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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): May 21, 1997
VAXCEL, INC.
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(Exact Name of Registrant as Specified in Charter)
Delaware 000-22373 58-2027283
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(State or Other (Commission (IRS Employer
Jurisdiction of File Number) Identification No.)
Incorporation)
154 Technology Parkway
Norcross, Georgia 30092
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(Addresses of Principal Executive Offices, including Zip Code)
(770) 453-0195
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(Registrant's Telephone Number, including Area Code)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On May 21, 1997 (the "Closing Date"), pursuant to the Agreement and
Plan of Merger and Contribution dated December 6, 1996 (the "Merger Agreement"
attached hereto as Exhibit 2.1 and incorporated herein by reference), among
Zynaxis, Inc., a Pennsylvania corporation ("Zynaxis"), CytRx Corporation, a
Delaware corporation ("CytRx"), Vaxcel, Inc., a Delaware corporation and a
wholly-owned subsidiary of CytRx ("Vaxcel"), and Vaxcel Merger Subsidiary, Inc.,
a Georgia corporation and a wholly-owned subsidiary of Vaxcel formed for the
purpose of consummating the transaction ("Merger Sub"), Merger Sub was merged
with and into Zynaxis (the "Merger") and each share of capital stock of Zynaxis
was converted into the right to receive shares of common stock of Vaxcel, par
value $.001 per share ("Vaxcel Common Stock"). Specifically, each share of
common stock of Zynaxis, par value $.01 per share ("Zynaxis Common Stock")
issued and outstanding immediately prior to the Closing Date (excluding certain
shares as set forth in the Merger Agreement), was exchanged for the right to
receive .0947 (the "Exchange Ratio" as further described in the Merger
Agreement) shares of Vaxcel Common Stock, with cash being paid in lieu of any
fractional shares. In addition, each share of Series A Convertible Preferred
Stock of Zynaxis, no par value ("Zynaxis Preferred Stock") issued and
outstanding immediately prior to the Closing Date (excluding certain shares as
set forth in the Merger Agreement), was exchanged for the right to receive .1894
(i.e., two times the Exchange Ratio) shares of Vaxcel Common Stock, with cash
being paid in lieu of any fractional shares.
Furthermore, on the Closing Date, CytRx contributed to Vaxcel a credit
facility (the "Senior Credit Facility") and a cash payment of $2,300,010 (the
"Cash Payment"). The Senior Credit Facility was delivered to CytRx concurrently
with the execution of the Merger Agreement in exchange for which CytRx provided
Zynaxis with working capital of up to $2,000,000 pending consummation of the
Merger. The Senior Credit Facility is comprised of a secured note, certain
security agreements, and a secured loan agreement. In exchange for the
contribution of the Senior Credit Facility and the Cash Payment, Vaxcel
delivered to CytRx a warrant to purchase shares of Vaxcel Common Stock (the
"CytRx Warrant") and 1,374,996 shares of Vaxcel Common Stock. The CytRx Warrant
has an exercise price equal to one-half of the Per Share Price of $.2754 (as
further described in the Merger Agreement) multiplied by the Exchange Ratio, and
may be exercised if, and only if, CytRx reasonably determines that Vaxcel's
total assets and capital and surplus are insufficient to satisfy the total
assets and capital surplus requirements for inclusion of Vaxcel Common Stock on
the Nasdaq SmallCap Market.
In addition to the foregoing, upon consummation of the Merger, holders
(the "Financing Warrantholders") of warrants to purchase shares of Zynaxis
Common Stock who were parties to that certain Preferred Stock and Warrant
Agreement, executed concurrently with the Merger Agreement, by and among
Zynaxis, CytRx, Vaxcel and each of the Financing Warrantholders (the "Preferred
Stock and Warrant Agreement" attached hereto as Exhibit 2.2 and incorporated
herein by reference), were granted the right to receive warrants to purchase
shares of Vaxcel Common Stock in accordance with the terms of the Preferred
Stock and Warrant Agreement.
Also, on the Closing Date holders of warrants (the "Non-Financing
Warrants") to purchase Zynaxis Common Stock who were not parties to the
Preferred Stock and Warrant Agreement were issued, in exchange therefor,
warrants to purchase Vaxcel Common Stock, substantially in the form of their
Non-Financing Warrants, except that (i) each Non-Financing Warrant assumed by
Vaxcel is exercisable solely for shares of Vaxcel Common Stock, (ii) the number
of shares of Vaxcel Common Stock subject to such Non-Financing Warrant is equal
to the number of shares of Zynaxis Common Stock subject to such Non-Financing
Warrant prior to the Closing Date multiplied by the Exchange Ratio, and (iii)
the per share
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exercise price under each such Non-Financing Warrant was adjusted by dividing
the per share exercise price under each such Non-Financing Warrant prior to
Closing by the Exchange Ratio and rounding up to the nearest cent.
Additionally, on the Closing Date, holders of options to purchase
shares of Zynaxis Common Stock ("Stock Options") granted pursuant to the
Zynaxis, Inc. Amended and Restated 1989 Stock Option Plan ("Stock Plan") were
granted rights with respect to the Vaxcel Common Stock, and Vaxcel assumed each
such Stock Option in accordance with the terms of the Stock Plan, except that
(i) Vaxcel and its compensation committee was substituted for Zynaxis and the
committee of Zynaxis' Board of Directors administering the Stock Plan, (ii) each
Stock Option assumed by Vaxcel is exercisable solely for shares of Vaxcel Common
Stock, (iii) the number of shares of Vaxcel Common Stock subject to the Stock
Option is equal to the number of shares of Zynaxis Common Stock subject to such
Stock Option immediately prior to the Closing Date multiplied by the Exchange
Ratio, and (iv) the per share exercise price under each such Stock Option was
adjusted by dividing the per share exercise price under each such Stock Option
immediately prior to the Closing Date by the Exchange Ratio and rounding up to
the nearest cent.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION, AND
EXHIBITS.
(a) Financial Statements of Businesses Acquired.
1. Audited balance sheets of Zynaxis as of the end of
each of the two most recent fiscal years (including
1995 and 1996).
2. Audited statements of income and cash flows of
Zynaxis for each of the three fiscal years preceding
the date of the most recent audited balance sheet
(including 1994, 1995, 1996).
The required financial statements will be filed no later than
August 4, 1997 (sixty days after the initial report on Form
8-K must be filed, June 5, 1997)
(b) Pro Forma Financial Information.
1. Pro forma condensed balance sheet of Zynaxis as of
the end of the most recent period for which a
consolidated balance sheet of Zynaxis is required
(1996 to the present).
2. Pro forma condensed statements of income for only
the most recent fiscal year (1996).
The required pro forma financial information will be filed no
later than August 4, 1997.
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(c) Exhibits.
2.1 Agreement and Plan of Merger and Contribution
dated as of December 6, 1996, among the Registrant,
CytRx Corporation, Vaxcel Merger Subsidiary, Inc.
and Zynaxis, Inc.
2.2 Preferred Stock and Warrant Agreement dated as of
December 6, 1996, among the Registrant, Zynaxis,
Inc., CytRx Corporation and each of the holders of
Zynaxis, Inc. warrants signatory thereto.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
VAXCEL, INC.
(REGISTRANT)
Date: June 3, 1997 By: /s/ Paul J. Wilson
-----------------------------
Paul J. Wilson, President
and Chief Executive Officer
(Principal Executive Officer)
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INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Sequential
Exhibit Page No.
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2.1
Agreement and Plan of Merger and Contribution dated as of December 6,
1997, among the Registrant, CytRx Corporation, Vaxcel Merger Subsidiary,
Inc. and Zynaxis, Inc.
2.2 Preferred Stock and Warrant Agreement dated as of December 6, 1996, among
the Registrant, Zynaxis, Inc., CytRx Corporation and each of the holders
of Zynaxis, Inc. warrants signatory thereto.
</TABLE>
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Exhibit 2.1
Agreement and Plan of Merger and Contribution dated as of December 6,
1996, among the Registrant, CytRx Corporation, Vaxcel Merger Subsidiary, Inc.
and Zynaxis, Inc.
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AGREEMENT AND PLAN OF MERGER AND CONTRIBUTION
BY AND AMONG
CYTRX CORPORATION,
VAXCEL, INC.,
VAXCEL MERGER SUBSIDIARY, INC.,
AND
ZYNAXIS, INC.
DATED AS OF DECEMBER 6, 1996
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TABLE OF CONTENTS
<TABLE>
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PAGE
<S> <C>
Parties ........................................................................................ 1
Section 351 Plan................................................................................. 1
ARTICLE 1 - summary of the contribution and the merger..................................... 2
1.1 Contribution by CytRx.......................................................... 2
1.2 Issuance of Shares............................................................. 2
1.3 Merger......................................................................... 2
1.4 Time and Place of Closing...................................................... 2
1.5 Effective Time................................................................. 3
ARTICLE 2 - TERMS OF MERGER and management after the merger................................ 3
2.1 Charter........................................................................ 3
2.2 Bylaws......................................................................... 3
2.3 Directors and Officers of Surviving Corporation................................ 3
2.4 Board of Directors of Vaxcel................................................... 3
2.5 Officers of Vaxcel............................................................. 3
ARTICLE 3 - MANNER OF CONVERTING SHARES.................................................... 4
3.1 Conversion of Shares........................................................... 4
3.2 Shares Held by Zynaxis or Vaxcel............................................... 4
3.3 Dissenting Shareholders........................................................ 5
3.4 Fractional Shares.............................................................. 5
3.5 Conversion of Stock Options; Restricted Stock.................................. 6
3.6 Conversion of Financing Warrants............................................... 7
3.7 Conversion of Warrants Other Than Financing Warrants........................... 7
3.8 Conversion of Promissory Notes................................................. 8
ARTICLE 4 - EXCHANGE OF SHARES............................................................. 8
4.1 Exchange Procedures............................................................ 8
4.2 Rights of Former Zynaxis Shareholders.......................................... 9
ARTICLE 5 - REPRESENTATIONS AND WARRANTIES OF Zynaxis...................................... 10
5.1 Organization, Standing, and Power.............................................. 10
</TABLE>
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<TABLE>
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5.2 Authority; No Breach By Agreement.............................................. 10
5.3 Capital Stock.................................................................. 11
5.4 Zynaxis Subsidiaries........................................................... 11
5.5 SEC Filings; Financial Statements.............................................. 12
5.6 Absence of Undisclosed Liabilities............................................. 13
5.7 Absence of Certain Changes or Events........................................... 13
5.8 Tax Matters.................................................................... 13
5.9 Assets......................................................................... 15
5.10 Intellectual Property.......................................................... 15
5.11 Environmental Matters.......................................................... 16
5.12 Compliance with Laws........................................................... 17
5.13 Labor Relations................................................................ 17
5.14 Employee Benefit Plans......................................................... 18
5.15 Material Contracts............................................................. 19
5.16 Legal Proceedings.............................................................. 20
5.17 Reports........................................................................ 20
5.18 Statements True and Correct.................................................... 21
5.19 Regulatory Matters............................................................. 21
5.20 Charter Provisions............................................................. 21
ARTICLE 6 - REPRESENTATIONS AND WARRANTIES OF CYTRX, Vaxcel and vaxcel merger sub.......... 22
6.1 Organization, Standing, and Power.............................................. 22
6.2 Authority; No Breach By Agreement.............................................. 22
6.3 Capital Stock.................................................................. 23
6.4 Vaxcel Subsidiaries............................................................ 24
6.5 Vaxcel Financial Statements.................................................... 25
6.6 Absence of Undisclosed Liabilities............................................. 25
6.7 Absence of Certain Changes or Events........................................... 25
6.8 Tax Matters.................................................................... 25
6.9 Assets......................................................................... 26
6.10 Intellectual Property.......................................................... 27
6.11 Environmental Matters.......................................................... 28
</TABLE>
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<TABLE>
<S> <C> <C>
6.12 Compliance With Laws........................................................... 28
6.13 Labor Relations................................................................ 29
6.14 Employee Benefit Plans......................................................... 29
6.15 Material Contracts............................................................. 31
6.16 Legal Proceedings.............................................................. 31
6.17 Reports........................................................................ 32
6.18 Statements True and Correct.................................................... 32
6.19 Regulatory Matters............................................................. 33
ARTICLE 7 - CONDUCT OF BUSINESS PENDING CONSUMMATION....................................... 33
7.1 Affirmative Covenants of Zynaxis............................................... 33
7.2 Negative Covenants of Zynaxis.................................................. 33
7.3 Covenants of Vaxcel............................................................ 35
7.4 Adverse Changes in Condition................................................... 35
7.5 Reports........................................................................ 35
ARTICLE 8 - ADDITIONAL AGREEMENTS.......................................................... 36
8.1 Registration Statement; Proxy Statement; Shareholder Approval.................. 36
8.2 Applications................................................................... 37
8.3 Filings with State Offices..................................................... 37
8.4 Agreement as to Efforts to Consummate.......................................... 37
8.5 Investigation and Confidentiality.............................................. 37
8.6 Press Releases................................................................. 38
8.7 Certain Actions................................................................ 38
8.8 State Antitakeover Laws........................................................ 39
8.9 Charter Provisions............................................................. 39
8.10 Cure of Defaults............................................................... 39
8.11 Negotiation of Malvern Lease Amendment......................................... 39
8.12 Nasdaq Listing................................................................. 40
8.13 Agreements of Affiliates....................................................... 40
8.14 Use of Proceeds of Senior Credit Facility...................................... 40
8.15 Registration Rights Agreement.................................................. 40
</TABLE>
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<TABLE>
<S> <C> <C>
ARTICLE 9 - CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE.............................. 40
9.1 Conditions to Obligations of Each Party........................................ 40
9.2 Conditions to Obligations of CytRx, Vaxcel and Vaxcel Merger Sub............... 42
9.3 Conditions to Obligations of Zynaxis........................................... 44
ARTICLE 10 - TERMINATION.................................................................... 45
10.1 Termination.................................................................... 45
10.2 Effect of Termination.......................................................... 46
10.3 Non-Survival of Representations and Covenants.................................. 46
ARTICLE 11 - MISCELLANEOUS.................................................................. 46
11.1 Definitions.................................................................... 46
11.2 Expenses....................................................................... 58
11.3 Brokers and Finders............................................................ 59
11.4 Entire Agreement............................................................... 60
11.5 Amendments..................................................................... 60
11.6 Waivers........................................................................ 60
11.7 Assignment..................................................................... 61
11.8 Notices........................................................................ 61
11.9 Governing Law.................................................................. 62
11.10 Counterparts................................................................... 62
11.11 Captions; Articles and Sections................................................ 62
11.12 Interpretations................................................................ 62
11.13 Severability................................................................... 62
Signatures....................................................................................... 63
</TABLE>
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LIST OF EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
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<S> <C>
1. Warrant Agreement. (ss. 1.2).
2. Agreement of Affiliates. (ss. 8.13).
3. Matters as to which Morgan, Lewis & Bockius will opine. (ss. 9.2(d)).
4. Matters as to which Alston & Bird will opine. (ss. 9.3(d)).
5. Form of Charter Amendments. (ss. 11.1(a)).
6. Example of Calculation of Exchange Ratio. (ss. 11.1(a)).
7. Liquidation Agreement. (ss. 11.1(a)).
8. Note Exchange Agreement. (ss. 11.1(a)).
9. Preferred Stock and Warrant Agreement. (ss. 11.1(a)).
10. Registration Rights Agreement. (ss. 11.1(a)).
11. Secured Loan Agreement. (ss. 11.1(a)).
12. Senior Secured Note. (ss. 11.1(a)).
13. Shareholder Voting Agreement. (ss. 11.1(a)).
14. Technology Development Agreement. (ss. 11.1(a)).
15. Zynaxis Pledge Agreement. (ss. 11.1(a)).
16. Zynaxis Security Agreement. (ss. 11.1(a)).
17. Zynaxis Vaccine Technologies Collateral Assignment of License Agreement. (ss. 11.1(a)).
18. Zynaxis Vaccine Technologies Guaranty. (ss.11.1(a)).
19. Zynaxis Vaccine Technologies Security Agreement. (ss.11.1(a)).
</TABLE>
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AGREEMENT AND PLAN OF MERGER AND CONTRIBUTION
THIS AGREEMENT AND PLAN OF MERGER AND CONTRIBUTION (this "Agreement")
is made and entered into as of December 6, 1996, by and among CYTRX CORPORATION
("CytRx"), a Delaware corporation, VAXCEL, INC. ("Vaxcel"), a Delaware
corporation and a wholly owned subsidiary of CytRx, VAXCEL MERGER SUBSIDIARY,
INC. ("Vaxcel Merger Sub"), a Georgia corporation, and a newly formed, wholly
owned subsidiary of Vaxcel, and ZYNAXIS, INC. ("Zynaxis"), a Pennsylvania
corporation.
SECTION 351 PLAN
The respective Boards of Directors of CytRx, Vaxcel, Vaxcel Merger Sub
and Zynaxis are of the opinion that the transactions described herein are in the
best interests of the Parties to this Agreement and their respective
shareholders. This Agreement provides for the issuance to CytRx of shares of
Vaxcel Common Stock and a warrant to purchase shares of Vaxcel Common Stock in
exchange for CytRx's contribution to Vaxcel of the Senior Secured Note and an
amount of cash equal to the difference, as of the Closing Date, between the
aggregate principal and interest balance outstanding under the Senior Credit
Facility and Four Million Dollars ($4,000,000). This Agreement also provides for
the issuance of shares of Vaxcel Common Stock to the existing shareholders of
Zynaxis in exchange for the contribution to Vaxcel by the existing shareholders
of Zynaxis of all of the outstanding shares of Zynaxis Capital Stock by means of
a merger of Vaxcel Merger Sub with and into Zynaxis. At the Effective Time of
the Merger, the outstanding shares of the Zynaxis Capital Stock shall be
converted into the right to receive shares of Vaxcel Common Stock (except as
provided herein) and the outstanding shares of Vaxcel Merger Sub Common Stock
shall be converted into Zynaxis Common Stock. As a result, shareholders of
Zynaxis shall become shareholders of Vaxcel and Zynaxis shall continue to
conduct its business and operations as a wholly owned subsidiary of Vaxcel. The
transactions described in this Agreement are subject to the approval of the
shareholders of Zynaxis, and the satisfaction of certain other conditions
described in this Agreement. It is the intention of the Parties to this
Agreement that the transactions contemplated by this Agreement shall qualify for
federal income tax purposes for treatment under Section 351 of the Internal
Revenue Code. The execution of this Agreement by each of the Parties hereto
shall constitute its adoption by such Party.
Simultaneously with the execution of this Agreement: (i) CytRx is
extending the Senior Credit Facility to Zynaxis; (ii) CytRx and Zynaxis are
entering into a Liquidation Agreement pursuant to which CytRx will serve as
Zynaxis's agent and assist Zynaxis in selling its assets and settling its
liabilities prior to the Merger; (iii) holders of Zynaxis Preferred Stock,
warrants and convertible notes issued by Zynaxis are entering into agreements
regarding the exchange of their warrants and the exchange of their convertible
notes for shares of Zynaxis Common Stock in the Merger and certain other
matters; and (iv) Vaxcel and Zynaxis are entering into the Technology
Development Agreement.
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Certain terms used in this Agreement are defined in Section 11.1 of
this Agreement.
NOW, THEREFORE, in consideration of the above and the mutual
warranties, representations, covenants, and agreements set forth herein, the
Parties agree as follows:
ARTICLE 1
SUMMARY OF THE CONTRIBUTION AND THE MERGER
1.1 CONTRIBUTION BY CYTRX. For the consideration hereinafter provided
and subject to the terms and conditions of this Agreement, at the Closing, CytRx
shall contribute to Vaxcel the Senior Credit Facility and a cash payment (the
"Cash Payment") in an amount equal to the difference, as of the Closing Date,
between Four Million Dollars ($4,000,000) and the sum of: (i) the aggregate
principal and interest balance outstanding under the Senior Secured Note; and
(ii) (A) the Per Share Price multiplied by (B) the number of votes entitled to
be cast by the holders of Zynaxis Capital Stock who elect to exercise their
statutory dissenters' rights or their objection rights, if any, under Section
2545 of the PBCL in excess of three percent (3%) of the votes that could be cast
by all holders of Zynaxis Capital Stock voting together as a single class. The
Cash Payment shall be made by wire transfer of immediately available funds to an
account specified in writing by Vaxcel.
1.2 ISSUANCE OF SHARES. Subject to the terms and conditions of this
Agreement, at the Closing, Vaxcel shall: (i) deliver to CytRx, in exchange for
the contribution of the Senior Secured Note and the Cash Payment, one warrant
agreement substantially in the form of Exhibit 1 hereto (the "CytRx Warrant")
and one certificate representing One Million Three Hundred Seventy Four Thousand
Nine Hundred Ninety-Six (1,374,996) shares of Vaxcel Common Stock; and (ii)
deliver to CytRx one certificate representing a number of shares of Vaxcel
Common Stock equal to the product of the Exchange Ratio, as defined below, times
the number of votes entitled to be cast by the holders of Zynaxis Capital Stock
who elect to exercise their statutory dissenters' rights or their objection
rights, if any, under Section 2545 of the PBCL. Each certificate of Vaxcel
Common Stock issued pursuant to this Section 1.2 shall be registered in the name
of CytRx, free and clear of any Liens.
1.3 MERGER. Subject to the terms and conditions of this Agreement, at
the Effective Time, Vaxcel Merger Sub shall be merged with and into Zynaxis in
accordance with the provisions of Section 1921 et seq. of the PBCL and Sections
14-2-1101 and 14-2-1107 of the GBCC and with the effects provided in Section
1929 of the PBCL and Section 14-2-1106 of the GBCC (the "Merger"). Zynaxis shall
be the Surviving Corporation resulting from the Merger and shall become a wholly
owned Subsidiary of Vaxcel and shall continue to be governed by the Laws of the
Commonwealth of Pennsylvania. The Merger shall be consummated pursuant to the
terms of this Agreement, which has been approved and adopted by the respective
Boards of Directors of CytRx, Zynaxis, Vaxcel Merger Sub, and Vaxcel and by
Vaxcel, as the sole shareholder of Vaxcel Merger Sub.
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1.4 TIME AND PLACE OF CLOSING. The closing of the transactions
contemplated hereby (the "Closing") will take place at 10:00 A.M. on the date on
which the Effective Time occurs (or the immediately preceding day if the
Effective Time is earlier than 10:00 A.M.), or at such other time as the
Parties, acting through their authorized officers, may mutually agree. The
Closing shall be held at such location as may be mutually agreed upon by the
Parties.
1.5 EFFECTIVE TIME. The Merger and other transactions contemplated by
this Agreement shall become effective upon the last to occur of: (i) the filing
of the Articles of Merger in the Department of State of the Commonwealth of
Pennsylvania and (ii) the filing of the Certificate of Merger with the Secretary
of State of the State of Georgia (the "Effective Time"). Subject to the terms
and conditions hereof, unless otherwise mutually agreed upon in writing by the
authorized officers of each Party, the Parties shall use their reasonable
efforts to cause the Effective Time to occur on the first business day following
the last to occur of (i) the effective date (including expiration of any
applicable waiting period) of the last required Consent of any Regulatory
Authority having authority over and approving or exempting the Merger, and (ii)
the date on which the shareholders of Zynaxis approve this Agreement to the
extent such approval is required by applicable Law.
ARTICLE 2
TERMS OF MERGER AND
MANAGEMENT AFTER THE MERGER
2.1 CHARTER. The Articles of Incorporation, as amended, of Zynaxis in
effect immediately prior to the Effective Time shall be the Articles of
Incorporation of the Surviving Corporation until duly amended or repealed.
2.2 BYLAWS. The Bylaws of Zynaxis in effect immediately prior to the
Effective Time shall be the Bylaws of the Surviving Corporation until duly
amended or repealed.
2.3 DIRECTORS AND OFFICERS OF SURVIVING CORPORATION. Jack L. Bowman,
Raymond C. Carnahan, Jr., Jack J. Luchese, Herbert H. McDade, Jr., and Paul
Wilson shall serve as the directors of the Surviving Corporation from and after
the Effective Time in accordance with the Bylaws of the Surviving Corporation
until their successors are elected and qualify. The following persons shall
serve as the officers of the Surviving Corporation from and after the Effective
Time in accordance with the Bylaws of the Surviving Corporation until their
successors are elected and qualify: Paul Wilson, President and Chief Executive
Officer; Mark Newman, Vice President - Research and Development; and Mark W.
Reynolds, Chief Financial Officer, Controller and Secretary.
2.4 BOARD OF DIRECTORS OF VAXCEL. Jack L. Bowman, Raymond C. Carnahan,
Jr., Lyle A. Hohnke, Jack J. Luchese, Herbert H. McDade, Jr., and Paul Wilson
shall serve as the directors of Vaxcel from and after the Effective Time in
accordance with the Bylaws of Vaxcel until their successors are elected and
qualify.
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2.5 OFFICERS OF VAXCEL. The officers of Vaxcel in office immediately
prior to the Effective Time, together with such additional persons as may
thereafter be elected, shall serve as the officers of Vaxcel from and after the
Effective Time in accordance with the Bylaws of Vaxcel until their successors
are elected and qualify.
ARTICLE 3
MANNER OF CONVERTING SHARES
3.1 CONVERSION OF SHARES. Subject to the provisions of this Article 3,
at the Effective Time, by virtue of the Merger and without any action on the
part of Vaxcel, Vaxcel Merger Sub or Zynaxis, or the shareholders of any of the
foregoing, the shares of the constituent corporations shall be converted as
follows:
(a) Each share of capital stock of Vaxcel issued and outstanding
immediately prior to the Effective Time shall remain issued and outstanding
from and after the Effective Time.
(b) Each share of Vaxcel Merger Sub Common Stock issued and outstanding
immediately prior to the Effective Time shall cease to be outstanding and
shall be converted into one share of Zynaxis Common Stock.
(c) Each share of Zynaxis Common Stock (excluding shares held by any
Zynaxis Company or any Vaxcel Company, and excluding shares held by
shareholders who perfect their statutory dissenters' rights or objection
rights under Section 2545 of the PBCL as provided in Section 3.3) issued and
outstanding immediately prior to the Effective Time shall cease to be
outstanding and shall be converted into and exchanged for the right to
receive a number of shares of Vaxcel Common Stock equal to the Exchange
Ratio.
(d) Each share of Zynaxis Preferred Stock (excluding shares held by any
Zynaxis Company or any Vaxcel Company, and excluding shares held by
shareholders who perfect their statutory dissenters' rights or objection
rights under Section 2545 of the PBCL as provided in Section 3.3) issued and
outstanding immediately prior to the Effective Time shall cease to be
outstanding and shall be converted into and exchanged for the right to
receive a number of shares of Vaxcel Common Stock equal to two times the
Exchange Ratio.
3.2 SHARES HELD BY ZYNAXIS OR VAXCEL. Each of the shares of Zynaxis
Common Stock held by any Zynaxis Company or by any Vaxcel Company shall be
canceled and retired at the Effective Time and no consideration shall be issued
in exchange therefor.
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3.3 DISSENTING SHAREHOLDERS.
(a) Any holder of shares of Zynaxis Capital Stock who perfects
his or her dissenters' rights in accordance with and as contemplated by
Section 1930 of the PBCL shall be entitled to receive the value of such
shares in cash as determined pursuant to such provision of Law; provided,
that no such payment shall be made to any dissenting shareholder unless and
until such dissenting shareholder has complied with the applicable
provisions of the PBCL and surrendered to Zynaxis the certificate or
certificates representing the shares for which payment is being made. In
the event that after the Effective Time a dissenting shareholder of Zynaxis
fails to perfect, or effectively withdraws or loses, his right to appraisal
and of payment for his shares, Vaxcel shall issue and deliver the
consideration to which such holder of shares of Zynaxis Capital Stock is
entitled under this Article 3 (without interest) upon surrender by such
holder of the certificate or certificates representing shares of Zynaxis
Capital Stock held by him. If and to the extent required by applicable Law,
Vaxcel will establish (or cause to be established) an escrow account with
an amount sufficient to satisfy the maximum aggregate payment that may be
required to be paid to dissenting shareholders. Upon satisfaction of all
claims of dissenting shareholders, the remaining escrowed amount, reduced
by payment of the fees and expenses of the escrow agent, will be returned
to Vaxcel.
(b) Any holder of shares of Zynaxis Capital Stock who objects to
the transaction and in accordance with and as contemplated by Sections
2544 and 2546 of the PBCL shall be entitled to receive the value of such
shares in cash as determined pursuant to such provision of Law; provided,
that no such payment shall be made to any objecting shareholder unless and
until such objecting shareholder has complied with the applicable
provisions of the PBCL and surrendered to Zynaxis the certificate or
certificates representing the shares for which payment is being made. In
the event that after the Effective Time an objecting shareholder of Zynaxis
fails to give proper notice and surrender his certificates as required by
Section 2547 of the PBCL, or otherwise effectively withdraws or loses his
right to appraisal and of payment for his shares, Vaxcel shall issue and
CytRx and Vaxcel shall deliver the consideration to which such holder of
shares of Zynaxis Capital Stock is entitled under this Article 3 (without
interest) upon surrender by such holder of the certificate or certificates
representing shares of Zynaxis Capital Stock held by him. If and to the
extent required by applicable Law, Vaxcel will establish (or cause to be
established) an escrow account with an amount sufficient to satisfy the
maximum aggregate payment that may be required to be paid to objecting
shareholders. Upon satisfaction of all claims of objecting shareholders,
the remaining escrowed amount, reduced by payment of the fees and expenses
of the escrow agent, will be returned to Vaxcel.
3.4 FRACTIONAL SHARES. Notwithstanding any other provision of this
Agreement, each holder of shares of Zynaxis Common Stock and each holder of
shares of Zynaxis Preferred Stock exchanged pursuant to the Merger who would
otherwise have been entitled to receive a fraction of a share of Vaxcel
Common Stock (after taking into account all whole shares delivered by such
holder) shall receive, in lieu thereof, cash (without interest) in an amount
equal to such fractional part of a share of Vaxcel Common Stock divided by
the Exchange Ratio and multiplied by the Per Share Price.
<PAGE> 13
3.5 CONVERSION OF STOCK OPTIONS; RESTRICTED STOCK.
(a) At the Effective Time, each option or other Equity Right to
purchase shares of Zynaxis Common Stock pursuant to stock options or stock
appreciation rights ("Zynaxis Options") granted by Zynaxis under the Zynaxis
Stock Plan which are outstanding at the Effective Time, whether or not
exercisable, shall be converted into and become rights with respect to
Vaxcel Common Stock, and Vaxcel shall assume each Zynaxis Option, in
accordance with the terms of the Zynaxis Stock Plan and stock option
agreement by which it is evidenced, except that from and after the Effective
Time, (i) Vaxcel and its Compensation Committee shall be substituted for
Zynaxis and the Committee of Zynaxis's Board of Directors (including, if
applicable, the entire Board of Directors of Zynaxis) administering such
Zynaxis Stock Plan, (ii) each Zynaxis Option assumed by Vaxcel may be
exercised solely for shares of Vaxcel Common Stock (or cash, if so provided
under the terms of such Zynaxis Option), (iii) the number of shares of
Vaxcel Common Stock subject to such Zynaxis Option shall be equal to the
number of shares of Zynaxis Common Stock subject to such Zynaxis Option
immediately prior to the Effective Time multiplied by the Exchange Ratio,
and (iv) the per share exercise price under each such Zynaxis Option shall
be adjusted by dividing the per share exercise price under each such Zynaxis
Option by the Exchange Ratio and rounding up to the nearest cent.
Notwithstanding the provisions of clause (iii) of the preceding sentence,
Vaxcel shall not be obligated to issue any fraction of a share of Vaxcel
Common Stock upon exercise of Zynaxis Options and any fraction of a share of
Vaxcel Common Stock that otherwise would be subject to a converted Zynaxis
Option shall represent the right to receive a cash payment upon exercise of
such converted Zynaxis Option equal to the product of such fraction and the
difference between the market value of one share of Vaxcel Common Stock at
the time of exercise of such Option and the per share exercise price of such
Zynaxis Option. The market value of one share of Vaxcel Common Stock at the
time of exercise of an Option shall be the last sale price of a share of
Vaxcel Common Stock on the Nasdaq SmallCap Market (as reported by The Wall
Street Journal or, if not reported thereby, any other authoritative source
selected by Vaxcel) on the last trading day preceding the date of exercise.
In addition, notwithstanding the provisions of clauses (iii) and (iv) of the
first sentence of this Section 3.5, each Zynaxis Option which is an
"incentive stock option" shall be adjusted as required by Section 424 of the
Internal Revenue Code, and the regulations promulgated thereunder, so as not
to constitute a modification, extension or renewal of the option, within the
meaning of Section 424(h) of the Internal Revenue Code. Each of Zynaxis and
Vaxcel agrees to take all necessary steps to effectuate the foregoing
provisions of this Section 3.5, including using its reasonable efforts to
obtain from each holder of a Zynaxis Option any Consent or Contract that may
be deemed necessary or advisable in order to effect the transactions
contemplated by this Section 3.5. Anything in this Agreement to the contrary
notwithstanding, Vaxcel shall have the right, in its sole discretion, not to
deliver the consideration provided in this Section 3.5 to a former holder of
a Zynaxis Option who has not delivered such Consent or Contract.
(b) As soon as practicable after the Effective Time, Vaxcel shall
deliver to the participants in the Zynaxis Stock Plan an appropriate notice
setting forth such participant's rights pursuant thereto and the grants
subject to the Zynaxis Stock Plan shall continue in effect on the same terms
and conditions (subject to the adjustments required by Section 3.5(a) after
giving
<PAGE> 14
effect to the Merger), and Vaxcel shall comply with the terms of the Zynaxis
Stock Plan to ensure, to the extent required by, and subject to the
provisions of, such Zynaxis Stock Plan, that Zynaxis Options which qualified
as incentive stock options prior to the Effective Time continue to qualify
as incentive stock options after the Effective Time. At or prior to the
Effective Time, Vaxcel shall take all corporate action necessary to reserve
for issuance sufficient shares of Vaxcel Common Stock for delivery upon
exercise of Zynaxis Options assumed by it in accordance with this Section
3.5. As soon as practicable after the Effective Time, Vaxcel shall file a
registration statement on Form S-3 or Form S-8, as the case may be (or any
successor or other appropriate forms), with respect to the shares of Vaxcel
Common Stock subject to such options and shall use its reasonable efforts to
maintain the effectiveness of such registration statements (and maintain the
current status of the prospectus or prospectuses contained therein) for so
long as such options remain outstanding.
(c) All contractual restrictions or limitations on transfer with
respect to Zynaxis Common Stock awarded under the Zynaxis Stock Plan or any
other plan, program, Contract or arrangement of any Zynaxis Company, to the
extent that such restrictions or limitations shall not have already lapsed
(whether as a result of the Merger or otherwise), and except as otherwise
expressly provided in such plan, program, Contract or arrangement, shall
remain in full force and effect with respect to shares of Vaxcel Common
Stock into which such restricted stock is converted pursuant to Section 3.1.
3.6 CONVERSION OF FINANCING WARRANTS. At the Effective Time, each
warrant to purchase shares of Zynaxis Common Stock which is outstanding at the
Effective Time and is held by a party to the Preferred Stock and Warrant
Agreement shall be exchanged for a warrant to purchase Vaxcel Common Stock in
accordance with the terms of the Preferred Stock and Warrant Agreement.
3.7 CONVERSION OF WARRANTS OTHER THAN FINANCING WARRANTS. At the
Effective Time, each warrant to purchase shares of Zynaxis Common Stock which is
outstanding at the Effective Time and is not being exchanged for a warrant to
purchase Vaxcel Common Stock in accordance with Section 3.6 and pursuant to the
Preferred Stock and Warrant Agreement (a "Non-Financing Warrant") shall be
converted into and become a warrant to purchase shares of Vaxcel Common Stock,
and Vaxcel shall assume each such warrant, in accordance with the terms of the
warrant agreement by which it is evidenced, except that from and after the
Effective Time, (i) each Non-Financing Warrant assumed by Vaxcel may be
exercised solely for shares of Vaxcel Common Stock, (ii) the number of shares of
Vaxcel Common Stock subject to such Non-Financing Warrant shall be equal to the
number of shares of Zynaxis Common Stock subject to such Non-Financing Warrant
immediately prior to the Effective Time multiplied by the Exchange Ratio, and
(iii) the per share exercise price under each such Non-Financing Warrant shall
be adjusted by dividing the per share exercise price under each such
Non-Financing Warrant by the Exchange Ratio and rounding up to the nearest cent.
Notwithstanding the provisions of clause (ii) of the preceding sentence, Vaxcel
shall not be obligated to issue any fraction of a share of Vaxcel Common Stock
upon exercise of such Non-Financing Warrants and any fraction of a share of
Vaxcel Common Stock that otherwise would be subject to a converted Non-Financing
Warrant shall represent the right to receive a cash payment
<PAGE> 15
upon exercise of such converted Non-Financing Warrant equal to the product of
such fraction and the difference between the market value of one share of Vaxcel
Common Stock at the time of exercise of such converted Non-Financing Warrant and
the per share exercise price of such converted Non-Financing Warrant. The market
value of one share of Vaxcel Common Stock at the time of exercise of a converted
Non-Financing Warrant shall be the last sale price of a share of Vaxcel Common
Stock on the Nasdaq SmallCap Market (as reported by The Wall Street Journal or,
if not reported thereby, any other authoritative source selected by Vaxcel) on
the last trading day preceding the date of exercise.
(b) As soon as practicable after the Effective Time, Vaxcel shall
deliver to the holders of Non-Financing Warrants an appropriate notice setting
forth such participant's rights pursuant thereto and the converted
Non-Financing Warrants shall continue in effect on the same terms and
conditions (subject to the adjustments required by Section 3.7(a) after giving
effect to the Merger). At or prior to the Effective Time, Vaxcel shall take all
corporate action necessary to reserve for issuance sufficient shares of Vaxcel
Common Stock for delivery upon exercise of converted Non-Financing Warrants
assumed by it in accordance with this Section 3.7.
3.8 CONVERSION OF PROMISSORY NOTES. At the Effective Time, each
promissory note on which Zynaxis is the obligor and which is held by a party to
the Note Exchange Agreement shall be exchanged for shares of Vaxcel Common Stock
in accordance with the terms of the Note Exchange Agreement.
ARTICLE 4
EXCHANGE OF SHARES
4.1 EXCHANGE PROCEDURES. Promptly after the Effective Time, Vaxcel and
Zynaxis shall cause the exchange agent selected by Vaxcel (the "Exchange Agent")
to mail to each holder of record of a certificate or certificates which
represented shares of Zynaxis Capital Stock immediately prior to the Effective
Time (the "Certificates") appropriate transmittal materials and instructions
(which shall specify that delivery shall be effected, and risk of loss and title
to such Certificates shall pass, only upon proper delivery of such Certificates
to the Exchange Agent). The Certificate or Certificates of Zynaxis Capital Stock
so delivered shall be duly endorsed as the Exchange Agent may require. In the
event of a transfer of ownership of shares of Zynaxis Capital Stock represented
by Certificates that are not registered in the transfer records of Zynaxis, the
consideration provided in Section 3.1 may be issued to a transferee if the
Certificates representing such shares are delivered to the Exchange Agent,
accompanied by all documents required to evidence such transfer and by evidence
satisfactory to the Exchange Agent that any applicable stock transfer taxes have
been paid. If any Certificate shall have been lost, stolen, mislaid or
destroyed, upon receipt of (i) an affidavit of that fact from the holder
claiming such Certificate to be lost, mislaid, stolen or destroyed, (ii) such
bond, security or indemnity as Vaxcel and the Exchange Agent may reasonably
require and (iii) any other documents necessary to evidence and effect the bona
fide exchange thereof, the Exchange Agent shall issue to such holder the
consideration into which the shares represented by such lost, stolen, mislaid or
destroyed Certificate shall have been converted. The Exchange Agent may
establish such other reasonable
<PAGE> 16
and customary rules and procedures in connection with its duties as it may deem
appropriate. After the Effective Time, each holder of shares of Zynaxis Capital
Stock (other than shares to be canceled pursuant to Section 3.2, or as to which
statutory dissenters' rights have been perfected as provided in Section 3.3(a),
or as to which proper notice has been given as provided in Section 3.3(b))
issued and outstanding at the Effective Time shall surrender the Certificate or
Certificates representing such shares to the Exchange Agent and shall promptly
upon surrender thereof receive in exchange therefor the consideration provided
in Section 3.1, together with all undelivered dividends or distributions in
respect of such shares (without interest thereon) pursuant to Section 4.2. To
the extent required by Section 3.4, each holder of shares of Zynaxis Capital
Stock issued and outstanding at the Effective Time also shall receive, upon
surrender of the Certificate or Certificates, cash in lieu of any fractional
share of Vaxcel Common Stock to which such holder may be otherwise entitled
(without interest). Vaxcel shall not be obligated to deliver the consideration
to which any former holder of Zynaxis Capital Stock is entitled as a result of
the Merger until such holder surrenders such holder's Certificate or
Certificates for exchange as provided in this Section 4.1. Any other provision
of this Agreement notwithstanding, neither Vaxcel, the Surviving Corporation nor
the Exchange Agent shall be liable to a holder of Zynaxis Capital Stock for any
amounts paid or property delivered in good faith to a public official pursuant
to any applicable abandoned property, escheat or similar Law. Adoption of this
Agreement by the shareholders of Zynaxis shall constitute ratification of the
appointment of the Exchange Agent.
4.2 RIGHTS OF FORMER ZYNAXIS SHAREHOLDERS. At the Effective Time, the
stock transfer books of Zynaxis shall be closed as to holders of Zynaxis Capital
Stock immediately prior to the Effective Time and no transfer of Zynaxis Capital
Stock by any such holder shall thereafter be made or recognized. Until
surrendered for exchange in accordance with the provisions of Section 4.1, each
Certificate theretofore representing shares of Zynaxis Capital Stock (other than
shares to be canceled pursuant to Section 3.2, or as to which statutory
dissenters' rights have been perfected as provided in Section 3.3(a), or as to
which proper notice has been given as provided in Section 3.3(b)) shall from and
after the Effective Time represent for all purposes only the right to receive
the consideration provided in Sections 3.1 and 3.4 in exchange therefor,
subject, however, to the Surviving Corporation's obligation to pay any dividends
or make any other distributions with a record date prior to the Effective Time
which have been declared or made by Zynaxis in respect of such shares of Zynaxis
Capital Stock in accordance with the terms of this Agreement and which remain
unpaid at the Effective Time. To the extent permitted by Law, former
shareholders of record of Zynaxis shall be entitled to vote after the Effective
Time at any meeting of Vaxcel shareholders the number of whole shares of Vaxcel
Common Stock into which their respective shares of Zynaxis Capital Stock are
converted, regardless of whether such holders have exchanged their Certificates
for certificates representing Vaxcel Common Stock in accordance with the
provisions of this Agreement. Whenever a dividend or other distribution is
declared by Vaxcel on the Vaxcel Common Stock, the record date for which is at
or after the Effective Time, the declaration shall include dividends or other
distributions on all shares of Vaxcel Common Stock issuable pursuant to this
Agreement, but beginning 30 days after the Effective Time no dividend or other
distribution payable to the holders of record of Vaxcel Common Stock as of any
time subsequent to the Effective Time shall be delivered to the holder of any
Certificate until such holder surrenders such Certificate for
<PAGE> 17
exchange as provided in Section 4.1. However, upon surrender of such
Certificate, both the Vaxcel Common Stock certificate (together with all such
undelivered dividends or other distributions without interest) and any
undelivered dividends and cash payments payable hereunder (without interest)
shall be delivered and paid with respect to each share represented by such
Certificate.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF ZYNAXIS
Zynaxis hereby represents and warrants to Vaxcel as follows:
5.1 ORGANIZATION, STANDING, AND POWER. Zynaxis is a corporation duly
organized, validly existing, and in good standing under the Laws of the
Commonwealth of Pennsylvania, and has the corporate power and authority to carry
on its business as now conducted and to own, lease and operate its Assets.
Zynaxis is duly qualified or licensed to transact business as a foreign
corporation in good standing in the States of the United States and foreign
jurisdictions where the character of its Assets or the nature or conduct of its
business requires it to be so qualified or licensed, except for such
jurisdictions in which the failure to be so qualified or licensed is not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on Zynaxis. The minute book and other organizational documents for
Zynaxis have been made available to Vaxcel for its review and, except as
disclosed in Section 5.1 of the Zynaxis Disclosure Memorandum, are true and
complete in all material respects as of the date of this Agreement and
accurately reflect in all material respects all amendments thereto and all
proceedings of the Board of Directors and shareholders thereof.
5.2 AUTHORITY; NO BREACH BY AGREEMENT.
(a) Zynaxis has the corporate power and authority necessary to
execute, deliver, and perform its obligations under this Agreement and to
consummate the transactions contemplated hereby. The execution, delivery, and
performance of this Agreement and the consummation of the transactions
contemplated herein, including the Merger, have been duly and validly
authorized by all necessary corporate action in respect thereof on the part of
Zynaxis, subject to the adoption of this Agreement: (i) by a majority vote of
the votes cast by all shareholders entitled to vote thereon (the holders of
shares of Zynaxis Common Stock and the holders of shares of Zynaxis Preferred
Stock, voting on an as-converted basis), and (ii) by a majority of the votes
cast by all holders of Zynaxis Preferred Stock entitled to vote thereon, voting
as a class. These are the only shareholder votes required for approval of this
Agreement and consummation of the transactions contemplated herein, including
the Merger, by Zynaxis. Subject to approval of this Agreement by the
shareholders of Zynaxis, this Agreement represents a legal, valid, and binding
obligation of Zynaxis, enforceable against Zynaxis in accordance with its
terms.
(b) The execution and delivery of this Agreement by Zynaxis, and,
upon approval of this Agreement and the transactions contemplated hereby by the
shareholders of
<PAGE> 18
Zynaxis, the consummation by Zynaxis of the transactions contemplated hereby
and the compliance by Zynaxis with any of the provisions hereof, will not (i)
conflict with or result in a breach of any provision of Zynaxis's Articles of
Incorporation, as amended, or Bylaws or the certificate or articles of
incorporation or bylaws of any Zynaxis Subsidiary or any resolution adopted by
the board of directors or the shareholders of any Zynaxis Company, or (ii)
except as disclosed in Section 5.2 of the Zynaxis Disclosure Memorandum,
constitute or result in a Default under, or require any Consent pursuant to, or
result in the creation of any Lien on any Asset of any Zynaxis Company under,
any Contract or Permit of any Zynaxis Company, or, (iii) subject to receipt of
the requisite Consents referred to in Section 9.1(b), constitute or result in a
Default under, or require any Consent pursuant to, any Law or Order applicable
to any Zynaxis Company or any of their respective material Assets (including
any Vaxcel Company or any Zynaxis Company becoming subject to or liable for the
payment of any Tax or any of the Assets owned by any Vaxcel Company or any
Zynaxis Company being reassessed or revalued by any Taxing authority).
(c) Other than in connection or compliance with the provisions of
the Securities Laws, applicable state corporate and securities Laws, and rules
of the NASD, and other than Consents required from Regulatory Authorities, and
other than notices to or filings with the Internal Revenue Service or the
Pension Benefit Guaranty Corporation with respect to any employee benefit
plans, no notice to, filing with, or Consent of, any public body or authority
is necessary for the execution, delivery and performance by Zynaxis of its
obligations under this Agreement.
5.3 CAPITAL STOCK.
(a) The authorized capital stock of Zynaxis consists of (i)
25,000,000 shares of Zynaxis Common Stock, of which 10,338,768 shares are
issued and outstanding, and (ii) 2,000,000 shares of preferred stock, 1,500,000
shares of which are designated Series A Convertible Preferred Stock and of
which 1,412,500 shares are issued and outstanding. The Conversion Price (as
that term is defined in the Statement With Respect to Shares) of the Zynaxis
Preferred Stock is One Dollar ($1.00) per share. All of the issued and
outstanding shares of capital stock of Zynaxis are duly and validly issued and
outstanding and are fully paid and nonassessable under the PBCL. None of the
outstanding shares of Zynaxis Capital Stock has been issued in violation of any
preemptive rights of the current or past shareholders of Zynaxis.
(b) Except as set forth in Section 5.3(a) or as disclosed in
Section 5.3 of the Zynaxis Disclosure Memorandum, there are no shares of
capital stock or other equity securities of Zynaxis outstanding and no
outstanding Equity Rights relating to the Zynaxis Capital Stock.
5.4 ZYNAXIS SUBSIDIARIES. Zynaxis has disclosed in Section 5.4 of the
Zynaxis Disclosure Memorandum all of the Zynaxis Subsidiaries (in each case
identifying its jurisdiction of incorporation, each jurisdiction in which it is
qualified and/or licensed to transact business, and the number of shares owned
by Zynaxis and percentage ownership interest represented by such share
ownership). Except as disclosed in Section 5.4 of the Zynaxis Disclosure
Memorandum, Zynaxis
<PAGE> 19
or one of its Subsidiaries owns all of the issued and outstanding shares of
capital stock (or other equity interests) of each Zynaxis Subsidiary. No capital
stock (or other equity interest) of any Zynaxis Subsidiary is or may become
required to be issued (other than to another Zynaxis Company) by reason of any
Equity Rights, and there are no Contracts by which any Zynaxis Subsidiary is
bound to issue (other than to another Zynaxis Company) additional shares of its
capital stock (or other equity interests) or Equity Rights or by which any
Zynaxis Company is or may be bound to transfer any shares of the capital stock
(or other equity interests) of any Zynaxis Subsidiary (other than to another
Zynaxis Company). There are no Contracts relating to the rights of any Zynaxis
Company to vote or to dispose of any shares of the capital stock (or other
equity interests) of any Zynaxis Subsidiary. All of the shares of capital stock
(or other equity interests) of each Zynaxis Subsidiary held by a Zynaxis Company
are fully paid and nonassessable under the applicable corporation Law of the
jurisdiction in which such Subsidiary is incorporated or organized and are owned
by the Zynaxis Company free and clear of any Lien, except as contemplated in the
Transaction Documents. Except as disclosed in Section 5.4 of the Zynaxis
Disclosure Memorandum, each Zynaxis Subsidiary is a corporation, and each such
Subsidiary is duly organized, validly existing, and (as to corporations) in good
standing under the Laws of the jurisdiction in which it is incorporated or
organized, and has the corporate power and authority necessary for it to own,
lease, and operate its Assets and to carry on its business as now conducted.
Each Zynaxis Subsidiary is duly qualified or licensed to transact business as a
foreign corporation in good standing in the States of the United States and
foreign jurisdictions where the character of its Assets or the nature or conduct
of its business requires it to be so qualified or licensed, except for such
jurisdictions in which the failure to be so qualified or licensed is not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on Zynaxis. The minute book and other organizational documents for each
Zynaxis Subsidiary have been made available to Vaxcel for its review, and,
except as disclosed in Section 5.4 of the Zynaxis Disclosure Memorandum, are
true and complete in all material respects as in effect as of the date of this
Agreement and accurately reflect in all material respects all amendments thereto
and all proceedings of the Board of Directors and shareholders thereof.
5.5 SEC FILINGS; FINANCIAL STATEMENTS.
(a) Zynaxis has timely filed and made available to Vaxcel all SEC
Documents required to be filed by Zynaxis since December 31, 1992 (the
"Zynaxis SEC Reports"). The Zynaxis SEC Reports (i) at the time filed,
complied in all material respects with the applicable requirements of the
Securities Laws and (ii) did not, at the time they were filed (or, if
amended or superseded by a filing prior to the date of this Agreement, then
on the date of such filing) contain any untrue statement of a material fact
or omit to state a material fact required to be stated in such Zynaxis SEC
Reports or necessary in order to make the statements in such Zynaxis SEC
Reports, in light of the circumstances under which they were made, not
misleading. No Zynaxis Subsidiary is required to file any SEC Documents.
(b) Each of the Zynaxis Financial Statements (including, in each
case, any related notes) contained in the Zynaxis SEC Reports,
including any Zynaxis SEC Reports filed after the date of this Agreement
until the Effective Time, complied or will comply as to form in all
material respects with the applicable published rules and regulations of
the SEC with respect
<PAGE> 20
thereto, was prepared in accordance with GAAP applied on a consistent basis
throughout the periods involved (except as may be indicated in the notes to
such financial statements or, in the case of unaudited interim statements, as
permitted by Form 10-Q of the SEC), and fairly presented in all material
respects the consolidated financial position of Zynaxis and its Subsidiaries as
at the respective dates and the consolidated results of operations and cash
flows for the periods indicated, except that the unaudited interim financial
statements were or are subject to normal and recurring year-end adjustments
which were not or are not expected to be material in amount or effect.
5.6 ABSENCE OF UNDISCLOSED LIABILITIES. Except as disclosed in Section
5.6 of the Zynaxis Disclosure Memorandum, no Zynaxis Company has any Liabilities
that are reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on Zynaxis, except Liabilities which are accrued or reserved
against in the consolidated balance sheets of Zynaxis as of December 31, 1995
and June 30, 1996, included in the Zynaxis Financial Statements delivered prior
to the date of this Agreement or reflected in the notes thereto. Except as
disclosed in Section 5.6 of the Zynaxis Disclosure Memorandum, no Zynaxis
Company has incurred or paid any Liability since June 30, 1996, except for such
Liabilities incurred or paid (i) in the ordinary course of business consistent
with past business practice and which are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Zynaxis or (ii)
in connection with the transactions contemplated by this Agreement. Except as
disclosed in Section 5.6 of the Zynaxis Disclosure Memorandum or in the Zynaxis
Financial Statements, no Zynaxis Company is directly or indirectly liable, by
guarantee, indemnity, or otherwise, upon or with respect to, or obligated, by
discount or repurchase agreement or in any other way, to provide funds in
respect to, or obligated to guarantee or assume any Liability of any Person for
any amount in excess of $10,000.
5.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December 31, 1995,
except as disclosed in the Zynaxis Financial Statements delivered prior to the
date of this Agreement or as disclosed in Section 5.7 of the Zynaxis Disclosure
Memorandum, (i) there have been no events, changes, or occurrences which have
had, or are reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on Zynaxis, and (ii) the Zynaxis Companies have not
taken any action, or failed to take any action, prior to the date of this
Agreement, which action or failure, if taken after the date of this Agreement,
would represent or result in a material breach or violation of any of the
covenants and agreements of Zynaxis provided in Article 7.
5.8 TAX MATTERS.
(a) All material Tax Returns required to be filed by or on behalf
of any of the Zynaxis Companies have been timely filed or requests for
extensions have been timely filed, granted, and have not expired for periods
ended on or before December 31, 1995, and on or before the date of the most
recent fiscal year end immediately preceding the Effective Time, and all Tax
Returns filed are complete and accurate. All Taxes shown on filed Tax Returns
have been paid. As of the date of this Agreement, there is no audit
examination, deficiency, or refund Litigation with respect to any Taxes, except
as reserved against in the Zynaxis Financial
<PAGE> 21
Statements delivered prior to the date of this Agreement. All Taxes and
other Liabilities due with respect to completed and settled examinations or
concluded Litigation have been paid. There are no Liens with respect to
Taxes upon any of the Assets of the Zynaxis Companies, except for any such
Liens which are not reasonably likely to have a Material Adverse Effect on
Zynaxis.
(b) None of the Zynaxis Companies has executed an extension or waiver
of any statute of limitations on the assessment or collection of any Tax due
(excluding such statutes that relate to years currently under examination by
the Internal Revenue Service or other applicable taxing authorities) that is
currently in effect.
(c) The provision for any Taxes due or to become due for any of the
Zynaxis Companies for the period or periods through and including the date
of the respective Zynaxis Financial Statements that has been made and is
reflected on such Zynaxis Financial Statements is sufficient to cover all
such Taxes.
(d) Deferred Taxes of the Zynaxis Companies have been provided for in
accordance with GAAP.
(e) None of the Zynaxis Companies is a party to any Tax allocation or
sharing agreement and none of the Zynaxis Companies has been a member of an
affiliated group filing a consolidated federal income Tax Return (other than
a group the common parent of which was Zynaxis) or has any Liability for
Taxes of any Person (other than Zynaxis and its Subsidiaries) under Treasury
Regulation Section 1.1502-6 (or any similar provision of state, local or
foreign Law) as a transferee or successor or by Contract or otherwise.
(f) Each of the Zynaxis Companies is in compliance with, and its
records contain all information and documents (including properly completed
IRS Forms W-9) necessary to comply with, all applicable information
reporting and Tax withholding requirements under federal, state, and local
Tax Laws, and such records identify with specificity all accounts subject to
backup withholding under Section 3406 of the Internal Revenue Code.
(g) Except as disclosed in Section 5.8 of the Zynaxis Disclosure
Memorandum, none of the Zynaxis Companies has made any payments, is
obligated to make any payments, or is a party to any Contract that could
obligate it to make any payments that would be disallowed as a deduction
under Section 280G or 162(m) of the Internal Revenue Code.
(h) There has not been an ownership change, as defined in Internal
Revenue Code Section 382(g), of the Zynaxis Companies that occurred during
or after any taxable period in which the Zynaxis Companies incurred a net
operating loss that carries over to any taxable period ending after December
31, 1995.
(i) No Zynaxis Company has or has had in any foreign country a
permanent establishment, as defined in any applicable tax treaty or
convention between the United States and such foreign country.
<PAGE> 22
5.9 ASSETS.
(a) Except as disclosed in Section 5.9 of the Zynaxis Disclosure
Memorandum or as disclosed or reserved against in the Zynaxis Financial
Statements delivered prior to the date of this Agreement, the Zynaxis Companies
have good and marketable title, free and clear of all Liens, to all of their
respective Assets, except for any such Liens or other defects of title which
are not reasonably likely to have a Material Adverse Effect on Zynaxis.
(b) Except as disclosed in Section 5.9(b) of the Zynaxis
Disclosure Memorandum, the accounts receivable of the Zynaxis Companies as set
forth on the most recent balance sheet included in the Zynaxis Financial
Statements delivered prior to the date of this Agreement or arising since the
date thereof are valid and genuine; have arisen solely out of bona fide sales
and deliveries of goods, performance of services and other business
transactions in the ordinary course of business consistent with past practice;
are not subject to valid defenses, set-offs or counterclaims. The allowance for
collection losses on such balance sheet has been determined in accordance with
GAAP.
(c) All Assets which are material to Zynaxis's business on a
consolidated basis, held under leases or subleases by any of the Zynaxis
Companies, are held under valid Contracts enforceable in accordance with their
respective terms (except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, or other Laws affecting the
enforcement of creditors' rights generally and except that the availability of
the equitable remedy of specific performance or injunctive relief is subject to
the discretion of the court before which any proceedings may be brought), and
each such Contract is in full force and effect.
(d) Set forth in Section 5.9(d) of the Zynaxis Disclosure
Memorandum is a description of each insurance policy maintained by any of the
Zynaxis Companies, including the type of policy, the name of the insurer, the
coverage limits and the premiums. None of the Zynaxis Companies has received
notice from any insurance carrier that (i) any policy of insurance will be
canceled or that coverage thereunder will be reduced or eliminated, or (ii)
premium costs with respect to such policies of insurance will be substantially
increased. There are presently no claims for amounts exceeding in any
individual case $5,000 pending under such policies of insurance and no notices
of claims in excess of such amounts have been given by any Zynaxis Company
under such policies.
(f) The Assets of the Zynaxis Companies include all Assets
required to operate the business of the Zynaxis Companies as presently
conducted. The Zynaxis Companies have no Inventory.
5.10 INTELLECTUAL PROPERTY. Except as disclosed in Section 5.10 of the
Zynaxis Disclosure Memorandum, each Zynaxis Company owns or has a license to use
all of the Intellectual Property used by such Zynaxis Company in the course of
its business. Each Zynaxis Company is the owner of or has a license to any
Intellectual Property sold or licensed to a third party by such Zynaxis Company
in connection with such Zynaxis Company's business operations,
<PAGE> 23
and such Zynaxis Company has the right to convey by sale or license any
Intellectual Property so conveyed. Except as disclosed in Section 5.10 of the
Zynaxis Disclosure Memorandum, no Zynaxis Company is in Default under any of its
Intellectual Property licenses. Except as disclosed in Section 5.10 of the
Zynaxis Disclosure Memorandum, no proceedings have been instituted, or are
pending or to the Knowledge of Zynaxis threatened, which challenge the rights of
any Zynaxis Company with respect to Intellectual Property used, sold or licensed
by such Zynaxis Company in the course of its business, nor has any person
claimed or alleged any rights to such Intellectual Property. To the Knowledge of
Zynaxis, the conduct of the business of the Zynaxis Companies does not infringe
any Intellectual Property of any other person. Except as disclosed in Section
5.10 of the Zynaxis Disclosure Memorandum, no Zynaxis Company is obligated to
pay any recurring royalties to any Person with respect to any such Intellectual
Property. Except as disclosed in Section 5.10 of the Zynaxis Disclosure
Memorandum, every officer, director, or employee of any Zynaxis Company is a
party to a Contract which requires such officer, director or employee to assign
any interest in any Intellectual Property to a Zynaxis Company and to keep
confidential any trade secrets, proprietary data, customer information, or other
business information of a Zynaxis Company, and, to the Knowledge of Zynaxis, no
such officer, director or employee is party to any Contract with any Person
other than a Zynaxis Company which requires such officer, director or employee
to assign any interest in any Intellectual Property to any Person other than a
Zynaxis Company or to keep confidential any trade secrets, proprietary data,
customer information, or other business information of any Person other than a
Zynaxis Company. Except as disclosed in Section 5.10 of the Zynaxis Disclosure
Memorandum, to the Knowledge of Zynaxis, no officer, director or employee of any
Zynaxis Company is party to any Contract which restricts or prohibits such
officer, director or employee from engaging in activities competitive with any
Person, including any Zynaxis Company.
5.11 ENVIRONMENTAL MATTERS.
(a) Each Zynaxis Company, its Participation Facilities, and its
Operating Properties are, and have been, in compliance with all Environmental
Laws.
(b) There is no Litigation pending or, to the Knowledge of
Zynaxis, threatened before any court, governmental agency, or authority or
other forum in which any Zynaxis Company or any of its Operating Properties or
Participation Facilities (or Zynaxis in respect of such Operating Property or
Participation Facility) has been or, with respect to threatened Litigation, may
be named as a defendant (i) for alleged noncompliance (including by any
predecessor) with any Environmental Law or (ii) relating to the release,
discharge, spillage, or disposal into the environment of any Hazardous
Material, whether or not occurring at, on, under, adjacent to, or affecting (or
potentially affecting) a site owned, leased, or operated by any Zynaxis Company
or any of its Operating Properties or Participation Facilities, nor is there
any reasonable basis for any Litigation of a type described in this sentence.
(c) During the period of (i) any Zynaxis Company's ownership or
operation of any of their respective current properties, (ii) any Zynaxis
Company's participation in the management of any Participation Facility, or
(iii) any Zynaxis Company's holding of a security interest in an Operating
Property, there have been no releases, discharges, spillages, or disposals
<PAGE> 24
of Hazardous Material in, on, under, adjacent to, or affecting (or potentially
affecting) such properties. Prior to the period of (i) any Zynaxis Company's
ownership or operation of any of their respective current properties, (ii) any
Zynaxis Company's participation in the management of any Participation
Facility, or (iii) any Zynaxis Company's holding of a security interest in a
Operating Property, to the Knowledge of Zynaxis, there were no releases,
discharges, spillages, or disposals of Hazardous Material in, on, under, or
affecting any such property, Participation Facility or Operating Property.
5.12 COMPLIANCE WITH LAWS. Each Zynaxis Company has in effect all
Permits necessary for it to own, lease, or operate its material Assets and to
carry on its business as now conducted, except for those Permits the absence of
which are not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on Zynaxis, and there has occurred no Default under any
such Permit other than Defaults which are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Zynaxis. Except
as disclosed in Section 5.12 of the Zynaxis Disclosure Memorandum, none of the
Zynaxis Companies:
(a) is in Default under any of the provisions of its Articles of
Incorporation, as amended, or Bylaws (or other governing instruments);
(b) is in Default under any Laws, Orders, or Permits applicable to its
business or employees conducting its business, except for Defaults which are
not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on Zynaxis; or
(c) since January 1, 1993, has received any notification or
communication from any agency or department of federal, state, or local
government or any Regulatory Authority or the staff thereof (i) asserting
that any Zynaxis Company is not in compliance with any of the Laws or Orders
which such governmental authority or Regulatory Authority enforces, where
such noncompliance is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Zynaxis, (ii) threatening to revoke
any Permits, the revocation of which is reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Zynaxis, or
(iii) requiring any Zynaxis Company to enter into or consent to the issuance
of a cease and desist order, formal agreement, directive, commitment, or
memorandum of understanding, or to adopt any Board resolution or similar
undertaking.
Copies of all material reports, correspondence, notices and other documents
relating to any inspection, audit, monitoring or other form of review or
enforcement action by a Regulatory Authority have been made available to Vaxcel.
5.13 LABOR RELATIONS. No Zynaxis Company is the subject of any
Litigation asserting that it or any other Zynaxis Company has committed an
unfair labor practice (within the meaning of the National Labor Relations Act or
comparable state Law) or seeking to compel it or any other Zynaxis Company to
bargain with any labor organization as to wages or conditions of employment, nor
is any Zynaxis Company party to any collective bargaining agreement, nor is
there any strike or other labor dispute involving any Zynaxis Company, pending
or threatened, nor
<PAGE> 25
to the Knowledge of Zynaxis, is there any activity involving any Zynaxis
Company's employees seeking to certify a collective bargaining unit or engaging
in any other organization activity.
5.14 EMPLOYEE BENEFIT PLANS.
(a) Zynaxis has disclosed in Section 5.14 of the Zynaxis
Disclosure Memorandum, and has delivered or made available to Vaxcel prior to
the execution of this Agreement, copies in each case of, all pension,
retirement, profit-sharing, deferred compensation, stock option, employee stock
ownership, severance pay, vacation, bonus, or other incentive plan, all other
written employee programs, arrangements, or agreements, all medical, vision,
dental, or other health plans, all life insurance plans, and all other employee
benefit plans or fringe benefit plans, including "employee benefit plans" as
that term is defined in Section 3(3) of ERISA, currently adopted, maintained
by, sponsored in whole or in part by, or contributed to by any Zynaxis Company
or ERISA Affiliate (as defined below) thereof for the benefit of employees,
retirees, dependents, spouses, directors, independent contractors, or other
beneficiaries and under which employees, retirees, dependents, spouses,
directors, independent contractors, or other beneficiaries are eligible to
participate (collectively, the "Zynaxis Benefit Plans"). Any of the Zynaxis
Benefit Plans which is an "employee pension benefit plan," as that term is
defined in Section 3(2) of ERISA, is referred to herein as a "Zynaxis ERISA
Plan." Each Zynaxis ERISA Plan which is also a "defined benefit plan" (as
defined in Section 414(j) of the Internal Revenue Code) is referred to herein
as a "Zynaxis Pension Plan." No Zynaxis Pension Plan is or has been a
multiemployer plan within the meaning of Section 3(37) of ERISA.
(b) All Zynaxis Benefit Plans are in compliance with the
applicable terms of ERISA, the Internal Revenue Code, and any other applicable
Laws the breach or violation of which are reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Zynaxis. Each
Zynaxis ERISA Plan which is intended to be qualified under Section 401(a) of
the Internal Revenue Code has received a favorable determination letter from
the Internal Revenue Service, and Zynaxis is not aware of any circumstances
likely to result in revocation of any such favorable determination letter. To
the Knowledge of Zynaxis, no Zynaxis Company has engaged in a transaction with
respect to any Zynaxis Benefit Plan that, assuming the taxable period of such
transaction expired as of the date hereof, would subject any Zynaxis Company to
a Tax imposed by either Section 4975 of the Internal Revenue Code or Section
502(i) of ERISA that, individually or in the aggregate, is reasonably likely to
have a Material Adverse Effect on Zynaxis.
(c) No Zynaxis Pension Plan has any "unfunded current liability,"
as that term is defined in Section 302(d)(8)(A) of ERISA, and the fair market
value of the assets of any such plan exceeds the plan's "benefit liabilities,"
as that term is defined in Section 4001(a)(16) of ERISA when determined under
actuarial factors that would apply if the Zynaxis Pension Plan were terminated
in accordance with all applicable legal requirements. Since the date of the
most recent actuarial valuation, there has been (i) no material change in the
financial position of any Zynaxis Pension Plan, (ii) no change in the actuarial
assumptions with respect to any Zynaxis Pension Plan, and (iii) no increase in
benefits under any Zynaxis Pension Plan as a result of plan amendments or
changes in applicable Law which is reasonably likely to have, individually or
in the
<PAGE> 26
aggregate, a Material Adverse Effect on Zynaxis or materially adversely affect
the funding status of any such plan. Neither any Zynaxis Pension Plan nor any
"single-employer plan," within the meaning of Section 4001(a)(15) of ERISA,
currently or formerly maintained by any Zynaxis Company, or the single-employer
plan of any entity which is considered one employer with Zynaxis under Section
4001 of ERISA or Section 414 of the Internal Revenue Code or Section 302 of
ERISA (whether or not waived) (an "ERISA Affiliate") has an "accumulated
funding deficiency" within the meaning of Section 412 of the Internal Revenue
Code or Section 302 of ERISA. No Zynaxis Company has provided, or is required
to provide, security to a Zynaxis Pension Plan or to any single-employer plan
of an ERISA Affiliate pursuant to Section 401(a)(29) of the Internal Revenue
Code.
(d) No Liability under Subtitle C or D of Title IV of ERISA has
been or is expected to be incurred by any Zynaxis Company with respect to any
ongoing, frozen, or terminated single-employer plan or the single-employer plan
of any ERISA Affiliate. No Zynaxis Company has incurred any withdrawal
Liability with respect to a multiemployer plan under Subtitle B of Title IV of
ERISA (regardless of whether based on contributions of an ERISA Affiliate). No
notice of a "reportable event," within the meaning of Section 4043 of ERISA for
which the 30-day reporting requirement has not been waived, has been required
to be filed for any Zynaxis Pension Plan or by any ERISA Affiliate within the
12-month period ending on the date hereof.
(e) Except as disclosed in Section 5.14 of the Zynaxis Disclosure
Memorandum, no Zynaxis Company has any Liability for retiree health and life
benefits under any of the Zynaxis Benefit Plans and there are no restrictions
on the rights of such Zynaxis Company to amend or terminate any such retiree
health or benefit Plan without incurring any Liability thereunder.
(f) Except as disclosed in Section 5.14 of the Zynaxis Disclosure
Memorandum, neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i) result in any
payment (including severance, unemployment compensation, golden parachute, or
otherwise) becoming due to any director or any employee of any Zynaxis Company
from any Zynaxis Company under any Zynaxis Benefit Plan or otherwise, (ii)
increase any benefits otherwise payable under any Zynaxis Benefit Plan, or
(iii) result in any acceleration of the time of payment or vesting of any such
benefit.
(g) The actuarial present values of all accrued deferred
compensation entitlements (including entitlements under any executive
compensation, supplemental retirement, or employment agreement) of employees
and former employees of any Zynaxis Company and their respective beneficiaries,
other than entitlements accrued pursuant to funded retirement plans subject to
the provisions of Section 412 of the Internal Revenue Code or Section 302 of
ERISA, have been fully reflected on the Zynaxis Financial Statements to the
extent required by and in accordance with GAAP.
5.15 MATERIAL CONTRACTS. Except as disclosed in Section 5.15 of the
Zynaxis Disclosure Memorandum or otherwise reflected in the Zynaxis Financial
Statements, none of the
<PAGE> 27
Zynaxis Companies, nor any of their respective Assets, businesses, or
operations, is a party to, or is bound or affected by, or receives benefits
under, (i) any employment, severance, termination, consulting, or retirement
Contract providing for aggregate payments to any Person in any calendar year in
excess of $10,000, (ii) any Contract relating to the borrowing of money by any
Zynaxis Company or the guarantee by any Zynaxis Company of any such obligation
(other than Contracts evidencing trade payables and Contracts relating to
borrowings or guarantees made in the ordinary course of business), (iii) any
Contract which prohibits or restricts any Zynaxis Company from engaging in any
business activities in any geographic area, line of business or otherwise in
competition with any other Person, (iv) any Contract between or among Zynaxis
Companies, (v) any Contract involving Intellectual Property (other than
Contracts entered into in the ordinary course with customers and "shrink-wrap"
software licenses), (vi) any Contract relating to the provision of data
processing, network communication, or other technical services to or by any
Zynaxis Company, (vii) any Contract relating to the purchase or sale of any
goods or services (other than Contracts entered into in the ordinary course of
business and involving payments under any individual Contract not in excess of
$20,000), and (viii) any other Contract or amendment thereto that would be
required to be filed as an exhibit to a Form 10-K filed by Zynaxis with the SEC
as of the date of this Agreement (together with all Contracts referred to in
Sections 5.9 and 5.14(a), the "Zynaxis Contracts"). With respect to each Zynaxis
Contract and except as disclosed in Section 5.15 of the Zynaxis Disclosure
Memorandum: (i) the Contract is in full force and effect; (ii) no Zynaxis
Company is in Default thereunder; (iii) no Zynaxis Company has repudiated or
waived any material provision of any such Contract; and (iv) no other party to
any such Contract is, to the Knowledge of Zynaxis, in Default in any respect or
has repudiated or waived any material provision thereunder. Except as disclosed
in Section 5.15 of the Zynaxis Disclosure Memorandum, all of the indebtedness of
any Zynaxis Company for money borrowed is prepayable at any time by such Zynaxis
Company without penalty or premium.
5.16 LEGAL PROCEEDINGS. Except as disclosed in Section 5.16 of the
Zynaxis Disclosure Memorandum, there is no Litigation instituted or pending, or,
to the Knowledge of Zynaxis, threatened (or unasserted but considered probable
of assertion and which if asserted would have at least a reasonable probability
of an unfavorable outcome) against any Zynaxis Company, or against any director,
employee or employee benefit plan of any Zynaxis Company, or against any Asset,
interest, or right of any of them, that are reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Zynaxis, nor are
there any Orders of any Regulatory Authorities, other governmental authorities,
or arbitrators outstanding against any Zynaxis Company that is reasonably likely
to have, individually or in the aggregate, a Material Adverse Effect on Zynaxis.
Section 5.16 of the Zynaxis Disclosure Memorandum contains a summary of all
Litigation as of the date of this Agreement to which any Zynaxis Company is a
party and which names a Zynaxis Company as a defendant or cross-defendant or for
which any Zynaxis Company has any potential Liability.
5.17 REPORTS. Since January 1, 1993, or the date of organization, if
later, each Zynaxis Company has timely filed all reports and statements,
together with any amendments required to be made with respect thereto, that it
was required to file with Regulatory Authorities (except, in the case of state
securities authorities, failures to file which are not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on Zynaxis).
As of their
<PAGE> 28
respective dates, each of such reports and documents, including the financial
statements, exhibits, and schedules thereto, complied in all material respects
with all applicable Laws. As of its respective date, each such report and
document did not, in all material respects, contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements made therein, in light of the circumstances
under which they were made, not misleading.
5.18 STATEMENTS TRUE AND CORRECT. No statement, certificate,
instrument, or other writing furnished or to be furnished by any Zynaxis Company
or any officer, director, employee or Subsidiary thereof to any Vaxcel Company
pursuant to this Agreement or any other document, agreement, or instrument
referred to herein contains or will contain any untrue statement of material
fact or will omit to state a material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. None of the information supplied or to be supplied by any Zynaxis
Company or any officer, director, employee or Subsidiary thereof for inclusion
in the Registration Statement to be filed by Vaxcel with the SEC will, when the
Registration Statement becomes effective, be false or misleading with respect to
any material fact, or omit to state any material fact necessary to make the
statements therein not misleading. None of the information supplied or to be
supplied by any Zynaxis Company or any officer, director, employee or Subsidiary
thereof for inclusion in the Proxy Statement to be mailed to Zynaxis's
shareholders in connection with the Shareholders' Meeting, and any other
documents to be filed by a Zynaxis Company or any officer, director, employee or
Subsidiary thereof with the SEC or any other Regulatory Authority in connection
with the transactions contemplated hereby, will, at the respective time such
documents are filed, and with respect to the Proxy Statement, when first mailed
to the shareholders of Zynaxis, be false or misleading with respect to any
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, or, in the case of the Proxy Statement or any amendment thereof
or supplement thereto, at the time of the Shareholders' Meeting, be false or
misleading with respect to any material fact, or omit to state any material fact
necessary to correct any statement in any earlier communication with respect to
the solicitation of any proxy for the Shareholders' Meeting. All documents that
any Zynaxis Company or any officer, director, employee or Subsidiary thereof is
responsible for filing with any Regulatory Authority in connection with the
transactions contemplated hereby will comply as to form in all material respects
with the provisions of applicable Law.
5.19 REGULATORY MATTERS. No Zynaxis Company or any officer, director,
employee or Subsidiary thereof has taken or agreed to take any action or has any
Knowledge of any fact or circumstance that is reasonably likely to materially
impede or delay receipt of any Consents of Regulatory Authorities referred to in
Section 7.1(b) or result in the imposition of a condition or restriction of the
type referred to in the last sentence of such Section.
5.20 CHARTER PROVISIONS. Each Zynaxis Company has taken all action so
that the entering into of this Agreement and the consummation of the Merger and
the other transactions contemplated by this Agreement do not and will not result
in the grant of any rights to any Person under the Articles of Incorporation, as
amended, Bylaws or other governing instruments of any Zynaxis Company, except
such rights as exist on the date hereof, or restrict or
<PAGE> 29
impair the ability of Vaxcel or any of its Subsidiaries to vote, or otherwise to
exercise the rights of a shareholder with respect to, shares of any Zynaxis
Company that may be directly or indirectly acquired or controlled by them.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF CYTRX, VAXCEL AND VAXCEL MERGER SUB
CytRx, Vaxcel and Vaxcel Merger Sub hereby represent and warrant to
Zynaxis as follows:
6.1 ORGANIZATION, STANDING, AND POWER.
(a) CytRx is a corporation duly organized, validly existing, and in
good standing under the Laws of the State of Delaware, and has the corporate
power and authority to carry on its business as now conducted and to own,
lease and operate its Assets. CytRx is duly qualified or licensed to
transact business as a foreign corporation in good standing in the states of
the United States and foreign jurisdictions where the character of its
Assets or the nature or conduct of its business requires it to be so
qualified or licensed, except for such jurisdictions in which the failure to
be so qualified or licensed is not reasonably likely to have, individually
or in the aggregate, a Material Adverse Effect on CytRx.
(b) Vaxcel is a corporation duly organized, validly existing, and
in good standing under the Laws of the State of Delaware, and has the
corporate power and authority to carry on its business as now conducted and
to own, lease and operate its Assets. Vaxcel is duly qualified or licensed
to transact business as a foreign corporation in good standing in the
States of the United States and foreign jurisdictions where the character
of its Assets or the nature or conduct of its business requires it to be so
qualified or licensed, except for such jurisdictions in which the failure
to be so qualified or licensed is not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Vaxcel. The
minute book and other organizational documents for Vaxcel have been made
available to Zynaxis for its review and, except as disclosed in Section 6.1
of the Vaxcel Disclosure Memorandum, are true and complete in all material
respects as of the date of this Agreement and accurately reflect in all
material respects all amendments thereto and all proceedings of the Board
of Directors and shareholders thereof.
<PAGE> 30
(c) Vaxcel Merger Sub is a corporation duly organized, validly
existing, and in good standing under the Laws of the State of Georgia, and
has the corporate power and authority to carry on its business as now
conducted and to own, lease and operate its Assets. The minute book and
other organizational documents for Vaxcel Merger Sub have been made
available to Zynaxis for its review and are true and complete in all
material respects as of the date of this Agreement and accurately reflect in
all material respects all amendments thereto and all proceedings of the
Board of Directors and shareholders thereof.
6.2 AUTHORITY; NO BREACH BY AGREEMENT.
(a) Each of CytRx, Vaxcel and Vaxcel Merger Sub has the corporate
power and authority necessary to execute, deliver and perform its
obligations under this Agreement and to consummate the transactions
contemplated hereby. The execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated herein,
including the Merger, have been duly and validly authorized by all
necessary corporate action in respect thereof on the part of such
corporations. Vaxcel, as the sole shareholder of Vaxcel Merger Sub, has
voted all outstanding shares of Vaxcel Merger Sub Common Stock in favor of
adoption of this Agreement, as and to the extent required by applicable
Law. This Agreement represents a legal, valid, and binding obligation of
each of CytRx, Vaxcel and Vaxcel Merger Sub, enforceable against each of
CytRx, Vaxcel and Vaxcel Merger Sub in accordance with its terms.
(b) Neither the execution and delivery of this Agreement by CytRx,
Vaxcel and Vaxcel Merger Sub, nor the consummation by CytRx, Vaxcel and
Vaxcel Merger Sub of the transactions contemplated hereby, nor compliance by
CytRx, Vaxcel and Vaxcel Merger Sub with any of the provisions hereof, will
(i) conflict with or result in a breach of any provision of the Certificate
of Incorporation or Bylaws of any of CytRx, Vaxcel or Vaxcel Merger Sub, or
any resolution adopted by the Board of Directors or the Shareholders of any
Vaxcel Company, or (ii) constitute or result in a Default under, or require
any Consent pursuant to, or result in the creation of any Lien on any Asset
of any Vaxcel Company under, any Contract or Permit of any Vaxcel Company,
or, (iii) subject to receipt of the requisite Consents referred to in
Section 9.1(b), constitute or result in a Default under, or require any
Consent pursuant to, any Law or Order applicable to any Vaxcel Company or
any of their respective material Assets (including any Vaxcel Company or any
Zynaxis Company becoming subject to or liable for the payment of any Tax or
any of the Assets owned by any Vaxcel Company or any Zynaxis Company being
reassessed or revalued by any Taxing authority).
(c) Other than in connection or compliance with the provisions of
the Securities Laws, applicable state corporate and securities Laws,
and rules of the NASD, and other than Consents required from Regulatory
Authorities, and other than notices to or filings with the Internal Revenue
Service or the Pension Benefit Guaranty Corporation with respect to any
employee benefit plans, no notice to, filing with, or Consent of, any
public body or authority is necessary for the execution, delivery and
performance by CytRx, Vaxcel and Vaxcel Merger Sub of their obligations
under this Agreement.
<PAGE> 31
6.3 CAPITAL STOCK.
(a) The authorized capital stock of Vaxcel consists of (i)
30,000,000 shares of Vaxcel Common Stock, of which 8,250,004 are issued and
outstanding, and (ii) 2,000,000 shares of Vaxcel Preferred Stock, none of which
are issued and outstanding. All of the issued and outstanding shares of Vaxcel
Capital Stock are, and all of the shares of Vaxcel Common Stock to be issued in
exchange for shares of Zynaxis Common Stock upon consummation of the Merger,
when issued in accordance with the terms of this Agreement, will be, duly and
validly issued and outstanding and fully paid and nonassessable under the DGCL.
None of the outstanding shares of Vaxcel Capital Stock has been, and none of
the shares of Vaxcel Common Stock to be issued in exchange for shares of
Zynaxis Common Stock upon consummation of the Merger will be, issued in
violation of any preemptive rights of the current or past stockholders of
Vaxcel.
(b) The authorized capital stock of Vaxcel Merger Sub consists of
(i) 1,000 shares of Common Stock, of which 500 shares are issued and
outstanding as of the date of this Agreement. All of the issued and outstanding
shares of Vaxcel Merger Sub Common Stock are duly and validly issued and fully
paid and nonassessable under the GBCC. None of the outstanding shares of Vaxcel
Merger Sub Common Stock has been issued in violation of any preemptive rights
of the current or past shareholders of Vaxcel Merger Sub.
(c) Except as set forth in Sections 6.3(a) and 6.3(b), or as
disclosed in Section 6.3 of the Vaxcel Disclosure Memorandum, there are no
shares of capital stock or other equity securities of Vaxcel or Vaxcel Merger
Sub outstanding and no outstanding Equity Rights relating to Vaxcel or Vaxcel
Merger Sub Capital Stock.
Vaxcel and Vaxcel Merger Sub hereby represent and warrant to Zynaxis as
follows:
6.4 VAXCEL SUBSIDIARIES. Vaxcel has disclosed in Section 6.4 of the
Vaxcel Disclosure Memorandum all of the Vaxcel Subsidiaries as of the date of
this Agreement that are corporations (identifying its jurisdiction of
incorporation, each jurisdiction in which the character of its Assets or the
nature or conduct of its business requires it to be qualified and/or licensed to
transact business, and the number of shares owned and percentage ownership
interest represented by such share ownership) and all of the Vaxcel Subsidiaries
that are general or limited partnerships or other non-corporate entities
(identifying the Law under which such entity is organized, each jurisdiction in
which the character of its Assets or the nature or conduct of its business
requires it to be qualified and/or licensed to transact business, and the amount
and nature of the ownership interest therein). Except as disclosed in Section
6.4 of the Vaxcel Disclosure Memorandum, Vaxcel or one of its Subsidiaries owns
all of the issued and outstanding shares of capital stock (or other equity
interests) of each Vaxcel Subsidiary. No capital stock (or other equity
interest) of any Vaxcel Subsidiary is or may become required to be issued (other
than to another Vaxcel Company) by reason of any Equity Rights, and there are no
Contracts by which any Vaxcel Subsidiary is bound to issue (other than to
another Vaxcel Company) additional shares
<PAGE> 32
of its capital stock (or other equity interests) or Equity Rights or by which
any Vaxcel Company is or may be bound to transfer any shares of the capital
stock (or other equity interests) of any Vaxcel Subsidiary (other than to
another Vaxcel Company). There are no Contracts relating to the rights of any
Vaxcel Company to vote or to dispose of any shares of the capital stock (or
other equity interests) of any Vaxcel Subsidiary. All of the shares of capital
stock (or other equity interests) of each Vaxcel Subsidiary held by a Vaxcel
Company are fully paid and nonassessable under the applicable corporation Law of
the jurisdiction in which such Subsidiary is incorporated or organized and are
owned by the Vaxcel Company free and clear of any Lien. Each Vaxcel Subsidiary
is duly organized, validly existing, and (as to corporations) in good standing
under the Laws of the jurisdiction in which it is incorporated or organized, and
has the power and authority necessary for it to own, lease and operate its
Assets and to carry on its business as now conducted. Each Vaxcel Subsidiary is
duly qualified or licensed to transact business as a foreign corporation in good
standing in the States of the United States and foreign jurisdictions where the
character of its Assets or the nature or conduct of its business requires it to
be so qualified or licensed, except for such jurisdictions in which the failure
to be so qualified or licensed is not reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect on Vaxcel. The minute book and other
organizational documents for each Vaxcel Subsidiary have been made available to
Zynaxis for its review, and are true and complete in all material respects as in
effect as of the date of this Agreement and accurately reflect in all material
respects all amendments thereto and all proceedings of the Board of Directors
and shareholders thereof.
6.5 VAXCEL FINANCIAL STATEMENTS. The books and records of Vaxcel are
accurate and complete. The Vaxcel Financial Statements have been prepared from
such books and records and reflect, in all material respects and in reasonable
detail, the transactions and assets and liabilities of Vaxcel.
6.6 ABSENCE OF UNDISCLOSED LIABILITIES. No Vaxcel Company has any
Liabilities that are reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Vaxcel, except Liabilities which are
accrued or reserved against in the consolidated balance sheets of Vaxcel as of
December 31, 1995 and September 30, 1996, included in the Vaxcel Financial
Statements delivered prior to the date of this Agreement or reflected in the
notes thereto. No Vaxcel Company has incurred or paid any Liability since
September 30, 1996, except for such Liabilities incurred or paid (i) in the
ordinary course of business consistent with past business practice and which are
not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on Vaxcel or (ii) in connection with the transactions
contemplated by this Agreement. Except as disclosed in the Vaxcel Financial
Statements, no Vaxcel Company is directly or indirectly liable, by guarantee,
indemnity, or otherwise, upon or with respect to, or obligated, by discount or
repurchase agreement or in any other way, to provide funds in respect to, or
obligated to guarantee or assume any Liability of any Person for any amount in
excess of $10,000.
6.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December 31, 1995,
except as disclosed in the Vaxcel Financial Statements delivered prior to the
date of this Agreement, (i) there have been no events, changes or occurrences
which have had, or are reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Vaxcel,
<PAGE> 33
and (ii) the Vaxcel Companies have not taken any action, or failed to take any
action, prior to the date of this Agreement, which action or failure, if taken
after the date of this Agreement, would represent or result in a material breach
or violation of any of the covenants and agreements of Vaxcel provided in
Article 7.
6.8 TAX MATTERS.
(a) All material Tax Returns required to be filed by or on behalf
of any of the Vaxcel Companies have been timely filed or requests for
extensions have been timely filed, granted, and have not expired for periods
ended on or before December 31, 1995, and on or before the date of the most
recent fiscal year end immediately preceding the Effective Time and all Tax
Returns filed are complete and accurate. All material Taxes shown on filed Tax
Returns have been paid. As of the date of this Agreement, there is no audit
examination, deficiency, or refund Litigation with respect to any Taxes except
as reserved against in the Vaxcel Financial Statements delivered prior to the
date of this Agreement. All Taxes and other Liabilities due with respect to
completed and settled examinations or concluded Litigation have been paid.
There are no Liens with respect to Taxes upon any of the Assets of the Vaxcel
Companies, except for such Liens which are not reasonably likely to have a
Material Adverse Effect on Vaxcel.
(b) None of the Vaxcel Companies has executed an extension or
waiver of any statute of limitations on the assessment or collection of any Tax
due (excluding such statutes that relate to years currently under examination
by the Internal Revenue Service or other applicable taxing authorities) that is
currently in effect.
(c) The provision for any Taxes due or to become due for any of the
Vaxcel Companies for the period or periods through and including the date of
the respective Vaxcel Financial Statements that has been made and is reflected
on such Vaxcel Financial Statements is sufficient to cover all such Taxes.
(d) Deferred Taxes of the Vaxcel Companies have been provided for
in accordance with GAAP.
(e) None of the Vaxcel Companies is a party to any Tax allocation
or sharing agreement and none of the Vaxcel Companies has been a member of an
affiliated group filing a consolidated federal income Tax Return (other than a
group the common parent of which was Vaxcel) has any Liability for Taxes of any
Person (other than Vaxcel and its Subsidiaries) under Treasury Regulation
Section 1.1502-6 (or any similar provision of state, local or foreign Law) as a
transferee or successor or by Contract or otherwise.
(f) Each of the Vaxcel Companies is in compliance with, and its
records contain all information and documents (including properly completed IRS
Forms W-9) necessary to comply with, all applicable information reporting and
Tax withholding requirements under federal, state, and local Tax Laws, and such
records identify with specificity all accounts subject to backup withholding
under Section 3406 of the Internal Revenue Code.
<PAGE> 34
6.9 ASSETS.
(a) Except as reserved against in the Vaxcel Financial Statements
delivered prior to the date of this Agreement, the Vaxcel Companies have good
and marketable title, free and clear of all Liens, to all of their respective
Assets, except for any such Liens or other defects of title which are not
reasonably likely to have a Material Adverse Effect on Vaxcel. All tangible
properties used in the businesses of the Vaxcel Companies are in good
condition, reasonable wear and tear excepted, and are usable in the ordinary
course of business consistent with Vaxcel's past practices of the Vaxcel
Companies.
(b) The Vaxcel Companies have no Inventory.
(c) The accounts receivable of the Vaxcel Companies as set forth
on the most recent balance sheet included in the Vaxcel Financial Statements
delivered prior to the date of this Agreement or arising since the date thereof
are valid and genuine; have arisen solely out of bona fide sales and deliveries
of goods, performance of services and other business transactions in the
ordinary course of business consistent with past practice; are not subject to
valid defenses, set-offs or counterclaims; and are collectible within 90 days
after billing at the full recorded amount thereof less, in the case of accounts
receivable appearing on the most recent balance sheet included in the Vaxcel
Financial Statements delivered prior to the date of this Agreement, the
recorded allowance for collection losses on such balance sheet. The allowance
for collection losses on such balance sheet has been determined in accordance
with GAAP.
(d) All Assets which are material to Vaxcel's business on a
consolidated basis, held under leases or subleases by any of the Vaxcel
Companies, are held under valid Contracts enforceable in accordance with their
respective terms (except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other Laws affecting the
enforcement of creditors' rights generally and except that the availability of
the equitable remedy of specific performance or injunctive relief is subject to
the discretion of the court before which any proceedings may be brought), and
each such Contract is in full force and effect.
(e) The Vaxcel Companies currently maintain insurance similar in
amounts, scope and coverage to that maintained by other peer companies. None of
the Vaxcel Companies has received notice from any insurance carrier that (i)
such insurance will be canceled or that coverage thereunder will be reduced or
eliminated, or (ii) premium costs with respect to such policies of insurance
will be substantially increased. There are presently no claims for amounts
exceeding in any individual case $5,000 pending under such policies of
insurance and no notices of claims in excess of such amount have been given by
any Vaxcel Company under such policies.
(f) The Assets of the Vaxcel Companies include all Assets required
to operate the business of the Vaxcel Companies as presently conducted.
6.10 INTELLECTUAL PROPERTY. Each Vaxcel Company owns or has a license
to use all of the Intellectual Property used by such Vaxcel Company in the
course of its business. Each
<PAGE> 35
Vaxcel Company is the owner of or has a license to any Intellectual Property
sold or licensed to a third party by such Vaxcel Company in connection with such
Vaxcel Company's business operations, and such Vaxcel Company has the right to
convey by sale or license any Intellectual Property so conveyed. No Vaxcel
Company is in Default under any of its Intellectual Property licenses. No
proceedings have been instituted, or are pending or, to the Knowledge of Vaxcel,
threatened, which challenge the rights of any Vaxcel Company with respect to
Intellectual Property used, sold or licensed by such Vaxcel Company in the
course of its business, nor has any person claimed or alleged any rights to such
Intellectual Property. To the knowledge of Vaxcel and Vaxcel Merger Sub, the
conduct of the business of the Vaxcel Companies does not infringe any
Intellectual Property of any other person. Except as disclosed in Section 6.10
of the Vaxcel Disclosure Memorandum, no Vaxcel Company is obligated to pay any
recurring royalties to any Person with respect to any such Intellectual
Property. Every officer, director, or employee of any Vaxcel Company is a party
to a Contract which requires such officer, director or employee to assign any
interest in any Intellectual Property to a Vaxcel Company and to keep
confidential any trade secrets, proprietary data, customer information, or other
business information of a Vaxcel Company, and to the Knowledge of Vaxcel and
Vaxcel Merger Sub, no such officer, director or employee is party to any
Contract with any Person other than a Vaxcel Company which requires such
officer, director or employee to assign any interest in any Intellectual
Property to any Person other than a Vaxcel Company or to keep confidential any
trade secrets, proprietary data, customer information, or other business
information of any Person other than a Vaxcel Company. To the Knowledge of
Vaxcel and Vaxcel Merger Sub, no officer, director or employee of any Vaxcel
Company is party to any Contract which restricts or prohibits such officer,
director or employee from engaging in activities competitive with any Person,
including any Vaxcel Company.
6.11 ENVIRONMENTAL MATTERS.
(a) Each Vaxcel Company, its Participation Facilities, and its
Operating Properties are, and have been, in compliance with all Environmental
Laws.
(b) There is no Litigation pending or, to the Knowledge of Vaxcel
and Vaxcel Merger Sub, threatened before any court, governmental agency, or
authority or other forum in which any Vaxcel Company or any of its Operating
Properties or Participation Facilities (or Vaxcel in respect of such Operating
Property or Participation Facility) has been or, with respect to threatened
Litigation, may be named as a defendant (i) for alleged noncompliance
(including by any predecessor) with any Environmental Law or (ii) relating to
the release, discharge, spillage, or disposal into the environment of any
Hazardous Material, whether or not occurring at, on, under, adjacent to, or
affecting (or potentially affecting) a site owned, leased, or operated by any
Vaxcel Company or any of its Operating Properties or Participation Facilities
nor is there any reasonable basis for any Litigation of a type described in
this sentence.
(c) During the period of (i) any Vaxcel Company's ownership or
operation of any of their respective current properties, (ii) any Vaxcel
Company's participation in the management of any Participation Facility, or
(iii) any Vaxcel Company's holding of a security interest in a Operating
Property, there have been no releases, discharges, spillages, or disposals of
Hazardous Material in, on, under, adjacent to, or affecting (or potentially
affecting) such
<PAGE> 36
properties. Prior to the period of (i) any Vaxcel Company's ownership or
operation of any of their respective current properties, (ii) any Vaxcel
Company's participation in the management of any Participation Facility, or
(iii) any Vaxcel Company's holding of a security interest in a Operating
Property, to the Knowledge of Vaxcel, there were no releases, discharges,
spillages, or disposals of Hazardous Material in, on, under, or affecting any
such property, Participation Facility or Operating Property.
6.12 COMPLIANCE WITH LAWS. Each Vaxcel Company has in effect all
Permits necessary for it to own, lease or operate its material Assets and to
carry on its business as now conducted, except for those Permits the absence of
which are not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on Vaxcel, and there has occurred no Default under any
such Permit, other than Defaults which are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Vaxcel. None of
the Vaxcel Companies:
(a) is in Default under its Certificate of Incorporation or Bylaws (or
other governing instruments); or
(b) is in Default under any Laws, Orders or Permits applicable to its
business or employees conducting its business, except for Defaults which are
not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on Vaxcel; or
(c) since January 1, 1993, has received any notification or
communication from any agency or department of federal, state, or local
government or any Regulatory Authority or the staff thereof (i) asserting
that any Vaxcel Company is not in compliance with any of the Laws or Orders
which such governmental authority or Regulatory Authority enforces, where
such noncompliance is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Vaxcel, (ii) threatening to revoke
any Permits, the revocation of which is reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Vaxcel, or
(iii) requiring any Vaxcel Company to enter into or consent to the issuance
of a cease and desist order, formal agreement, directive, commitment or
memorandum of understanding, or to adopt any Board resolution or similar
undertaking.
6.13 LABOR RELATIONS. No Vaxcel Company is the subject of any
Litigation asserting that it or any other Vaxcel Company has committed an unfair
labor practice (within the meaning of the National Labor Relations Act or
comparable state Law) or seeking to compel it or any other Vaxcel Company to
bargain with any labor organization as to wages or conditions of employment, nor
is any Vaxcel Company party to any collective bargaining agreement, nor is there
any strike or other labor dispute involving any Vaxcel Company, pending or
threatened, nor to the Knowledge of Vaxcel, is there any activity involving any
Vaxcel Company's employees seeking to certify a collective bargaining unit or
engaging in any other organization activity.
<PAGE> 37
6.14 EMPLOYEE BENEFIT PLANS.
(a) Vaxcel has delivered or made available to Zynaxis prior to the
execution of this Agreement copies in each case of all pension, retirement,
profit-sharing, deferred compensation, stock option, employee stock
ownership, severance pay, vacation, bonus, or other incentive plan, all
other written employee programs, arrangements, or agreements, all medical,
vision, dental, or other health plans, all life insurance plans, and all
other employee benefit plans or fringe benefit plans, including "employee
benefit plans" as that term is defined in Section 3(3) of ERISA, currently
adopted, maintained by, sponsored in whole or in part by, or contributed to
by any Vaxcel Company or ERISA Affiliate thereof for the benefit of
employees, retirees, dependents, spouses, directors, independent
contractors, or other beneficiaries and under which employees, retirees,
dependents, spouses, directors, independent contractors, or other
beneficiaries are eligible to participate (collectively, the "Vaxcel Benefit
Plans"). Any of the Vaxcel Benefit Plans which is an "employee pension
benefit plan," as that term is defined in Section 3(2) of ERISA, is referred
to herein as a "Vaxcel ERISA Plan." Each Vaxcel ERISA Plan which is also a
"defined benefit plan" (as defined in Section 414(j) of the Internal Revenue
Code) is referred to herein as a "Vaxcel Pension Plan." No Vaxcel Pension
Plan is or has been a multiemployer plan within the meaning of Section 3(37)
of ERISA.
(b) All Vaxcel Benefit Plans are in compliance with the applicable
terms of ERISA, the Internal Revenue Code, and any other applicable Laws the
breach or violation of which are reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect on Vaxcel. Each Vaxcel ERISA
Plan which is intended to be qualified under Section 401(a) of the Internal
Revenue Code has received a favorable determination letter from the Internal
Revenue Service, and Vaxcel is not aware of any circumstances likely to
result in revocation of any such favorable determination letter. To the
Knowledge of Vaxcel, no Vaxcel Company has engaged in a transaction with
respect to any Vaxcel Benefit Plan that, assuming the taxable period of such
transaction expired as of the date hereof, would subject any Vaxcel Company
to a Tax imposed by either Section 4975 of the Internal Revenue Code or
Section 502(i) of ERISA that, individually or in the aggregate, is
reasonably likely to have a Material Adverse Effect on Vaxcel.
(c) No Vaxcel Pension Plan has any "unfunded current liability,"
as that term is defined in Section 302(d)(8)(A) of ERISA, and the fair
market value of the assets of any such plan exceeds the plan's "benefit
liabilities," as that term is defined in Section 4001(a)(16) of ERISA when
determined under actuarial factors that would apply if the Vaxcel Pension
Plan were terminated in accordance with all applicable legal requirements.
Since the date of the most recent actuarial valuation, there has been (i) no
material change in the financial position of a Vaxcel Pension Plan, (ii) no
change in the actuarial assumptions with respect to any Vaxcel Pension Plan,
and (iii) no increase in benefits under any Vaxcel Pension Plan as a result
of plan amendments or changes in applicable Law which is reasonably likely
to have, individually or in the aggregate, a Material Adverse Effect on
Vaxcel or materially adversely affect the funding status of any such plan.
Neither any Vaxcel Pension Plan nor any "single-employer plan," within the
meaning of Section 4001(a)(15) of ERISA, currently or formerly maintained by
any Vaxcel Company, or the single-employer plan of any ERISA Affiliate has
an "accumulated funding deficiency" within the
<PAGE> 38
meaning of Section 412 of the Internal Revenue Code or Section 302 of ERISA. No
Vaxcel Company has provided, or is required to provide, security to a Vaxcel
Pension Plan or to any single-employer plan of an ERISA Affiliate pursuant to
Section 401(a)(29) of the Internal Revenue Code.
(d) No Liability under Subtitle C or D of Title IV of ERISA has
been or is expected to be incurred by any Vaxcel Company with respect to any
ongoing, frozen or terminated single-employer plan or the single-employer plan
of any ERISA Affiliate. No Vaxcel Company has incurred any withdrawal Liability
with respect to a multiemployer plan under Subtitle B of Title IV of ERISA
(regardless of whether based on contributions of an ERISA Affiliate). No notice
of a "reportable event," within the meaning of Section 4043 of ERISA for which
the 30-day reporting requirement has not been waived, has been required to be
filed for any Vaxcel Pension Plan or by any ERISA Affiliate within the 12-month
period ending on the date hereof.
(e) No Vaxcel Company has any Liability for retiree health and
life benefits under any of the Vaxcel Benefit Plans and there are no
restrictions on the rights of such Vaxcel Company to amend or terminate any
such retiree health or benefit Plan without incurring any Liability thereunder.
(f) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i) result in any
payment (including severance, unemployment compensation, golden parachute, or
otherwise) becoming due to any director or any employee of any Vaxcel Company
from any Vaxcel Company under any Vaxcel Benefit Plan or otherwise, (ii)
increase any benefits otherwise payable under any Vaxcel Benefit Plan, or (iii)
result in any acceleration of the time of payment or vesting of any such
benefit.
(g) The actuarial present values of all accrued deferred
compensation entitlements (including entitlements under any executive
compensation, supplemental retirement, or employment agreement) of employees
and former employees of any Vaxcel Company and their respective beneficiaries,
other than entitlements accrued pursuant to funded retirement plans subject to
the provisions of Section 412 of the Internal Revenue Code or Section 302 of
ERISA, have been fully reflected on the Vaxcel Financial Statements to the
extent required by and in accordance with GAAP.
6.15 MATERIAL CONTRACTS. Except as disclosed in Section 6.15 of
the Vaxcel Disclosure Memorandum or otherwise reflected in the Vaxcel Financial
Statements, none of the Vaxcel Companies, nor any of their respective Assets,
businesses, or operations, is a party to, or is bound or affected by, or
receives benefits under, (i) any employment, severance, termination, consulting
or retirement Contract providing for aggregate payments to any Person in any
calendar year in excess of $10,000, (ii) any Contract relating to the borrowing
of money by any Vaxcel Company or the guarantee by any Vaxcel Company of any
such obligation (other than Contracts evidencing trade payables and Contracts
relating to borrowings or guarantees made in the ordinary course of business),
(iii) any Contract which prohibits or restricts any Vaxcel Company from engaging
in any business activities in any geographic area, line of business or otherwise
in
<PAGE> 39
competition with any other Person, (iv) any Contract between or among Vaxcel
Companies, (v) any Contract involving Intellectual Property (other than
Contracts entered into in the ordinary course with customers and "shrink-wrap"
software licenses), (vi) any Contract relating to the provision of data
processing, network communication, or other technical services to or by any
Vaxcel Company, and (vii) any Contract relating to the purchase or sale of any
goods or services (other than Contracts entered into in the ordinary course of
business and involving payments under any individual Contract not in excess of
$20,000) (together with all Contracts referred to in Sections 6.9 and 6.14(a),
the "Vaxcel Contracts"). With respect to each Vaxcel Contract: (i) the Contract
is in full force and effect; (ii) no Vaxcel Company is in Default thereunder;
(iii) no Vaxcel Company has repudiated or waived any material provision of any
such Contract; and (iv) no other party to any such Contract is, to the Knowledge
of Vaxcel, in Default in any respect or has repudiated or waived any material
provision thereunder. All of the indebtedness of any Vaxcel Company for money
borrowed is prepayable at any time by such Vaxcel Company without penalty or
premium.
6.16 LEGAL PROCEEDINGS. There is no Litigation instituted or
pending, or, to the Knowledge of Vaxcel, threatened (or unasserted but
considered probable of assertion and which if asserted would have at least a
reasonable probability of an unfavorable outcome) against any Vaxcel Company,
or against any director, employee or employee benefit plan of any Vaxcel
Company, or against any Asset, interest, or right of any of them, that is
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on Vaxcel, nor are there any Orders of any Regulatory Authorities, other
governmental authorities, or arbitrators outstanding against any Vaxcel
Company, that are reasonably likely to have, individually or in the aggregate,
a Material Adverse Effect on Vaxcel.
6.17 REPORTS. Since January 1, 1993, or the date of organization
if later, each Vaxcel Company has timely filed all reports and statements,
together with any amendments required to be made with respect thereto, that it
was required to file with Regulatory Authorities (except, in the case of state
securities authorities, failures to file which are not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on Vaxcel).
As of their respective dates, each of such reports and documents, including the
financial statements, exhibits, and schedules thereto, complied in all material
respects with all applicable Laws. As of its respective date, each such report
and document did not, in all material respects, contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements made therein, in light of the circumstances
under which they were made, not misleading.
6.18 STATEMENTS TRUE AND CORRECT. No statement, certificate,
instrument or other writing furnished or to be furnished by any Vaxcel Company
or any officer, director, employee or Subsidiary thereof to Zynaxis pursuant to
this Agreement or any other document, agreement or instrument referred to
herein contains or will contain any untrue statement of material fact or will
omit to state a material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. None of
the information supplied or to be supplied by any Vaxcel Company or any
officer, director, employee or Subsidiary thereof for inclusion in the
Registration Statement to be filed by Vaxcel with the SEC,
<PAGE> 40
will, when the Registration Statement becomes effective, be false or
misleading with respect to any material fact, or omit to state any material
fact necessary to make the statements therein not misleading. None of the
information supplied or to be supplied by any Vaxcel Company or any officer,
director, employee or Subsidiary thereof for inclusion in the Proxy
Statement to be mailed to Zynaxis's shareholders in connection with the
Shareholders' Meeting, and any other documents to be filed by any Vaxcel
Company or any officer, director, employee or Subsidiary thereof with any
Regulatory Authority in connection with the transactions contemplated
hereby, will, at the respective time such documents are filed, and with
respect to the Proxy Statement, when first mailed to the shareholders of
Zynaxis, be false or misleading with respect to any 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, or,
in the case of the Proxy Statement or any amendment thereof or supplement
thereto, at the time of the Shareholders' Meeting, be false or misleading
with respect to any material fact, or omit to state any material fact
necessary to correct any statement in any earlier communication with respect
to the solicitation of any proxy for the Shareholders' Meeting. All
documents that any Vaxcel Company or any officer, director, employee or
Subsidiary thereof is responsible for filing with any Regulatory Authority
in connection with the transactions contemplated hereby will comply as to
form in all material respects with the provisions of applicable Law.
6.19 REGULATORY MATTERS. Neither CytRx nor any Vaxcel Company or
any officer, director, employee or Subsidiary thereof has taken or agreed to
take any action or has any Knowledge of any fact or circumstance that is
reasonably likely to materially impede or delay receipt of any Consents of
Regulatory Authorities referred to in Section 9.1(b) or result in the
imposition of a condition or restriction of the type referred to in the last
sentence of such Section.
ARTICLE 7
CONDUCT OF BUSINESS PENDING CONSUMMATION
7.1 AFFIRMATIVE COVENANTS OF ZYNAXIS. From the date of this
Agreement until the earlier of the Effective Time or the termination of this
Agreement, unless the prior written consent of Vaxcel shall have been
obtained, and except as otherwise expressly contemplated by the Transaction
Documents or disclosed in the Zynaxis Disclosure Memorandum, Zynaxis shall
and shall cause each of its Subsidiaries to (a) operate its business only in
the usual, regular, and ordinary course, (b) preserve intact its business
organization and Assets and maintain its rights and franchises, and (c) take
no action which would (i) materially adversely affect the ability of any
Party to obtain any Consents required for the transactions contemplated
hereby without imposition of a condition or restriction of the type referred
to in the last sentences of Section 9.1(b) or 9.1(c), or (ii) materially
adversely affect the ability of any Party to perform its covenants and
agreements under this Agreement.
7.2 NEGATIVE COVENANTS OF ZYNAXIS. From the date of this Agreement
until the earlier of the Effective Time or the termination of this
Agreement, unless the prior written consent of Vaxcel shall have been
obtained, and except as otherwise expressly contemplated by the Transaction
Documents or disclosed in the Zynaxis Disclosure Memorandum, Zynaxis
<PAGE> 41
covenants and agrees that it will not do or agree or commit to do, or permit
any of its Subsidiaries to do or agree or commit to do, any of the
following:
(a) amend the Articles of Incorporation, as amended, Bylaws, or
other governing instruments of any Zynaxis Company; or
(b) incur any additional debt obligation or other obligation for
borrowed money except in the ordinary course of the business of the Zynaxis
Companies consistent with past practices, or impose, or suffer the
imposition, on any Asset of any Zynaxis Company of any Lien or permit any
such Lien to exist; or
(c) repurchase, redeem, or otherwise acquire or exchange (other
than exchanges in the ordinary course under employee benefit plans),
directly or indirectly, any shares, or any securities convertible into any
shares, of the capital stock of any Zynaxis Company, or declare or pay any
dividend or make any other distribution in respect of Zynaxis's capital
stock; or
(d) except as pursuant to the conversion of Zynaxis Preferred
Stock or the exercise of stock options or warrants listed in Section 5.3 of
the Zynaxis Disclosure Memorandum, issue, sell, pledge, encumber, authorize
the issuance of, enter into any Contract to issue, sell, pledge, encumber,
or authorize the issuance of, or otherwise permit to become outstanding, any
additional shares of capital stock of any Zynaxis Company, or any stock
appreciation rights, or any option, warrant, or other Equity Right; or
(e) adjust, split, combine or reclassify any capital stock of any
Zynaxis Company or issue or authorize the issuance of any other securities
in respect of or in substitution for shares of Zynaxis Capital Stock, or
sell, lease, mortgage or otherwise dispose of or otherwise encumber any
shares of capital stock of any Zynaxis Subsidiary (unless any such shares of
stock are sold or otherwise transferred to another Zynaxis Company); or
(f) sell, lease, mortgage or otherwise dispose of or otherwise
encumber any Asset other than in the ordinary course of business for
reasonable and adequate consideration; or
(g) except for purchases of U.S. Treasury securities or U.S.
Government agency securities, which in either case have maturities of three
years or less, purchase any securities or make any material investment,
either by purchase of stock or securities, contributions to capital, Asset
transfers, or purchase of any Assets, in any Person other than a wholly
owned Zynaxis Subsidiary, or otherwise acquire direct or indirect control
over any Person, other than in connection with foreclosures in the ordinary
course of business; or
(h) grant any increase in compensation or benefits to the
employees or officers of any Zynaxis Company, except in accordance with past
practice disclosed in Section 7.2(h) of the Zynaxis Disclosure Memorandum or
as required by Law; pay any severance or
<PAGE> 42
termination pay or any bonus other than pursuant to written policies or
Contracts in effect on the date of this Agreement and disclosed in Section
7.2(h) of the Zynaxis Disclosure Memorandum or as required by Law; and enter
into or amend any severance agreements with officers of any Zynaxis Company;
grant any material increase in fees or other increases in compensation or
other benefits to directors of any Zynaxis Company except in accordance with
past practice disclosed in Section 7.2(h) of the Zynaxis Disclosure
Memorandum; or
(i) enter into or amend any employment Contract between any
Zynaxis Company and any Person (unless such amendment is required by Law)
that the Zynaxis Company does not have the unconditional right to terminate
without Liability (other than Liability for services already rendered), at
any time on or after the Closing; or
(j) adopt any new employee benefit plan of any Zynaxis Company or
terminate or withdraw from, or make any material change in or to, any
existing employee benefit plans of any Zynaxis Company other than any such
change that is required by Law or that, in the opinion of counsel, is
necessary or advisable to maintain the tax qualified status of any such
plan, or make any distributions from such employee benefit plans, except as
required by Law, the terms of such plans or consistent with past practice;
or
(k) make any significant change in any Tax or accounting methods
or systems of internal accounting controls, except as may be appropriate to
conform to changes in Tax Laws or regulatory accounting requirements or
GAAP; or
(l) commence any Litigation other than in accordance with past
practice, settle any Litigation involving any Liability of any Zynaxis
Company for material money damages or restrictions upon the operations of
any Zynaxis Company; or
(m) enter into, modify, amend or terminate any material Contract
(including any loan Contract with an unpaid balance exceeding $10,000) or
waive, release, compromise or assign any material rights or claims.
7.3 COVENANTS OF VAXCEL. From the date of this Agreement until the
earlier of the Effective Time or the termination of this Agreement, unless the
prior written consent of Zynaxis shall have been obtained, and except as
otherwise expressly contemplated herein, Vaxcel covenants and agrees that it
shall (a) continue to conduct its business and the business of its Subsidiaries
in a manner designed, in its reasonable judgment, to enhance the long-term value
of the Vaxcel Common Stock and the business prospects of the Vaxcel Companies
and to the extent consistent therewith use all reasonable efforts to preserve
intact the Vaxcel Companies' core businesses and goodwill with their respective
employees and the communities they serve, and (b) take no action which would (i)
materially adversely affect the ability of any Party to obtain any Consents
required for the transactions contemplated hereby without imposition of a
condition or restriction of the type referred to in the last sentences of
Section 9.1(b) or 9.1(c), or (ii) materially adversely affect the ability of any
Party to perform its covenants and agreements under this Agreement; provided,
that the foregoing shall not prevent any Vaxcel Company from acquiring
<PAGE> 43
any Assets or other businesses or from discontinuing or disposing of any of its
Assets or business if such action is, in the reasonable judgment of Vaxcel,
desirable in the conduct of the business of Vaxcel and its Subsidiaries,
provided that such actions shall not materially delay the Effective Time or
materially hinder consummation of the Merger. Vaxcel further covenants and
agrees that it will not, without the prior written consent of Zynaxis, which
consent shall not be unreasonably withheld, amend the Certificate of
Incorporation or Bylaws of Vaxcel or, except as expressly contemplated by this
Agreement or the Transaction Documents, in any manner adverse to the holders of
Zynaxis Capital Stock as compared to rights of holders of Vaxcel Common Stock
generally as of the date of this Agreement.
7.4 ADVERSE CHANGES IN CONDITION. Each Party agrees to give
written notice promptly to the other Party upon becoming aware of the occurrence
or impending occurrence of any event or circumstance relating to it or any of
its Subsidiaries which (i) is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on it or (ii) would cause or constitute a
material breach of any of its representations, warranties, or covenants
contained herein, and to use its reasonable efforts to prevent or promptly to
remedy the same.
7.5 REPORTS. Each Party and its Subsidiaries shall file all
reports required to be filed by it with Regulatory Authorities between the date
of this Agreement and the Effective Time and shall deliver to the other Party
copies of all such reports promptly after the same are filed. If financial
statements are contained in any such reports filed with the SEC, such financial
statements will fairly present the consolidated financial position of the entity
filing such statements as of the dates indicated and the consolidated results of
operations, changes in shareholders' equity, and cash flows for the periods then
ended in accordance with GAAP (subject in the case of interim financial
statements to normal recurring year-end adjustments that are not material). As
of their respective dates, such reports filed with the SEC will comply in all
material respects with the Securities Laws and will not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. Any financial
statements contained in any other reports to another Regulatory Authority shall
be prepared in accordance with Laws applicable to such reports.
ARTICLE 8
ADDITIONAL AGREEMENTS
8.1 REGISTRATION STATEMENT; PROXY STATEMENT; SHAREHOLDER APPROVAL.
(a) As soon as practicable after the date hereof Vaxcel shall
prepare and file the Registration Statement with the SEC to register the
issuance of the Merger Shares and to register for resale by the holders thereof
the Affiliate Shares, the Lock-Up Shares and the Warrant Shares (collectively,
the "Resale Shares"), and shall use its reasonable efforts to cause the
Registration Statement to become effective under the 1933 Act and take any
action required to be taken under the applicable state Blue Sky or securities
Laws in connection with the issuance of the Merger Shares and the resale of the
Resale Shares upon consummation of the transactions
<PAGE> 44
contemplated by the Transaction Documents. Zynaxis shall cooperate in the
preparation and filing of the Registration Statement and shall furnish all
information concerning it and the holders of Zynaxis Capital Stock and Equity
Rights of Zynaxis as Vaxcel may reasonably request in connection with such
action. Zynaxis shall call a Shareholders' Meeting, to be held as soon as
reasonably practicable after the Registration Statement is declared effective by
the SEC, for the purpose of voting upon adoption of this Agreement and such
other related matters as it deems appropriate. In connection with the
Shareholders' Meeting, (i) Zynaxis and Vaxcel shall prepare and file with the
SEC a Proxy Statement and mail such Proxy Statement to the shareholders of
Zynaxis, (ii) the Parties shall furnish to each other all information concerning
them that they may reasonably request in connection with such Proxy Statement,
(iii) the Board of Directors of Zynaxis shall recommend to its shareholders the
approval of the matters submitted for approval (subject to the Board of
Directors of Zynaxis, after having consulted with and considered the advice of
outside counsel, reasonably determining in good faith that the making of such
recommendation, or the failure to withdraw or modify its recommendation, would
constitute a breach of fiduciary duties of the members of such Board of
Directors to Zynaxis's shareholders under applicable Law), and (iv) the Board of
Directors and officers of Zynaxis shall use their reasonable efforts to obtain
such shareholders' approval (subject to the Board of Directors of Zynaxis after
having consulted with and considered the advice of outside counsel, reasonably
determining in good faith that the taking of such actions would constitute a
breach of fiduciary duties of the members of such Board of Directors to
Zynaxis's shareholders under applicable Law). Vaxcel and Zynaxis shall make all
necessary filings with respect to the Merger under the Securities Laws.
(b) Vaxcel shall use its best efforts to maintain the
effectiveness of the Registration Statement until the earlier of (i) the date
on which the Resale Shares may be sold without restriction under the 1933 Act
or (ii) the fifth anniversary of the Closing Date subject to such periods of
time when Vaxcel must suspend the use of the prospectus forming a part of the
Registration Statement until such time as an amendment is filed and declared
effective or an appropriate report is filed by Vaxcel with the SEC.
8.2 APPLICATIONS. The Parties shall promptly prepare and file, and
each of the Parties shall cooperate with each of the other Parties in the
preparation and, where appropriate, filing of, applications with all Regulatory
Authorities having jurisdiction over the transactions contemplated by this
Agreement seeking the requisite Consents necessary to consummate the
transactions contemplated by this Agreement. The Parties shall deliver to each
other copies of all filings, correspondence and orders to and from all
Regulatory Authorities in connection with the transactions contemplated hereby.
8.3 FILINGS WITH STATE OFFICES. Upon the terms and subject to the
conditions of this Agreement, Zynaxis and Vaxcel Merger Sub shall execute and
file the Articles of Merger in the Department of State of the Commonwealth of
Pennsylvania and the Certificate of Merger with the Secretary of State of the
State of Georgia in connection with the Merger.
8.4 AGREEMENT AS TO EFFORTS TO CONSUMMATE. Subject to the terms
and conditions of this Agreement, each Party agrees to use, and to cause its
Subsidiaries to use, its
<PAGE> 45
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 applicable
Laws to consummate and make effective, as soon as reasonably practicable after
the date of this Agreement, the transactions contemplated by this Agreement,
including using its reasonable efforts to lift or rescind any Order adversely
affecting its ability to consummate the transactions contemplated herein and to
cause to be satisfied the conditions referred to in Article 9; provided, that
nothing herein shall preclude either Party from exercising its rights under this
Agreement. Each Party shall use, and shall cause each of its Subsidiaries to
use, its reasonable efforts to obtain all Consents necessary or desirable for
the consummation of the transactions contemplated by this Agreement.
8.5 INVESTIGATION AND CONFIDENTIALITY.
(a) Prior to the Effective Time, each Party shall keep the other
Parties advised of all material developments relevant to its business and the
consummation of the Merger and shall permit the other Parties to make or cause
to be made such investigation of the business and properties of it and its
Subsidiaries and of their respective financial and legal conditions as the other
Party reasonably requests, provided that such investigation shall be reasonably
related to the transactions contemplated hereby and shall not interfere
unnecessarily with normal operations. No investigation by a Party shall affect
the representations and warranties of the other Party.
(b) In addition to the Parties' respective obligations under the
Confidentiality Agreement, which is hereby reaffirmed and adopted, and
incorporated by reference herein each Party shall, and shall cause its advisers
and agents to, maintain the confidentiality of all confidential information
furnished to it by the other Party concerning its and its Subsidiaries'
businesses, operations, and financial positions and shall not use such
information for any purpose except in furtherance of the transactions
contemplated by this Agreement. If this Agreement is terminated prior to the
Effective Time, each Party shall promptly return or certify the destruction of
all documents and copies thereof, and all work papers containing confidential
information received from the other Party.
(c) Each Party agrees to give the other Party notice as soon as
practicable after any determination by it of any fact or occurrence relating to
the other Party which it has discovered through the course of its investigation
and which represents, or is reasonably likely to represent, either a material
breach of any representation, warranty, covenant or agreement of the other Party
or which has had or is reasonably likely to have a Material Adverse Effect on
the other Party.
8.6 PRESS RELEASES. Prior to the Effective Time, each of the
Parties shall consult with the other Parties as to the form and substance of any
press release or other public disclosure materially related to this Agreement or
any other transaction contemplated hereby; provided, that nothing in this
Section 8.6 shall be deemed to prohibit any Party from making any disclosure
which its counsel deems necessary or advisable in order to satisfy such Party's
disclosure obligations imposed by Law.
<PAGE> 46
8.7 CERTAIN ACTIONS. Except with respect to the Transaction
Documents, no Zynaxis Company nor any officer, director, employee or Subsidiary
thereof nor any Representatives thereof retained by any Zynaxis Company shall
directly or indirectly solicit any Acquisition Proposal by any Person. Except to
the extent the Board of Directors of Zynaxis, after having consulted with and
considered the advice of outside counsel, reasonably determines in good faith
that the failure to take such actions would constitute a breach of fiduciary
duties of the members of such Board of Directors to Zynaxis's shareholders under
applicable Law, no Zynaxis Company or any officer, director, employee or
Subsidiary or Representative thereof shall furnish any non-public information
that it is not legally obligated to furnish, negotiate with respect to, or enter
into any Contract with respect to, any Acquisition Proposal, but Zynaxis may
communicate information about such an Acquisition Proposal to its shareholders
if and to the extent that it is required to do so in order to comply with its
legal obligations as advised by outside counsel. Zynaxis shall promptly advise
Vaxcel following the receipt of any Acquisition Proposal and the details
thereof, and advise Vaxcel of any developments with respect to such Acquisition
Proposal promptly upon the occurrence thereof. Zynaxis shall (i) immediately
cease and cause to be terminated any existing activities, discussions or
negotiations with any Persons conducted heretofore with respect to any of the
foregoing, and (ii) direct and use its reasonable efforts to cause all of its
officer, director, employee or Subsidiaries and Representatives not to engage in
any of the foregoing.
8.8 STATE ANTITAKEOVER LAWS. Each Zynaxis Company shall exerts its
best efforts to take all necessary and reasonably possible steps to assure that
the entering into of the Transaction Documents will not and, upon performance of
the covenants set forth in the Transaction Documents, no facet of the
consummation of the transactions contemplated by the Transaction Documents will:
(a) be prohibited by any provision of the PBCL, including Chapter
25 of the PBCL (the "Antitakeover Laws");
(b) cause any shareholder of Zynaxis to exercise any right or
remedy under the Antitakeover Laws;
(c) cause the rights of CytRx to vote the shares of Vaxcel Common
Stock issued pursuant to this Agreement or to exercise its rights as a
shareholder of Vaxcel with respect to such shares to be impaired by action
of any provision of the Antitakeover Laws or otherwise;
(d) cause CytRx to be subject to any Liability, including any
obligation or potential obligation to pay money or disgorge profits (other
than an obligation to make payments pursuant to Subchapter E of the
Antitakeover Laws), under the provisions of the Antitakeover Laws; or
(e) cause the termination, impairment, modification, or extension
of any Contract to which Zynaxis is a party by action of the provisions of
the Antitakeover Laws.
<PAGE> 47
8.9 CHARTER PROVISIONS. Each Zynaxis Company shall take all
necessary action to ensure that the entering into of this Agreement and the
consummation of the Merger and the other transactions contemplated by the
Transaction Documents do not and will not result in the grant of any rights to
any Person under the Articles of Incorporation, as amended, Bylaws or other
governing instruments of any Zynaxis Company, except such rights as exist on the
date hereof, or restrict or impair the ability of Vaxcel or any of its
Subsidiaries to vote, or otherwise to exercise the rights of a shareholder with
respect to, shares of any Zynaxis Company that may be directly or indirectly
acquired or controlled by them.
8.10 CURE OF DEFAULTS. Zynaxis shall use proceeds from its initial
loan under the Senior Credit Facility to cure all Defaults under the Secretech
License Agreement and the Malvern Lease by 5:00 p.m. on the earlier of: (i)
November 27, 1996 or (ii) the fifth (5th) business day after Zynaxis first
receives money from CytRx pursuant to the Senior Credit Facility, and after such
cure shall not Default under the Secretech License Agreement.
8.11 NEGOTIATION OF MALVERN LEASE AMENDMENT. Zynaxis shall
negotiate in good faith to obtain an amendment to the Malvern Lease and releases
from the Adolor Sublease that are reasonably satisfactory to CytRx.
8.12 NASDAQ LISTING. Vaxcel shall use its reasonable efforts to
list, prior to the Effective Time, on the Nasdaq SmallCap Market, the shares of
Vaxcel Common Stock to be issued pursuant to this Agreement and upon exercise of
outstanding warrants and options to purchase shares of Zynaxis Common Stock that
are assumed by Vaxcel in the Merger, and Vaxcel shall give all notices and make
all required filings with the NASD in connection with the transactions
contemplated herein.
8.13 AGREEMENTS OF AFFILIATES. Zynaxis has disclosed in Section
8.13 of the Zynaxis Disclosure Memorandum all Persons whom it reasonably
believes is an "affiliate" of Zynaxis for purposes of Rule 145 under the 1933
Act. Zynaxis shall use its reasonable efforts to cause each such Person to
deliver to Vaxcel not later than 30 days after the date of this Agreement, a
written agreement, substantially in the form of Exhibit 2, providing that such
Person will not sell, pledge, transfer, or otherwise dispose of the shares of
Zynaxis Capital Stock held by such Person except as contemplated by such
agreement or by this Agreement and will not sell, pledge, transfer, or otherwise
dispose of the shares of Vaxcel Common Stock to be received by such Person upon
consummation of the Merger except in compliance with applicable provisions of
the 1933 Act and the rules and regulations thereunder.
8.14 USE OF PROCEEDS OF SENIOR CREDIT FACILITY. Zynaxis shall use
proceeds of loans made under the Senior Credit Facility only in accordance with
the Secured Loan Agreement.
8.15 REGISTRATION RIGHTS AGREEMENT. At the Closing CytRx and
Vaxcel shall enter into the Registration Rights Agreement.
<PAGE> 48
ARTICLE 9
CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE
9.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY. The respective
obligations of each Party to perform this Agreement and consummate the Merger
and the other transactions contemplated by the Transaction Documents are subject
to the satisfaction of the following conditions, unless waived by both Parties
pursuant to Section 11.6:
(A) SHAREHOLDER APPROVAL. The holders of Zynaxis Common Stock
voting together with holders of Zynaxis Preferred Stock (on an
as-converted basis) and the holders of Zynaxis Preferred Stock voting as
a separate class of Zynaxis shall have approved (i) the Charter
Amendments, (ii) this Agreement and the consummation of the transactions
contemplated hereby, including the Merger, as and to the extent required
by Law, by the provisions of any governing instruments or by the rules of
the NASD, (iii) the sale of substantially all of the Assets of Zynaxis as
contemplated in the Liquidation Agreement as and to the extent required
by Law, the provisions of any governing instruments, or by the rules of
the NASD, and (iv) such other related matters deemed necessary by the
Parties to assure that the transactions contemplated by the Transaction
Documents are permitted under the Law as and to the extent required by
Law, by the provisions of any governing instruments, or by the rules of
the NASD.
(B) REGULATORY APPROVALS. All Consents of, filings and
registrations with, and notifications to, all Regulatory Authorities
required for consummation of the Merger shall have been obtained or made
and shall be in full force and effect and all waiting periods required by
Law shall have expired. No Consent obtained from any Regulatory Authority
which is necessary to consummate the transactions contemplated hereby
shall be conditioned or restricted in a manner (including requirements
relating to the raising of additional capital or the disposition of
Assets) which in the reasonable judgment of the Boards of Directors of
either CytRx or Vaxcel would so materially adversely impact the economic
or business benefits of the transactions contemplated by this Agreement
that, had such condition or requirement been known, such Party would not,
in its reasonable judgment, have entered into this Agreement.
(C) CONSENTS AND APPROVALS. Each Party shall have obtained any
and all Consents required for consummation of the Merger (other than
those referred to in Section 9.1(b)) or for the preventing of any Default
under any Contract or Permit of such Party which, if not obtained or
made, is reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on such Party. No Consent so obtained which is
necessary to consummate the transactions contemplated hereby shall be
conditioned or restricted in a manner which in the reasonable judgment of
the Boards of Directors of either CytRx or Vaxcel would so materially
adversely impact the economic or business benefits of the transactions
contemplated by this Agreement that, had such condition or requirement
been known, such Party would not, in its reasonable judgment, have
entered into this Agreement.
<PAGE> 49
(D) LEGAL PROCEEDINGS. No court or governmental or regulatory
authority of competent jurisdiction shall have enacted, issued,
promulgated, enforced or entered any Law or Order (whether temporary,
preliminary or permanent) or taken any other action which prohibits,
restricts or makes illegal consummation of the transactions contemplated
by this Agreement.
(E) REGISTRATION STATEMENT. The Registration Statement shall
be effective under the 1933 Act, no stop orders suspending the
effectiveness of the Registration Statement shall have been issued, no
action, suit, proceeding or investigation by the SEC to suspend the
effectiveness thereof shall have been initiated and be continuing, and
all necessary approvals under state securities Laws or the 1933 Act or
1934 Act relating to the issuance or trading of the shares of Vaxcel
Common Stock issuable pursuant to the transaction contemplated by this
Agreement shall have been received.
(F) EXCHANGE LISTING. The shares of Vaxcel Common Stock
issuable pursuant to the Merger shall have been approved for listing on
the Nasdaq SmallCap Market.
(G) TAX MATTERS. Each Party shall have received a written
opinion of counsel from Alston & Bird, in form reasonably satisfactory to
such Parties (the "Tax Opinion"), to the effect that for federal income
tax purposes the Contributions in exchange for Vaxcel Common Stock will
constitute a transaction described in Section 351 of the Internal Revenue
Code. In rendering such Tax Opinion, such counsel shall be entitled to
rely upon representations of CytRx, Vaxcel, and Zynaxis reasonably
satisfactory in form and substance to such counsel.
<PAGE> 50
(H) ANTITAKEOVER LAWS. No facet of the consummation of the
transactions contemplated by the Transaction Documents shall have been found
to:
(i) be prohibited by any provision of the PBCL, including the
Antitakeover Laws;
(ii) cause the rights of CytRx to vote the shares of Vaxcel
Common Stock issued pursuant to this Agreement or to exercise its
rights as a shareholder of Vaxcel with respect to such shares to be
impaired by action of any provision of the Antitakeover Laws or
otherwise;
(iii) cause CytRx to be subject to any Liability, including any
obligation or potential obligation to pay money or disgorge profits
(other than an obligation to make payments pursuant to Subchapter E
of the Antitakeover Laws), under the provisions of the Antitakeover
Laws;
(iv) cause the termination, impairment, modification or
extension of any Contract to which Zynaxis is a party by action of
the provisions of the Antitakeover Laws; or
(v) except as set forth in Section 8.9 of the Zynaxis
Disclosure Memorandum, result in the grant of any rights to any
Person under the Articles of Incorporation, Bylaws, or other
governing instruments of any Zynaxis Company.
9.2 CONDITIONS TO OBLIGATIONS OF CYTRX, VAXCEL AND VAXCEL
MERGER SUB. The obligations of CytRx, Vaxcel and Vaxcel Merger Sub to perform
this Agreement and consummate the Merger and the other transactions contemplated
hereby are subject to the satisfaction of the following conditions, unless
waived by CytRx, Vaxcel and Vaxcel Merger Sub pursuant to Section 11.6(a):
(A) REPRESENTATIONS AND WARRANTIES. For purposes of this Section
9.2(a), the accuracy of the representations and warranties of Zynaxis set
forth in this Agreement shall be assessed as of the date of this Agreement
and as of the Effective Time with the same effect as though all such
representations and warranties had been made on and as of the Effective Time
(provided that representations and warranties which are confined to a
specified date shall speak only as of such date). The representations and
warranties made in Sections 5.18 and 5.19 with respect to officers,
directors, employees and Subsidiaries of Zynaxis shall be true and correct
with respect to all Affiliates of Zynaxis. The representations and
warranties set forth in Section 5.3 shall be true and correct (except for
inaccuracies which are de minimus in amount). The representations and
warranties set forth in Sections 5.19 and 5.20 shall be true and correct in
all material respects. There shall not exist inaccuracies in the
representations and warranties of Zynaxis set forth in this Agreement
(including the representations and warranties set forth in Sections 5.3,
5.19 and 5.20) such that the aggregate effect of such inaccuracies has, or
is reasonably likely to have, a Material Adverse Effect on Zynaxis; provided
that, for purposes of this sentence only,
<PAGE> 51
those representations and warranties which are qualified by references to
"material" or "Material Adverse Effect" or to the "Knowledge" of any Person
shall be deemed not to include such qualifications.
(B) PERFORMANCE OF AGREEMENTS AND COVENANTS. Each and all of the
agreements and covenants of Zynaxis to be performed and complied with
pursuant to , the Transaction Documents prior to the Effective Time shall
have been duly performed and complied with in all material respects.
(C) CERTIFICATES. Zynaxis shall have delivered to Vaxcel (i) a
certificate, dated as of the Effective Time and signed on its behalf by its
chief executive officer, to the effect that the conditions set forth in
Section 9.1 as relates to Zynaxis and in Section 9.2(a) and 9.2(b) have been
satisfied, and (ii) certified copies of resolutions duly adopted by
Zynaxis's Board of Directors and shareholders evidencing the taking of all
corporate action necessary to authorize the execution, delivery and
performance of this Agreement, and the consummation of the transactions
contemplated hereby, all in such reasonable detail as Vaxcel and its counsel
shall request.
(D) OPINION OF COUNSEL. CytRx and Vaxcel shall have received an
opinion of Morgan, Lewis & Bockius LLP, counsel to Zynaxis, dated as of the
Closing, in form reasonably satisfactory to Vaxcel, as to the matters set
forth in Exhibit 3.
(E) AFFILIATES AGREEMENTS. Vaxcel shall have received from each
affiliate of Zynaxis the affiliates letter referred to in Section 8.13.
(F) EXECUTION OF AGREEMENTS. The Transaction Documents shall have
been executed and delivered by each of the intended Parties thereto and no
Party shall be in Default thereunder.
(G) EXECUTION OF MALVERN LEASE AMENDMENT. Zynaxis shall have
entered into an amendment to the Malvern Lease that is reasonably
satisfactory to CytRx, Vaxcel and Vaxcel Merger Sub.
(H) RELEASES FROM ADOLOR LEASE. Zynaxis shall have obtained
releases from liability under the Adolor Sublease that are satisfactory to
CytRx, Vaxcel and Vaxcel Merger Sub.
(I) BOARD RESOLUTIONS REGARDING ZYNAXIS OPTIONS. The Board of
Directors of Zynaxis and all relevant committees thereof shall have adopted
resolutions that in the judgment of CytRx and its counsel are sufficient to
prevent immediate vesting of outstanding Zynaxis Options, to approve the
treatment of outstanding Zynaxis Options in the Merger and to find the
options to be received "comparable" to currently outstanding Zynaxis Options
within the meaning of the Zynaxis Stock Plan.
<PAGE> 52
(J) DISSENTERS. The holders of shares of Zynaxis Capital Stock
having the right to vote no more than ten percent (10%) of the votes that
could be cast by all holders of Zynaxis Capital Stock voting together as a
single class shall have elected to exercise their statutory dissenters'
rights or their objection rights, if any, under Section 2545 of the PBCL.
(K) EXECUTION OF PREFERRED STOCK AND WARRANT AGREEMENT. Every
holder of shares of Zynaxis Preferred Stock or of Warrants referenced in the
Preferred Stock and Warrant Agreement shall have executed the Preferred
Stock and Warrant Agreement.
9.3 CONDITIONS TO OBLIGATIONS OF ZYNAXIS. The obligations of
Zynaxis to perform this Agreement and consummate the Merger and the other
transactions contemplated hereby are subject to the satisfaction of the
following conditions, unless waived by Zynaxis pursuant to Section 11.6(b):
(A) REPRESENTATIONS AND WARRANTIES. For purposes of this Section
9.3(a), the accuracy of the representations and warranties of Vaxcel set
forth in this Agreement shall be assessed as of the date of this Agreement
and as of the Effective Time with the same effect as though all such
representations and warranties had been made on and as of the Effective Time
(provided that representations and warranties which are confined to a
specified date shall speak only as of such date). The representations and
warranties set forth in Section 6.3 shall be true and correct (except for
inaccuracies which are de minimus in amount). There shall not exist
inaccuracies in the representations and warranties of Vaxcel set forth in
this Agreement (including the representations and warranties set forth in
Section 6.3) such that the aggregate effect of such inaccuracies has, or is
reasonably likely to have, a Material Adverse Effect on Vaxcel; provided
that, for purposes of this sentence only, those representations and
warranties which are qualified by references to "material" or "Material
Adverse Effect" or to the "Knowledge" of any Person shall be deemed not to
include such qualifications.
(B) PERFORMANCE OF AGREEMENTS AND COVENANTS. Each and all of the
agreements and covenants of Vaxcel to be performed and complied with
pursuant to , the Transaction Documents prior to the Effective Time shall
have been duly performed and complied with in all material respects.
(C) CERTIFICATES. Vaxcel shall have delivered to Zynaxis (i) a
certificate, dated as of the Effective Time and signed on its behalf by its
chief executive officer, to the effect that the conditions set forth in
Section 9.1 as relates to Vaxcel and in Section 9.3(a) and 9.3(b) have been
satisfied, and (ii) certified copies of resolutions duly adopted by CytRx's
Board of Directors, Vaxcel's Board of Directors, CytRx as sole shareholder
of Vaxcel, Vaxcel Merger Sub's Board of Directors and Vaxcel as sole
shareholder of Vaxcel Merger Sub evidencing the taking of all corporate
action necessary to authorize the execution, delivery and performance of
this Agreement, and the consummation of the transactions contemplated
hereby, all in such reasonable detail as Zynaxis and its counsel shall
request.
<PAGE> 53
(D) OPINION OF COUNSEL. Zynaxis shall have received an opinion of
Alston & Bird, counsel to CytRx and Vaxcel, dated as of the Effective Time,
in form reasonably acceptable to Zynaxis, as to the matters set forth in
Exhibit 4.
ARTICLE 10
TERMINATION
10.1 TERMINATION. Notwithstanding any other provision of this
Agreement, and notwithstanding the approval of this Agreement by the
shareholders of Zynaxis, this Agreement may be terminated and the Merger
abandoned at any time prior to the Effective Time:
(a) By mutual consent of CytRx and Zynaxis; or
(b) By either CytRx or Zynaxis (provided that the terminating
Party is not then in material breach of any representation, warranty,
covenant, or other agreement contained in this Agreement) in the event of a
material breach by the other Party of any representation or warranty
contained in this Agreement which cannot be or has not been cured within 30
days after the giving of written notice to the breaching Party of such
breach and which breach is reasonably likely, in the opinion of the
non-breaching Party, to have, individually or in the aggregate, a Material
Adverse Effect on the breaching Party; or
(c) By either CytRx or Zynaxis (provided that the terminating
Party is not then in material breach of any representation, warranty,
covenant, or other agreement contained in this Agreement) in the event of a
material breach by the other Party of any covenant or agreement contained in
this Agreement which cannot be or has not been cured within 30 days after
the giving of written notice to the breaching Party of such breach; or
(d) By either CytRx or Zynaxis (provided that the terminating
Party is not then in material breach of any representation, warranty,
covenant, or other agreement contained in this Agreement) in the event (i)
any Consent of any Regulatory Authority required for consummation of the
Merger and the other transactions contemplated hereby shall have been denied
by final nonappealable action of such authority or if any action taken by
such authority is not appealed within the time limit for appeal, or (ii) the
shareholders of Zynaxis fail to vote their approval of the matters relating
to this Agreement and the transactions contemplated hereby at the
Shareholders' Meeting where such matters were presented to such shareholders
for approval and voted upon; or
(e) By any Party in the event that the Merger shall not have been
consummated by March 31, 1997, if the failure to consummate the transactions
contemplated hereby on or before such date is not caused by any breach of
this Agreement by the Party electing to terminate pursuant to this Section
10.1(e); or
(f) By either CytRx or Zynaxis (provided that the terminating
Party is not then in material breach of any representation, warranty,
covenant, or other agreement contained
<PAGE> 54
in this Agreement) in the event that any of the conditions precedent to the
obligations of such Party to consummate the Merger cannot be satisfied or
fulfilled by the date specified in Section 10.1(e).
10.2 EFFECT OF TERMINATION. In the event of the termination and
abandonment of this Agreement pursuant to Section 10.1, this Agreement shall
become void and have no effect, except that (i) the provisions of this Section
10.2 and Article 11 and Section 8.5(b) shall survive any such termination and
abandonment, and (ii) a termination pursuant to Sections 10.1(b), 10.1(c) or
10.1(f) shall not relieve the breaching Party from Liability for an uncured
willful breach of a representation, warranty, covenant, or agreement giving rise
to such termination.
10.3 NON-SURVIVAL OF REPRESENTATIONS AND COVENANTS. The respective
representations, warranties, obligations, covenants, and agreements of the
Parties shall not survive the Effective Time except this Section 10.3 and
Articles 1, 2, 3, 4 and 11.
ARTICLE 11
MISCELLANEOUS
11.1 DEFINITIONS.
(a) Except as otherwise provided herein, the capitalized
terms set forth below shall have the following meanings:
"1933 ACT" shall mean the Securities Act of 1933, as amended.
"1934 ACT" shall mean the Securities Exchange Act of 1934, as
amended.
"ACQUISITION PROPOSAL" with respect to a Party shall mean any
tender offer or exchange offer or any proposal for a merger, acquisition of
all of the stock or assets of, or other business combination involving the
acquisition of such Party or any of its Subsidiaries or the acquisition of a
substantial equity interest in, or a substantial portion of the assets of,
such Party or any of its Subsidiaries.
"ADOLOR SUBLEASE" shall mean that certain Sublease Agreement dated
May 15, 1996 between Zynaxis, Inc. and Adolor Corporation, as amended.
"AFFILIATE" of a Person shall mean: (i) any other Person directly,
or indirectly through one or more intermediaries, controlling, controlled by
or under common control with such Person; (ii) any officer, director,
partner, employer, or direct or indirect beneficial owner of any 10% or
greater equity or voting interest of such Person; or (iii) any other Person
for which a Person described in clause (ii) acts in any such capacity.
"AFFILIATE SHARES" shall mean the shares of Vaxcel Common Stock to
be issued to the holders of Zynaxis Common Stock and Zynaxis Preferred Stock
in accordance with
<PAGE> 55
Section 3.1 hereof who are "affiliates" of Zynaxis for purposes of Rule 145
under the 1933 Act as set forth in Section 8.13 of the Zynaxis Disclosure
Memorandum.
"AGREEMENT" shall mean this Agreement and Plan of Merger and
Contribution, including the Exhibits and Disclosure Memoranda delivered
pursuant hereto and incorporated herein by reference.
"ARTICLES OF MERGER" shall mean the Articles of Merger to be
executed by Zynaxis and filed in the Department of State of the Commonwealth
of Pennsylvania relating to the Merger as contemplated by Section 1.5.
"ASSETS" of a Person shall mean all of the assets, properties,
businesses and rights of such Person of every kind, nature, character and
description, whether real, personal or mixed, tangible or intangible,
accrued or contingent, or otherwise relating to or utilized in such Person's
business, directly or indirectly, in whole or in part, whether or not
carried on the books and records of such Person, and whether or not owned in
the name of such Person or any Affiliate of such Person and wherever
located.
"CERTIFICATE OF MERGER" shall mean the Certificate of Merger to be
executed by Zynaxis and filed with the Secretary of State of the State of
Georgia relating to the Merger as contemplated by Section 1.5.
"CHARTER AMENDMENTS" shall mean the proposals substantially in the
form attached hereto at Exhibit 5 to be submitted to the shareholders of
Zynaxis in connection with the transactions contemplated by this Agreement.
"CLOSING DATE" shall mean the date on which the Closing occurs.
"CONFIDENTIALITY AGREEMENT" shall mean that certain
Confidentiality Agreement, dated September 18, 1996, between Zynaxis and
CytRx.
"CONSENT" shall mean any consent, approval, authorization,
clearance, exemption, waiver, or similar affirmation by any Person pursuant
to any Contract, Law, Order, or Permit.
"CONTRACT" shall mean any written or oral agreement, arrangement,
authorization, commitment, contract, indenture, instrument, lease,
obligation, plan, practice, restriction, understanding, or undertaking of
any kind or character, or other document to which any Person is a party or
that is binding on any Person or its capital stock, Assets or business.
"CONTRIBUTIONS" shall mean the contribution of the Cash Payment
and the Senior Credit Facility and conversion of the Zynaxis shares, as
provided in Section 1.1 hereof.
"DEFAULT" shall mean (i) any breach or violation of, default
under, contravention of, or conflict with, any Contract, Law, Order, or
Permit, (ii) any occurrence of any event that with the passage of time or
the giving of notice or both would constitute a breach or violation of,
default under, contravention of, or conflict with, any Contract, Law, Order,
or
<PAGE> 56
Permit, or (iii) any occurrence of any event that with or without the
passage of time or the giving of notice would give rise to a right of any
Person to exercise any remedy or obtain any relief under, terminate or
revoke, suspend, cancel, or modify or change the current terms of, or
renegotiate, or to accelerate the maturity or performance of, or to increase
or impose any Liability under, any Contract, Law, Order, or Permit, where,
in any such event, such Default is reasonably likely to have, individually
or in the aggregate, a Material Adverse Effect on a Party.
"DGCL" shall mean the Delaware General Corporation Law, as
amended.
"ENVIRONMENTAL LAWS" shall mean all Laws relating to pollution or
protection of human health or the environment (including ambient air,
surface water, ground water, land surface, or subsurface strata) and which
are administered, interpreted, or enforced by the United States
Environmental Protection Agency and state and local agencies with
jurisdiction over, and including common law in respect of, pollution or
protection of the environment, including the Comprehensive Environmental
Response Compensation and Liability Act, as amended, 42 U.S.C. 9601 et seq.
("CERCLA"), the Resource Conservation and Recovery Act, as amended, 42
U.S.C. 6901 et seq. ("RCRA"), and other Laws relating to emissions,
discharges, releases, or threatened releases of any Hazardous Material, or
otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling of any Hazardous
Material.
"EQUITY RIGHTS" shall mean all arrangements, calls, commitments,
Contracts, options, rights to subscribe to, scrip, understandings, warrants,
or other binding obligations of any character whatsoever relating to, or
securities or rights convertible into or exchangeable for, shares of the
capital stock of a Person or by which a Person is or may be bound to issue
additional shares of its capital stock or other Equity Rights.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"EXCHANGE RATIO" shall mean: (i) the number of shares of Vaxcel
Common Stock held by CytRx immediately prior to the Closing, giving effect
to the issuance of shares to CytRx in connection with the Closing pursuant
to Section 1.2 of this Agreement, divided by (ii) seven (7) and further
divided by (iii) the sum of (A) the number of shares of Zynaxis Common Stock
outstanding immediately prior to the Closing, giving effect to all issuances
of common stock to which Zynaxis is committed as of the time of Closing
other than issuances to occur upon the exercise of outstanding stock options
and warrants including but not limited to: (I) the delivery of Thirty Four
Thousand Five Hundred Forty-Eight (34,548) shares of common stock of Zynaxis
to John Chappell pursuant to the settlement agreement set forth in the
letter from Zynaxis to John Chappell dated October 10, 1996, and (II) the
issuance of approximately Six Thousand (6,000) additional shares of Zynaxis
common stock to the Zynaxis 401(k) plan for the fourth quarter of 1996, (B)
two times the number of shares of Zynaxis Preferred Stock outstanding as of
the Closing, and (C) 1,320,706. The number 1,320,706 will be adjusted for
splits and reverse splits of Vaxcel Common Stock, e.g., if Vaxcel effects a
1-for-2 reverse stock split the number 1,320,706
<PAGE> 57
shall be deemed changed to 660,353, etc. An example calculation of the
Exchange Ratio based on current information is attached as Exhibit 6.
"EXHIBITS" 1 through 19, inclusive, shall mean the Exhibits so
marked, copies of which are attached to this Agreement. Such Exhibits are
hereby incorporated by reference herein and made a part hereof, and may be
referred to in this Agreement and any other related instrument or document
without being attached hereto.
"GAAP" shall mean generally accepted accounting principles,
consistently applied during the periods involved.
"GBCC" shall mean the Georgia Business Corporation Code, as
amended.
"HAZARDOUS MATERIAL" shall mean (i) any hazardous substance,
hazardous material, hazardous waste, regulated substance, or toxic substance
(as those terms are defined by any applicable Environmental Laws) and (ii)
any chemicals, pollutants, contaminants, petroleum, petroleum products, or
oil (and specifically shall include asbestos requiring abatement, removal,
or encapsulation pursuant to the requirements of governmental authorities
and any polychlorinated biphenyls).
"INTELLECTUAL PROPERTY" shall mean copyrights, patents,
trademarks, service marks, service names, trade names, applications
therefor, technology rights and licenses, computer software (including any
source or object codes therefor or documentation relating thereto), trade
secrets, franchises, know-how, inventions, and other intellectual property
rights.
"INTERNAL REVENUE CODE" shall mean the Internal Revenue Code of
1986, as amended, and the rules and regulations promulgated thereunder.
"INVENTORY" shall mean (a) all inventory of Zynaxis and all goods
intended for sale or lease by Zynaxis, or for display or demonstration; (b)
all work-in-process; (c) all raw materials and other materials and supplies
of every nature and description used or which might be used in connection
with the manufacture, packing, shipping, advertising, selling, leasing or
furnishing of such goods or otherwise used or consumed in Zynaxis's
business; and (d) all documents relating to any of the foregoing.
"KNOWLEDGE" as used with respect to a Person (including references
to such Person being aware of a particular matter) shall mean the personal
knowledge after due inquiry of the chairman, president, chief financial
officer, chief accounting officer, chief operating officer, general counsel,
any assistant or deputy general counsel, or any senior, executive or other
vice president of such Person and the knowledge of any such persons obtained
or which would have been obtained from a reasonable investigation.
"LAW" shall mean any code, law (including common law), ordinance,
regulation, reporting or licensing requirement, rule, or statute applicable
to a Person or its Assets,
<PAGE> 58
Liabilities, or business, including those promulgated, interpreted or
enforced by any Regulatory Authority.
"LIABILITY" shall mean any direct or indirect, primary or
secondary, liability, indebtedness, obligation, penalty, cost or expense
(including costs of investigation, collection and defense), claim,
deficiency, guaranty or endorsement of or by any Person (other than
endorsements of notes, bills, checks, and drafts presented for collection or
deposit in the ordinary course of business) of any type, whether accrued,
absolute or contingent, liquidated or unliquidated, matured or unmatured, or
otherwise.
"LIEN" shall mean any conditional sale agreement, default of
title, easement, encroachment, encumbrance, hypothecation, infringement,
lien, mortgage, pledge, reservation, restriction, security interest, title
retention or other security arrangement, or any adverse right or interest,
charge, or claim of any nature whatsoever of, on, or with respect to any
property or property interest, other than (i) Liens for current property
Taxes not yet due and payable, and (iii) Liens which do not materially
impair the use of or title to the Assets subject to such Lien.
"LIQUIDATION AGREEMENT" shall mean that certain agreement in the
form attached hereto as Exhibit 7 being entered into simultaneously with the
execution of this Agreement between Zynaxis and CytRx regarding the sale of
assets and settlement of liabilities of Zynaxis.
"LITIGATION" shall mean any action, arbitration, cause of action,
claim, complaint, criminal prosecution, governmental or other examination or
investigation, hearing, administrative or other proceeding relating to or
affecting a Party, its business, its Assets (including Contracts related to
it), or the transactions contemplated by this Agreement.
"LOCK-UP SHARES" shall mean the shares of Vaxcel Common Stock to
be issued to the holders of Zynaxis Common Stock and Zynaxis Preferred Stock
in accordance with Section 3.1 hereof who are parties to the Shareholder
Voting Agreement.
"MALVERN LEASE" shall mean that certain Agreement of Lease dated
August 30, 1988 between Rouse & Associates and Zynaxis Cell Science, Inc.,
as amended.
"MATERIAL" for purposes of this Agreement shall be determined in
light of the facts and circumstances of the matter in question; provided
that any specific monetary amount stated in this Agreement shall determine
materiality in that instance.
"MATERIAL ADVERSE EFFECT" on a Party shall mean an event, change
or occurrence which, individually or together with any other event, change
or occurrence, has a material adverse impact on (i) the financial position,
business, or results of operations of such Party and its Subsidiaries, taken
as a whole, or (ii) the ability of such Party to perform its obligations
under this Agreement or to consummate the Merger or the other transactions
contemplated by this Agreement, provided that "Material Adverse Effect"
shall not be deemed to include the impact of (a) changes in Laws of general
applicability or
<PAGE> 59
interpretations thereof by courts or governmental authorities, (b) changes
in generally accepted accounting principles or regulatory accounting
principles, (c) actions and omissions of a Party (or any of its
Subsidiaries) taken with the prior informed written Consent of the other
Party in contemplation of the transactions contemplated hereby, and (d) the
direct effects of compliance with this Agreement on the operating
performance of the Parties, including expenses incurred by the Parties in
consummating the transactions contemplated by this Agreement.
"MERGER SHARES" shall mean the shares of Vaxcel Common Stock to be
issued to the holders of Zynaxis Common Stock and Zynaxis Preferred Stock in
accordance with Section 3.1 hereof.
"NASD" shall mean the National Association of Securities Dealers,
Inc.
"NASDAQ SMALLCAP MARKET" shall mean the SmallCap Market System of
the National Association of Securities Dealers Automated Quotations System.
"NOTE EXCHANGE AGREEMENT" shall mean that certain Note Exchange
Agreement on the form attached hereto as Exhibit 8 being entered into
simultaneously with the execution of this Agreement by and among Zynaxis,
CytRx, Vaxcel, Euclid Partners III, L.P. and S.R. One, Ltd.
"OPERATING PROPERTY" shall mean any property owned, leased, or
operated by the Party in question or by any of its Subsidiaries or in which
such Party or Subsidiary holds a security interest or other interest
(including an interest in a fiduciary capacity), and, where required by the
context, includes the owner or operator of such property, but only with
respect to such property.
"ORDER" shall mean any administrative decision or award, decree,
injunction, judgment, order, quasi-judicial decision or award, ruling, or
writ of any federal, state, local or foreign or other court, arbitrator,
mediator, tribunal, administrative agency, or Regulatory Authority.
"PARTICIPATION FACILITY" shall mean any facility or property in
which the Party in question or any of its Subsidiaries participates in the
management and, where required by the context, said term means the owner or
operator of such facility or property, but only with respect to such
facility or property.
"PARTY" shall mean any of CytRx, Zynaxis, Vaxcel, or Vaxcel Merger
Sub, and "PARTIES" shall mean CytRx, Zynaxis, Vaxcel, and Vaxcel Merger Sub.
"PBCL" shall mean the Pennsylvania Business Corporation Law, as
amended.
"PERMIT" shall mean any federal, state, local, and foreign
governmental approval, authorization, certificate, easement, filing,
franchise, license, notice, permit, or right to which any Person is a party
or that is or may be binding upon or inure to the benefit of any Person or
its securities, Assets, or business.
<PAGE> 60
"PER SHARE PRICE" shall mean: (i) Four Million Dollars
($4,000,000.00), divided by (ii) the sum of (A) the number of shares of
Zynaxis Common Stock outstanding immediately prior to the Closing, giving
effect to all issuances of common stock to which Zynaxis is committed as
of the time of Closing other than issuances to occur upon the exercise of
outstanding stock options and warrants including but not limited to: (I)
the delivery of Thirty Four Thousand Five Hundred Forty-Eight (34,548)
shares of common stock of Zynaxis to John Chappell pursuant to the
settlement agreement set forth in the letter from Zynaxis to John
Chappell dated October 10, 1996, and (II) the issuance of approximately
Six Thousand (6,000) additional shares of Zynaxis common stock to the
Zynaxis 401(k) plan for the fourth quarter of 1996, (B) two times the
number of shares of Zynaxis Preferred Stock outstanding immediately prior
to the Closing, and (C) 1,320,706. The number 1,320,706 will be adjusted
for splits and reverse splits of Vaxcel Common Stock, e.g., if Vaxcel
effects a 1-for-2 reverse stock split the number 1,320,706 shall be
deemed changed to 660,353, etc.
"PERSON" shall mean a natural person or any legal, commercial
or governmental entity, such as, but not limited to, a corporation,
general partnership, joint venture, limited partnership, limited
liability company, trust, business association, group acting in concert,
or any person acting in a representative capacity.
"PREFERRED STOCK AND WARRANT AGREEMENT" shall mean the
Preferred Stock and Warrant Agreement in the form attached hereto as
Exhibit 9.
"PROXY STATEMENT" shall mean the proxy statement used by
Zynaxis to solicit the approval of its shareholders of the transactions
contemplated by this Agreement, which shall include the prospectus of
Vaxcel relating to the issuance of the Vaxcel Common Stock to holders of
Zynaxis Common Stock.
"REGISTRATION RIGHTS AGREEMENT" shall mean that certain
Registration Rights Agreement in the form attached hereto as Exhibit 10
to be entered into at the Closing between CytRx and Vaxcel, pursuant to
which CytRx and Vaxcel make certain agreements regarding the registration
for resale under the 1933 Act of Shares of Vaxcel Common Stock held by
CytRx.
"REGISTRATION STATEMENT" shall mean the Registration
Statement(s) on Form S-4, or other appropriate form, including any
pre-effective or post-effective amendments or supplements thereto, filed
with the SEC by Vaxcel under the 1933 Act to register the issuance of the
Merger Shares and to register the resale of the Resale Shares..
"REGULATORY AUTHORITIES" shall mean, collectively, the SEC,
the NASD, the Federal Trade Commission, the United States Department of
Justice, and all other federal, state, county, local or other
governmental or regulatory agencies, authorities (including
self-regulatory authorities), instrumentalities, commissions, boards or
bodies having jurisdiction over the Parties and their respective
Subsidiaries.
<PAGE> 61
"REPRESENTATIVE" shall mean any investment banker, financial
advisor, attorney, accountant, consultant, or other representative
engaged by a Person.
"SEC" shall mean the United States Securities and Exchange
Commission.
"SEC DOCUMENTS" shall mean all forms, proxy statements,
registration statements, reports, schedules, and other documents filed,
or required to be filed, by a Party or any of its Subsidiaries with any
Regulatory Authority pursuant to the Securities Laws.
"SECRETECH LICENSE AGREEMENT" shall mean that certain License
Agreement dated July 1, 1987 between Southern Research Institute and
Molecular Engineering Associates, Ltd.
"SECURED LOAN AGREEMENT" shall mean that certain Secured Loan
Agreement in the form attached hereto as Exhibit 11 being entered into
simultaneously with the execution of this Agreement between CytRx and
Zynaxis.
"SECURITIES LAWS" shall mean the 1933 Act, the 1934 Act, the
Investment Company Act of 1940, as amended, the Investment Advisors Act
of 1940, as amended, the Trust Indenture Act of 1939, as amended, and the
rules and regulations of any Regulatory Authority promulgated thereunder.
"SENIOR CREDIT FACILITY" shall mean, collectively, the Secured
Loan Agreement, the Senior Secured Note, the Zynaxis Pledge Agreement,
the Zynaxis Security Agreement, the Zynaxis Vaccine Technologies
Guaranty, the Zynaxis Vaccine Technologies Security Agreement and the
Zynaxis Vaccine Technologies Collateral Assignment of License Agreement.
"SENIOR SECURED NOTE" shall mean that certain Secured
Promissory Note in the form attached hereto as Exhibit 12 being entered
into simultaneously with the execution of this Agreement by Zynaxis, as
the maker, and CytRx, as the holder, outlining the terms governing the
lending of up to Two Million Dollars ($2,000,000) by CytRx to Zynaxis.
"SHAREHOLDER VOTING AGREEMENT" shall mean the Shareholder
Voting Agreement in the form attached hereto as Exhibit 13 being entered
into simultaneously with the execution of this Agreement.
"SHAREHOLDERS' MEETING" shall mean the meeting of the
shareholders of Zynaxis to be held pursuant to Section 8.1, including any
adjournment or adjournments thereof.
"STATEMENT WITH RESPECT TO SHARES" shall mean the Statement
With Respect to Shares filed by Zynaxis in the Department of State of the
Commonwealth of Pennsylvania on April 6, 1995.
"SUBSIDIARIES" shall mean all those corporations,
associations, or other business entities of which the entity in question
either (i) owns or controls 50% or more of the outstanding equity
securities either directly or through an unbroken chain of entities as to
<PAGE> 62
each of which 50% or more 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), (ii) in the case of partnerships,
serves as a general partner, (iii) in the case of a limited liability
company, serves as a managing member, or (iv) otherwise has the ability
to elect a majority of the directors, trustees or managing members
thereof.
"SURVIVING CORPORATION" shall mean Zynaxis as the surviving
corporation resulting from the Merger.
"TAX RETURN" shall mean any report, return, information
return, or other information required to be supplied to a taxing
authority in connection with Taxes, including any return of an affiliated
or combined or unitary group that includes a Party or its Subsidiaries.
"TAX" or "TAXES" shall mean any federal, state, county, local,
or foreign taxes, charges, fees, levies, imposts, duties, or other
assessments, including income, gross receipts, excise, employment, sales,
use, transfer, license, payroll, franchise, severance, stamp, occupation,
windfall profits, environmental, federal highway use, commercial rent,
customs duties, capital stock, paid-up capital, profits, withholding,
Social Security, single business and unemployment, disability, real
property, personal property, registration, ad valorem, value added,
alternative or add-on minimum, estimated, or other tax or governmental
fee of any kind whatsoever, imposed or required to be withheld by the
United States or any state, county, local or foreign government or
subdivision or agency thereof, including any interest, penalties, and
additions imposed thereon or with respect thereto.
"TECHNOLOGY DEVELOPMENT AGREEMENT" shall mean that certain
Technology Development Agreement in the form attached hereto as Exhibit
14 being entered into simultaneously with the execution of this Agreement
between Vaxcel and Zynaxis regarding the joint development of the
technology that is the subject of the Secretech License Agreement by
Vaxcel and Zynaxis.
"TRANSACTION DOCUMENTS" shall mean this Agreement and the
other documents executed by any of CytRx, Vaxcel, Vaxcel Merger Sub or
Zynaxis that are referenced by this Agreement.
"VAXCEL CAPITAL STOCK" shall mean, collectively, the Vaxcel
Common Stock and any other class or series of capital stock of Vaxcel.
"VAXCEL COMMON STOCK" shall mean the $0.001 par value common
stock of Vaxcel.
"VAXCEL COMPANIES" shall mean, collectively, Vaxcel and all
Vaxcel Subsidiaries.
"VAXCEL DISCLOSURE MEMORANDUM" shall mean the written
information entitled "Vaxcel, Inc. Disclosure Memorandum" delivered prior
to the date of this Agreement to
<PAGE> 63
Zynaxis describing in reasonable detail the matters contained therein
and, with respect to each disclosure made therein, specifically
referencing each Section of this Agreement under which such disclosure
is being made. Information disclosed with respect to one Section shall
not be deemed to be disclosed for purposes of any other Section not
specifically referenced with respect thereto.
"VAXCEL FINANCIAL STATEMENTS" shall mean (i) the balance
sheets of Vaxcel as of December 31, 1995 and 1994, and the related
statements of operations, changes in shareholders' equity, and cash flows
for each of the three fiscal years ended December 31, 1995, 1994 and
1993, and (ii) the balance sheet of Vaxcel as of September 30, 1996 and
the related statements of operations, changes in shareholders' equity,
and cash flows with respect to the nine-month period then ended.
"VAXCEL MERGER SUB COMMON STOCK" shall mean the $0.01 par
value common stock of Vaxcel Merger Sub.
"VAXCEL PREFERRED STOCK" shall mean the $.001 par value
preferred stock of Vaxcel.
"VAXCEL SUBSIDIARIES" shall mean the Subsidiaries of Vaxcel,
which shall include the Vaxcel Subsidiaries described in Section 6.4 and
any corporation or other organization acquired as a Subsidiary of Vaxcel
in the future and held as a Subsidiary by Vaxcel at the Effective Time.
"WARRANT SHARES" shall mean the shares of Vaxcel Common Stock
issuable upon the exercise of warrants to purchase Vaxcel Common Stock to
be assumed by Vaxcel or issued by Vaxcel, as the case may be, in
accordance with Sections 3.6 and 3.7 hereof.
"ZYNAXIS CAPITAL STOCK" shall mean, collectively, the Zynaxis
Common Stock, the Zynaxis Preferred Stock, and any other class or series
of capital stock of Zynaxis.
"ZYNAXIS COMMON STOCK" shall mean the $0.01 par value common
stock of Zynaxis.
"ZYNAXIS COMPANIES" shall mean, collectively, Zynaxis and all
Zynaxis Subsidiaries.
"ZYNAXIS DISCLOSURE MEMORANDUM" shall mean the written
information entitled "Zynaxis, Inc. Disclosure Memorandum" delivered
prior to the date of this Agreement to Vaxcel describing in reasonable
detail the matters contained therein and, with respect to each disclosure
made therein, specifically referencing each Section of this Agreement
under which such disclosure is being made. Information disclosed with
respect to one Section shall not be deemed to be disclosed for purposes
of any other Section not specifically referenced with respect thereto.
"ZYNAXIS FINANCIAL STATEMENTS" shall mean (i) the consolidated
balance sheets (including related notes and schedules, if any) of Zynaxis
as of June 30, 1996, and as of
<PAGE> 64
December 31, 1995 and 1994, and the related statements of operations,
changes in stockholders' equity, and cash flows (including related notes
and schedules, if any) for the six months ended June 30, 1996, and for
each of the three fiscal years ended December 31, 1995, 1994 and 1993, as
filed by Zynaxis in SEC Documents, and (ii) the consolidated balance
sheets of Zynaxis (including related notes and schedules, if any) and
related statements of operations, changes in shareholders' equity, and
cash flows (including related notes and schedules, if any) included in
SEC Documents filed with respect to periods ended subsequent to June 30,
1996.
"ZYNAXIS PLEDGE AGREEMENT" shall mean that certain Pledge
Agreement in the form attached hereto as Exhibit 15 being entered into
simultaneously with the execution of this Agreement between Zynaxis, as
pledgor, and CytRx, as pledgee, pursuant to which Zynaxis pledges the
stock of its Subsidiaries to CytRx as security in connection with the
lending of funds under the Senior Secured Note.
"ZYNAXIS PREFERRED STOCK" shall mean the no par value Series A
Convertible Preferred Stock of Zynaxis.
"ZYNAXIS SECURITY AGREEMENT" shall mean that certain Security
Agreement in the form attached hereto as Exhibit 16 being entered into
simultaneously with the execution of this Agreement between Zynaxis, as
debtor, and CytRx, as secured party, pursuant to which Zynaxis grants to
CytRx a security interest in certain of Zynaxis assets in connection with
the lending of funds under the Senior Secured Note.
"ZYNAXIS STOCK PLAN" shall mean the Zynaxis, Inc. Amended
and Restated 1989 Stock Option Plan.
"ZYNAXIS SUBSIDIARIES" shall mean the Subsidiaries of Zynaxis,
which shall include the Zynaxis Subsidiaries described in Section 5.4 and
any corporation or other organization acquired as a Subsidiary of Zynaxis
in the future and held as a Subsidiary by Zynaxis at the Effective Time.
"ZYNAXIS VACCINE TECHNOLOGIES COLLATERAL ASSIGNMENT OF LICENSE
AGREEMENT" shall mean that certain Collateral Assignment of License
Agreement in the form attached hereto as Exhibit 17 being entered into
simultaneously with the execution of this Agreement between CytRx and
Zynaxis Vaccine Technologies, Inc., pursuant to which Zynaxis Vaccine
Technologies, Inc. grants to CytRx a security interest in its license of
certain technology from Southern Research Institute.
"ZYNAXIS VACCINE TECHNOLOGIES GUARANTY" shall mean that
certain Guaranty in the form attached hereto as Exhibit 18 being entered
into simultaneously with the execution of this Agreement between Zynaxis
Vaccine Technologies, Inc., as guarantor and CytRx Corporation.
"ZYNAXIS VACCINE TECHNOLOGIES SECURITY AGREEMENT" shall mean
that certain Security Agreement in the form attached hereto as Exhibit 19
being entered into
<PAGE> 65
simultaneously with the execution of this Agreement between Zynaxis
Vaccine Technologies, Inc., as guarantor and CytRx Corporation.
(b) The terms set forth below shall have the meanings ascribed
thereto in the referenced sections:
<TABLE>
<S> <C>
Cash Payment Section 1.1
Certificates Section 4.1
Closing Section 1.4
CytRx Warrant Section 1.2
Effective Time Section 1.5
ERISA Affiliate Section 5.14(c)
Exchange Agent Section 4.1
Merger Section 1.3
Non-Financing Warrants Section 3.7
Resale Shares Section 8.1
Tax Opinion Section 9.1(g)
Vaxcel Benefit Plans Section 6.14
Vaxcel Contracts Section 6.15
Vaxcel ERISA Plan Section 6.142
Vaxcel Pension Plan Section 6.14
Zynaxis Benefit Plans Section 5.14
Zynaxis Contracts Section 5.15
Zynaxis ERISA Plan Section 5.14
Zynaxis Options Section 3.5
Zynaxis Pension Plan Section 5.14
Zynaxis SEC Reports Section 5.5(a)
</TABLE>
(c) Any singular term in this Agreement shall be deemed to include
the plural, and any plural term the singular. Any masculine or neuter personal
pronoun shall be considered to mean the corresponding masculine, feminine or
neuter personal pronoun, as the context requires. Whenever the words "include,"
"includes" or "including" are used in this Agreement, they shall be deemed
followed by the words "without limitation."
11.2 EXPENSES.
(a) Except as otherwise provided in this Section 11.2, each of the
Parties shall bear and pay all direct costs and expenses incurred by it or on
its behalf in connection with the transactions contemplated hereunder, including
filing, registration and application fees, printing fees, and fees and expenses
of its own financial or other consultants, investment bankers, accountants, and
counsel, except that: (i) each of the Parties shall bear and pay one-half of the
filing fees payable in connection with the Registration Statement and the Proxy
Statement and printing costs incurred in connection with the printing of the
Registration Statement and the Proxy Statement; and (ii) Zynaxis shall pay all
fees and expenses of counsel to CytRx and Vaxcel.
<PAGE> 66
Notwithstanding the foregoing, if this Agreement is terminated for any reason
other than as set forth in Section 11.2(b) below then the amount of fees and
expenses of Alston & Bird paid by Zynaxis through the date of termination shall
be deducted from the balance due under the Senior Credit Facility.
(b) Notwithstanding the foregoing,
(i) if this Agreement is terminated by CytRx pursuant to Section
10.1(d)(ii) (as relates to approval of Zynaxis's shareholders), or
(ii) if the Merger is not consummated as a result of the failure,
due to intentional action or inaction on the part of Zynaxis or any of its
officers, directors, employees or agents of Zynaxis to satisfy any of the
conditions set forth in Section 9.2, other than Section 9.2(d), or,
(iii) if this Agreement is terminated for any reason after the
Board of Directors of Zynaxis takes any action in reliance upon the first
clause of the second sentence of Section 8.7 or either of the parenthetical
phrases in clauses (iii) and (iv) of the penultimate sentence of Section
8.1,
then Zynaxis shall promptly pay CytRx all the out-of-pocket costs and expenses
of CytRx and its Subsidiaries, including reasonable costs of counsel, investment
bankers, actuaries and accountants, incurred in connection with the transactions
contemplated by this Agreement.
(c) In addition to the foregoing, if, after the date of this
Agreement and within twelve (12) months following
(i) any termination of this Agreement
(1) by CytRx pursuant to Sections 10.1(b), 10.1(c),
10.1(f) (but only on the basis of the failure of Zynaxis to satisfy
any of the conditions enumerated in Section 9.2, other than Section
9.2(d)), or
(2) by either Party pursuant to Section 10.1(d)(ii)
(with respect to approval of the shareholders of Zynaxis), or
(ii) failure to consummate the Merger by reason of any failure of
Zynaxis to satisfy the conditions enumerated in Section 9.2, other than
Section 9.2(d), or 9.1(a) (as such section relates to approval by the
shareholders of Zynaxis),
any third-party shall acquire, merge with, combine with, purchase a substantial
part of the Assets of, or engage in any other business combination with, or
purchase any equity securities involving an acquisition of 20% or more of the
voting stock of, Zynaxis, or enter into any binding agreement to do any of the
foregoing (collectively, a "Business Combination"), such third-party that is a
party to the Business Combination shall pay to CytRx, prior to the earlier of
<PAGE> 67
consummation of the Business Combination or execution of any letter of intent or
definitive agreement with Zynaxis relating to such Business Combination, an
amount in cash equal to the sum of
(x) the direct costs and expenses or portion thereof referred to
in subsection (a) above incurred by or on behalf of CytRx or Vaxcel in
connection with the transactions contemplated by this Agreement, plus
(y) 5% of the aggregate fair market value of the consideration
received by the shareholders of Zynaxis in such Business Combination, less
(z) any amounts previously paid by Zynaxis to CytRx or Vaxcel
pursuant to subsection (b) of this Section 11.2,
which sum represents additional compensation for CytRx's loss as the result of
the transactions contemplated by this Agreement not being consummated. In the
event such third-party shall refuse to pay such amounts within ten days of
demand therefor by CytRx, the amounts shall be an obligation of Zynaxis and
shall be paid by Zynaxis promptly upon notice to Zynaxis by CytRx.
(d) The Parties acknowledge that the loss to either Party
resulting from breach of this Agreement by the other Party or other failure of
the transactions contemplated by this Agreement to be consummated is not
susceptible of ready measurement and, therefore, that the payments provided in
this Section 11.2 are intended by the Parties to constitute liquidated damages
for any breach by a Party of the terms of this Agreement, and not a penalty.
11.3 BROKERS AND FINDERS. With the exception of the agreement
established by a letter dated June 17, 1996 from QED Technologies, L.P., to
CytRx Corporation, as amended by that letter dated November 8, 1996 From Vaxcel,
Inc. to QED Technologies, L.P., for which Vaxcel shall be responsible, each of
the Parties represents and warrants that neither it nor any of its officers,
directors, employees, or Affiliates has employed any broker or finder or
incurred any Liability for any financial advisory fees, investment bankers'
fees, brokerage fees, commissions, or finders' fees in connection with this
Agreement or the transactions contemplated hereby. In the event of a claim by
any broker or finder based upon his or its representing or being retained by or
allegedly representing or being retained by Zynaxis or Vaxcel, each of Zynaxis
and Vaxcel, as the case may be, agrees to indemnify and hold the other Party
harmless of and from any Liability in respect of any such claim.
11.4 ENTIRE AGREEMENT. Except as otherwise expressly provided
herein, this Agreement (including the documents and instruments referred to
herein) constitutes the entire agreement between the Parties with respect to the
transactions contemplated hereunder and supersedes all prior arrangements or
understandings with respect thereto, written or oral (except, as to Section
8.5(b), for the Confidentiality Agreement). Nothing in this Agreement expressed
or implied, is intended to confer upon any Person, other than the Parties or
their respective successors, any rights, remedies, obligations, or liabilities
under or by reason of this Agreement.
<PAGE> 68
11.5 AMENDMENTS. To the extent permitted by Law, this Agreement
may be amended by a subsequent writing signed by each of the Parties upon the
approval of each of the Parties, whether before or after shareholder approval of
this Agreement has been obtained; provided, that after any such approval by the
holders of Zynaxis Capital Stock, there shall be made no amendment that reduces
or modifies in any material respect the consideration to be received by holders
of Zynaxis Capital Stock or pursuant to applicable Law requires the further
approval by such shareholders without the further approval of such shareholders.
11.6 WAIVERS.
(a) Prior to or at the Effective Time, Vaxcel, acting through
its Board of Directors, chief executive officer or other authorized officer,
shall have the right to waive any Default in the performance of any term of this
Agreement by Zynaxis, to waive or extend the time for the compliance or
fulfillment by Zynaxis of any and all of its obligations under this Agreement,
and to waive any or all of the conditions precedent to the obligations of Vaxcel
under this Agreement, except any condition which, if not satisfied, would result
in the violation of any Law. No such waiver shall be effective unless in writing
signed by a duly authorized officer of Vaxcel.
(b) Prior to or at the Effective Time, Zynaxis, acting
through its Board of Directors, chief executive officer or other authorized
officer, shall have the right to waive any Default in the performance of any
term of this Agreement by Vaxcel, to waive or extend the time for the compliance
or fulfillment by Vaxcel of any and all of its obligations under this Agreement,
and to waive any or all of the conditions precedent to the obligations of
Zynaxis under this Agreement, except any condition which, if not satisfied,
would result in the violation of any Law. No such waiver shall be effective
unless in writing signed by a duly authorized officer of Zynaxis.
(c) The failure of any Party at any time or times to require
performance of any provision hereof shall in no manner affect the right of such
Party at a later time to enforce the same or any other provision of this
Agreement. No waiver of any condition or of the breach of any term contained in
this Agreement in one or more instances shall be deemed to be or construed as a
further or continuing waiver of such condition or breach or a waiver of any
other condition or of the breach of any other term of this Agreement.
11.7 ASSIGNMENT. Except as expressly contemplated hereby, neither
this Agreement nor any of the rights, interests or obligations hereunder shall
be assigned by any Party hereto (whether by operation of Law or otherwise)
without the prior written consent of the other Party. Subject to the preceding
sentence, this Agreement will be binding upon, inure to the benefit of and be
enforceable by the Parties and their respective successors and assigns.
11.8 NOTICES. All notices or other communications which are
required or permitted hereunder shall be in writing and sufficient if delivered
by hand, by facsimile transmission, by registered or certified mail, postage
pre-paid, or by courier or overnight carrier, to the persons at the addresses
set forth below (or at such other address as may be provided hereunder), and
shall be deemed to have been delivered as of the date so delivered:
<PAGE> 69
Zynaxis: Zynaxis, Inc.
371 Phoenixville Pike
Malvern, Pennsylvania 19355
Telecopy Number: (610) 889-2222
Attention: Martyn D. Greenacre
Chairman, President and
Chief Executive Officer
Copy to Counsel: Morgan, Lewis & Bockius LLP
2000 One Logan Square
Philadelphia, Pennsylvania 19103-6993
Telecopy Number: (215) 963-5299
Attention:Debra J. Poul
CytRx: CytRx Corporation
154 Technology Parkway
Norcross, Georgia 30092
Telecopy Number: (770) 448-3357
Attention: Jack J. Luchese
Chairman, President and
Chief Executive Officer
Copy to Counsel: Alston & Bird
1201 West Peachtree Street
Atlanta, Georgia 30309-3424
Telecopy Number: (404) 881-7777
Attention: George M. Maxwell, Jr.
Vaxcel: Vaxcel, Inc.
154 Technology Parkway
Norcross, Georgia 30092
Telecopy Number: (770) 368-9500
Attention: Paul Wilson
<PAGE> 70
Copy to Counsel: Alston & Bird
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309
Telecopy Number: (404) 881-7777
Attention: George M. Maxwell, Jr.
11.9 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the Laws of the State of Georgia, without
regard to any applicable conflicts of Laws.
11.10 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of
which together shall constitute one and the same instrument.
11.11 CAPTIONS; ARTICLES AND SECTIONS. The captions contained in
this Agreement are for reference purposes only and are not part of this
Agreement. Unless otherwise indicated, all references to particular Articles
or Sections shall mean and refer to the referenced Articles and Sections of
this Agreement.
11.12 INTERPRETATIONS. Neither this Agreement nor any uncertainty
or ambiguity herein shall be construed or resolved against any Party,
whether under any rule of construction or otherwise. No Party to this
Agreement shall be considered the draftsman. The Parties acknowledge and
agree that this Agreement has been reviewed, negotiated, and accepted by all
Parties and their attorneys and shall be construed and interpreted according
to the ordinary meaning of the words used so as fairly to accomplish the
purposes and intentions of all Parties hereto.
11.13 SEVERABILITY. Any term or provision of this Agreement which
is invalid or unenforceable in any jurisdiction shall, as to that
jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining
terms and provisions of this Agreement or affecting the validity or
enforceability of any of the terms or provisions of this Agreement in any
other jurisdiction. If any provision of this Agreement is so broad as to be
unenforceable, the provision shall be interpreted to be only so broad as is
enforceable.
<PAGE> 71
IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be executed
on its behalf and its corporate seal to be hereunto affixed and attested by
officers thereunto as of the day and year first above written.
ATTEST: VAXCEL, INC.
By:
- --------------------------- ----------------------------------
Paul J. Wilson, III
- --------------------------- President and Chief Executive Officer
Secretary
[CORPORATE SEAL]
ATTEST: VAXCEL MERGER SUBSIDIARY, INC.
By:
- --------------------------- ----------------------------------
Paul J. Wilson, III
- --------------------------- President and Chief Executive Officer
Secretary
[CORPORATE SEAL]
<PAGE> 72
ATTEST: ZYNAXIS, INC.
By:
- ----------------------------- --------------------------------------------
Martyn D. Greenacre
- ----------------------------- Chairman, President and Chief Executive Officer
Secretary
[CORPORATE SEAL]
ATTEST: CYTRX CORPORATION
By:
- ----------------------------- -------------------------------------------
Jack J. Luchese
- ----------------------------- Chairman, President and Chief Executive Officer
Secretary
[CORPORATE SEAL]
<PAGE> 1
Exhibit 2.2
Preferred Stock and Warrant Agreement dated as of December 6,
1996, among the Registrant, Zynaxis, Inc., Vaxcel, Inc. and each of the holders
of Zynaxis, Inc. warrants signatory thereto.
<PAGE> 2
PREFERRED STOCK AND WARRANT AGREEMENT
THIS AGREEMENT (this "Agreement") is made and entered into as of
December 6, 1996, by and among ZYNAXIS, INC., a Pennsylvania corporation
("Zynaxis"), CYTRX CORPORATION, a Delaware corporation ("CytRx"), Vaxcel, Inc.,
a Delaware corporation and a wholly owned subsidiary of CytRx ("Vaxcel") and the
persons listed in Exhibit A (the "Securityholders").
WITNESSETH:
WHEREAS, the Securityholders collectively hold all of the outstanding
shares of Series A Convertible Preferred Stock of Zynaxis (the "Series A Stock")
and each Securityholder holds the number of shares of Series A Stock and the
number of warrants to purchase additional shares of Common Stock of Zynaxis set
forth beside such Securityholder's name in Exhibit A (the "Warrants");
WHEREAS, the Series A Stock and the Warrants were issued pursuant to
that certain Preferred Stock and Warrant Purchase Agreement dated March 29,
1995, as amended (the "Preferred Stock and Warrant Purchase Agreement"), and in
connection with bridge loans extended by certain of the Securityholders to
Zynaxis;
WHEREAS, simultaneously with the execution of this Agreement Zynaxis is
entering into an Agreement and Plan of Merger and Contribution (the "Merger and
Contribution Agreement") with CytRx, Vaxcel, and Vaxcel Merger Sub, Inc., a
Georgia corporation and a newly formed, wholly owned subsidiary of Vaxcel
("Vaxcel Merger Sub"), and certain other agreements, including, among other
things, a Liquidation Agreement (the "Liquidation Agreement") contemplating the
sale of Assets (as defined therein) of Zynaxis and documents (the "Secured Loan
Documents") relating to a secured loan being extended to Zynaxis by CytRx (the
"Secured Loan"). The Merger and Contribution Agreement provides for the issuance
of shares of Vaxcel Common Stock and a warrant to purchase shares of Vaxcel
Common Stock to CytRx in exchange for CytRx's contribution to Vaxcel of the
Secured Loan and a cash payment in an amount equal to Four Million Dollars
($4,000,000) minus the aggregate principal and interest balance outstanding
under the Secured Loan, subject to adjustment for payments made to shareholders
of Zynaxis pursuant to Section 3.3 of the Merger and Contribution Agreement. The
Merger and Contribution Agreement also provides for the issuance of shares of
Vaxcel Common Stock to the existing shareholders of Zynaxis in exchange for the
contribution to Vaxcel by the existing shareholders of Zynaxis of all of the
outstanding shares of capital stock of Zynaxis by means of a merger of Vaxcel
Merger Sub with and into Zynaxis. At the effective time of such merger, the
outstanding shares of the capital stock of Zynaxis will be converted into the
right to receive shares of the common stock of Vaxcel (except as provided
herein). As a result, shareholders of Zynaxis will become shareholders of Vaxcel
and Zynaxis will continue to conduct its business and operations as a wholly
owned subsidiary of Vaxcel.
<PAGE> 3
WHEREAS, CytRx is unwilling to enter into the Merger and Contribution
Agreement unless the rights of the Securityholders are modified as set forth in
this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises, covenants, and agreements contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto, intending to be legally bound, hereby agree as follows:
1. Treatment of Transactions. Each of the undersigned elects that
the consummation of the transactions contemplated by the Merger and Contribution
Agreement and the other agreements contemplated by the Merger and Contribution
Agreement, including but not limited to the Liquidation Agreement, will not be
deemed a liquidation for purposes of Sections 3.1 and 3.2 of the Statement with
Respect to Shares filed by Zynaxis in the Department of State of the
Commonwealth of Pennsylvania on April 6, 1995.
2. Consent to Secured Loan. Each of the undersigned consents to
the Secured Loan and all liens, pledges, mortgages, security interests and other
encumbrances to which the assets or properties of Zynaxis may become subject as
part of the Secured Loan.
3. Exchange of Warrants. Each of the undersigned agrees that upon
consummation of the merger between Zynaxis and Vaxcel Merger Sub pursuant to the
Merger and Contribution Agreement (the "Merger"), each Warrant held by the
undersigned shall be exchanged for a new warrant substantially in the form
attached hereto as Exhibit B to purchase a number of shares of Vaxcel Common
Stock equal to: (i) the number of shares of Common Stock of Zynaxis as the
Warrants held by such undersigned are exercisable to purchase at that time
multiplied by (ii) the Exchange Ratio (the "New Warrant"). Each of the
undersigned Securityholders agrees that such undersigned Securityholder shall
surrender the Warrants held by such undersigned Securityholder and shall receive
in exchange therefor a New Warrant. Zynaxis shall not honor any warrant
agreement representing a Warrant after the Merger.
4. Termination of Preferred Stock and Warrant Purchase Agreement
and Registration Rights. Each of the undersigned agrees that the Preferred Stock
and Warrant Purchase Agreement and all rights of the Securityholders thereunder
shall terminate upon the Merger. Each of the undersigned further agrees that:
(i) upon execution of this Agreement all rights that the undersigned
Securityholder may have to require Zynaxis to register securities of Zynaxis for
sale under applicable state and federal securities laws, whether granted
pursuant to the Preferred Stock and Warrant Agreement or otherwise
("Registration Rights"), are suspended pending the Merger, and (ii) upon
occurrence of the Merger all such Registration Rights will be terminated and
such Securityholder will have such Registration Rights as are provided for such
Securityholder in the Merger and Contribution Agreement. If the Merger and
Contribution Agreement is terminated for any reason, beginning at the time of
such termination the undersigned Securityholder shall have such Registration
Rights as such Securityholder would have had at such time if such Registration
Rights had not been suspended pursuant to the preceding sentence.
-3-
<PAGE> 4
5. Accredited Investor Status of Securityholder. Each of the
undersigned Securityholders represents and warrants to CytRx, Vaxcel and Zynaxis
that he or it is an "accredited investor" within the meaning of Regulation D
promulgated under the Securities Act of 1933, as amended (the "Securities Act"),
and that he or it is acquiring New Warrants for himself or itself and not for
other persons. Each Securityholder understands that the New Warrants and any
Securities purchased upon exercise of New Warrants (the "Warrant Securities")
have not been registered under the Securities Act and, therefore, cannot be
resold unless such Warrant Securities are registered under the Securities Act or
unless an exemption from such registration is available.
6. Notices. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given if delivered personally or sent by overnight courier (providing proof of
delivery) to the parties at the following addresses (or at such other address
for a party as shall be specified by like notice): (i) if to Zynaxis, CytRx or
Vaxcel, to the address set forth in Section 11.8 of the Merger and Contribution
Agreement; and (ii) if to a Securityholder, to its address shown below its
signature on the last page hereof.
7. Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
8. Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement.
9. Entire Agreement. This Agreement (including the documents and
instruments referred to herein) constitutes the entire agreement, and supersedes
all prior agreements and understandings, both written and oral, among the
parties with respect to the subject matter hereof.
10. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the Commonwealth of Pennsylvania,
regardless of the laws that might otherwise govern under applicable principles
of conflicts of laws thereof.
11. Assignment. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement shall be assigned, in whole or in
part, by operation of law or otherwise, by any of the parties without the prior
written consent of the other parties. Any assignment in violation of the
foregoing shall be void.
12. Equitable Remedies. Each Securityholder agrees that
irreparable damage would occur and that CytRx and Vaxcel would not have any
adequate remedy at law in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that CytRx and Vaxcel shall be entitled to an
injunction or injunctions to prevent breaches by a Securityholder of this
Agreement and to enforce specifically the terms and provisions of this
Agreement.
-4-
<PAGE> 5
13. Severability. If any term, provision, covenant or restriction
herein, or the application thereof to any circumstance, shall, to any extent, be
held by a court of competent jurisdiction to be invalid, void or unenforceable,
the remainder of the terms, provisions, covenants and restrictions herein and
the application thereof to any other circumstances, shall remain in full force
and effect, shall not in any way be affected, impaired or invalidated, and shall
be enforced to the fullest extent permitted by law.
14. Defined Terms. Capitalized terms used in this Agreement but
not defined herein shall have the meanings given such terms in the Merger and
Contribution Agreement.
[Remainder of page intentionally left blank.]
-5-
<PAGE> 6
[FIRST OF THREE SIGNATURE PAGES TO PREFERRED STOCK AND WARRANT AGREEMENT
DATED NOVEMBER _, 1996]
IN WITNESS WHEREOF, the undersigned have duly executed this Agreement
under seal as of the day and year first above written.
ZYNAXIS, INC. CYTRX CORPORATION
By: By:
------------------------------- --------------------------
Name: Name:
----------------------------- ------------------------
Title: Title:
---------------------------- -----------------------
VAXCEL, INC. S.R. ONE, LTD.
By: By:
------------------------------- --------------------------
Name: Name:
----------------------------- ------------------------
Title: Title:
---------------------------- -----------------------
Address:
---------------------
---------------------
---------------------
---------------------
EUCLID PARTNERS III, L.P. ALPHI FUND L.P.
By: By: Alphi Investment
------------------------------- Management Company,
Name: General Partner
-----------------------------
Title:
----------------------------
By:
--------------------------
Address: Name:
-------------------------- ------------------------
Title:
-------------------------- -----------------------
-------------------------- Address:
---------------------
--------------------------
---------------------
---------------------
JAVELIN CAPITAL FUND, L.P.
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
Address:
--------------------------
--------------------------
--------------------------
--------------------------
-6-
<PAGE> 7
[SECOND OF THREE SIGNATURE PAGES TO PREFERRED STOCK AND WARRANT AGREEMENT
DATED NOVEMBER _, 1996]
SENMED MEDICAL VENTURES CIP CAPITAL L.P.
By: CIP Capital Management
Inc.,
General Partner
By: By:
------------------------------ -------------------------
Name: Name:
---------------------------- -----------------------
Title: Title:
--------------------------- ----------------------
Address: Address:
------------------------- --------------------
------------------------- --------------------
------------------------- --------------------
------------------------- --------------------
THE WEST COMPANY WILLIAM M. SPENCER, III
By: By:
------------------------------ -------------------------
Name: Name:
---------------------------- -----------------------
Title: Title:
--------------------------- ----------------------
Address: Address:
------------------------- --------------------
------------------------- --------------------
------------------------- --------------------
------------------------- --------------------
BIOTECHNOLOGY VENTURE COMMONWEALTH VENTURE
FUND S.A. PARTNERS I, L.P.
By: By:
------------------------------ -------------------------
Name: Name:
---------------------------- -----------------------
Title: Title:
--------------------------- ----------------------
Address: Address:
------------------------- --------------------
------------------------- --------------------
------------------------- --------------------
------------------------- --------------------
-7-
<PAGE> 8
[THIRD OF THREE SIGNATURE PAGES TO PREFERRED STOCK AND WARRANT AGREEMENT DATED
NOVEMBER _, 1996]
PLEXUS VENTURES, INC. PHILADELPHIA VENTURES - JAPAN I,
L.P.
By: By:
------------------------------ -----------------------------
Name: Name:
---------------------------- ---------------------------
Title: Title:
--------------------------- --------------------------
Address: Address:
------------------------- ------------------------
------------------------- ------------------------
------------------------- ------------------------
------------------------- ------------------------
GROTECH PARTNERS II, L.P. GROTECH PARTNERS III, L.P.
GROTECH III COMPANION FUND, L.P.
By: Mid Atlantic Ventures II, L.P., GROTECH III PENNSYLVANIA FUND, L.P.
General Partner
By: Grotech Capital Group, Inc.,
By: Grotech Capital Group, Inc., General Partner
General Partner
By: By:
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Name: Name:
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Title: Title:
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Address: Address:
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Dr. Gus G. Casten
Address:
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<PAGE> 9
EXHIBIT A
HOLDERS OF PREFERRED STOCK AND WARRANTS ISSUED BY
ZYNAXIS, INC.
<TABLE>
<CAPTION>
SERIES A
NAME SHARES WARRANTS
---- ------ --------
<S> <C> <C>
Euclid Partners III, L.P. 260,000 680,775
S.R. One, Ltd. 257,500 540,000
Javelin Capital Fund, L.P. 250,000 500,000
Alphi Fund L.P. 150,000 300,000
Senmed Medical Ventures 135,000 270,000
The West Company 125,000 250,000
William M. Spencer, III 55,000 110,000
Biotechnology Venture Fund S.A. 50,000 100,000
CIP Capital L.P. 45,000 265,000
Grotech Partners III, L.P. 26,490 52,980
Plexus Ventures, Inc. 25,000 150,000
Dr. Gus G. Casten 12,500 25,000
Commonwealth Venture Partners I, L.P. 10,000 20,000
Grotech Partners II, L.P. 3,455 6,910
Grotech III Companion Fund, L.P. 3,155 6,310
Philadelphia Ventures - Japan I, L.P. 2,500 5,000
Grotech III Pennsylvania Fund, L.P. 1,900 3,800
Totals 1,412,500 3,285,775
</TABLE>
