any right or privilege under, any Contract to which
Buyer is a party or by which Buyer is bound or to which any of its assets are subject, except which do not, and would not reasonably be expected to, materially and adversely affect Buyers ability to consummate the transactions contemplated
hereby; or
(d) conflict with or violate any Order or Law or other restriction of any Governmental Entity applicable to Buyer or any of
its properties or assets;
except, in the case of clauses
(b)
through
(d)
of this
Section 3.03
, for
such conflicts, breaches, defaults, consents, approvals, authorizations, declarations, filings or notices which would reasonably be expected to have a Buyer Material Adverse Effect.
Section 3.04
Brokers Fees
.
No agent, broker, finder or investment banker is entitled to any brokerage,
finders or other similar fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by, or on behalf of, Buyer. Buyer is solely responsible for the fees and expenses of any such agent,
broker, finder or investment banker.
Section 3.05
Litigation
.
There is no claim, complaint, action, suit,
proceeding, hearing or investigation initiated, or, to the knowledge of Buyer, threatened, before any Governmental Entity or arbitral body against Buyer (but excluding any claim, complaint, action, suit, proceeding, hearing or investigation relating
to sealed qui tam cases) which would adversely affect Buyers performance under this Agreement or any Related Agreement or the consummation of the transactions contemplated by this Agreement or any Related Agreement. There are no outstanding
Orders of any Governmental Entity or arbitral body against Buyer which would adversely affect Buyers performance under this Agreement or any Related Agreement or the consummation of the transactions contemplated by this Agreement or any
Related Agreement.
Section 3.06
Sufficiency of Funds
.
As of the date hereof, Buyer has, and at all times until
the satisfaction of all of its obligations under this Agreement will have, sufficient cash, available lines of credit or other sources of immediately available funds on hand to enable it perform all of its obligations under this Agreement.
Section 3.07
Information Supplied
.
The information supplied by Buyer for inclusion in the Proxy Statement will not,
as of the date the Proxy Statement is first mailed to the stockholders of Seller, and at the time of the Seller Special Meeting, contain any untrue statement of a material fact, or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. Notwithstanding the foregoing sentence, Buyer makes no representation or warranty with respect to any information supplied
by Seller or any of its Representatives for inclusion in the Proxy Statement. The information supplied by Buyer for inclusion in the Proxy Statement will comply in all material respects with the applicable requirements of the Securities Act and the
Exchange Act.
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Section 3.08
Solvency
.
Assuming satisfaction of the conditions to this
Agreement and after giving effect to the transactions contemplated hereby, the assumption or retention (as applicable) of the Assumed Liabilities by Buyer, payment of all amounts required to be paid in connection with the consummation of the
transactions contemplated hereby, and payment of all related fees and expenses, neither the Buyer nor the Guarantor will be insolvent as of the Closing Date and the consummation of the transactions contemplated by this Agreement and the Related
Agreements shall not render Buyer or the Guarantor insolvent. As used herein, insolvent means the sum of the debts and other probable Liabilities of the Buyer exceeds the present fair saleable value of the assets of the Buyer. Neither
Buyer nor the Guarantor has current plans to file and prosecute a petition for relief under Chapter 11 or 7 of the United States Bankruptcy Code or any similar foreign Laws.
Section 3.09
Limited Representations
.
Buyer acknowledges, for itself and on behalf of its Affiliates, that none of
Seller, its Affiliates or their respective Representatives or any other Person acting on their behalf has made any representation or warranty regarding the CF Enterprise, the Acquired Assets, the Assumed Liabilities or the transactions contemplated
by this Agreement, except as expressly set forth in
Article II
, the certificate delivered pursuant to
Section 5.02(c)
or in one of the Related Agreements. Buyer acknowledges that, to the extent provided by Seller, none of Seller,
its Affiliates or their respective Representatives thereof makes any representation or warranty with respect to any estimates, projections, forecasts or business plans (including the reasonableness of the assumptions underlying such estimates,
projections, forecasts or plans).
ARTICLE IV
PRE-CLOSING
COVENANTS
Section 4.01
Operation of Business
.
(a) Except as otherwise consented to in writing by Buyer, as set forth on
Section 4.01
of the Seller Disclosure Letter, the
Research and Testing Agreement or as required by applicable Law or Order, or as expressly contemplated by this Agreement, during the period from the date of this Agreement until the Closing Date or the date, if any, on which this Agreement is
earlier validly terminated pursuant to
Section 7.01
(the
Pre-Closing
Period
), Seller shall:
(i) use commercially reasonable efforts to preserve the CF Enterprise and operate the Acquired Assets in the Ordinary Course;
and
(ii) not materially deviate from the planned re-stocking of Transferred Inventory summarized on
Section 4.01(a)(ii) of the Seller Disclosure Letter unless such material deviation is the result of a circumstance outside of Sellers control and to which Seller did not contribute. Seller shall promptly notify Buyer once it becomes aware
of any actual or expected material deviation.
(b) Except (1) as set forth on
Section 4.01(b)
of the Seller Disclosure
Letter or as required by this Agreement, (2) as required by applicable Law or Order, or (3) with the written consent of Buyer, such consent not to unreasonably be withheld, conditioned or delayed, Seller shall not:
(i) sell, lease, abandon or otherwise dispose of or permit any Encumbrance (other than Permitted Encumbrances) on any Acquired
Asset, except inventory in the Ordinary Course;
(ii) acquire any properties or assets that constitute Acquired Assets,
either tangible or intangible, other than in the Ordinary Course;
(iii) (A) settle or commence any claim, complaint,
action, suit, proceeding, hearing or investigation; or (B) waive any claims or rights, in either case in a manner that would constitute an Assumed Liability or with respect to the Acquired Assets, except, after reasonable consultation with
Buyer, claims or rights relating to any Transaction Litigation that would not reasonably be expected to impair or adversely affect the Acquired Assets;
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(iv) fail to pay in the Ordinary Course all payables and other Liabilities, in
each case, that would constitute Assumed Liabilities, when due;
(v) (A) enter into, extend, modify, amend, terminate
or renew or waive any right or remedy under any Assigned Contract (or any Contract that would be an Assigned Contract if entered into prior to the date hereof) or (B) knowingly take, or fail to take, any action that would constitute a breach,
violate the terms, conditions or provisions of, or result in a default under, or give to others any rights of termination, amendment, acceleration or cancellation of any Assigned Contract;
(vi) except as otherwise expressly permitted or required under this Agreement, terminate or materially modify any ongoing
clinical trial with respect to the Transferred Products;
(vii) take any action which would reasonably be likely to impair
Buyers rights in the Acquired Assets;
(viii) fail to maintain material insurance policies currently maintained by or
on behalf of Seller or covering the Acquired Assets or the Assumed Liabilities unless comparable replacement policies with substantially similar coverage areas and amounts are procured;
(ix) fail to comply with all Laws applicable to the Acquired Assets and the Assumed Liabilities in all material respects;
(x) terminate or fail to maintain or renew any Transferred Permits;
(xi) dispose of or permit to lapse any Transferred IP; or
(xii) enter into any agreement, or otherwise become obligated, to do any action prohibited under
clauses (i)
(xi)
of this
Section 4.01(b)
.
Section 4.02
Access
.
During the
Pre-Closing
Period, Seller shall keep Buyer informed of all material developments relevant to the ownership, Development, Manufacture, Commercialization and operation of the Acquired Assets and its ability to
consummate the transactions contemplated hereby, including with respect to the items set forth on Section 4.02 of the Seller Disclosure Letter. During the
Pre-Closing
Period, subject to
(a) compliance with applicable Laws and (b) any established legal privilege, Seller shall permit (or cause to be permitted) the Representatives of Buyer, at Buyers expense, to have reasonable access (at reasonable times, on
reasonable prior written notice and in a manner so as not to unreasonably disrupt the normal business operations of Seller or its Affiliates) to the premises, properties, financial and accounting records, employees, Contracts, and other records and
documents, of or pertaining to the CF Enterprise, the Acquired Assets and the Assumed Liabilities, and such other relevant information and materials as may be reasonably requested. Buyer acknowledges that it remains bound by the amended and restated
mutual confidentiality agreement, dated August 5, 2016, entered into between Buyer and Seller (the
Confidentiality Agreement
), provided that Buyer shall be authorized to engage in discussions with, and disclose confidential
information (as defined in the Confidentiality Agreement) to, (i) Regulatory Authorities in connection with its post-closing integration planning and (ii) such other third-parties as may be required in connection with the conduct of
activities under the Research and Testing Agreement. Prior to the Closing, except as contemplated by the Research and Testing Agreement, Buyer shall not, and shall cause each member of the Buyer Group and their respective
Representatives not to, contact or communicate with the employees, customers and suppliers of Seller or any of their respective Affiliates in connection with
the transactions contemplated by this Agreement without the prior written consent of Seller.
Section 4.03
Governmental
Approvals and Consents
.
(a) Subject to the terms and conditions of this Agreement (including
Section 4.03(f)
),
each Party will use commercially reasonable efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable under this Agreement and applicable Laws to satisfy the conditions to Closing
set forth herein and consummate the transactions contemplated hereby as soon as practicable after the
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date of this Agreement and in any event no later than the Outside Date, including (x) preparing and filing, in consultation with the other Party and as promptly as practicable and advisable
after the date of this Agreement, all documentation (A) to effect all necessary applications, notices, petitions and other filings and (B) to obtain all waiting period expirations or terminations, registrations, permits and authorizations
necessary or advisable to be obtained from any Governmental Entity in order to consummate the transactions contemplated hereby and (y) taking all steps as may be necessary to obtain all waiting period expirations or terminations, registrations,
permits and authorizations, including defending or contesting any suit, action, legal proceeding or claim brought by a Third Party, including any Governmental Entities, that would otherwise prevent or materially impede, interfere with, hinder or
delay the consummation of the transactions contemplated hereby. In furtherance and not in limitation of the foregoing, each Party agrees (i) to make all necessary applications, notices, petitions and filings required (and thereafter make any
other required submissions and respond as promptly as practicable to any requests for additional information or documentary material) with respect to this Agreement or the transactions contemplated hereby with the Antitrust Division of the
Department of Justice (the
DOJ
) and the Federal Trade Commission (the
FTC
) on a Notification and Report Form pursuant to the HSR Act with respect to the transactions contemplated hereby as promptly as
practicable, and in any event within ten (10) Business Days after the execution of this Agreement (unless another date is mutually agreed between the Parties), and any other Governmental Entity under any other applicable Antitrust Law and
(ii) to promptly determine whether any other filings are required to be made with, and whether any other consents, approvals, Permits or authorizations are required to be obtained from, any Governmental Entity under any other applicable Law in
connection with the transactions contemplated hereby, and if so, to promptly prepare and file any such filings and to seek any such other consents, approvals, permits or authorizations (the filings described in the foregoing
clauses
(i)
and
(ii)
collectively,
Regulatory Filings
). All filing fees required in connection with the Regulatory Filings shall be borne by Buyer.
(b) In connection with, and without limiting, the efforts or the obligations of the Parties under
Section 4.03(a)
but subject
to
Section 4.03(f)
, each of Buyer and Seller shall, to the extent permitted by applicable Law and not prohibited by the applicable Governmental Entity, (i) cooperate and coordinate in all respects with the other in the making of
Regulatory Filings (including, to the extent permitted by applicable Law, providing copies, or portions thereof, of all such documents to the
non-filing
Parties prior to filing and considering all reasonable
additions, deletions or changes suggested by the
non-filing
Parties in connection therewith) and in connection with resolving any investigation, request or other inquiry of any Governmental Entity under any
applicable Law with respect to any such filing, (ii) supply the other Party and its counsel, as applicable, with any information and reasonable assistance that may be required or reasonably requested in connection with the making of such
filings, including, within the time allowed by the relevant Governmental Entity and under applicable Law, any additional or supplemental information that may be required or reasonably requested by the FTC, the DOJ and the relevant Governmental
Entities in any applicable jurisdiction in which any such filing is made under any other applicable Law and (iii) use commercially reasonable efforts to take, or cause to be taken, all actions and to do, or cause to be done, and to assist and
cooperate with the other Parties in doing, all things necessary, proper or advisable to obtain the expiration or termination of the applicable waiting periods (and any extension thereof) under the HSR Act or any other Antitrust Law (the
Antitrust Approvals
), in each case as soon as practicable, and to avoid any impediment to the consummation of the transactions contemplated hereby under any applicable Law, including using commercially reasonable efforts to take
all such action as reasonably may be necessary to resolve such objections, if any, as the FTC, the DOJ or any other Governmental Entity or Person may assert with respect to the transactions contemplated hereby. Notwithstanding anything to the
contrary in this
Section 4.03(b)
, none of Buyer, on the one hand, or Seller, on the other hand, shall be required to agree to any term or take or refrain from taking any action in connection with obtaining the Antitrust Approvals that is
not conditioned upon the consummation of the transactions contemplated hereby.
(c) Each of Buyer, on the one hand, and Seller, on the
other hand, shall, to the extent practicable and unless prohibited by applicable Law or by the applicable Governmental Entity, promptly inform the other of any material communication from any Governmental Entity regarding any of the transactions
contemplated hereby in connection with any Regulatory Filings or investigations with, by or before any Governmental Entity relating to
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this Agreement or the transactions contemplated hereby, including any claims, complaints, actions, suits, proceedings, hearings or investigations initiated by a private party. If any Party or
affiliate thereof shall receive a request for additional information or documentary material from any Governmental Entity with respect to a Regulatory Filing, then such Party shall, subject to
Section 4.03(f)
, use its commercially
reasonable efforts to make, or cause to be made, as soon as reasonably practicable, an appropriate response in compliance with such request. In connection with and without limiting the foregoing, to the extent reasonably practicable and unless
prohibited by applicable Law or by the applicable Governmental Entity, the Parties will (i) give each other reasonable advance notice of all meetings with any Governmental Entity relating to the transactions contemplated hereby, (ii) give
each other an opportunity to participate in each of such meetings, (iii) keep the other Party reasonably apprised with respect to any material communications with any Governmental Entity regarding the transactions contemplated hereby,
(iv) cooperate in the filing of any analyses, presentations, memoranda, briefs, arguments, opinions or other written communications explaining or defending the transactions contemplated hereby, articulating any regulatory or competitive
argument or responding to requests or objections made by any Governmental Entity, (v) provide each other with a reasonable advance opportunity to review and comment upon, and consider in good faith the views of the other with respect to, all
material written communications (including applications, analyses, presentations, memoranda, briefs, arguments and opinions) with a Governmental Entity regarding the transactions contemplated hereby and (vi) provide each other (or counsel of
each Party, as appropriate) with copies of all material written communications to or from any Governmental Entity relating to the transactions contemplated hereby. Any such disclosures, rights to participate or provisions of information by one Party
to the other may be made on a
counsel-only
basis to the extent required under applicable Law. It is acknowledged and agreed that, subject to the provisions of this
Section 4.03(c)
and except where
prohibited by applicable Law, Buyer shall have sole responsibility for determining strategy with respect to the Antitrust Approvals.
(d)
Buyer will not extend any waiting period under the HSR Act (by pull and refile, or otherwise) or any other Antitrust Laws or enter into any agreement with the FTC, the DOJ or any other Governmental Entity not to consummate the transactions
contemplated hereby, except with the prior written consent of Seller. Neither Buyer nor Seller shall, nor shall they permit their respective Subsidiaries to, acquire or agree to acquire any business, Person or division thereof, or otherwise acquire
or agree to acquire any assets, if the entering into of a definitive agreement relating to, or the consummation of, such acquisition could reasonably be expected to increase the risk of not obtaining the applicable consent, clearance, approval,
authorization or waiver under the HSR Act or any Antitrust Law with respect to the transactions contemplated hereby.
(e) Subject to
Section 4.03(f)
, each of Buyer and Seller shall use its commercially reasonable efforts to obtain all of its respective consents, waivers, authorizations and approvals of all Third Parties (other than Governmental Entities, which are the
subject of
clauses
(a)-(d)
above) necessary, proper or advisable for the consummation of the transactions contemplated hereby and to provide any notices to Third Parties required to be provided by it
prior to the Closing.
(f) Nothing contained in this
Section 4.03
or in any other provision of this Agreement shall be
construed as requiring Buyer to agree to any terms or conditions as a condition to, or in connection with, obtaining any Antitrust Approval that would (i) impose any limitations on Buyers ownership or operation of all or any portion of
the Acquired Assets or all or any portion of its or its Subsidiaries, businesses or assets, or compel Buyer or any of its Subsidiaries to dispose of or hold separate all or any portion of the Acquired Assets or any portion of its or its
Subsidiaries, businesses or assets, (ii) impose any limitations on the ability of Buyer to acquire or hold or to exercise full rights of ownership of the Acquired Assets, (iii) impose any obligations on Buyer or any of its
Subsidiaries in respect of or relating to Buyers or any of its Subsidiaries facilities, operations, places of business, employment levels, products or businesses, (iv) require Buyer or any of its Subsidiaries to make any payments or
(v) impose any other obligation, restriction, limitation, qualification or other condition on Buyer or any of its Subsidiaries (other than, with respect to clauses (iii), (iv) and (v), such terms or conditions as are reasonable and relate
to the Ordinary Course and that are imposed by a Governmental Entity with power and authority to grant the Antitrust Approvals, and which, individually or in the aggregate, do
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not competitively disadvantage Buyer or any of its Subsidiaries) (any such term or condition in (i) through (v) being referred to herein as a
Burdensome Term or
Condition
).
(g) Notwithstanding anything herein to the contrary, in no event shall Seller or any of its Subsidiaries agree to
any obligation, restriction, requirement, limitation, qualification, condition, remedy or other action relating to the Antitrust Approvals without the prior written consent of Buyer;
provided
, that notwithstanding the foregoing (i) it is
understood and agreed that any failure by Seller to agree to any such obligation, restriction, requirement, limitation, qualification, condition, remedy or other action by reason of Buyers withholding its written consent from Seller to do so
shall not constitute a breach of this
Section 4.03
by Seller and (ii) Buyer shall be required to provide its written consent to Seller agreeing to any such obligation, restriction, requirement, limitation, qualification, condition,
remedy or other action to the extent it would not, individually, or together with any other such obligation, restriction, requirement, limitation, qualification, condition, remedy or other action, impose a Burdensome Term or Condition.
Section 4.04
Notices of Certain Events
.
During the
Pre-Closing
Period,
Seller and Buyer shall promptly notify the other Party of any of the following after gaining knowledge thereof:
(a) any material actions,
suits, claims or proceedings in connection with the transactions contemplated by this Agreement commenced or threatened against Seller relating to the Acquired Assets or the Assumed Liabilities, or Buyer, as the case may be;
(b) the occurrence or non-occurrence of any fact or event which would be reasonably likely to cause any condition set forth in
Article
V
of this Agreement not to be satisfied;
(c) the occurrence or existence of any fact, circumstance or event which could result in any
representation or warranty made by Seller in this Agreement or any exhibit, schedule or certificate or delivered herewith, to be untrue or inaccurate in any material respect;
(d) any notice or other communication from any Person alleging that the consent of such Person is or may be required in connection with the
transactions contemplated by this Agreement;
(e) any oral or written communication Seller receives from any Governmental Entity with
respect to the Acquired Assets, the Assumed Liabilities or the transactions contemplated hereby;
(f) the occurrence of any event,
circumstance, development, state of facts, occurrence, change or Effect which has had a Seller Material Adverse Effect or the occurrence or non-occurrence of any event, circumstance, development, state of facts, occurrence, change or effect which
would reasonably be expected, individually or in the aggregate to result in a Seller Material Adverse Effect; and
(g) any filings,
payments or similar actions that must be taken within 120 days of the Closing Date for the purposes of obtaining, maintaining, perfecting or renewing registration of Registered IP.
If Seller provides a notification pursuant to this
Section 4.04(a)
,
(b)
,
(c)
,
(f)
and (g) prior to
the Closing, Seller shall also, by notice in accordance with the terms of this Agreement, supplement or amend the Seller Disclosure Letter (each, a
Supplement
), in order to correct any matter that first arises after the date
hereof which may constitute a breach of any representation, warranty, agreement or covenant contained herein. If Buyer does not provide a written termination notice pursuant to
Section 7.01(h)
within five (5) Business Days after the
expiration of the thirty (30) day cure period set forth in
Section 7.01(b)
, Buyer shall be deemed to have waived its rights (i) to terminate this Agreement pursuant to
Section 7.01(b)
and (ii) to seek
indemnification from Seller in accordance with
Section 6.02
, in each case, solely with respect to the subject matter of such Supplement.
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Section 4.05
Release of Encumbrances
.
Seller shall take all actions
required of Seller to cause any Encumbrance, other than Permitted Encumbrances, on the Acquired Assets to be terminated and released as of the Closing. For the avoidance of doubt, nothing in this
Section 4.05
modifies Sellers
obligation to deliver the Acquired Assets free and clear of all Encumbrances, other than Permitted Encumbrances.
Section 4.06
No Solicitation by Seller; Seller Board Recommendation
.
(a) During the
Pre-Closing
Period, Seller shall not, and shall cause its Subsidiaries and their respective Representatives not to, directly or indirectly, solicit, initiate, knowingly encourage or knowingly facilitate, or
furnish or disclose non-public information in furtherance of, any inquiries that would reasonably be expected to lead to, or the making of any proposal or offer to implement, any Alternative Transaction, or negotiate or otherwise engage in
discussions with any Person (other than Buyer or its Representatives) with respect to any Alternative Transaction, or approve, recommend or authorize any Alternative Transaction, or enter into any agreement, arrangement or understanding with respect
to any Alternative Transaction or requiring it to abandon, terminate or fail to consummate the sale of the Acquired Assets in accordance with the terms hereof;
provided
, that at any time prior to receipt of the Seller Stockholder Approval
(and in no event after receipt of the Seller Stockholder Approval), Seller may furnish information or afford access to, and negotiate or otherwise engage in discussions with, any Third Party who delivers a bona fide written proposal for an
Alternative Transaction that was not solicited after the date of this Agreement or in violation of this
Section 4.06
, if and so long as the Seller Board determines in good faith after consultation with its outside legal counsel that
failure to take such action would be reasonably likely to be inconsistent with the Seller Boards fiduciary duties under Delaware Law and determines in good faith that such a proposal is, or would reasonably be expected to lead to, a Superior
Proposal.
(b) During the Pre-Closing Period, Seller shall notify Buyer promptly (but in any event within 24 hours) of any inquiries,
proposals or offers received by, or any discussions or negotiations sought to be initiated or continued with, Seller or any of its Representatives, in each case relating to an Alternative Transaction, indicating the name of such Person and providing
to Buyer a summary of the material terms of such proposal or offer for an Alternative Transaction. Prior to providing any information or data to, or entering into any negotiations or discussions with, any Person in connection with a proposal or
offer for an Alternative Transaction, Seller shall receive from such Person an executed confidentiality agreement containing confidentiality terms and provisions at least as restrictive as those contained in the Confidentiality Agreement (which
shall not preclude discussions or negotiations relating to the proposal or offer from such Person and which shall not contain any exclusivity provision or other term that would restrict, in any manner, Sellers ability to consummate the
transactions contemplated by this Agreement). Seller agrees that it will keep Buyer reasonably informed, on a reasonably prompt basis, of the status and material terms of any such proposals or offers (including any material developments) in respect
of any such discussions or negotiations and that it will deliver to Buyer a summary of any material changes to any such proposals or offers and all nonpublic information being furnished to such Person not previously provided to Buyer.
(c) Seller agrees that it will immediately cease and cause to be terminated any existing activities, discussions or negotiations with any
Third Parties conducted prior to the date of this Agreement with respect to any Alternative Transaction (and promptly terminate all physical and electronic data room access previously granted to any such Third Party) and will not terminate, amend,
modify or waive any provision of any confidentiality or standstill agreement to which it is a party and shall enforce, to the fullest extent permitted under applicable Law, the provisions of any such agreement.
(d) Notwithstanding anything in this
Section 4.06
or
Section 4.07
to the contrary, at any time prior to the receipt of
the Seller Stockholder Approval (and in no event after the receipt of the Seller Stockholder Approval), the Seller Board may (i) effect a Seller Change of Recommendation in response to a Seller Intervening Event or (ii) effect a Seller
Change of Recommendation and, subject to compliance with this
Section 4.06
and
Section 7.01(g)
, terminate this Agreement in accordance with
Section 7.01(g)
, following receipt of an unsolicited bona fide written
proposal for an Alternative Transaction after the date of this Agreement,
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which the Seller Board determines in good faith by resolution duly adopted after consultation with its outside legal counsel is a Superior Proposal, in each case with respect to clauses
(i) and (ii), if and only if the Seller Board determines in good faith after consultation with its outside legal counsel that such action would be reasonably likely to be inconsistent with the Seller Boards fiduciary duties under Delaware
Law and Seller has complied in all material respects with the applicable provisions of this
Section 4.06
with respect thereto. Prior to effecting a Seller Change of Recommendation or Seller Change of Recommendation and termination of
this Agreement in accordance with
Section 7.01(g)
as provided above, Seller shall provide Buyer with five (5) Business Days prior written notice (it being understood and agreed that any amendment to the financial terms or any
other material term of such applicable Alternative Transaction or any change to the material facts or circumstances relating to such Seller Intervening Event shall, in each case, require a new written notice and a new three (3) Business Day
period commencing at the time of such new notice) advising Buyer of Sellers intention to effect a Seller Change of Recommendation or Seller Change of Recommendation and termination of this Agreement in accordance with
Section 7.01(g)
as provided above, and specifying in reasonable detail (i) in the case of an Alternative Transaction, the material terms and conditions of, and the identity of any Person proposing, such Alternative Transaction or
(ii) in the case of a Seller Intervening Event, the material facts and circumstances relating to such Seller Intervening Event, and that Seller shall, during such time and if requested by Buyer, engage in good faith negotiations with Buyer
(including by making its officers and its legal advisors reasonably available to negotiate) to amend this Agreement (x) such that the proposed Alternative Transaction would no longer constitute a Superior Proposal or (y) in a manner that
obviates the need to effect a Seller Change of Recommendation, as applicable. The Parties agree that nothing in this
Section 4.06
shall in any way limit or otherwise affect Buyers right to terminate this Agreement pursuant to
Section 7.01(d)
at such time as the requirements of such subsection have been met. Any such Seller Change of Recommendation shall not change the approval of this Agreement or any other approval of the Seller Board in any respect that
would have the effect of causing any state corporate takeover statute or other similar statute to be applicable to the transactions contemplated hereby. Notwithstanding any Seller Change of Recommendation, if this Agreement is not otherwise
terminated by either Party in accordance with the terms hereof, this Agreement shall be submitted to the stockholders of Seller at the Seller Special Meeting for the purpose of voting on the authorization of this Agreement and the transactions
consummated hereby, and nothing contained herein, including any rights of Seller to take certain actions pursuant to
Section 4.06
, shall be deemed to relieve Seller of such obligation. Nothing contained in this Agreement shall prohibit
Seller from (A) complying with Rule 14a-9, Rule 14d-9 and Rule 14e-2(a) promulgated under the Exchange Act;
provided
, that any such action made that relates to an Alternative Transaction shall be deemed to be a Seller Change of
Recommendation unless the Seller Board recommends against the Alternative Transaction and reaffirms the Seller Board Recommendation in connection with such action, (B) making any disclosure to the stockholders of Seller if the Seller Board
determines in good faith, after consultation with its outside legal counsel, that failure to take such action would be reasonably likely to be inconsistent with the Seller Boards fiduciary duties under Delaware Law or (C) informing any
Person of the existence of the provisions contained in this
Section 4.06
;
provided
,
however
, that neither the Seller Board nor any committee thereof shall, except as expressly permitted by this
Section 4.06(d)
,
effect any Seller Change of Recommendation, it being understood that a stop, look and listen communication to the stockholders of Seller pursuant to Rule 14d-9(f) under the Exchange Act (or any similar communication to the stockholders
of Seller) shall not be deemed to be or constitute a Seller Change of Recommendation.
Section 4.07
Preparation of the Proxy
Statement; Seller Stockholders Meeting
.
(a) As promptly as reasonably practicable following the date of this
Agreement (but in any event, no more than twenty (20) days following the date of this Agreement), Seller shall prepare and cause to be filed with the SEC the Proxy Statement in preliminary form, in such form and substance as Seller shall
determine and providing Buyer with an opportunity to review (and Seller will give reasonable and due consideration to all comments by Buyer) and in compliance as to form in all material respects with the applicable provisions of the Securities Act
and the rules and regulations thereunder. Each of Seller and Buyer shall furnish all information concerning itself, its Affiliates and the holders of its Common Stock to the other and provide such other assistance as may be reasonably requested by
such other Party in connection with the preparation, filing and
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distribution of the Proxy Statement. Seller shall promptly notify Buyer upon the receipt of any comments from the SEC or any request from the SEC for amendments or supplements to the Proxy
Statement, and shall, as promptly as reasonably practicable after receipt thereof, provide Buyer with copies of all correspondence related to the Proxy Statement between it and its Representatives, on one hand, and the SEC, on the other hand, and
all written comments with respect to the Proxy Statement received from the SEC, and advise Buyer of any oral comments with respect to the Proxy Statement received from the SEC. Seller shall respond as promptly as reasonably practicable to any
comments from the SEC with respect to the Proxy Statement. Notwithstanding the foregoing, no filing of any amendment or supplement to the Proxy Statement or response to any comments of the SEC with respect to the Proxy Statement or any amendment or
supplement thereof shall be made by Seller without providing Buyer with an opportunity to review (and Seller will give reasonable and due consideration to all comments by Buyer), except to the extent such amendment, supplement or response are made
in connection with an Alternative Transaction as permitted by
Section 4.06
.
(b) Without limiting the generality of the
foregoing, the information supplied or to be supplied by either Party for inclusion or incorporation by reference in the Proxy Statement shall not, on the date the Proxy Statement (or any amendment thereof or supplement thereto) is first mailed to
stockholders of Seller, at the time of the Seller Special Meeting, or as of the Closing Date, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were made, not misleading. If, at any time prior to the Closing Date, any information relating to Seller or Buyer, or any of their respective Affiliates, should be discovered by
Seller or Buyer that, in the reasonable judgment of Seller or Buyer, should be set forth in an amendment of, or a supplement to, the Proxy Statement, so that the Proxy Statement 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 that discovers such information shall promptly notify the other Party, and Seller and Buyer shall
cooperate in the prompt filing with the SEC of any necessary amendment of, or supplement to, the Proxy Statement and, to the extent required by Law, in disseminating the information contained in such amendment or supplement to stockholders of
Seller. Nothing in this
Section 4.07(b)
shall limit the obligations of any Party under
Section 4.07(a)
. For purposes of this
Section 4.07
, any information concerning or related to Seller or its Affiliates or their
respective Representatives will be deemed to have been provided by Seller, and any information concerning or related to Buyer or its Affiliates or their respective Representatives will be deemed to have been provided by Buyer.
(c) Subject to the provisions of
Section 4.06
, Seller shall, in accordance with applicable Law and Sellers charter and
bylaws, establish a record date for, duly call, give notice of, convene and hold the Seller Special Meeting as promptly as reasonably practicable after the date hereof, for the purpose of obtaining the Seller Stockholder Approval;
provided
,
that the Seller Special Meeting shall occur no more than thirty (30) Business Days after the date that the SEC has advised that it will not provide further comments on the Proxy Statement (or the date on which the
ten-day
period referred to in Rule
14a-6
under the Exchange Act has expired without receipt of SEC comments or notice from the SEC that it will provide comments).
Subject to the provisions of
Section 4.06
and compliance with applicable Law, Seller shall, as promptly as reasonably practicable on or after the date that the SEC has advised that it will not provide further comments on the Proxy
Statement (or the date on which the
ten-day
period referred to in Rule
14a-6
under the Exchange Act has expired without receipt of SEC comments or notice from the SEC
that it will provide comments) (but it any event no more than five (5) Business Days thereafter), mail the Proxy Statement to the stockholders of Seller. Subject to the provisions of
Section 4.06
, Seller (i) shall include in
the Proxy Statement the Seller Board Recommendation, (ii) shall use its reasonable best efforts to solicit and obtain the Seller Stockholder Approval, and (iii) shall not withhold, withdraw, amend, modify or qualify (or publicly propose to
or publicly state that it intends to withdraw, amend, modify or qualify) in any manner adverse to Buyer the Seller Board Recommendation (it being understood that publicly taking a neutral position or no position with respect to an Alternative
Transaction (other than a stop, look and listen communication to the stockholders of Seller pursuant to Rule 14d-9(f) under the Exchange Act (or any similar communication to the stockholders of Seller) shall be considered a modification
to the Seller Board Recommendation in a manner adverse to Buyer) (collectively, a
Seller Change of
Recommendation
), except to the extent permitted by
Section 4.06
.
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Notwithstanding the foregoing provisions of this
Section 4.07(c)
, Seller shall be permitted to recess, adjourn, postpone or delay the Seller Special Meeting without the prior consent
of Buyer if and solely to the extent that: (i) there are holders of an insufficient number of Common Stock present or represented by a proxy at the Seller Special Meeting to constitute a quorum at the Seller Special Meeting,
provided
,
that any such recesses, adjournments, postponements or delays shall not cause the Seller Special Meeting to be recessed, adjourned, postponed or delayed by more than fifteen (15) days after the initial date established for the Seller Special
Meeting; (ii) Seller has not received proxies representing a sufficient number of Common Stock to obtain the Seller Stockholder Approval,
provided
, that any such adjournments, postponements or delays shall not cause the Seller Special
Meeting to be adjourned, postponed or delayed by more than more than fifteen (15) days after the initial date established for the Seller Special Meeting; (iii) such adjournment, postponement, delay or cancellation is required by applicable
Law or a request from the SEC or its staff; or (iv) in the good faith judgment of the Seller Board (after consultation with its outside legal advisors), the failure to adjourn, postpone or delay the Seller Special Meeting would be reasonably
likely to not allow sufficient time under applicable Laws for the distribution and review of any required or appropriate supplement or amendment to the Proxy Statement by Sellers stockholders prior to the Seller Special Meeting as
then-scheduled.
ARTICLE V
CONDITIONS PRECEDENT TO CLOSING
Section 5.01
Conditions to the Obligations of Each Party
.
The respective obligations of Buyer and Seller to
consummate the transactions contemplated hereby are subject to the satisfaction or waiver (if permissible under applicable Law) by Buyer or Seller, as appropriate, at or before the Closing Date, of each of the following conditions:
(a) the Seller Stockholder Approval shall have been obtained;
(b) no Order, stipulation or injunction by any Governmental Entity of competent jurisdiction shall be in effect which prevents, makes illegal,
or limits the consummation of any of the transactions contemplated by this Agreement, and no action, suit or proceeding shall be pending by or before any Governmental Entity of competent jurisdiction seeking an Order, stipulation or injunction
seeking to enjoin, restrain or otherwise prevent or prohibit the consummation of, or limit, any of the transactions contemplated by this Agreement;
(c) no Law shall have been enacted, promulgated or deemed applicable to the transactions contemplated hereby by any Governmental Entity that
prevents the consummation of such transactions or has the effect of making such consummation thereof illegal or otherwise prohibiting, restraining or enjoining the consummation of such transactions;
(d) all waiting periods under the HSR Act and any other applicable Antitrust Laws (and any extensions thereof) shall have been terminated or
shall have expired; and
(e) the Escrow Agreement shall have been duly executed and delivered by the Escrow Agent.
Section 5.02
Conditions to Obligations of Buyer
.
In addition to the satisfaction or waiver, as applicable, of the
conditions under
Section 5.01
, the obligation of Buyer to consummate the transactions to be consummated at the Closing is subject to the satisfaction (or waiver (if permissible under applicable Law) in writing by Buyer) of the following
conditions:
(a) (i) each of the Fundamental Representations of Seller set forth in
Article II
shall be true and correct
(disregarding all qualifications and exceptions as to materiality or Seller Material Adverse Effect contained therein) in all material respects on and as of the date of this Agreement and on and as of the Closing Date (except
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with respect to representations and warranties that address matters only as of a particular date, in which case, as of such other date); and (ii) each of the representations and warranties
of Seller set forth in
Article II
(other than the Fundamental Representations) shall be true and correct (disregarding all qualifications and exceptions as to materiality or Seller Material Adverse Effect contained therein) on and as of the
date of this Agreement and on and as of the Closing Date (except with respect to representations and warranties that address matters only as of a particular date, in which case, as of such other date), except for failures of such representations and
warranties to be true and correct as to matters that would not reasonably be expected to have a Seller Material Adverse Effect;
(b)
Seller shall have performed or complied in all material respects with the agreements and covenants required to be performed or complied with by it under this Agreement at or prior to the Closing;
(c) Seller shall have delivered to Buyer a certificate, validly executed by a duly authorized officer of Seller, dated as of the Closing Date,
certifying that each of the conditions specified in
clauses (a)
,
(b)
and
(h)
of this
Section 5.02
is satisfied;
(d) Seller shall have delivered a certificate of
non-foreign
status satisfying the requirements of
Treasury Regulation
Section 1.1445-2(b)
in a form reasonably acceptable to Buyer;
(e)
Seller shall have delivered to Buyer all other items listed in
Section 1.03(b)
not otherwise delivered under this
Section 5.02
;
(f) Seller shall have delivered to Buyer letters from Seller to the FDA transferring to Buyer or any of its designees ownership of
(i) Investigational New Drug Application # 12855 (and any additional applications with the FDA) in substantially the form attached hereto as
Exhibit E-1
(the
Seller FDA Letter
) and (ii) the orphan drug designation
of CTP-656 in substantially the form attached hereto as
Exhibit E-2
(the
Seller Orphan Designation Letter
);
(g)
Seller shall have delivered a counterpart to the Escrow Agreement, duly executed by Seller;
(h) All Third Party consents and notices set
forth on
Section 5.02(h)
of the Seller Disclosure Letter shall have been obtained or delivered, as applicable, in form and substance reasonably satisfactory to Buyer;
(i) Since the date of this Agreement, there shall not have occurred a Seller Material Adverse Effect;
(j) No Antitrust Approval shall, individually or in the aggregate, impose any Burdensome Term or Condition; and
(k) Seller shall have in its inventory, a minimum quantity of Transferred Inventory with respect to CTP-656 Free Base equal to forty
(40) kilograms.
Section 5.03
Conditions to Obligations of Seller
.
The obligation of Seller to consummate
(or cause to be consummated) the transactions to be consummated at the Closing are subject to the satisfaction (or waiver in writing by Seller) of the following conditions:
(a) (i) each of the Fundamental Representations of Buyer set forth in
Article III
shall be true and correct (disregarding all
qualifications and exceptions as to materiality or Buyer Material Adverse Effect contained therein) in all material respects on and as of the date of this Agreement and on and as of the Closing Date (except with respect to representations and
warranties that address matters only as of a particular date, in which case, as of such other date); and (ii) each of the representations and warranties of Buyer set forth in
Article III
(other than the Fundamental Representations)
shall be true and correct (disregarding all qualifications and exceptions as to materiality or Buyer Material Adverse Effect contained therein) on and as of the date of this Agreement and on and as of the Closing Date (except with respect to
representations and warranties that address
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matters only as of a particular date, in which case, as of such other date), except for failures of such representations and warranties to be true and correct as to matters that would not
reasonably be expected to have a Buyer Material Adverse Effect;
(b) Buyer shall have performed or complied with in all material respects
its agreements and covenants required to be performed or complied with by it under this Agreement at or prior to the Closing;
(c) Buyer
shall have delivered to Seller a certificate, validly executed by a duly authorized officer of Buyer, dated as of the Closing Date, certifying that each of the conditions specified in
clauses (a)
and
(b)
of this
Section 5.03
is satisfied;
(d) Buyer shall have delivered a counterpart to the Escrow Agreement, duly executed by Buyer;
(e) Buyer shall have delivered to Seller letters from Buyer or any of its designees to the FDA accepting ownership of (i) Investigational
New Drug Application # 12855 (and any additional applications with the FDA) issued by the FDA in substantially the form attached hereto as
Exhibit F-1
(the
Buyer FDA Letter
) and (ii) the orphan drug designation of
CTP-656 in substantially the form attached hereto as
Exhibit F-2
(the
Buyer Orphan Designation Letter
); and
(f)
Buyer shall have delivered to Seller all other items listed in
Section 1.03(b)
not otherwise delivered under this
Section 5.03
.
ARTICLE VI
INDEMNIFICATION
Section 6.01
Survival
.
(a) Other than claims alleging fraud or willful or intentional misconduct or breach of this Agreement, the representations and warranties of
Seller and Buyer set forth in this Agreement and the certificates delivered at Closing pursuant to
Sections 5.02(c)
and
5.03(c)
shall survive the Closing for a period of eighteen (18) months from the Closing Date, other than for
the representations and warranties of Seller contained in
Section 2.01
(Organization, Qualification and Corporate Power),
Section 2.02
(Title to Assets),
Section 2.03
(Authority),
Section 2.05
(Non-Contravention; Consents) and
Section 2.17
(Brokers Fees), and of Buyer contained in
Sections 3.01
(Organization),
Section 3.02
(Authorization of Transaction) and
Section 3.04
(Brokers
Fees), (collectively, the
Fundamental Representations
), which shall survive the Closing until the date that is sixty (60) days after the expiration of the applicable statute of limitations.
(b) The covenants and agreements to be performed by or on behalf of a Party prior to the Closing shall survive the Closing for a period of
twenty four (24) months from the Closing Date. The covenants or other agreements contained in this Agreement that by their terms are to be performed by or on behalf of a Party after the Closing shall survive until the date that such covenants
and agreements are fully performed.
(c) No Person shall be liable for any claim for indemnification under this
Article VI
unless a
Claim Notice is delivered by the Person seeking indemnification to the Person from whom indemnification is sought prior to the expiration of the applicable survival period, in which case the representation, warranty, covenant or agreement which is
the subject of such claim shall survive, to the extent of the claims described in such Claim Notice only, until such claim is resolved, whether or not the amount of the Damages resulting from such breach has been finally determined at the time the
notice is given.
(d) The right of a Person to any remedy pursuant to this
Article VI
shall not be affected by any investigation or
examination conducted, or any knowledge possessed or acquired (or capable of being possessed
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or acquired), by such Person at any time concerning any circumstance, action, omission or event relating to the accuracy or performance of any representation, warranty, covenant or obligation.
Section 6.02
Indemnification by Seller
.
Subject to the terms and conditions of this
Article VI
, from and
after the Closing, Seller shall defend, indemnify and hold harmless Buyer and its Subsidiaries and their respective officers, directors, Affiliates, stockholders, members, partners and each of the heirs, executors, successors and assigns of any of
the foregoing (collectively, the
Buyer Indemnified Parties
) in respect of any and all Damages incurred as a result or arising out of:
(a) any (i) breach of any representation or warranty of Seller in this Agreement or the certificate of Seller delivered at the Closing
pursuant to
Section 5.02(c)
(without giving effect to any Seller Material Adverse Effect or other materiality threshold or qualifier contained therein, except in the case of the representation contained in
Section 2.07(c))
, or (ii) failure to perform any covenant or agreement of Seller contained in this Agreement or the Related Agreements;
(b) Sellers and its Affiliates failure, fully or timely, to pay, satisfy or perform the Excluded Liabilities;
(c) any Tax for which Seller is responsible pursuant to
Section 8.01
;
(d) any Tax imposed on or relating to Acquired Assets that is attributable to any
Pre-Closing
Tax
Period;
(e) any failure by Seller, or claim by a creditor of Seller that Seller has failed to comply with the provisions of any
applicable bulk sales, bulk transfer or similar Laws; or
(f) all costs and Liabilities, including product Liability, associated with the
open-label Phase 2 clinical trial of CTP-656 in Europe, including all costs associated with termination of such clinical trial.
Section 6.03
Indemnification by Buyer
.
Subject to the terms and conditions of this
Article VI
, from and after
the Closing, Buyer shall indemnify Seller and its Subsidiaries and their respective officers, directors, Affiliates, stockholders, members, partners and each of the heirs, executors, successors and assigns of any of the foregoing (collectively, the
Seller Indemnified Parties
) in respect of, and hold the Seller Indemnified Parties harmless against, any and all Damages incurred as a result or arising out of:
(a) any (i) breach of any representation or warranty of Buyer contained in
Article III
of this Agreement or the certificate of
Buyer delivered at the Closing pursuant to
Section 5.03(c)
(without giving effect to any Buyer Material Adverse Effect or other materiality threshold or qualifier contained therein), or (ii) failure to perform any
covenant or agreement of Buyer contained in this Agreement or the Related Agreements;
(b) Buyers and its Affiliates failure,
fully or timely, to pay, satisfy or perform the Assumed Liabilities;
(c) any Tax for which Buyer is responsible pursuant to
Section 8.01
; or
(d) any Tax imposed on or relating to Acquired Assets that is attributable to any Post-Closing Tax Period.
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Section 6.04
Claims for Indemnification
.
(a)
Third Party Claims
.
(i) All claims for indemnification made under this Agreement resulting from, related to or arising out of a Third Party claim,
action, suit or proceeding (a
Third Party Claim
) against an Indemnified Party shall be made in accordance with the following procedures. A Person entitled to indemnification under this
Article VI
(an
Indemnified
Party
) shall give prompt written notification to the Person from whom indemnification is sought (the
Indemnifying Party
) of the commencement of any Third Party Claim for which indemnification may be sought or, if
earlier, upon the written assertion of any such Third Party Claim;
provided
,
however
, that no delay on the part of the Indemnified Party in notifying the Indemnifying Party shall relieve the Indemnifying Party of any Liability
hereunder, except to the extent that the Indemnifying Party has been materially prejudiced thereby, and then only to such extent. Within twenty (20) days after delivery of such notification, the Indemnifying Party may, upon written notice
thereof to the Indemnified Party, assume control of the defense of such Third Party Claim, so long as prior to the Indemnifying Party assuming control of such defense, it has provided reasonable assurance to the Indemnified Party (A) of its
financial ability to assume the cost of such Third Party Claim and (B) that, as between the Indemnifying Party and the Indemnified Party, any Damages related to such Third Party Claim shall be the responsibility of the Indemnifying Party
(subject to any applicable limitations provided in
Section 6.05
);
provided
, that the Indemnifying Party shall not be entitled to assume control of such defense and shall pay the fees and expenses of counsel retained by the
Indemnified Party if (i) the Third Party Claim seeks an injunction or other equitable or non-monetary relief, (ii) the maximum amount the Indemnified Party would be entitled to recover under this
Article VI
in respect of such Third
Party Claim is anticipated to be more than the Cap, (iii) the Indemnified Party has been advised in writing by its counsel that a reasonable likelihood exists of a conflict of interest between the Indemnifying Party and the Indemnified Party,
and (iv) upon petition by the Indemnified Party, the appropriate court rules that the Indemnifying Party failed or is failing to vigorously prosecute or defend such Third Party Claim. If the Indemnifying Party does not assume control of such
defense in accordance with the terms hereof, the Indemnified Party shall control such defense.
(ii) The Party not
controlling such defense may participate therein at its own expense and may retain separate
co-counsel
at its own expense;
provided
, that if (A) the Indemnifying Party shall have failed, or is not
entitled, to assume the defense of such Third Party Claim in accordance with
Section 6.04(a)(i)
, (B) the employment of such counsel has been specifically authorized in writing by the Indemnifying Party, which authorization shall not
be unreasonably withheld, conditioned or delayed, or (C) the named parties to any such action (including any impleaded parties) include both such Indemnified Party and the Indemnifying Party and such Indemnified Party shall have been advised in
writing by such counsel that there may be one (1) or more legal defenses available to the Indemnified Party which are not available to the Indemnifying Party, or are available to the Indemnifying Party but the assertion of which would be
adverse to the interests of the Indemnified Party, the reasonable fees and expenses of counsel to the Indemnified Party solely in connection therewith shall be considered Damages for purposes of this Agreement;
provided
,
however
, that
in no event shall the Indemnifying Party be responsible for the fees and expenses of more than one (1) counsel for all Indemnified Parties. The Party controlling such defense shall keep the other Party advised of the status of such Third Party
Claim and the defense thereof and shall consider recommendations made by the other Party with respect thereto.
(iii) The
Indemnified Party shall not agree to any settlement of such Third Party Claim without the prior written consent of the Indemnifying Party, which consent shall not be unreasonably withheld, conditioned or delayed so long as the Indemnifying Party is
actively and diligently defending in good faith any such Third Party Claim. The Indemnifying Party shall not agree to any settlement of (y) such Third Party Claim that (A) does not include a complete and unconditional release of the
Indemnified
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Party from all Liability with respect thereto, (B) has a finding or admission of any violation of Law or any violation of the rights of any Person, (C) imposes any injunctive relief or
other restrictions of any kind or nature on any Indemnified Party or (D) imposes any Liability on the Indemnified Party, or (z) any matters with respect to Taxes that could reasonably be expected to adversely impact Buyer or the Acquired
Assets in any Post-Closing Tax Period, in each case without the prior written consent of the Indemnified Party, which consent shall not be unreasonably withheld, conditioned or delayed. Each of the Indemnifying Party and the Indemnified Party shall
direct their respective counsel to reasonably cooperate with the other.
(b)
Procedure for Other Claims
. An Indemnified Party
wishing to assert a claim for indemnification under this
Article VI
which is not subject to
Section 6.04(a)
shall deliver to the Indemnifying Party a written notice (a
Claim Notice
) which contains (i) a
description and, if then known, the amount (the
Claimed Amount
) of any Damages incurred by the Indemnified Party or the method of computation of the amount of such claim of any Damages, (ii) a statement that the Indemnified
Party is entitled to indemnification under this
Article VI
and a reasonable explanation of the basis therefor, and (iii) a demand for payment in the amount of such Damages (including wire instructions if payment is requested to be made
by wire transfer). Within twenty (20) days after delivery of a Claim Notice, the Indemnifying Party shall deliver to the Indemnified Party a written response in which the Indemnifying Party shall (A) agree that the Indemnified Party is
entitled to receive all of the Claimed Amount (in which case, within five (5) Business Days of such response, the Indemnifying Party shall, as applicable, pay to the Indemnified Party by check or by wire transfer, or Seller and Buyer shall
deliver joint written instructions to the Escrow Agent to release to the Indemnified Party from the Escrow Amount an amount equal to the Claimed Amount to the bank account or accounts designated by the Indemnified Party in a notice to the
Indemnifying Party not less than two (2) Business Days prior to such payment), (B) agree that the Indemnified Party is entitled to receive part, but not all, of the Claimed Amount (the
Agreed Amount
) (in which case,
within five (5) Business Days of such response, the Indemnifying Party shall, as applicable, pay to the Indemnified Party by check or by wire transfer, or Seller and Buyer shall deliver joint written instructions to the Escrow Agent to release
to the Indemnified Party from the Escrow Amount an amount equal to the Agreed Amount to the bank account or accounts designated by the Indemnified Party in a notice to the Indemnifying Party not less than two (2) Business Days prior to such
payment), or (C) contest that the Indemnified Party is entitled to receive any of the Claimed Amount including the reasons therefor. If the Indemnifying Party in such response contests the payment of all or part of the Claimed Amount, the
Indemnifying Party and the Indemnified Party shall use commercially reasonable efforts to resolve such dispute. If such dispute is not resolved within sixty (60) days following the delivery by the Indemnifying Party of such response, the
Indemnifying Party and the Indemnified Party shall each have the right to submit such dispute to a court of competent jurisdiction in accordance with the provisions of
Section 10.09
.
Section 6.05
Limitations
.
(a) Subject to
Section 10.13
, from and after the Closing, the rights of
the Indemnified Parties under this
Article VI
shall be the sole and exclusive remedies of the Indemnified Parties with respect to claims resulting from any breach of warranty or failure to perform any covenant or agreement contained in this
Agreement or any Related Agreement or otherwise relating to the transactions that are the subject of this Agreement. Notwithstanding the foregoing or anything in this Agreement to the contrary, nothing contained in this Agreement shall relieve or
limit the Liability of any Party or any officer or director of such Party from any liability arising out of or resulting from fraud or intentional or willful misconduct in connection with the transactions contemplated by this Agreement or the
Related Agreement, or in connection with the delivery of any of the documents referred to herein or therein.
(b) Notwithstanding anything
to the contrary contained in this Agreement, each of the following limitations shall apply:
(i) the aggregate liability of
Seller for all Damages (y) under
Section 6.02(a)(i)
(other than in respect of fraud or intentional or willful misconduct by Seller or in respect of any Fundamental Representation of Seller) shall not exceed an amount equal to the
Escrow Amount (the
Cap
); and
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(z) other than in respect of fraud or intentional or willful misconduct by Seller, under
Section 6.02(a)
shall not exceed an amount equal to the sum of the Base Purchase Price
and any Contingent Payment paid pursuant to
Section 1.02(b)
;
(ii) a Buyer Indemnified Party shall have no
right to indemnification under
Section 6.02(a)(i)
(other than in respect of fraud or intentional or willful misconduct by Seller or in respect of any Fundamental Representation of Seller, in each case, as to which the limitation shall
not apply) unless and until the amount of Damages suffered by such Buyer Indemnified Party with respect to an individual claim under such sections exceeds $50,000 (it being stated for the avoidance of doubt that Damages arising from any potential
indemnification claims that arise out of or involve or relate to similar facts or are based on related or similar occurrences, events or circumstances will be aggregated and treated as an individual claim for this purpose) and the aggregate amount
of Damages suffered by such Buyer Indemnified Party under such section exceeds $1,600,000 (the
Aggregate Threshold
), whereupon the Buyer Indemnified Parties shall be indemnified for all Damages (including Damages up to the
Aggregate Threshold), subject to the limitations contained in
Section 6.05(b)(i)
;
(iii) the aggregate
liability of Buyer for all Damages (y) under
Section 6.03(a)(i)
(other than on account of fraud or intentional or willful misconduct by Buyer or in respect of any Fundamental Representation of Buyer) shall not exceed an amount equal
to the Cap; and (z) other than on account of fraud or willful misconduct by Buyer, under
Section 6.03(a)
shall not exceed an amount equal to the sum of the Base Purchase Price and any Contingent Payment paid pursuant to
Section 1.02(b)
; and
(iv) a Seller Indemnified Party shall have no right to indemnification under
Section 6.03(a)(i)
(other than on account fraud or intentional or willful misconduct by Buyer or in respect of any Fundamental Representation of Buyer, in each case, as to which the limitation shall not apply) unless and until the amount
of Damages suffered by such Seller Indemnified Party with respect to an individual claim under such sections exceeds $50,000 (it being stated for the avoidance of doubt that Damages arising from any potential indemnification claims that arise out of
or involve or relate to similar facts or are based on related or similar occurrences, events or circumstances will be aggregated and treated as an individual claim for this purpose) and the aggregate amount of Damages suffered by such Seller
Indemnified Party under such sections exceeds the Aggregate Threshold, whereupon the Seller Indemnified Parties shall be indemnified for all Damages (including Damages up to the Aggregate Threshold), subject to the limitations contained in
Section 6.05(b)(iii)
.
(c) In no event shall any Indemnifying Party be responsible and liable under this
Article VI
for
special or punitive Damages, except to the extent that any of the foregoing are awarded to a Third Party against any Indemnified Party in circumstances in which such Indemnified Party is entitled to indemnification hereunder. In no event shall any
Indemnifying Party be responsible and liable under this
Article VI
for indirect, consequential or incidental Damages except to the extent that (i) such Damages are awarded to a Third Party against any Indemnified Party in circumstances
in which such Indemnified Party is entitled to indemnification hereunder, or (ii) such Damages are a reasonably foreseeable result of the event that gave rise thereto or the matter for which indemnification is sought hereunder.
(d) The amount of any Damages for which indemnification is provided under this
Article VI
shall be computed net of any Third Party
insurance proceeds actually received by the Indemnified Party (net of any retroactive premium adjustments and any other costs of collection), each Party agreeing (i) to use commercially reasonable efforts to recover all available insurance
proceeds and (ii) to the extent any indemnity payment under this Agreement has been paid by the Indemnifying Party to or on behalf of the Indemnified Party prior to the receipt, directly or indirectly by the Indemnified Party of any net
insurance proceeds under Third Party insurance policies on account of such Damages which duplicate, in whole or in part, the payment by the Indemnifying Party to or on behalf of the Indemnified Party, the Indemnified Party shall remit to the
Indemnifying Party an amount equal to the amount of the net insurance proceeds actually received by the Indemnified Party on account of such Damages which duplicate, in whole or in part, the payment made by the Indemnifying Party to or on behalf of
the Indemnified Party. No Party shall be entitled to recover more than once for the same Damages.
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Section 6.06
Manner of Payment
.
(i) Subject to the limitations set
forth in
Section 6.05(b)
, any indemnification of Buyer pursuant to
Section 6.02
shall be effected (i) first, by release of funds held by the Escrow Agent with respect to indemnification of Buyer pursuant to
Section 6.02
for any Damages incurred up to an amount equal to the Escrow Amount pursuant to the terms of the Escrow Agreement and (ii) second, to the extent of any difference, by wire transfer of immediately available funds from
Seller to an account designated in writing by Buyer. In the event any payment is to be made from the Escrow Account in accordance with this
Section 6.06
, Seller and Buyer shall deliver joint written instructions to the Escrow Agent to
release to the Indemnified Party from the Escrow Account the appropriate amount by wire transfer in immediately available funds to the bank account or accounts designated by the Indemnified Party in a notice to the Indemnifying Party not less than
two (2) Business Days prior to such payment.
Section 6.07
Right of Setoff
.
Upon notice to Seller
specifying in reasonable detail the basis therefor, Buyer may, at its sole discretion, set off any amount to which it may be entitled under this
Article VI
that is the subject of a final, non-appealable decision from a court of competent
jurisdiction against amounts otherwise payable pursuant to
Section 1.02
.
Section 6.08
Adjustment to Purchase
Price
.
Any payment by Buyer or Seller, as the case may be, pursuant to this
Article VI
shall be treated as an adjustment to the Base Purchase Price for Tax purposes unless otherwise required by applicable Law.
Section 6.09
Release of the Escrow Account
.
On the eighteen (18) month anniversary of the Closing Date, to the
extent the amount remaining in the Escrow Account exceeds any amounts which are the subject of any unresolved or unsatisfied claims for indemnifiable Damages pursuant to
Section 6.02
that were properly made on or prior to the eighteen
(18) month anniversary of the Closing Date in accordance with the provisions of this
Article VI
, Buyer and Seller shall deliver to the Escrow Agent a joint written instruction in accordance with the terms of the Escrow Agreement to the
effect that the Escrow Agent release any such excess amount to Seller as of such date. To the extent any amounts are retained in the Escrow Account pursuant to the immediately preceding sentence, Buyer and Seller shall instruct the Escrow Agent to
release such funds, following the resolution of each such claim, to Buyer or to Seller in accordance with the resolution of the applicable claim, as appropriate.
ARTICLE VII
TERMINATION
Section 7.01
Termination of Agreement
.
The Parties may terminate this Agreement prior to the Closing as provided
below:
(a) by mutual written agreement of Seller and Buyer;
(b) by Buyer if a breach of any representation or warranty or failure to perform any covenant or agreement on the part of Seller set forth in
this Agreement shall have occurred that would cause any of the conditions set forth in
Section 5.02(a)
or
(b)
not to be satisfied, and such breach is incapable of being cured or not cured within thirty (30) days
following Buyers delivery of notice to Seller of such breach or failure to perform,
provided
, that Buyer may terminate this Agreement pursuant to this
Section 7.01(b)
only if, at the time of termination, Buyer is not in
material breach of any of its representations, warranties, covenants or agreements contained in this Agreement;
(c) by Seller if a breach
of any representation or warranty or failure to perform any covenant or agreement on the part of Buyer set forth in this Agreement shall have occurred that would cause any of the conditions set forth in
Section 5.03(a)
or
(a)
not to be satisfied, and such breach is incapable of being cured or
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not cured within thirty (30) days following Sellers delivery of notice to Buyer of such breach or failure to perform,
provided
, that Seller may terminate this Agreement pursuant
to this
Section 7.01(c)
only if, at the time of termination, Seller is not in material breach of any of its representations, warranties, covenants or agreements contained in this Agreement;
(d) by Buyer, if the Seller Board (i) fails to make the Seller Board Recommendation referred to in
Section 4.06(d)
or shall
fail to include in the Proxy Statement the Seller Board Recommendation, (ii) effects a Seller Change of Recommendation, (iii) authorizes, approves or recommends to Sellers stockholders, or otherwise authorizes, approves or publicly
recommends, an Alternative Transaction or (iv) fails to publicly confirm the Seller Board Recommendation within ten (10) Business Days after a written request (which request must be reasonable under the circumstances) by Buyer that it do
so following Sellers receipt of an Alternative Transaction;
(e) by Buyer, if there shall have been a material breach by Seller of
Section 4.06
or
Section 4.07
;
(f) by Buyer or Seller by written notice to the other if;
(i) the condition set forth in
Section 5.01(b)
or
Section 5.01(c)
is not satisfied and the Order,
stipulation or injunction giving rise to such non-satisfaction has become final and non-appealable;
provided
,
however
, that the right to terminate this Agreement pursuant to this
Section 7.01(f)(i)
shall not be available to
any party that has failed to perform fully its obligations under this Agreement in any manner that shall have proximately caused or resulted in the imposition of such Order, stipulation or injunction or the failure of such Order, stipulation or
injunction to be resisted, resolved or lifted;
(ii) the Closing shall not have occurred on or before October 31, 2017
(the
Outside Date
);
provided
,
however
, that no Party may terminate this Agreement pursuant to this
Section 7.01(f)(ii)
if such Partys material breach of any representation, warranty, covenant or
other obligation under this Agreement shall have proximately caused or resulted in the Closing not having occurred on or prior to the Outside Date; or
(iii) the Seller Stockholder Approval is not obtained at the Seller Special Meeting or at any adjournment or postponement
thereof, in each case at which a vote on such approval was taken; or
(g) by Seller,
provided
, that it has complied with its
obligations under
Section 4.06
and
Section 4.07
, at any time prior to obtaining the Seller Stockholder Approval at the Seller Special Meeting or at any adjournment or postponement thereof, in order to concurrently enter into
a binding agreement for an Alternative Transaction that constitutes a Superior Proposal, if prior to or concurrently with such termination, Seller pays the Termination Fee (
as defined in Section 7.02(b)
); or
(h) by Buyer within five (5) Business Days following the cure period set forth in
Section 7.01(b)
upon receipt by Buyer of a
Supplement pursuant to
Section 4.04
, if the Supplement gives rise to a breach that is not cured within the cure period.
Section 7.02
Effect of Termination
.
(a) To terminate this Agreement as provided in
Section 7.01
(except in the case of termination pursuant to
Section 7.01(a)
), the terminating party shall have given written notice to the other Party specifying the subsection of
Section 7.01
pursuant to which such termination is made, and this Agreement shall forthwith become null
and void and there will be no liability of any Party (or any stockholder or Representative of such Party) to each other Party hereto, except with respect to the Confidentiality Agreement, this
Section 7.02
,
Section 9.04
and
Article X
;
provided
, that no such termination shall relieve any Party from liability for any damages resulting from fraud or a willful breach of its representations, warranties or covenants set forth in this Agreement prior to such
termination and any aggrieved Party will be entitled to all rights and remedies under applicable Law or in equity.
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(b)
Seller Termination Fee
. (i) If this Agreement is terminated pursuant to:
(A)
Section 7.01(d)
or
Section 7.01(e)
;
(B)
Section 7.01(f)(ii)
and (x) a vote of the stockholders of Seller contemplated by this Agreement at the
Seller Special Meeting to obtain the Seller Stockholder Approval has not occurred and (y) a proposal with respect to an Alternative Transaction shall have been publicly proposed or announced or otherwise publicly disclosed and not withdrawn
after the date of this Agreement and prior to the date of termination of this Agreement;
(C)
Section 7.01(b)
or
Section 7.01(f)(iii)
, and, in either case, a proposal with respect to an Alternative Transaction shall have been publicly proposed or announced or otherwise publicly disclosed and not withdrawn after the date of this Agreement and
prior to the date of the Seller Special Meeting; or
(D)
Section 7.01(g)
;
then (x) in the case of a termination contemplated by
Section 7.02(b)(i)(A)
, Seller shall pay or cause to be paid to Buyer
within two (2) Business Days following the termination of this Agreement, a fee, by wire transfer in immediately available funds to an account specified by Buyer, equal to $6,400,000 (the
Termination Fee
); (y) in the
case of termination contemplated by
Section 7.02(b)(i)(D)
, Seller shall pay or cause to be paid to Buyer the Termination Fee on the date of termination of this Agreement; and (z) in the case of a termination contemplated by
Section 7.02(b)(i)(B)
or
Section 7.02(b)(i)(C)
, if Seller, within twelve (12) months after such termination either consummates an Alternative Transaction or enters into a definitive agreement to implement an Alternative
Transaction, Seller shall pay to Buyer the Termination Fee simultaneously with such consummation or entering into such definitive agreement, as the case may be. For purposes of clause (z) of this
Section 7.02(b)(i)
, each reference
to 15% in the definition of Alternative Transaction shall be deemed to be a reference to 50%.
(ii) If Buyer or Seller terminates this Agreement pursuant to
Section 7.01(f)(iii)
, then Seller shall reimburse
Buyer, or cause Buyer to be reimbursed, for Buyers reasonable, documented
out-of-pocket
expenses incurred in connection with this Agreement and the transactions
contemplated hereby,
provided
,
however
, Sellers aggregate liability under this
Section 7.02(b)(ii)
shall not exceed an amount equal to $500,000.
(iii) In no event shall Seller be obligated to pay the Termination Fee on more than one occasion.
(c) Seller acknowledges that (i) the agreements contained in this
Section 7.02
are an integral part of the transactions
contemplated by this Agreement and that without this
Section 7.02
Buyer would not have entered into this Agreement and (ii) the Termination Fee is not a penalty, but rather is liquidated damages in a reasonable amount that will
compensate Buyer in the circumstances in which the Termination Fee is payable for the efforts and resources expended and opportunities foregone while negotiating this Agreement and in reliance on this Agreement and on the expectation of the
consummation of the transactions contemplated hereby. If Seller fails to promptly pay any amount due pursuant to this
Section 7.02
, Seller shall pay to Buyer all reasonable fees, costs and expenses of enforcement (including reasonable
attorneys fees as well as reasonable expenses incurred in connection with any action initiated by Buyer), together with interest on the amount of the Termination Fee at the prime lending rate as published in
The Wall Street Journal
,
Eastern Edition, in effect on the date such payment is required to be made.
(d) If Seller becomes obligated to pay the Termination Fee
pursuant to Section 7.02(b), Buyer agrees that Buyers right to receive the Termination Fee from Seller shall be Buyers sole and exclusive remedy against Seller, its Subsidiaries, Affiliates and their respective Representatives and,
upon payment of the Termination Fee, neither Seller, its Subsidiaries, Affiliates nor their respective Representatives shall have any Liability or obligation to Buyer relating to or arising out of this Agreement or the transactions contemplated
hereby.
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(e) In the event that this Agreement is terminated (i) by either Buyer or Seller pursuant to
Section 7.01(f)(ii)
, and at the time of such termination any of the conditions set forth in
Section 5.01(b)
or
(c)
(under conditions attributable to one or more Antitrust Laws) or
Section 5.01(d)
shall
not have been satisfied or waived or (ii) by either Buyer or Seller pursuant to
Section 7.01(f)(i)
(under conditions attributable to one or more Antitrust Laws), and at the time of such termination under either
Section 7.01(f)(i)
or
Section 7.01(f)(ii)
, all conditions set forth in
Article 5
other than those attributable to Antitrust Laws have been satisfied or waived by the party or parties then entitled to give such waiver
(other than those conditions that by their terms are to be satisfied as of the Closing,
provided
, that each such condition is then capable of being satisfied), then Buyer shall reimburse Seller, or cause Seller to be reimbursed, for
Sellers reasonable, documented
out-of-pocket
expenses incurred in connection with this Agreement and the transactions contemplated hereby, provided, however, that
Buyers aggregate liability under this
Section 7.02(e)
shall not exceed an amount equal to $500,000.
ARTICLE VIII
TAX MATTERS
Section 8.01
Certain Tax Matters
.
Buyer shall be responsible for the payment of any transfer, sales, use, stamp,
conveyance, value added, recording, registration, documentary, filing and other
non-income
Taxes and administrative fees (including notary fees) arising in connection with the consummation of the transactions
contemplated by this Agreement (
Transfer Taxes
). Buyer shall, at its own expense, timely file any Tax Return or other document with respect to such Taxes or fees (and Seller shall cooperate with respect thereto as necessary).
Buyer and Seller shall use commercially reasonable efforts to cooperate with each other to minimize any Transfer Taxes.
Section 8.02
Withholding Taxes
.
Each of Buyer and Escrow Agent shall be entitled to deduct and withhold from any
consideration payable or otherwise deliverable to Seller or any other Person pursuant to this Agreement (including the Contingent Payments, if any) all Taxes that Buyer or the Escrow Agent, as the case may be, are required to deduct or withhold
therefrom under any applicable provision of Tax Law with respect to the making of such payment. All such withheld amounts shall be treated as delivered to Seller;
provided
, that Buyer or the Escrow Agent shall remit or cause to be remitted to
the applicable Governmental Entity the amounts withheld as required under any applicable provision of Tax Law. Buyer shall, to the extent reasonable, notify Seller if any such withholding is required.
ARTICLE IX
FURTHER AGREEMENTS
Section 9.01
Post-Closing
Information
.
After the Closing, Buyer shall
respond to reasonable, written requests for information and assistance by Seller in connection with Seller completing the audit of its accounts and preparation of its required federal, state and local Tax Returns.
Section 9.02
Wrong Pockets
.
If either Buyer, on the one hand, or Seller, on the other hand, becomes aware that any
of the Acquired Assets has not been transferred to Buyer or that any of the Excluded Assets has been transferred to Buyer, Buyer or Seller, as applicable, shall promptly notify the other and the Parties shall, as soon as reasonably practicable,
ensure that such property is transferred, with any necessary prior Third Party consent or approval, to (a) Buyer, in the case of any Acquired Asset which was not transferred to Buyer at the Closing; or (b) Seller, in the case of any
Excluded Asset which was transferred to Buyer at the Closing.
Section 9.03
Use of Names
.
After the Closing
Date, Seller shall, and shall cause its Affiliates to, cease to use the names set forth on
Section 9.03
of the Seller Disclosure Letter and any name confusingly similar thereto
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(collectively, the
Restricted Names
) and any trademarks, trade names, trade dress, service marks and logos that use or incorporate any Restricted Name. Seller agrees that from
and after the Closing, Seller shall not have any right, title, interest, license or other right whatsoever in the Restricted Names. Seller shall, and shall cause its Affiliates to, remove, strike over or obliterate all Restricted Names and any
trademarks, trade names, trade dress, service marks and logos that use or incorporate any Restricted Name from the Excluded Assets (it being understood that this requirement shall not apply to fair use of any Restricted Name, including, but not
limited to, in documents and materials kept as records that are maintained for internal use only and not publicly disseminated, or to be archived as such records, for historical purposes or as required by applicable Law). Any use of the Restricted
Names by Seller as permitted in this
Section 9.03
is subject to its use of each Restricted Name in the same form and manner as, to the same extent as (without an increase in extent or type of uses of each Restricted Name) and subject to
the same standards of quality that are in effect for each Restricted Name as of the Closing Date. All goodwill arising from any such use shall inure to the benefit of Buyer or an applicable Affiliate of Buyer owning the Restricted Name so used.
Seller shall not to use any Restricted Name in any manner that may reflect negatively on such name and mark or on Buyer or any of its Affiliates.
Section 9.04
Confidentiality
.
(a) From and after the date of this Agreement until the Closing, Buyer and Seller each agree they will be bound by and comply with the
obligations of the Confidentiality Agreement. After the Closing Date, Buyers obligations with respect to Confidential Material under the Confidentiality Agreement shall be deemed to have been terminated by and the Confidentiality Agreement
shall no longer be binding upon Buyer.
(b) Seller acknowledges that it is in possession of Confidential Material. Seller shall, and shall
cause each of its Affiliates and their respective Representatives to, (i) treat confidentially and not disclose all or any portion of such Confidential Material and use such Confidential Material solely for the purpose of fulfilling its
obligations under this Agreement and the Related Agreements and for no other purpose, in each case, following the Closing Date and (ii) from the date hereof and until the Closing Date, use Confidential Material for the sole purpose of
developing and operating the Acquired Assets in the Ordinary Course and to consummate the transactions contemplated by this Agreement. Seller acknowledges and agrees that such Confidential Material is proprietary and confidential in nature and may
be disclosed to its Representatives only to the extent necessary for Seller to consummate the transactions contemplated by this Agreement (it being understood that Seller shall be responsible for any disclosure by any such Representative not
permitted by this Agreement). If, following the Closing Date, Seller or any of its Affiliates or their respective Representatives are requested or required to disclose (after Seller has used its commercially reasonable efforts to avoid such
disclosure and after promptly advising and consulting with Buyer about Sellers intention to make, and the proposed contents of, such disclosure) any of the Confidential Material (whether by deposition, interrogatory, request for documents,
subpoena, civil investigative demand or similar process), Seller shall, or shall cause such Affiliate or Representative, to provide Buyer with prompt written notice of such request so that Buyer may seek an appropriate protective order or other
appropriate remedy. At any time that such protective order or remedy has not been obtained, Seller or such Affiliate or Representative may disclose only that portion of the Confidential Material which such Person is legally required to disclose or
of which disclosure is required to avoid sanction for contempt or any similar sanction, and Seller shall exercise its commercially reasonable efforts to obtain assurance that confidential treatment will be accorded to such Confidential Material so
disclosed. Seller further agrees that, from and after the Closing Date, Seller and its Affiliates and Representatives, upon the request of Buyer, promptly will deliver to Buyer all documents, or other tangible embodiments, constituting Confidential
Material or other information with respect to the Acquired Assets, without retaining any copy thereof, and shall promptly destroy all other information and documents constituting or containing Confidential Material;
provided
,
however
,
that Seller or its Representatives shall be permitted to retain one archival copy of any Confidential Material for record purposes and to evidence Sellers compliance with this Agreement or applicable Law, and in addition, nothing in this
Agreement shall require the alteration, modification, deletion or destruction of back-up tapes or other media made in the ordinary course of business.
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Section 9.05
Restrictive Covenants
.
(a) During the period
beginning on the Closing Date and ending on the fifth (5th) anniversary of the Closing Date (the
Non-Compete
Period
), Seller covenants and agrees not to, and shall cause its Affiliates
not to, directly or indirectly anywhere in the world, acquire or Develop, Manufacture or Commercialize any compound or product or file any Intellectual Property related thereto, in each case with the intention of treating cystic fibrosis, and shall
not control, advise, enable, provide services to, fund or guarantee the obligations of, any Third Party engaged in, or planning to engage in, any of the foregoing. Notwithstanding the foregoing, nothing in this
Section 9.05
shall
restrict, place conditions on or impede Seller from the current or planned (each as of the Closing Date) Development, Manufacturing, or Commercialization of any Excluded Therapeutic Products.
(b) During the period beginning on the date of this Agreement and ending on the date that is twelve (12) months after the earlier of
(i) termination of this Agreement in accordance with its terms and (ii) the Closing Date, each of Buyer and Seller shall not, and shall cause their respective Affiliates not to, directly or indirectly, solicit for employment or employ or
cause to leave the employ of the other Party or any of its Affiliates, any employee of the other Party or its Affiliates, without obtaining the prior written consent of the other Party;
provided
that each Party may make general solicitations
for employment not specifically directed at the other Party or any of its Affiliates or their respective employees and employ any person who responds to such solicitations.
(c) Seller shall instruct its officers and directors, and shall cause its Affiliates to instruct their officers and directors, not to directly
or indirectly through any other Person (whether as an officer, manager, director, employee, partner, consultant, holder of equity or debt investment, lender or in any other manner or capacity), engage in conduct, oral or otherwise, that disparages
or damages or would reasonably be expected to disparage or damage any of Buyer, its Affiliates or any of their respective current or former Representatives, holders of equity or debt investments, lenders, businesses, activities, operations or
reputations.
(d) As a material inducement to Buyers execution of this Agreement (without such inducement Buyer would not have
entered into this Agreement), Seller acknowledges and agrees that the provisions of this
Section 9.05
are reasonable and necessary to protect the legitimate business interests of Buyer and its acquisition of the Acquired Assets. Seller
shall not contest that Buyers remedies at law for any breach or threat of breach by Seller or any of its Affiliates of the provisions of this
Section 9.05
will be inadequate, and that Buyer shall be entitled to an injunction or
injunctions to prevent breaches or threatened breaches of the provisions of this
Section 9.05
and to enforce specifically such terms and provisions, in addition to any other remedy to which Buyer may be entitled at Law or equity, as well
as the reasonable costs and attorneys fees it incurs in enforcing the provisions contained in this
Section 9.05
. The covenants contained in this
Section 9.05
are covenants independent of any other provision of this
Agreement or any other agreement between the Parties hereunder, and the existence of any claim Seller may have against Buyer under any other provision of this Agreement or otherwise, shall not constitute a defense to the enforcement of the
provisions contained in this
Section 9.05
. Seller further agrees that should it violate any provisions contained in this
Section 9.05
, the
Non-Compete
Period shall extend for an
additional time period that is equal to the term of such violation so that Buyer is provided with the full benefit of the restrictive period set forth in this
Section 9.05
.
(e) If any of the provisions contained in this
Section 9.05
shall for any reason be held by a court of competent jurisdiction to
be excessively broad as to duration, scope, activity or subject, then such provision shall be construed by limiting and reducing it with respect to such jurisdiction, only to the extent necessary so as to be valid and enforceable to the extent
compatible with the applicable Law of such jurisdiction.
Section 9.06
FDA Letters
.
Promptly after the Closing
(but in no event later than two (2) Business Days following the Closing), Seller shall file, or cause to be filed, with the FDA the Seller FDA Letter, the Buyer FDA Letter, the Seller Orphan Designation Letter and the Buyer Orphan Designation
Letter and shall provide an
as-filed
copy of each such letter to Buyer.
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ARTICLE X
MISCELLANEOUS
Section 10.01
Certain Definitions
.
For the purposes of this Agreement, the term:
Affiliates
has the meaning set forth in Rule
12b-2
of the Exchange Act.
Alternative Transaction
means, whether or not proposed in writing, any of the following events (in each case in a single
transaction or series of related transactions): (i) any sale, lease, contribution or other disposition, directly or indirectly (including by way of merger, consolidation, share exchange, tender offer, exchange offer, other business combination,
partnership, joint venture, sale of capital stock of or other equity interests in Subsidiaries or otherwise) to any Third Party of (A) Acquired Assets (other than sales, dispositions or transfers in the Ordinary Course), or (B) beneficial
ownership of fifteen percent (15%) or more of the combined voting securities of Seller or of any resulting parent company of Seller (excluding voting securities acquired in open market purchases), or (ii) any issuance, sale or other
disposition, directly or indirectly, to any Third Party (or the shareholders of any Third Party) of securities (or options, rights or warrants to purchase, or securities convertible into or exchangeable for, such securities) representing fifteen
percent (15%) or more of the combined voting securities of Seller (excluding voting securities acquired in open market purchases), in each case other than transactions contemplated by this Agreement.
Anti-Bribery Law
means (i) the U.S. Foreign Corrupt Practices Act of 1977, as amended, and the rules and regulations
issued thereunder, and (ii) any law, rule, regulation, or other legally binding measure of any jurisdiction including, without limitation, the OECD Convention on Combating Bribery of Foreign Public Officials in International Business
Transactions, or that otherwise relates to bribery or corruption.
Antitrust Laws
means the Sherman Act, 15 U.S.C.
§§ 1-7, as amended; the Clayton Act, 15 U.S.C. §§ 12-27, 29 U.S.C. §§ 52-53, as amended; the HSR Act; the Federal Trade Commission Act, 15 U.S.C. § 41-58, as amended; and all other Laws and
Orders that are designed or intended to prohibit, restrict or regulate actions having the purpose or effect of monopolization, restraint of trade, or lessening of competition through merger or acquisition.
Base Purchase Price
means $160,000,000.
Business Day
means any day that is not a Saturday or Sunday or a day on which banking institutions located in New York, New
York or Boston, Massachusetts are required by Law to remain closed.
Buyer Material Adverse Effect
means any Effect
that is materially adverse to the ability of Buyer to consummate the transactions contemplated by this Agreement.
Commercialize
or
Commercialization
means all activities related to importing, storing,
transporting, distributing, marketing, detailing, and selling a medicinal product or any such use with a view to sale of a medicinal product; and Commercialization shall be construed accordingly. Commercialization shall not include
Development or Manufacturing.
Common Stock
means the common stock of Seller, par value $0.001 per share.
Confidential Material
means all data and information (whether written or oral) that is confidential, proprietary or is not
otherwise generally available to the public regarding the Acquired Assets or the Assumed Liabilities. Notwithstanding the foregoing, the restrictions set forth in Section 9.04 shall not apply to data or information (a) that is or becomes
generally available to the public, other than as a result of disclosure by Seller, its Affiliates or their respective Representatives in violation of this Agreement, (b) becomes available to Seller its
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Affiliates or their respective Representatives from a Person other than a member of the Buyer Group or their respective Representatives on a
non-confidential
basis,
provided
, that such Person was not bound by a confidentiality agreement with or other contractual, legal or fiduciary obligation of confidentiality to the Buyer Group or such
Representatives with respect to such materials or (c) to the extent not severable, that primarily relates to the Excluded Assets and Excluded Liabilities.
Contract
means any contract, agreement, license, sublicense, indenture, instrument, commitment and any other legally
binding agreement, whether written or oral.
Damage
or
Damages
means, without duplication,
(a) any and all claims, actions, causes of action, judgments, awards, penalties, Liabilities, losses, costs or damages (of any kind including economic, consequential, special, indirect, incidental, punitive, or exemplary losses, costs or
damages, including without limitation, lost profits ), including reasonable fees and expenses of attorneys, accountants and other professional advisors, whether involving a dispute solely between the parties hereto or otherwise, and (b) any
losses or costs incurred in investigating, defending or settling any claim, action or cause of action described in
clause (a)
.
DCE Platform Know-How
means Sellers Know-How, other than Transferred Know-How that has specific application to the
ownership, operation or conduct of the CF Enterprise, to Develop, Manufacture or Commercialize deuterium-substituted therapeutic agents, including Know-How to (i) assess compounds as suitable targets for deuterium substitution;
(ii) synthesize a wide range of chemical compounds that incorporate deuterium selectively at specific positions and accurately analyze deuterium content at those positions; (iii) optimize assays to evaluate the metabolic stability and
metabolite profile of deuterated compounds; (iv) identify deuterated compounds that possess improved in vitro or in vivo metabolic or pharmacokinetic properties relative to the corresponding non-deuterated compound; (v) develop and apply
bioanalytical methods to identify and measure metabolites formed by the in vitro and in vivo metabolism of deuterated compounds; (vi) understand how the effects of selective deuterium substitution may translate from in vitro to in vivo systems
and from non-human models to humans, and how deuterium substitution affects individual and population-based ADME parameters; (vii) manufacture, analyze, and formulate deuterated compounds, including development of analytical methods for
determining level of deuterium incorporation; and (viii) sourcing deuterium reagents, starting materials, and intermediates, and developing and utilizing a supply chain of multiple vendors.
Develop
,
Developed
or
Development
means all activities related to research and
development of a medicinal product including, all testing and studies (non-clinical, preclinical and clinical), toxicology testing, pharmacology, statistical analysis, and reporting, together with all other activities with respect to the product
useful for the preparation and submission of applications or other filings to a Regulatory Authority to obtain Regulatory Approval for the product and in support of obtaining Regulatory Approval. Development shall not include Manufacturing or
Commercialization.
Effect
means any event, occurrence, change, development or effect.
EMA
means the European Medicines Agency or any successor agency that is responsible for reviewing applications seeking
approval for the sale of pharmaceuticals in the European Union.
Encumbrance
means any charge, claim, condition,
equitable interest, lien, encumbrance, option, pledge, security interest, hypothecation, mortgage, right of first refusal, or any restriction on use, voting, transfer, receipt of income, right of
set-off,
title retention, or exercise of any other attribute of ownership.
Escrow Agent
means Citibank, N.A.
Escrow Agreement
means the Escrow Agreement to be entered into on the Closing Date in substantially the form
attached hereto as
Exhibit G
.
Escrow Account
means the escrow account to be established and
maintained pursuant to the terms of the Escrow Agreement for the Escrow Amount.
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Escrow Amount
means, initially, $16,000,000, which amount shall be
adjusted to reflect any earnings thereon and any amounts released pursuant to the terms and subject to the conditions set forth in this Agreement and the Escrow Agreement.
Exchange Act
means the Securities Exchange Act of 1934.
Excluded Therapeutic Product
means any product of Seller that is not a Transferred Product, including compounds that are
solely intended for use as a treatment of antibacterial infections in patients with cystic fibrosis.
GAAP
means
generally accepted accounting principles in the United States.
Governmental Entity
means any United States or
non-United States federal, state, provincial or local court, tribunal, arbitrator or arbitral body, the United States Congress or other state or local legislative body, administrative agency or commission or other governmental or regulatory agency
or authority or any securities exchange.
Indebtedness
means, with respect to any Person, any principal, interest,
premiums or other obligations of such Person (excluding accrued expenses and trade payables), whether or not contingent: (a) in respect of notes payable, accrued interest payable or other obligations for borrowed money, whether secured or
unsecured; (b) evidenced by bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof); (c) in respect of bankers acceptances; (d) representing capital lease
obligations; (e) representing the balance deferred and unpaid of the purchase price of any property or services; (f) representing any hedging obligations, if and to the extent any of the preceding items (other than letters of credit and
hedging obligations) would appear as a liability upon a balance sheet of the specified Person prepared in accordance with GAAP; (g) in respect of accrued bonuses owed to any employees of such Person with respect to the 2016 calendar year;
(h) any Liability of such Person in respect of bankers acceptances or letters of credit (but solely to the extent drawn and not paid), (i) all prepayment premiums, penalties, costs and/or expenses related to any items of Indebtedness
of the type referred to in
clauses (a)
through
(i)
above that would be required to be paid as a result of the transactions contemplated hereby or to extinguish the Indebtedness as of immediately prior to the Closing or
(j) direct or indirect guarantees or other contingent Liabilities (including so called make-whole, take-or-pay or keep-well agreements) with respect to any indebtedness, obligation, claim or Liability of any
other Person of a type described in clauses (a) through (i) above. In addition, the term Indebtedness includes all Indebtedness of others secured by a lien on any asset of the specified Person (whether or not such Indebtedness
is assumed by the specified Person) and, to the extent not otherwise included, the guarantee by the specified Person of any Indebtedness of any other Person.
Intellectual Property
means any and all intellectual property rights or similar proprietary rights and description
throughout the world, whether registered or unregistered, including all rights pertaining to or deriving from: (a) Patents, inventions, invention disclosures, discoveries and improvements, whether or not patentable; (b) trademarks, trade
dress, service marks, certification marks, logos, brands, slogans, design rights, names, corporate names, trade names, Internet domain names, social media accounts and addresses and other similar designations of source or origin, together with the
goodwill symbolized by any of the foregoing; (c) copyrights and copyrightable subject matter; (d) rights in any computer software or firmware (whether in source code, object code or other form), algorithms, data files, databases,
compilations and data technology supporting the foregoing, and all documentation, including user manuals and training materials, related to any of the foregoing; (e) trade secrets (including those trade secrets defined in the Uniform Trade
Secrets Act and under corresponding foreign Law), and all other
non-public
confidential or proprietary information,
Know-How,
clinical data,
non-clinical
data,
pre-clinical
data,
in-vitro
data, inventions, processes, formulae, models, and methodologies, excluding Patents, and
rights to limit the use or disclosure thereof by any Person; and (f) all applications, registrations, and renewals for the foregoing in any jurisdiction throughout the world.
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Know-How
means any know-how, trade secret, proprietary invention,
discovery, data, information, process, method, technique, material, technology, result or other know-how, whether or not patentable, and all other
non-public
confidential or proprietary information.
knowledge
means (i) with respect to Seller, the knowledge, within the scope of his or her responsibility
assuming reasonable inquiry of those employees known to such persons to have specialized knowledge of the subject matter of the representation and warranty, of the individuals listed in
Section 10.01(a)
of the Seller Disclosure Letter
and (ii) with respect to Buyer, the knowledge, within the scope of his or her responsibility assuming reasonable inquiry of those employees known to such persons to have specialized knowledge of the subject matter of the representation and
warranty, of the Chief Legal and Administrative Officer.
Law
means (i) any statute, code, rule, regulation,
ordinance, rule of common law, requirement or other pronouncement of any Governmental Entity having the effect of law and (ii) any binding guidance document with regard to drug approval requirements.
Liability
means any debt, Indebtedness, obligation, Tax, duty or liability of any nature (including known, unknown, fixed,
absolute, disclosed, undisclosed, matured, unmatured, accrued, unaccrued, asserted, unasserted, determined, determinable, contingent, indirect, conditional, implied, vicarious, derivative, joint, several or secondary liability), regardless of
whether such debt, Indebtedness, obligation, Tax, duty or liability would be required to be disclosed on a balance sheet prepared in accordance with GAAP and regardless of whether such debt, obligation, duty or liability is immediately due and
payable.
Manufacture
or
Manufacturing
shall mean any and all activities related to making,
producing, processing, filling, finishing, packaging, labeling or quality assurance testing and releasing of a medicinal product (or any ingredient thereof). Manufacturing shall not include Development or Commercialization.
Milestone Event
means each of the events set forth in
Section 1.02(b)
.
Official
means any official, employee or representative of, or any other person acting in an official capacity for or on
behalf of, any (i) Governmental Entity, including any entity owned or controlled thereby, (ii) political party, party official or political candidate, or (iii) public international organization.
Orders
means all orders, rulings, judgments, settlements, arbitration awards or decrees of any Governmental Entity (or any
agreement entered into or any administrative, judicial or arbitration award with any Governmental Entity).
Ordinary
Course
means the ordinary course of the ownership, operation, Development, Manufacture and Commercialization of the Acquired Assets consistent with past practice.
Patents
means patents, including utility and design patents, patent applications, including provisionals, non-provisionals,
utility models and any and all related national or international counterparts thereto, including any divisional, continuation,
continuation-in-part
applications,
reissues, reexaminations, substitutions and extensions thereof (including supplementary protection certificates, requests for, and grants of, continued examination,
post-grant
confirmations or amendments,
counterparts claiming priority from any of the foregoing; and any patents or patent applications that claim priority to or from any of the foregoing) and all rights associated with any of the foregoing, including the right to claim priority arising
from or related to any of the foregoing.
Permitted Encumbrance
means: (i) Encumbrances for Taxes, assessments and
governmental charts or levies either not yet due and payable or which are being contested in good faith by appropriate proceedings and for which adequate reserves have been established in accordance with GAAP; (ii) Encumbrances incurred in the
Ordinary Course for mechanics, carriers, workmens, warehousemans, repairmens, materialmens or other similar liens that are not yet due and payable or that are being contested in good faith by appropriate proceedings;
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and (iii) Encumbrances incurred in the Ordinary Course for pledges and deposits to secure the performance of bids, trade Contracts, surety and appeal bonds, performance bonds and other
obligations of a similar nature, in each case in the Ordinary Course.
Permits
means any and all federal, state, local
and foreign qualifications, permits, registrations, clearances, certificates, rights, applications, submissions, variances, exemptions, filings, approvals and authorizations from Governmental Entities.
Person
means any individual, corporation, limited liability company, partnership, joint venture, estate, trust,
association, unincorporated organization, other form of entity, of whatever nature, or Governmental Entity.
Post-Closing
Tax Period
means a Tax period that begins after the Closing Date and the portion of a Straddle Period that begins after the Closing Date.
Pre-Closing
Tax Period
means a Tax period that ends on or before the Closing Date
and the portion of a Straddle Period ending on and including the Closing Date.
Proxy Statement
means a proxy statement
to be sent to the stockholders of Seller (together with any amendments or supplements thereto) with respect to the Seller Special Meeting.
Regulatory Approval
means any and all registration, clearance, license permit, approval, concession, variance,
waiver, or other authorization of any national, regional, state, or regulatory authority, department, bureau, commission, council or other Governmental Entity that is necessary for any activities in relation to or with a medicinal product in a given
country, jurisdiction, or region (including for the Development, Manufacture, supply, and Commercialization of such medicinal product) in such country or jurisdiction.
Regulatory Documentation
means with respect to any Transferred Products, the regulatory documentation, or portion thereof,
related to each such product, including (as applicable) all applications for Transferred Registrations and renewals thereof (including investigational new drug applications, orphan designations, new drug applications, abbreviated new drug
applications and marketing authorization applications), and the safety reports, information on adverse events, and copies of all correspondence, reports, or minutes with any Governmental Entity, and all data submitted to Governmental Entities in
connection with Transferred Registrations, pricing studies, and documents (including, without limitation, laboratory, clinical and
pre-clinical
animal study data) relating to the Transferred Registrations or
to the subject matter of the Transferred Registrations to the extent relating to the Transferred Products. For the avoidance of doubt, Regulatory Documentation shall not include laboratory notebooks, internal audit reports or batch records (other
than those batch records contained in Transferred Registrations).
Representatives
means, when used with respect to
Buyer or Seller, the directors, officers, employees, consultants, financial advisors, accountants, legal counsel, investment bankers, lenders and other agents, advisors and representatives of Buyer or Seller, as applicable, and their respective
Subsidiaries.
SEC
means the United States Securities and Exchange Commission.
Securities Act
means the Securities Act of 1933, as amended.
Seller Board Recommendation
means the recommendation of the Seller Board that the stockholders of Seller vote in favor of
approval of the sale of the Acquired Assets pursuant to this Agreement and the transaction contemplated hereby.
Seller
Intervening Event
means an Effect that affects or would reasonably be expected to affect the Acquired Assets, taken as a whole, that (a) is material, (b) was not known to the Seller Board as of the date of
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this Agreement (and which could not have become known through any further reasonable investigation, discussion, inquiry or negotiation with respect to any event, fact, circumstance, development
or occurrence known to Seller as of the date of this Agreement), (c) becomes known to the Seller Board prior to obtaining the Seller Stockholder Approval (d) does not relate to or involve any Alternative Transaction and (e) is not the
result of a material breach of this Agreement by Seller.
Seller Material Adverse Effect
means any Effect that is
materially adverse to (i) the ability of Seller to consummate the transactions contemplated by this Agreement or (ii) the condition (financial or otherwise) or ownership, operation or development of the Acquired Assets, taken as a whole;
provided
,
however
, that a Seller Material Adverse Effect shall not include, either alone or in combination, any Effect resulting from or arising out of (and the following will not be taken into account when determining
whether a Seller Material Adverse Effect has occurred): (A) the announcement, pendency or consummation of this Agreement or the transactions contemplated hereby, including the identity of, or any facts or circumstances relating to,
Buyer or any of its Affiliates to the extent resulting from the public announcement of this Agreement or the pendency of the transactions contemplated hereby; (B) any action taken by Seller at the written request of Buyer or with Buyers
written consent, or the failure of Seller to take an action that Seller is specifically prohibited from taking by the terms of this Agreement; (C) any event or occurrence generally affecting the industries in which Seller operates relating to
the Acquired Assets or in the economy generally or other general business, financial or market conditions; (D) changes affecting the national or international general economic, political, legal or regulatory conditions; (E) changes in Laws
after the date hereof applicable to the Acquired Assets; or (F) national or international political conditions or instability, including the engagement by the United States in hostilities, whether or not pursuant to a declaration of emergency
or war, or the occurrence of any military or terrorist attack upon the United States or any other nation, except, in each of
clauses (C)
,
(D)
,
(E)
, or
(F)
above, to the extent such Effects have a disproportionate
impact on the Acquired Assets and the Assumed Liabilities, taken as a whole, relative to other Persons owning assets similar to the Acquired Assets, in the industry or markets in which Seller operates.
Seller Special Meeting
means the meeting of the holders of Common Stock for the purpose of seeking the Seller Stockholder
Approval, including any postponement or adjournment thereof.
Seller Stockholder Approval
means the affirmative vote of
the holders of a majority of the outstanding Common Stock entitled to vote upon the authorization of this Agreement and the transactions contemplated hereby at the Seller Special Meeting.
Straddle Period
means a taxable period that begins before the Closing Date and ends after the Closing Date
Subsidiaries
means all those corporations, associations or other business entities of which the entity in question
(a) owns or controls a majority of the outstanding equity securities either directly or through an unbroken chain of entities as to each of which a majority of the outstanding equity securities is owned directly or indirectly by its parent
(
provided
, there shall not be included any such entity the equity securities of which are owned or controlled in a fiduciary capacity), (b) in the case of partnerships, serves as a general partner, (c) in the case of a limited
liability company, serves as a managing member, or (d) otherwise has the ability to elect a majority of the directors, trustees or managing members thereof.
Superior Proposal
means any
bona fide
written proposal made to Seller by any Third Party which did not result from a
breach of
Section 4.06
with respect to any Alternative Transaction or any purchase or acquisition (a) involving the Acquired Assets or more than 50% of the voting power of the Common Stock, (b) that is on terms that the Seller
Board determines in good faith (after consultation with its financial advisors and outside legal counsel) would result in a transaction that, if consummated, is more favorable to Sellers stockholders from a financial point of view than the
transactions contemplated by this Agreement (taking into account any proposal by Buyer to amend the terms of this Agreement); (c) with respect to which the cash consideration and other
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amounts (including costs associated with the proposed acquisition) payable at closing are subject to fully committed financing from recognized financial institutions; and (d) that is
reasonably likely to receive all required governmental approvals on a timely basis and otherwise reasonably capable of being completed within a reasonable period of time on the terms proposed, taking into account all financial, regulatory, legal and
other aspects of such proposal.
Tax Returns
means all reports, returns, declarations, statements, forms or other
information required to be supplied to a Governmental Entity in connection with Taxes, including amendments thereto.
Taxes
means (a) all taxes, including income, gross receipts, capital gain, ad valorem,
value-added,
goods and services, excise, real property, personal property, sales, use, transfer, withholding, employment and franchise taxes or other similar charges imposed by the United States of America or
any state, local or foreign government, or any agency thereof, or other political subdivision of the United States or any such government, and any interest, penalties, assessments or additions to tax resulting from, attributable to or incurred in
connection with any tax or any contest or dispute thereof and (b) any liability for any item described in
clause (a)
of another natural person, corporation, limited liability company, association, partnership, not for profit entity,
other form of business, or Governmental Entity, whether by Contract (other than any Contract entered into in the Ordinary Course the principal purpose of which is not related to taxes) or express or implied agreement, pursuant to any applicable Law,
as a transferee or successor, or otherwise.
Third Party
means any Person other than the Parties or any of their
respective Subsidiaries and Affiliates.
Transaction Litigation
means any claim or legal proceeding (including any
class action or derivative litigation) not involving a Governmental Entity asserted or commenced by, on behalf of or in the name of, against or otherwise involving Seller and/or any of its directors or officers relating directly or indirectly to
this Agreement, the sale of the Acquired Assets or any of the other transactions contemplated by this Agreement (including any such claim or legal proceeding based on allegations that Sellers entry into the Agreement or the terms and
conditions of the Agreement constituted a breach of the fiduciary duties of Sellers Board or any officer of Seller).
Transferred Inventory
means all inventory of Transferred Products and reference standards, retains and intermediates
related thereto, ingredients and any other raw materials,
work-in-progress
materials, package inserts, packaging and labeling materials, supplies and other inventories
used in the manufacturing or production of any Transferred Products, but specifically excluding such quantity of CTP-656 as may be required by Seller prior to Closing in the Ordinary Course, including material required for Seller to support and
conduct its clinical trials.
Transferred Know-How
means Know-How (other than DCE Platform Know-How) that
is necessary or useful for the ownership, Development, Manufacture and Commercialization of the CF Enterprise.
Transferred Products
means (i) all deuterated ivacaftor, including the deuterated form of ivacaftor having a
chemical formula as set forth on
Section 10.01(b)
of the Seller Disclosure Letter, including the compound coded by Seller as CTP-656, and (ii) any other compounds used, planned for use or held for use, in each case, in the
ownership, operation or conduct of the CF Enterprise (including deuterated tezacaftor) as of the date hereof and the Closing Date, in each of cases (i) and (ii), including any derivatives, combinations, or other forms thereof;
provided
,
that compounds that are (a) solely intended for use as a treatment of antibacterial infections in patients with cystic fibrosis or (b) listed on
Section 10.01(c)
of the Seller Disclosure Letter shall not be considered
Transferred Products.
Transferred Product Records
(i) written records lab notebooks, accounts,
notes, reports, batch records and data, (ii) Regulatory Documentation, (iii) Development data (of any kind) from discovery through to
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submission (raw data, stability, validation, quality by design work), all analytical methods development and validation, (iv) Manufacturing data (of any kind), batch records,
Manufacturing facility, quality control lab commissioning, validation protocols, testing protocols, and reports, (v) facility and equipment detailed drawings, all equipment maintenance and calibration data, and (vi) records relating to the
filing, prosecution, issuance, maintenance, enforcement or defense of the Transferred IP, in the case of
clauses (i)
(vi)
that are owned or controlled by or otherwise in the possession of Seller as of the Closing Date and
related to the Transferred Products.
Transferred Registrations
any and all Regulatory Approvals granted
or issued by, or applied for to a national, regional, state, or regulatory authority, department, bureau, commission, council or other Governmental Entity for any activities in relation to or with a medicinal product in a given country,
jurisdiction, or region (including for the Development, Manufacture, supply, and Commercialization of such medicinal product).
Section 10.02
Terms Defined Elsewhere
. The following terms are defined elsewhere in this Agreement, as indicated below:
|
|
|
Acquired Assets
|
|
Section 1.01(a)
|
Acquired Assets Permits
|
|
Section 2.12(a)
|
Acquired Assets Regulatory Filings
|
|
Section 2.12(a)
|
Aggregate Threshold
|
|
Section 6.05(b)(ii)
|
Agreed Amount
|
|
Section 6.04(b)
|
Agreement
|
|
Preamble
|
Antitrust Approvals
|
|
Section 4.03(b)
|
Assigned Contracts
|
|
Section 1.01(a)(iv)
|
Assigned IP Contracts
|
|
Section 1.01(a)(iv)
|
Assumed Liabilities
|
|
Section 1.01(d)
|
Assumption Agreements
|
|
Section 1.01(d)
|
Bill of Sale
|
|
Section 1.03(b)(iii)
|
Burdensome Term or Condition
|
|
Section 4.03(f)
|
Buyer
|
|
Preamble
|
Buyer FDA Letter
|
|
Section 5.03(e)
|
Buyer Group
|
|
Section 1.01(a)
|
Buyer Indemnified Parties
|
|
Section 6.02
|
Buyer Orphan Designation Letter
|
|
Section 5.03(e)
|
Cap
|
|
Section 6.05(b)(i)
|
CF Enterprise
|
|
Recitals
|
Claim Notice
|
|
Section 6.04(b)
|
Claimed Amount
|
|
Section 6.04(b)
|
Closing
|
|
Section 1.03(a)
|
Closing Date
|
|
Section 1.03(a)
|
Confidentiality Agreement
|
|
Section 4.02
|
Contingent Payment
|
|
Section 1.02(b)
|
CTAs
|
|
Section 2.10(a)(viii)
|
DOJ
|
|
Section 4.03(a)
|
Electronic Delivery
|
|
Section 10.07
|
Excluded Assets
|
|
Section 1.01(b)
|
Excluded Liabilities
|
|
Section 1.01(e)
|
FDA
|
|
Section 2.12(a)
|
FDCA
|
|
Section 2.12(a)
|
FTC
|
|
Section 4.03(a)
|
Fundamental Representations
|
|
Section 6.01(a)
|
Guarantor
|
|
Preamble
|
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|
|
|
HSR Act
|
|
Section 2.05(c)
|
Indemnified Party
|
|
Section 6.04(a)
|
Indemnifying Party
|
|
Section 6.04(a)
|
IP Assignment Agreements
|
|
Section 1.03(b)(iv)
|
Material Contract
|
|
Section 2.10(a)
|
MTAs
|
|
Section 2.10(a)(viii)
|
NDAs
|
|
Section 2.10(a)(viii)
|
Non-Compete
Period
|
|
Section 9.05(a)
|
Outside Date
|
|
Section 7.01(f)(ii)
|
Parties
|
|
Preamble
|
Party
|
|
Preamble
|
PHSA
|
|
Section 2.12(a)
|
Pre-Closing
Period
|
|
Section 4.01(a)
|
Research and Testing Agreement
|
|
Recitals
|
Registered Business IP
|
|
Section 2.09(a)
|
Regulatory Authority
|
|
Section 2.12(a)
|
Regulatory Filings
|
|
Section 4.03(a)
|
Related Agreements
|
|
Section 2.03
|
Restricted Names
|
|
Section 9.02
|
Safety Notice
|
|
Section 2.12(d)
|
Seller
|
|
Preamble
|
Seller Board
|
|
Section 2.03
|
Seller Board Approval
|
|
Section 2.20
|
Seller Change of Recommendation
|
|
Section 4.07(c)
|
Seller Disclosure Letter
|
|
Article II
|
Seller FDA Letter
|
|
Section 5.02(f)
|
Seller Indemnified Parties
|
|
Section 6.03
|
Seller Orphan Designation Letter
|
|
Section 5.02(f)
|
Supplement
|
|
Section 4.04
|
Termination Fee
|
|
Section 7.02(b)
|
Third Party Claim
|
|
Section 6.04(a)
|
Third Party IP
|
|
Section 2.09(f)
|
Transfer Taxes
|
|
Section 8.01(a)
|
Transferred IP
|
|
Section 1.01(a)(ii)
|
Transferred IP Documentation
|
|
Section 1.01(a)(iii)
|
Transferred Permits
|
|
Section 1.01(a)(vi)
|
Transition Services Agreement
|
|
Section 1.03(b)(vii)
|
Section 10.03
Press Releases and Announcements
.
Each Party shall consult with the
other Party and give the other Party a reasonable opportunity to comment on such Partys press release announcing the execution and delivery of this Agreement. No Party shall issue (and each Party shall cause its Affiliates not to issue) any
press release or public disclosure relating to the subject matter of this Agreement, or its terms, without the prior written approval of the other Party;
provided
,
however
, that nothing in this
Section 10.03
shall prevent
any Party from (a) making any public disclosure it believes in good faith is required by Law, regulation or stock exchange rule (in which case the disclosing Party shall use its commercially reasonable efforts to advise the other Party prior to
making disclosure and the other Party shall have the right to review such press release or announcement prior to its publication) or (b) enforcing its rights hereunder.
Section 10.04
No Third Party Beneficiaries
.
Except as provided by applicable Law, this Agreement shall not confer
any rights or remedies upon any Person other than each Party and its respective successors and permitted assigns and, to the extent specified herein, its respective Affiliates;
provided
,
however
, that the
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provisions of
Article VI
and
Article VII
are intended for the benefit of the entities and individuals specified therein and their respective legal representatives, successors and
assigns.
Section 10.05
Entire Agreement
.
This Agreement (including the documents referred to herein), the
Related Agreements, the Confidentiality Agreement and the Escrow Agreement constitute the entire agreement between the Parties with respect to the subject matters hereof and thereof and supersede all other prior agreements (except that the
Confidentiality Agreement shall be deemed amended hereby so that until the termination of this Agreement in accordance with
Section 7.01
, Buyer shall be permitted to take the actions contemplated by this Agreement) and understandings,
both written and oral, between the Parties or any of them with respect to the subject matter hereof and thereof.
Section 10.06
Succession and Assignment
.
This Agreement shall be binding upon and inure to the benefit of and be enforceable by each of the Parties named herein and its respective successors and permitted assigns. No Party may assign either this
Agreement or any of its rights, interests, or obligations hereunder (whether by operation of Law or otherwise) without the prior written consent of the other Party;
provided
, that (i) Seller may assign all of its rights and obligations
hereunder to any successor or assign of Sellers business through the acquisition (whether by operation of Law or otherwise) of more than 50% of the voting power of Common Stock and/or substantially all of Sellers assets and
(ii) Buyer may assign the right to acquire certain of the Acquired Assets to one or more of its Affiliates prior to the Closing (
provided
, that in connection with any such assignment, Buyer shall remain primarily liable for such assigned
obligations);
provided
,
however
, following the Closing, Buyer may assign and delegate, in whole or in part, its rights and obligations hereunder to either (i) a
wholly-owned
Subsidiary of
Buyer, (ii) an Affiliate under common control with Buyer or (iii) in connection with the transfer by Buyer of all or substantially all of the Acquired Assets; and
provided
,
further
,
however
, that no such assignment
shall relieve Buyer of any obligation or liability under this Agreement.
Section 10.07
Counterparts
.
This
Agreement may be executed in two or more counterparts, each of which shall be deemed an original but both of which together shall constitute one and the same instrument. This Agreement may be executed and delivered by
e-mail
of a .pdf, .tif, .jpeg or similar attachment (
Electronic Delivery
), and any such counterparty delivered using Electronic Delivery shall be treated in all manner and respects as an
original executed counterpart and shall be considered to have the same binding legal effect as if it were the original signed version thereof delivered in person.
Section 10.08
Notices
.
All written notices that are required or permitted hereunder will be in writing and
sufficient if delivered personally or sent by nationally-recognized overnight courier, addressed as follows:
if to Buyer, to:
Vertex Pharmaceuticals Incorporated
Attention: Business Development
50 Northern Avenue
Boston, MA
02110
with a copy (which shall not constitute notice) to:
Vertex Pharmaceuticals Incorporated
Attention: Corporate Legal
50
Northern Avenue
Boston, MA 02110
Email: Legal_Notice@vrtx.com
A-47
and
White & Case LLP
1155
Avenue of the Americas
New York, New York 10036
Attn: Daniel G. Dufner, Jr., Esq.
Michael A. Deyong, Esq.
Email: daniel.dufner@whitecase.com
michael.deyong@whitecase.com
If to Seller, to:
Concert
Pharmaceuticals, Inc.
99 Hayden Avenue, Suite 500
Lexington, MA 02421
Attn:
Chief Executive Officer and General Counsel
Email: rtung@concertpharma.com
rsilverman@concertpharma.com
with a copy (which shall not constitute notice) to:
Goodwin Procter LLP
100
Northern Ave
Boston, MA 02210
Attn: John M. Mutkoski, Esq.
Andrew H. Goodman, Esq.
Email: JMutkoski@goodwinlaw.com
AGoodman@goodwinlaw.com
or to such other address as the Party to whom written notice is to be given may have furnished to the other Party in writing in accordance herewith. Any such
written notice will be deemed to have been given and received by the other Party: (a) when delivered if personally delivered; or (b) on receipt if sent by overnight courier.
Section 10.09
Governing Law; Jurisdiction
.
This Agreement shall be governed by, and construed in accordance with,
the Laws of the State of Delaware, without giving effect to conflicts of laws principles that would result in the application of the Law of any other state. Each of the Parties hereto hereby irrevocably and unconditionally submits, for itself and
its property, to the exclusive jurisdiction of the Court of Chancery of the State of Delaware, or, if such court finds it lacks subject matter jurisdiction, the federal court of the United States of America sitting in Delaware, and any appellate
court from any thereof, in any suit, action, legal proceeding or claim arising out of or relating to this Agreement or the agreements delivered in connection herewith or the transactions contemplated hereby or thereby or for recognition or
enforcement of any judgment relating thereto, and each of the Parties hereby irrevocably and unconditionally (i) agrees not to commence any such suit, action, legal proceeding or claim except in the Court of Chancery of the State of Delaware,
or, if such court finds it lacks subject matter jurisdiction, the federal court of the United States of America sitting in Delaware, and any appellate court from any thereof, (ii) agrees that any claim in respect of any such suit, action, legal
proceeding or claim may be heard and determined in the Court of Chancery of the State of Delaware, or, if such court finds it lacks subject matter jurisdiction, the federal court of the United States of America sitting in Delaware, and any appellate
court from any thereof, (iii) waives, to the fullest extent it may legally and effectively do so, any objection that it may now or hereafter have to the laying of venue of any such suit, action, legal proceeding or claim in such courts and
(iv) waives, to the fullest extent permitted by Law, the defense of an inconvenient forum to the maintenance of such suit, action, legal proceeding or claim in such courts. Each of the Parties hereto (A) agrees that a final judgment in any
such suit, action, legal proceeding or claim shall be conclusive and may
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be enforced in other jurisdictions by suit on the judgment or in any other manner provided by Law and (B) waives any objection to the recognition and enforcement by a court in other
jurisdictions of any such final judgment. Each Party to this Agreement irrevocably consents to service of process inside or outside the territorial jurisdiction of the courts referred to in this
Section 10.09
in the manner provided for
notices in
Section 10.08
. Nothing in this Agreement will affect the right of any Party to this Agreement to serve process in any other manner permitted by Law.
Section 10.10
Amendments and Waivers
.
The Parties may mutually amend or waive any provision of this Agreement at any
time. No amendment or waiver of any provision of this Agreement shall be valid unless the same shall be in writing and signed by each of the Parties. No waiver by either Party of any default, misrepresentation, or breach of warranty or covenant
hereunder, whether intentional or not, shall be deemed to extend to any prior or subsequent default, misrepresentation or breach of warranty or covenant hereunder or affect in any way any rights arising by virtue of any prior or subsequent such
occurrence. No failure or delay by any Party in exercising any right, power or privilege hereunder shall operate as a waiver thereof.
Section 10.11
Severability
.
Any term or provision of this Agreement that is invalid or unenforceable in any
situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction. If
the final judgment of a court of competent jurisdiction declares that any term or provision hereof is invalid or unenforceable, the Parties agree that the body making the determination of invalidity or unenforceability shall have the power to reduce
the scope, duration or area of the term or provision, to delete specific words or phrases, or to replace any invalid or unenforceable term or provision with a term or provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision, and this Agreement shall be enforceable as so modified after the expiration of the time within which the judgment may be appealed.
Section 10.12
Expenses
.
Except as otherwise specifically provided to the contrary in this Agreement or any of the
Related Agreements, each of the Parties shall bear its own costs and expenses (including legal fees and expenses) incurred in connection with this Agreement and the transactions contemplated hereby, whether or not the Closing takes place.
Section 10.13
Specific Performance
.
Each Party acknowledges and agrees that the other Party would be damaged
irreparably in the event any of the provisions of this Agreement are not performed in accordance with their specific terms or otherwise are breached or are threatened to be breached, and that money damages or other legal remedies would not be an
adequate remedy for any such damages. It is accordingly agreed that prior to the valid termination of this Agreement in accordance with
Section 7.01
, (i) the Parties shall be entitled to seek (in a court of competent jurisdiction as
set forth in
Section 10.09
) an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement (including Buyers obligation to effect the Closing), without bond
or other security being required, this being in addition to any remedy to which they are entitled under this Agreement, and (ii) the right of specific enforcement is an integral part of the transactions contemplated by this Agreement and
without that right, neither Seller nor Buyer would have entered into this Agreement. Without limiting the generality of the foregoing, it is explicitly agreed that Seller shall be entitled to an injunction, specific performance or other equitable
remedy to specifically enforce Buyers obligation to effect the Closing on the terms and conditions set forth herein in the event that all conditions in
Sections 5.01
and
5.02
have been satisfied (other than those conditions that
by their nature are to be satisfied by actions taken at the Closing, each of which is then capable of being satisfied at a Closing on such date) at the time when the Closing would have occurred but for the failure of Buyer to comply with its
obligations to effect the Closing pursuant to the terms of this Agreement. Each of Seller and Buyer acknowledges and agrees that following a valid termination of this Agreement in accordance with
Section 7.01
, each Party shall be
entitled to seek monetary damages for a willful or intentional breach of this Agreement in accordance with
Section 7.02(a)
.
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Section 10.14
Guaranty
.
Guarantor irrevocably guarantees each and every
covenant and obligation of Buyer and the full and timely performance of Buyers obligations under the provisions of this Agreement. This is a guaranty of payment and performance, and not of collection, and Guarantor acknowledges and agrees that
this guaranty is full and unconditional, and no release or extinguishments of Buyers Liabilities (other than in accordance with the terms of this Agreement), whether by decree in any bankruptcy proceeding or otherwise, will affect the
continuing validity and enforceability of this guaranty. Guarantor hereby waives, for the benefit of Seller, (i) any right to require Seller as a condition of payment or performance of Guarantor to proceed against Buyer or pursue any other
remedies whatsoever and (ii) to the fullest extent permitted by Law, any defenses or benefits that may be derived from or afforded by Law that limit the liability of or exonerate guarantors or sureties, except to the extent that any such
defense is available to Buyer. Guarantor understands that Seller is relying on this guaranty in entering into this Agreement. Under no circumstances shall the maximum amount payable by Guarantor hereunder for any reason and under any legal theory in
law or at equity exceed an amount equal to the Base Purchase Price and any Contingent Payment that becomes payable pursuant to Section 1.02(b)
.
Section 10.15
Construction
.
Except where expressly stated otherwise in this Agreement, the following rules of
interpretation apply to this Agreement: (a) either and or are not exclusive and include, includes and including are not limiting; (b) hereof, hereto,
hereby, herein and hereunder and words of similar import when used in this Agreement refer to this Agreement as a whole and not to any particular provision of this Agreement; (c) the word will
shall be construed to have the same meaning as the word shall; (d) extent in the phrase to the extent means the degree to which a subject or other thing extends, and such phrase does not mean simply
if; (e) definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms; (f) references to any Law, Contract, instrument or other document shall mean such Law, Contract,
instrument or other document as amended, supplemented or otherwise modified from time to time, including by succession of comparable successor Laws; (g) references to a person or entity are also to its permitted successors and assigns;
(h) references to an Article, Section, Exhibit, Annex or Schedule refer to an Article or Section of, or an Exhibit, Annex or Schedule to, this Agreement; (i) references to
$ or otherwise to dollar amounts refer to the lawful currency of the United States; (j) unless the context so requires, references to any Laws or specific provisions of Laws shall include any rules, regulations and delegated
legislation issued thereunder; (k) references to any pronoun shall include the corresponding masculine, feminine and neuter forms; (l) the table of contents and headings set forth in this Agreement are for convenience of reference purposes
only and shall not affect or be deemed to affect in any way the meaning or interpretation of this Agreement or any term or provision hereof; and (m) references herein to primarily shall include primarily as well as any
other standard that reflects a majority or more of the matter addressed, including exclusively or any similar term. Whenever this Agreement refers to a number of days, such number shall refer to calendar days unless Business Days are
specified, and if any action is to be taken or given on or by a particular calendar day, and such calendar day is not a Business Day, then such action may be deferred until the next Business Day. The language used in this Agreement shall be deemed
to be the language chosen by the Parties hereto to express their mutual intent, and no rule of strict construction shall be applied against either Party. The Parties 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.
Section 10.16
Waiver of Jury Trial
.
EACH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY
RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT AND ANY OF THE AGREEMENTS DELIVERED IN CONNECTION HEREWITH AND THE TRANSACTIONS CONTEMPLATED HEREBY. EACH
PARTY CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE EITHER OF SUCH WAIVERS,
(B) IT UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVERS, (C) IT MAKES SUCH WAIVERS VOLUNTARILY, AND (D) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN
THIS
SECTION 10.16
.
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[
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]
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The Parties hereto have executed this Agreement as of the date first above written.
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CONCERT PHARMACEUTICALS, INC.
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By:
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/s/ Roger Tung
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Name:
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Roger Tung
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Title:
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President & CEO
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VERTEX PHARMACEUTICALS (EUROPE) LIMITED
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By:
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/s/ Ian Smith
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Name:
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Ian Smith
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Title:
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Director
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Solely with respect to Section 10.14 herein:
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VERTEX PHARMACEUTICALS INCORPORATED
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By:
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/s/ Ian Smith
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Name:
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Ian Smith
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Title:
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Executive Vice President, Chief Operating Officer and Chief Financial Officer
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[Bach Signature Page to Asset
Purchase Agreement]
Annex B
March 3, 2017
Board of
Directors
Concert Pharmaceuticals, Inc.
99 Hayden Avenue,
Suite 500
Lexington, Massachusetts 02421
Members of the
Board of Directors:
You have asked us to advise you with respect to the fairness, from a financial point of view, to Concert Pharmaceuticals, Inc.
(Concert, or the Company) of the Consideration (as defined below) to be received by the Company for all of the Companys right, title and interest in CTP-656 and certain related assets and liabilities associated
therewith (collectively, CTP-656) in accordance with the terms of the Asset Purchase Agreement by and among the Company, Vertex Pharmaceuticals (Europe) Limited and Vertex Pharmaceuticals Incorporated (together, Vertex),
dated March 3, 2017 (the Asset Purchase Agreement). In exchange for CTP-656, (a) the Company will receive $160,000,000 in cash at the Closing (less the Escrow Amount, which shall be paid to the Escrow Agent), (b) Vertex
will assume the Assumed Liabilities at the Closing, and (c) the Company will have the right to receive each Contingent Payment based on the achievement by or on behalf of Vertex or its Affiliates, licensees, sublicensees or transferees of the
corresponding Milestone Event ((a) and (c), together, the Consideration). The transaction contemplated by the Asset Purchase Agreement shall be referred to herein as the Transaction. Defined terms used herein but not
otherwise defined shall be as defined in the Asset Purchase Agreement.
Our opinion addresses only the fairness, from a financial point of view, to the
Company of the Consideration to be received by the Company for CTP-656 in accordance with the Asset Purchase Agreement and does not address any other aspect or implication of the Transaction, including, but not limited to, any other aspect of the
Companys business unrelated to CTP-656 or any other asset of the Company other than CTP-656, or any other agreement, arrangement or understanding entered into in connection with the Transaction or otherwise. We have not been requested to opine
as to, and our opinion does not in any manner address, the Companys underlying business decision to proceed with or effect the Transaction, or any other aspect of the Companys business or any of its other assets. In addition, we express
no opinion on, and our opinion does not in any manner address, the likelihood or probability of the achievement or satisfaction of the Milestone Events.
In arriving at our opinion, we have reviewed, analyzed and considered: the Purchase Agreement; certain annual and interim reports to stockholders on Form 10-K
and 10-Q of the Company and Vertex; certain other publicly available business and financial information relating to the Company, CTP-656 and Vertex we deemed relevant; certain other financial information relating to the Company, including financial
forecasts relating to the Company, which were provided to us by the Company; certain business and financial information, including financial forecasts, relating to CTP-656 separately, which were provided to us by the Company; the publicly available
financial terms of certain transactions involving companies we deemed relevant and the consideration paid for such companies or their asset(s) and comparisons of these terms with the proposed financial terms of the Transaction; certain publicly
available financial and business information concerning certain other companies and certain of their assets we deemed relevant and comparisons of this financial and business information to that of CTP-656; and such other factors as we considered
appropriate. In addition, we have discussed with the
March 3, 2017
Page
2
management of the Company the
business, operations, financial condition and prospects of the Company, both with and without CTP-656, including such managements views of the operational and financial risks and uncertainties associated with continuing to develop CTP-656
itself.
In connection with our review, we have not assumed any responsibility for independent verification of any of the information and have, with your
consent, relied on such information being complete and accurate in all material respects. With respect to the financial forecasts for the Company and CTP-656, respectively, the management of the Company has advised us, and we have assumed with your
consent, that such forecasts have been reasonably prepared on bases reflecting the best currently available estimates and judgments of the management of the Company as to the future financial performance of the Company and CTP-656, respectively. In
addition, we have not been requested to make, and have not made, an independent evaluation or appraisal of the assets or liabilities (contingent or otherwise) of the Company, whether with or without CTP-656, nor have we been furnished with any such
evaluations or appraisals. Furthermore, we have not been requested to make, and have not made, any physical inspection of CTP-656.
We have relied upon
and assumed, without independent verification, that (a) the representations and warranties of all parties to the Asset Purchase Agreement are true and correct, (b) each party to the Asset Purchase Agreement will fully and timely perform
all of the covenants and agreements required to be performed by such party, (c) all conditions to the consummation of the Transaction will be satisfied without waiver thereof, and (d) the Transaction will be consummated in a timely manner
in accordance with the terms described in the Asset Purchase Agreement, without any amendments or modifications thereto. We also have relied upon and assumed, without independent verification, that all governmental, regulatory, and other consents
and approvals necessary for the consummation of the Transaction will be obtained and that no delay, limitations, restrictions or conditions will be imposed or amendments, modifications or waivers made that would have an effect on the Company that
would be material to our analyses or this opinion. We have undertaken no independent analysis of any potential or actual litigation, regulatory action, possible unasserted claims or other contingent liabilities, to which the Company is or may be a
party or to which CTP-656 is or may be subject, or of any governmental investigation of any possible unasserted claims or other contingent liabilities to which the Company is or may be a party or to which CTP-656 is or may be subject. Our opinion
does not address (i) the solvency, creditworthiness or fair value of the Company, whether with or without CTP-656, or Vertex, or any of their respective assets, under any applicable laws relating to bankruptcy, insolvency, fraudulent conveyance
or similar matters, (ii) the ability of the Company or Vertex to continue as a going concern; (iii) the underlying business decision of the Company to engage in the Transaction, or (iv) any legal, regulatory, tax or accounting
matters.
We have been engaged by the Company to render this opinion and will receive a fee for doing so, which is payable upon delivery of this opinion.
In addition, the Company has agreed to reimburse us for the payment of certain expenses rendered by us in connection with the delivery of this opinion and indemnify us for certain liabilities and other items arising out of our engagement. During the
two year period prior to the date hereof, no material relationship existed between us or any of our affiliates and the Company or Vertex pursuant to which compensation was received by us or our affiliates; however, we and/or our affiliates may in
the future provide investment banking and other financial services to the Company or Vertex and their respective affiliates for which we would expect to receive compensation. We have not been requested to, and did not, (a) initiate or
participate in any discussions or negotiations with, or solicit any indications of interest from, third parties with respect to the Transaction or any alternatives to the Transaction, (b) negotiate the terms of the Transaction, or
(c) advise the Board of Directors of the Company or any other party with respect to alternatives to the Transaction. This opinion is necessarily based on financial, economic, market and other conditions as in effect on, and the information made
available to us as of, the date hereof. We have not undertaken, and are under no obligation, to update, revise, reaffirm or withdraw this opinion, or otherwise comment on or consider events occurring or coming to our attention after the date hereof.
March 3, 2017
Page
3
The issuance of this opinion has been
approved by a fairness opinion committee of Aquilo Partners, L.P. (Aquilo Partners). This opinion is for the use and benefit of the Board of Directors of the Company in connection with its evaluation of the Transaction. This opinion does
not constitute a recommendation to any stockholder as to how such stockholder should vote with respect to the Transaction or any other matter. This opinion shall not be reproduced, disseminated, quoted, summarized or referred to at any time, in any
manner or for any purpose, nor shall any public references to Aquilo Partners or any of its affiliates be made by the Company or any of its affiliates, without the prior written consent of Aquilo Partners, provided that this opinion may be
reproduced in full in any proxy or information statement mailed to stockholders of the Company.
Based upon and subject to the foregoing, it is our
opinion that, as of the date hereof, the Consideration to be received by the Company for CTP-656 in accordance with the Asset Purchase Agreement is fair, from a financial point of view, to the Company.
Very truly yours,
AQUILO PARTNERS, L.P.
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By:
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/s/ John Dyer
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John Dyer
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Managing Director
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PRELIMINARY PROXY CARD DATED MARCH 23, 2017 SUBJECT TO COMPLETION
CONCERT PHARMACEUTICALS, INC.
ANNUAL MEETING OF STOCKHOLDERS
[
●
], 2017
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of Concert Pharmaceuticals, Inc. hereby acknowledges receipt of the Notice of Annual Meeting of Stockholders
and Proxy Statement, each dated [●], 2017, and hereby appoints Roger D. Tung, D. Ryan Daws and I. Robert Silverman, and each of them, with full power of substitution, as proxy or proxies, to vote all shares of the common stock of the
undersigned at the Annual Meeting of stockholder of Concert Pharmaceuticals, Inc. to be held [●], 2017, and at any adjournments or postponements thereof, upon the proposals set forth on this form of proxy and described in the proxy
statement, and in their discretion with respect to such other matters as may be properly brought before the meeting or any adjournments or postponements thereof.
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION IS INDICATED, WILL BE VOTED FOR EACH OF THE PROPOSALS LISTED ON THE REVERSE SIDE, AND AS SAID PROXIES
DEEM ADVISABLE ON SUCH OTHER MATTERS AS MAY COME BEFORE THE MEETING.
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1.
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Election of three class III directors to our Board of Directors to serve until the 2020 annual meeting of stockholder:
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Nominees:
01) Richard H. Aldrich
02) Thomas G. Auchincloss, Jr.
03) Christine van Heek
☐ FOR ALL
☐ WITHHOLD ALL ☐ FOR ALL EXCEPT
To withhold authority to vote for any individual nominee(s), mark For All Except
and write the number(s) of the nominee(s) on the line below.
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2.
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Ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2017.
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☐ FOR ☐
AGAINST ☐ ABSTAIN
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3.
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Authorization of the sale by the Company to Vertex Pharmaceuticals (Europe) Limited, a U.K. limited company of the assets related to the synthesis, research and development of compounds as potential therapeutic products
for treating cystic fibrosis, including the compound
CTP-656,
pursuant to an Asset Purchase Agreement, dated as of March 3, 2017, by and among the Company, Vertex and Vertex Pharmaceuticals Incorporated,
a Massachusetts corporation, as Guarantor, for an aggregate of $160 million in cash upon closing of the transaction, and an aggregate of up to $90 million following the closing upon the achievement of certain milestone events.
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☐ FOR ☐
AGAINST ☐ ABSTAIN
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4.
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The adjournment of the Annual Meeting, if necessary and to the extent permitted by the Asset Purchase Agreement, to solicit additional proxies if there are insufficient votes at the time of the Annual Meeting to approve
the proposals described.
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☐ FOR ☐
AGAINST ☐ ABSTAIN
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THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION IS INDICATED, WILL BE VOTED FOR EACH OF THE PROPOSALS LISTED ABOVE, AND AS SAID
PROXIES DEEM ADVISABLE ON SUCH OTHER MATTERS AS MAY COME BEFORE THE MEETING.
(This
proxy should be marked, dated and signed by the stockholder or stockholders exactly as the stockholders or stockholders names appear hereon, and returned promptly in the enclosed envelope. Persons signing in a fiduciary or representative
capacity should so indicate. If shares are held by joint tenants, as community property or otherwise by more than one person, all should sign.)
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Signature:
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Date:
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Signature:
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Date:
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