SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
_____________
April 13, 1998
Date of report (date of earliest event reported)
Aquila Biopharmaceuticals, Inc.
(Exact name of Registrant as specified in Charter)
Delaware 0-12081 04-3307818
(State or (Commission File (I.R.S. Employer
jurisdiction of Number) Identification Number)
incorporation)
365 Plantation Street, Worcester, MA 01605
(Address of Principal Executive Offices) (Zip Code)
(508) 797-5777
(Registrant's Telephone Number including Area Code)
Not Applicable
(Former name or former address, if changed since last report)
Item 2. Acquisition or Disposition of Assets.
On April 13, 1998, VacTex, Inc. ("VacTex") became a wholly owned subsidiary
of Aquila Biopharmaceuticals, Inc. (the "Company") by virtue of its merger
with Aquila Acquisition, Inc., a wholly owned subsidiary of the Company.
To effect the merger, the Company caused the exchange of 1,150,000 shares
of the Company's common stock, $.01 par value, and 7% subordinated
debentures in the aggregate principal amount of $1,300,000 ("Debentures")
for all of the issued and outstanding capital stock of VacTex. The amount
of consideration for the transaction was determined by the Company based
upon the value to the Company of acquiring the business of VacTex.
VacTex is a development stage company formed in January 1996 to develop a
scientific understanding of the CD1 lipid antigen presenting system.
Through sponsored research arrangements, VacTex has sought to demonstrate
that the host response to lipid antigens is an important component of the
immune system. VacTex' principle asset is a license agreement with Brigham
& Women's Hospital, Inc. granting to VacTex the exclusive right to make,
use, sell, distribute and license products relating to the CD1 lipid
antigen presenting system.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements of Business Acquired.
VACTEX, INC.
(A Development Stage Enterprise)
FINANCIAL STATEMENTS
For the years ended DECEMBER 31, 1997 AND 1996
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of VacTex, Inc.:
We have audited the accompanying balance sheets of VacTex, Inc. (a
development stage enterprise), as of December 31, 1997 and 1996 and the
related statements of operations, changes in stockholders' equity, and cash
flows for the years then ended and cumulative from inception (November 1,
1995) to December 31, 1997. These financial statement are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of VacTex, Inc. (a
development stage enterprise), as of December 31, 1997 and 1996 and the
results of its operations and its cash flows for the years then ended and
cumulative from inception (November 1, 1995) to December 31, 1997, in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note A to the
financial statements, the Company has incurred losses from operations since
inception and requires additional financing. These circumstances raise
substantial doubt about the Company's ability to continue as a going
concern. Management's plans in regard to these matters are also described
in Note A. The financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
/s/ Coopers & Lybrand, L.L.P.
Boston, Massachusetts
March 16, 1998
VACTEX, INC.
(A Development Stage Enterprise)
BALANCE SHEETS
December 31, 1997 and 1996
ASSETS 1997 1996
______ ______
Current assets: $ 135,346 1,171,577
Cash and cash equivalents
Interest receivable - 9,350
-------- ----------
Total current assets 135,346 1,180,927
-------- ---------
Total assets $ 135,346 $ 1,180,927
======== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable 6,455 1,913
Payable to related party (Note D) 14,519 172,813
Commitments (Notes C and D)
Stockholders' equity (Note C):
Redeemable preferred stock Series A Cumulative
Convertible, $.01 par value; 2,500,000
authorized; 2,000,000 shares issued and
outstanding 2,383,586 2,183,586
Common stock, $.01 par value; 5,000,000
authorized; 935,000 and 785,000
shares issued and outstanding as of
December 31, 1997 and 1996, respectively 9,350 7,850
Additional paid-in capital - -
Deficit accumulated during development stage (2,278,564) (1,185,235)
----------- -----------
Total stockholders' equity 114,372 1,006,201
----------- -----------
Total liabilities and stockholders' equity $ 135,346 $ 1,180,927
=========== ===========
The accompanying notes are an integral part of the financial statements.
VACTEX, INC.
(A Development Stage Enterprise)
STATEMENTS OF OPERATIONS
for the years ended December 31, 1997 and 1996 and cumulative
from inception (November 1, 1995) to December 31, 1997
Cumulative
From Inception
(November 1,
1995) to
December 31,
1997 1996 1997
------ ------ --------------
Operating expenses:
Research and development (891,160) $ (992,102) $(1,883,262)
General and administrative (39,238) (94,044) (133,806)
--------- ---------- ------------
Operating loss (930,398) (1,086,146) (2,017,068)
Interest income, net 21,949 71,267 93,470
---------- ----------- -----------
Net loss $ (908,449) $(1,014,879) $(1,923,598)
========= =========== ===========
The accompanying notes are an integral part of the financial statements.
<TABLE>
VACTEX, INC.
(A Development Stage Enterprise)
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
from inception (November 1, 1995) through December 31, 1997
<CAPTION>
Redeemable
Series A
Cumulative Deficit
Convertible Additional Accumulated Total
Preferred Stock Common Stock Paid-In Since Stockholders'
Shares Amount Shares Amount Capital Inception Equity
<S> <C> <C> <C> <C> <C> <C> <C>
November 1, 1995
Issuance of common stock
to founders,
December 1995 310,000 $ 3,100 $3,100
Issuance of Series A
Preferred stock,
December 1995 1,000,000 $1,000,000 1,000,000
Accretion of redeemable
stock 3,283 $ (3,283) -
Net loss (270) (270)
----- -----
Balance December 31,
1995 1,000,000 1,003,283 310,000 3,100 (3,553) 1,002,830
Issuance of common stock
to BWH (see Note D),
January 1996 325,000 3,250 3,250
Issuance of common stock
to Procept (see Note D),
March through December 1996 150,000 1,500 $ 13,500 15,000
Issuance of Series A
Preferred stock,
February 1996 1,000,000 1,000,000 1,000,000
Accretion of redeemable
stock 180,303 (13,500) (166,803) -
Net loss (1,014,879) (1,014,879)
----------- -----------
Balance December 31,
1996 2,000,000 2,183,586 785,000 7,850 (1,185,235) 1,006,201
Issuance of common stock
to Procept (see
Note D), March through
December 1997 150,000 1,500 13,500 15,000
Stock option compensation 1,620 1,620
Accretion of redeemable stock 200,000 (15,120) (184,880) -
Net loss (908,449) (908,449)
--------- ---------
Balance December 31,
1997 2,000,000 $2,383,586 935,000 $9,350 - $(2,278,564) $114,372
========= ========== ======= ====== ======= =========== =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
VACTEX, INC.
(A Development Stage Enterprise)
STATEMENT OF CASH FLOWS
for the years ended December 31, 1997 and 1996 and cumulative
from inception (November 1, 1995) to December 31, 1997
Cumulative
From Inception
(November 1,
1995) to
December 31,
1997 1996 1997
------ ----- --------------
Cash flows for operating
activities:
Net loss $ (908,449) $ (1,014,879) $ (1,923,598)
Adjustments to reconcile
net loss to net cash used
for operating activities:
Noncash compensation expense 1,620 1,620
Noncash issuance of common stock 15,000 18,250 36,350
(Decrease)/increase in accounts
payable (153,752) 174,726 20,974
Decrease/(increase) in
accounts receivable 9,350 (9,350) -
-------- ----------- ----------
Net cash used for operating
activities (1,036,231) (831,253) (1,864,654)
----------- ----------- -----------
Cash flows from financing activities:
Proceeds from issuance of
preferred stock - 1,000,000 2,000,000
---------- --------- ----------
Net cash provided by financing
activities - 1,000,000 2,000,000
---------- ---------- ----------
Net increase in cash and
cash equivalents (1,036,231) 168,747 135,346
----------- ---------- ----------
Cash and cash equivalents,
at beginning of period 1,171,577 1,002,830 -
----------- ---------- ----------
Cash and cash equivalents,
at end of period $ 135,346 $1,171,577 $135,346
========== ========== =========
The accompanying notes are an integral part of the financial statements.
VACTEX, INC.
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. Nature of Business:
VacTex, Inc. (the "Company") (a development stage enterprise) is a
Delaware Corporation which began operations on November 1, 1995, and
is engaged in performing research in the field of immunology, with
hopes of producing therapeutic and/or prophylactic vaccines to combat
worldwide infectious diseases. Since its inception, the Company has
devoted substantially all of its efforts establishing a new business
and to carry on research and development activities.
The Company is subject to risks common to companies in the industry
including, but not limited to, new technological innovations,
dependence on key personnel, protection of proprietary technology,
compliance with government regulations, uncertainty of market
acceptance of products, product liability and the need to obtain
financing.
The Company's financial statements have been presented on the basis
that it is a going concern, which contemplates continuity of
operations, realization of assets and the satisfaction of liabilities
in the normal course of business. The Company needs to obtain
additional financing in 1998 to continue operations. The Company is
pursuing potential investors, strategic partners, and corporate
agreements. There can be no assurance that the Company will achieve
its 1998 operating plan or that it will be able to obtain additional
financing to provide the liquidity necessary for the Company to
continue its operations. The financial statements do not include any
adjustments that might result from the outcome of these uncertainties.
B. Summary of Significant Accounting Policies:
Cash and Cash Equivalents
The Company considers all highly liquid investments with remaining
maturities of three months or less at the time of acquisition to be
cash equivalents. At December 31, 1996 cash equivalents include a
Federal National Mortgage Association discount note with an effective
yield of 5.22% which matured in 1997.
Concentration of Credit Risk
Cash and cash equivalents are financial instruments which potentially
subject the Company to concentrations of credit risk. At December 31,
1997, substantially all of the Company's cash was invested in a single
financial institution.
Research and Development Expense
Research and development costs are expensed as incurred.
Income Taxes
The Company uses the liability method of accounting for income taxes.
Under the liability method, deferred tax assets and liabilities
reflect the impact of temporary timing differences between amounts of
assets and liabilities for financial reporting purposes and such
amounts as measured by tax laws. A valuation allowance is required to
offset any net deferred tax assets if, based upon available evidence,
it is more likely than not that some or all of the deferred tax assets
will not be realized.
Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities, disclosure of contingent assets and liabilities at the
dates of the financial statements and the reported amounts of revenues
and expenses during the reporting periods. Actual results could
differ from those estimates.
C. Equity:
Common Stock
The Company has authorized 5,000,000 shares of common stock at a par
value of $.01 per share. On November 1, 1995, the Company issued
310,000 shares ("founders shares") to eight individuals pursuant to
the provisions of a Restricted Stock Purchase Agreement, in exchange
for services provided by each individual prior to that date. As of
December 31, 1997, the Company has 935,000 common shares outstanding.
Preferred Stock
The Company has authorized 2,500,000 shares of Series A Cumulative
Convertible Redeemable Preferred Stock at a par value of $.01 per
share. Dividends on each share of the Series A Preferred Stock accrue
on a daily basis at the rate of $.10 per annum. The stock maintains a
liquidation preference equal to $1.00 per share plus any accrued or
declared but unpaid dividends.
The Company shall, unless waived by holders of at least 66 2/3% of the
then outstanding shares of Series A Preferred Stock, redeem the
following portions of the number of shares of Series A Preferred Stock
from each holder requesting redemption:
Percentage of shares
of
Redemption Series A Preferred
Date Stock
Then Outstanding to
be
Redeemed from each holder
----------- -------------------------
December 31, 2001 33 1/3%
December 31, 2003 50%
December 31, 2004 100%
The redemption price shall be $1.00 per share plus all accrued and
unpaid dividends.
1995 Equity Incentive Plan
On December 18, 1995, the Board of Directors approved an equity
incentive plan to attract and retain key employees and consultants.
Awards under the plan may be for up to 1,000,000 shares of common
stock. Stock options may be in the form of Incentive Stock Options
(granted at fair market value) or Nonqualified Options (at a price
determined by the Board of Directors), or may be in the form of
restricted stock. Stock Appreciation Rights may be issued separately,
or in tandem with an option.
Pursuant to the provisions of the Equity Incentive Plan (the "Plan"),
on April 4, 1996 and September 18, 1996 the Board of Directors voted
to grant nonqualified options to certain nonemployees to purchase
36,000 and 18,000 shares of common stock, respectively, which
approximates the common stock's fair value. The options are
immediately exercisable, are subject to a two-year repurchase
restriction and have an exercise price of $.10 per share which
approximates the common stock's fair value.
Pursuant to the provisions of the Plan, on March 6, 1997 and September
16, 1997 the Board of Directors voted to grant nonqualified options to
a director and certain nonemployees to purchase 20,000 and 27,000
shares of common stock, respectively, having an exercise price of $.10
per share which approximates the common stock's fair value. The
options are immediately exercisable, are subject to a two-year
repurchase restriction and have an exercise price of $.10 per share.
At December 31, 1997 no options have been canceled or forfeited, none
have been exercised and there were 101,000 options outstanding and
exercisable under the Plan.
The Company applies Accounting Principles Board Opinion 25 and related
interpretations in accounting for its Plan and, accordingly,
compensation expense of $1,620 has been recorded in the year ended
December 31, 1997 for options granted to nonemployees. Had
compensation expense for employee options been determined based on the
fair value at the grant date for options granted under the Plan
consistent with the method of Statement of Financial Accounting
Standards No. 123 (SFAS 123), "Accounting for Stock-Based
Compensation," the Company's net loss would have been as follows:
Net Loss December 31, 1997 December 31, 1996
--------- ----------------- -----------------
As reported $(908,449) $(1,014,879)
Pro forma (908,889) (1,018,119)
The effects of applying SFAS 123 in this pro forma disclosure are not
likely to be representative of the effects or reported net income for
future years. Additional awards are anticipated in future years.
The fair value of each option grant was estimated on the date of grant
using the minimum value option-pricing model. In computing these pro
forma amounts, the Company has used the following weighted average
assumptions:
December 31, 1997 December 31, 1996
----------------- -----------------
Risk-free interest rate 6.32% 6% - 6.6%
Dividend yield 0% 0%
Expected option life 4 years 4 years
Weighted average grant date
fair value $.06 $.06
D. Collaborative Research and Development Agreements:
Procept
In January 1996, VacTex entered into a Sponsored Research Agreement
with Procept, Inc., a biotechnology company, to provide research
services relating to the development of novel vaccines based on
discoveries licensed from the Brigham and Women's Hospital and Harvard
Medical School relative to the CDI system of lipid antigen
presentation.
Under the Sponsored Research Agreement, Procept will conduct specified
research tasks on behalf of VacTex for which Procept will receive a
combination of cash and equity in VacTex based on the number of full-
time equivalent employees of Procept engaged in the research, but
subject to maximum cash and stock limits. Currently, Procept has
neither invested cash in, nor transferred technology to VacTex. At
any time until the earlier of December 1997 or the termination of the
Sponsored Research Agreement by VacTex, Procept may exercise an option
to purchase all of the outstanding capital stock of VacTex at a fixed
price. If Procept does not exercise this option, it must issue
Procept common stock warrants to VacTex or its stockholders to
purchase an aggregate of 100,000 shares of common stock at an exercise
price of $3.50 per share.
For the year ended December 31, 1996, VacTex has research and
development expenses totaling $562,500 related to Procept under this
agreement which consists of $412,500 paid or payable in cash, and the
issuance of 150,000 shares of VacTex common stock issued and recorded
at ten cents per share.
For the year ended December 31, 1997, VacTex has research and
development expenses totaling $315,183 related to Procept under this
agreement which consists of $300,183 paid or payable in cash, and the
issuance of 150,000 shares of VacTex common stock issued and recorded
at ten cents per shares.
Brigham and Women's License Agreement
On January 8, 1996 VacTex entered into an exclusive license and
research agreement with Brigham and Women's Hospital ("BWH") who owns
the patent on certain technology. BWH wishes to have the vaccine
perfected and marketed as soon as possible to make them available for
public use, while VacTex will have the development and marketing
skills to undertake the development, manufacture, and selling of the
licensed product.
VacTex agrees to pay BWH the following:
a) $10,000 upon execution of the agreement
b) $20,000 on or before 1/1/98
c) $20,000 on or before 1/1/99
d) $20,000 on or before 1/1/00
In addition, VacTex is required to pay BWH a two percent royalty on
the net sales, if any, of licensed products. In addition to royalty
payments, VacTex is to pay BWH $100,000 upon the filing of the first
IND for any licensed product and $500,000 upon approval by the FDA of
the first NDA for a licensed product. Also, in addition to $10,000 of
cash paid, VacTex has issued to BWH 325,000 shares of its Common Stock
recorded at one cent per share pursuant to the signing of the license
agreement. The agreement, unless extended, remains in effect until
the expiration of the last to expire of the licensed patents or twenty
years, whichever is longer. BWH has the right to terminate the
license at any time after two years from the date of the agreement if
VacTex is not demonstrably engaged actively pursuing the goals of the
agreement, defined as VacTex expending $200,000 per year on said
technology.
Brigham and Women's Research Agreement
VacTex has agreed to pay BWH in support of a two-year funded research
program on February 8, 1996, undertaken by two employees of BWH as
follows:
a) $100,000 upon execution of the research agreement, and;
b) $100,000 on the first day of the next seven calendar
quarters, for a total payment of $800,000 during the
performance period.
For the years ended December 31, 1997 and 1996, VacTex has research
and development expenses totaling $400,000 paid to BWH in cash
pursuant to this research agreement.
On February 8, 1998, this agreement was amended to extend it until
February 7, 1999. VacTex has agreed to pay $412,924 to B&W in support
of a one-year funded research program undertaken by two employees of
BWH as follows:
a) $103,231 upon execution of the amendment (February 8, 1998)
b) $103,231 due on May 8, 1998
c) $103,231 due on August 8, 1998
d) $103,231 due November 8, 1998
BWH can terminate the one-year agreement given thirty days' written
notice if VacTex does not meet its financial obligation. VacTex can
terminate the agreement given thirty-day written notice to BWH but
remains obligated for a twelve-month period to pay salary continuance
costs to the two BWH employees.
E. Income Taxes:
Since the Company has incurred net losses since inception, no
provision for income taxes has been recorded. Deferred income taxes
consist principally of deferred tax assets relating to net operating
losses and research and development credits offset by deferred tax
liabilities relating to deprecation. The net deferred federal and
state tax asset is approximately $878,000 for which a full valuation
allowance has been provided.
At December 31, 1997, the Company had approximately $1,800,000 of net
operating loss carryforwards available for income tax purposes. These
net operating loss carryforwards will expire in 2011. However,
changes in the Company's ownership as defined by the Internal Revenue
Code may limit the Company's ability to utilize net operating loss and
tax credit carryforwards.
(b) Pro Forma Financial Information.
Aquila Biopharmaceuticals, Inc.
Unaudited Pro Forma Condensed Balance Sheets
As of December 31, 1997
(in thousands)
Historical Historical Pro Forma Pro
Aquila VacTex Adjustments Forma Aquila
---------- ---------- ----------- ------------
Cash, cash equivalents
and marketable securities $16,897 $ 135 $ - $17,032
Total Assets $20,667 $ 135 $ - $20,802
Current liabilities $ 2,417 $ 21 $ 100 (1) $ 2,538
Long term obligations $ 364 $ - $ 1,300 (2) $ 1,664
Shareholders equity $17,887 $ 114 $ 8,337 (3) $16,601
$(9,623)(4)
$ (114)(5)
(1) To reflect estimated acquisition costs of $100,000.
(2) To reflect the Debentures of $1.3 million.
(3) To record the issuance of 1,150,000 shares of Aquila common stock.
(4) To reflect the write off of the purchase of incomplete technology of
$9.6 million.
(5) To reflect the elimination of VacTex equity.
Aquila Biopharmaceuticals, Inc.
Unaudited Pro Forma Statement of Operations
For the Year Ended December 31, 1997
(in thousands, except per share amounts)
Historical Historical Pro Forma Pro Forma
Aquila VacTex Adjustments Aquila
---------- ---------- ----------- ----------
Revenue $ 6,928 $ - $ - $ 6,928
Operating cost and
expenses $ 10,564 $ 930 $ - $11,494
Other income, net $ 4,370 $ 22 $ (91) (1) $ 4,301
Income/(loss) from
continuing
operations $ 734 $ (908) $ (91) $ (265)
Gain on sale $ 191 $ - $ - $ 191
Net income/(loss) $ 925 $ (908) $ (91) $ (74)
EPS Basic $ 0.18 $ (1.08) $(0.01)
Diluted 0.18 (l.08) (0.01)
Shares outstanding
Basic 5,004 841 1,150 (2) 6,154
(841) (3)
Diluted 5,142 841 1,150 (2) 6,292
(841) (3)
(1) To reflect the accrual of interest on the Debentures.
(2) To record the issuance of 1,150,000 shares of Aquila common stock.
(3) To eliminate the VacTex shares outstanding.
(c) Exhibits.
2.1. Agreement and Plan of Merger by and among Aquila
Biopharmaceuticals, Inc., Aquila Acquisition, Inc. and VacTex,
Inc. dated April 13, 1998. The Company will provide the
Commission with exhibits and schedules to the Agreement and Plan
of Merger upon request.
4.1 Form of Debenture.
23.1 Consent of Coopers & Lybrand L.L.P.
SIGNATURES
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.
AQUILA BIOPHARMACEUTICALS, INC.
By:_/s/James L. Warren__________
James L. Warren
Date:_April 22, 1998
EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of April ___, 1998 by
and among Aquila Biopharmaceuticals, Inc., a Delaware corporation
("Aquila"), Aquila Acquisition, Inc., a Delaware corporation and
a wholly owned subsidiary of Aquila ("Sub") and VacTex, Inc., a
Delaware corporation ("VacTex") (Sub and VacTex being sometimes
hereinafter collectively referred to as the "Constituent
Corporations").
WHEREAS, the Board of Directors of Aquila, Sub, and VacTex,
deeming it advisable for the respective benefit of Aquila, Sub
and VacTex and their respective shareholders that VacTex merge
with Sub on the terms and conditions hereinafter set forth (the
"Merger"), have approved this Agreement; and
WHEREAS, for federal income tax purposes it is intended that
the Merger shall qualify as a reorganization within the meaning
of Section 368 of the Internal Revenue Code of 1986, as amended
(the "Code") ;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein, the parties agree as follows:
ARTICLE I
THE MERGER
1.01 The Merger. Subject to the terms and conditions
hereof, at the Effective Time (as defined in Section 1.02), Sub
shall be merged with and into VacTex in accordance with the
applicable provisions of Delaware General Corporation Law
("GCL"), the separate existence of Sub shall cease, and VacTex
shall be the surviving corporation (the "Surviving Corporation")
in the Merger. Upon the consummation of the Merger, the
Surviving Corporation shall thereupon possess all the rights,
privileges, powers and franchises of each of the Constituent
Corporations; and all property, real, personal and mixed, and all
debts due to either of the Constituent Corporations on whatever
account, as well as all other things in action or belonging to
either of the Constituent Corporations shall be vested in the
Surviving Corporation. All property rights, privileges, powers
and franchises and all and every other interest shall be
thereafter as effectually the property of the Surviving
Corporation as they were of the Constituent Corporations. All
rights of creditors and all liens upon any property of either of
the Constituent Corporations shall be preserved unimpaired, and
debts, liabilities and duties of each of the Constituent
Corporations shall be preserved unimpaired; and all debts,
liabilities and duties of each of the Constituent Corporations
shall thenceforth attach to the Surviving Corporation and may be
enforced against it to the same extent as if said debts,
liabilities and duties had been incurred or contracted by it.
1.02 Effective Time of the Merger. As soon as practicable
after satisfaction or waiver of all conditions to the Merger, the
parties shall cause a certificate of merger (the "Certificate of
Merger") to be filed and recorded in accordance with Section
251(c) of the GCL and shall take such further action as may be
required by law to make the Merger effective. The Merger shall
be effective as of the later of the time the Certificate of
Merger is duly filed with the Secretary of the State of Delaware
in accordance with Section 103 of the GCL or at such later time
as is specified in the Certificate of Merger (the "Effective
Time").
ARTICLE II
THE SURVIVING CORPORATION
2.01 Certificate of Incorporation. The certificate of
incorporation of VacTex, as in effect immediately prior to the
Effective Time, shall be the certificate of incorporation of the
Surviving Corporation; provided such certificate shall have been
amended and restated in its entirety so as to be in substantially
the form attached hereto as Exhibit A.
2.02 By-Laws. The bylaws of VacTex as in effect at the
Effective Time shall be the By-Laws of the Surviving Corporation,
provided such by-laws shall have been amended and restated in its
entirety so as to be in substantially the form attached hereto as
Exhibit B.
2.03 Officers and Directors. The officers and directors of
the Surviving Corporation shall be those officers and directors
listed in Exhibit C and in each case until their successors have
been elected and qualified or until otherwise provided by law,
the certificate of incorporation and the by-laws of the Surviving
Corporation.
ARTICLE III
CONVERSION OF SHARES
3.01 Conversion of Shares. At the Effective Time, by virtue
of the Merger and without any action on the part of the holders
of the capital stock of the Constituent Corporations: (a) each
issued and outstanding share of Sub Common stock, par value $.01
per share, of Sub ("Sub Common Stock") shall be converted into
and become one fully paid and non assessable share of common
stock of the Surviving Corporation, (b) all shares of common
stock, par value $.0l per share, of VacTex (the "VacTex Common
Stock") and all shares of Series A Cumulative Convertible
Preferred Stock, par value $.01 per share, of VacTex (the "VacTex
Preferred Stock") outstanding immediately prior to the Effective
Time, other than VacTex Dissenting Shares (as defined in Section
3.05), if any, shall be converted into and exchanged for in the
aggregate: (i) 1,150,000 shares of common stock, par value $.0l
per share, of Aquila (the "Aquila Common Stock"), and (ii) 7%
Subordinated Debentures of Aquila in the aggregate principal
amount of $1,300,000 (the "Aquila Debentures"). The Aquila
Debentures shall be in substantially the form attached hereto as
Exhibit D. The Aquila Common Stock and the Aquila Debentures
shall be allocated among the VacTex stockholders in accordance
with Schedule 3.01 hereto. The Aquila Common Stock and the
Aquila Debentures are sometimes collectively referred to herein
as the "Merger Consideration."
3.02 Exchange of Certificates. Upon surrender of a VacTex
Common Stock certificate or a VacTex Preferred Stock certificate
for cancellation, the holder of such certificate shall be
entitled to receive in exchange therefor a certificate
representing that number of whole shares of Aquila Common Stock
and an Aquila Debenture representing the appropriate principal
amount into which the shares of VacTex Common Stock or the shares
of VacTex Preferred Stock theretofore represented by such
certificate so surrendered shall have been converted pursuant to
the provisions of this Agreement, and the certificate so
surrendered shall forthwith be cancelled. Aquila Common Stock
and Aquila Debentures into which VacTex Common Stock and the
VacTex Preferred Stock shall be converted in the Merger shall be
deemed to have been issued at the Effective Time.
3.03 No Fractional Securities. No certificate or scrip
representing fractional shares of Aquila Common Stock shall be
issued upon the surrender for exchange of certificates
representing VacTex Common Stock or VacTex Preferred Stock. The
number of shares of Aquila Common Stock which each holder of
VacTex Common Stock and/or of VacTex Preferred Stock shall be
entitled to receive shall be rounded to the nearest whole share.
Each holder of VacTex Common Stock or VacTex Preferred Stock who
would be entitled to receive an Aquila Debenture in the principal
amount of less than $1,000 shall be entitled to receive cash in
lieu of such Aquila Debenture.
3.04 Closing of VacTex Transfer Books. At the Effective
Time, the stock transfer books of VacTex shall be closed and no
transfer of VacTex Common Stock or VacTex Preferred Stock shall
thereafter be made. If, after the Effective Time, certificates
representing shares of VacTex Common Stock or shares of VacTex
Preferred Stock are presented to the Surviving Corporation, they
shall be cancelled and exchanged for certificates representing
the appropriate Merger Consideration.
3.05 Dissenting Shares. (a) In the event that appraisal
rights are available for the shares of VacTex Common Stock under
Section 262 ("Section 262") of the GCL, shares of VacTex Common
Stock held by a shareholder who has properly exercised appraisal
rights with respect thereto in accordance with Section 262
(collectively, the "VacTex Dissenting Shares") shall not be
converted into shares of Aquila Common Stock, but each such
shareholder shall be entitled to receive payment of the fair
value of such shares in accordance with the provisions of Section
262, except that any VacTex Dissenting Shares held by a
shareholder who shall thereafter withdraw, in accordance with
Section 262, such demand for appraisal or lose the right to such
payment shall thereupon be deemed to have been converted into, at
the Effective Time, the right to receive Merger Consideration as
provided herein.
(b) VacTex shall give Aquila (i) prompt notice of any
written demands under Section 262 of the GCL, withdrawal of any
such demands and any other instruments served pursuant to the GCL
received by VacTex and (ii) the right to participate in all
negotiations and proceedings with respect to any demands with
respect to the VacTex Dissenting Shares. VacTex shall cooperate
with Aquila concerning and shall not, except with the prior
written consent of Aquila, voluntarily make any payment with
respect to, or offer to settle or settle, any such demands.
3.06 Transfer of Aquila Common Stock and Aquila Debentures.
Each certificate of Aquila Common Stock and each Aquila
Debenture issued pursuant to this Agreement shall be stamped or
otherwise imprinted with a legend in substantially the following
form mutatis mutandus:
The shares represented by this certificate have not
been registered under the Securities Act of 1933, as
amended, and thus may not be offered for sale, sold,
transferred or otherwise disposed of unless registered
under the Securities Act of 1933, as amended, or unless
an exemption from such registration is available.
Aquila may order the transfer agent for Aquila Common Stock
to stop the transfer of any shares of Aquila Common Stock
acquired pursuant to this Agreement bearing the legend set forth
herein.
3.07 Rights of Holders of VacTex Common Stock and VacTex
Preferred Stock. At and after the Effective Time, persons who
were holders of VacTex Common Stock or VacTex Preferred Stock
shall cease to have any rights as stockholders of VacTex except
for the right to surrender the stockholder's certificate in
exchange for receipt of the Merger Consideration.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF VACTEX
VacTex represents, warrants and covenants to each of Sub and
Aquila as of the Effective Time and as of the date hereof as set
forth below. The information disclosed on any Schedule shall be
deemed to relate solely to the section of this Article IV to
which such Schedule relates and shall not be deemed made for
other sections to which such disclosures may apply unless (i) it
is readily apparent that such information is clearly applicable
to another section of this Article IV or (ii) such disclosure is
cross-referenced in the Schedule(s) relating to such other
section(s), and, in each such case, only to the extent that the
applicable information or risk is described.
4.01 Corporate Organization. VacTex (i) is a corporation
duly organized, validly existing and in good standing under the
laws of the State of Delaware, (ii) has all requisite power and
authority, corporate and otherwise, to own, operate and lease the
properties and assets it now owns, operates and leases and to
carry on its business as now being conducted and (iii) is
qualified or licensed to do business and in good standing in
every jurisdiction in which the ownership, operation or lease of
property by it or the conduct of its business requires such
qualification or licensing, except for such failures, if any, to
be so qualified and in good standing, which either individually
or in the aggregate would not have a "Material Adverse Effect"
(as hereinafter defined). Material Adverse Effect when used in
connection with any entity means any change or effect that is
materially adverse to the business, financial condition,
operations, properties, assets or liabilities of such entity.
VacTex has previously delivered to Aquila complete and correct
copies of its Certificate of Incorporation, as amended, ("VacTex
Charter") and by-laws ("VacTex By-Laws") as presently in effect,
and VacTex is not in default in the performance, observation or
fulfillment of any provision of the VacTex Charter or VacTex By-
Laws.
4.02 Authorization. VacTex has full corporate power and
authority to execute and deliver this Agreement and, subject to
approval of the proposed Merger contemplated by this Agreement by
VacTex's shareholders, to consummate the transactions
contemplated hereby. The Board of Directors of VacTex has duly
adopted resolutions (a) declaring that the proposed Merger is
advisable on substantially the terms and conditions set forth in
this Agreement, (b) authorizing the execution and delivery of
this Agreement and the consummation of the transactions
contemplated hereby, (c) directing that the proposed Merger be
submitted for consideration at a special meeting of VacTex's
shareholders and (d) recommending that VacTex's shareholders
approve the proposed Merger; no other corporate proceedings
(other than the approval of the proposed Merger by the
shareholders of VacTex) on the part of VacTex are necessary to
authorize this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly and validly
executed and delivered by VacTex and, subject to approval of the
shareholders of VacTex, this Agreement constitutes (assuming due
authorization, execution and delivery of this Agreement by Aquila
and Sub), the valid and binding agreement of VacTex, enforceable
against VacTex in accordance with its terms.
4.03 Capitalization. (a) The authorized capital stock of
VacTex consists of 5,000,000 shares of VacTex Common Stock of
which 1,035,000 shares are issued and outstanding and 2,500,000
shares of VacTex Preferred Stock, of which 2,000,000 shares are
issued and outstanding. No other class of capital stock is
issued or outstanding. All shares of capital stock of VacTex
which are outstanding as of the date hereof, are duly authorized,
validly issued, fully paid and nonassessable, and are not subject
to, nor were they issued in violation of, any preemptive rights.
Schedule 3.01 contains a true, correct and complete list of each
person who owns of record or beneficially any of the capital
stock of VacTex specifying the number of shares and class of
securities held by each.
(b) Except as set forth above, on Schedule 3.01 and on
Schedule 4.03, there are (i) no shares of capital stock or other
voting securities of VacTex authorized or outstanding, (ii) no
subscriptions, options, conversion or exchange rights, warrants,
repurchase or redemption agreements, or other agreements, claims
or commitments of any nature whatsoever obligating VacTex to
issue, transfer, deliver or sell, repurchase or redeem or cause
to be issued, transferred, delivered, sold, repurchased or
redeemed, additional shares of its capital stock or other
securities or obligating VacTex to grant, extend or enter into
any such agreement or commitment; and (iii) there are no voting
trusts or other agreements or understandings with respect to the
voting of the capital stock of VacTex or agreements or
understandings restricting the disposition of the capital stock
of VacTex to which VacTex is a party or is bound or, to the best
knowledge of VacTex after due investigation and inquiry, to which
any other party is bound. VacTex does not own beneficially any
shares of capital stock of Aquila.
4.04 Non-Contravention; Consents and Approvals. Except for
(a) the filing of the Certificate of Merger and other appropriate
merger documents, if any, as required by the laws of the State of
Delaware and (b) those agreements with respect to which VacTex
shall obtain the consents and modifications from the appropriate
parties all as set forth on Schedule 4.04 (the "Required
Consents"), the execution and delivery of this Agreement by
VacTex and the consummation of the transactions contemplated
hereby do not and will not (i) violate any provision of the
VacTex Charter or VacTex By-Laws; (ii) violate any statute,
ordinance, rule, regulation, order or decree of any court or of
any public, governmental or regulatory body, agency or authority
applicable to VacTex or by which any of its properties or assets
may be bound; (iii) require any filing with, or permit, consent
or approval of, or the giving of any notice to, any public,
governmental or regulatory body, agency or authority; or (iv)
result in a violation of, or constitute (with or without due
notice or lapse of time or both) a default (or give rise to any
right of termination, cancellation or acceleration) under, any of
the terms, conditions or provisions of any note, bond, mortgage,
indenture, license, franchise, permit, agreement or other
instrument or obligation to which VacTex is a party, or by which
VacTex or any of its properties or assets may be bound, excluding
from the foregoing clauses (ii), (iii) and (iv) violations,
breaches and defaults, which, and filings, notices, permits,
consents and approvals the absence of which, in the aggregate,
would not have a Material Adverse Effect on VacTex or on the
ability of VacTex to consummate the transactions contemplated
hereby.
4.05 Equity Ownership. VacTex does not own, directly or
indirectly, any capital stock or other equity securities of any
corporation or have any direct or indirect equity or ownership
interest in any entity or business. VacTex is not subject to any
obligation or requirement to provide funds for or to make any
investment in the form of a loan, capital contribution or
otherwise in any entity or business.
4.06 Financial Statements. VacTex has previously delivered
to Aquila (i) the audited financial statements of VacTex as of
December 31, 1996 and December 31, 1997, including the notes
thereto, in each case examined by and accompanied by the report
of independent certified public accountants, (hereinafter
collectively referred to as the "VacTex Audited Financial
Statements"). The VacTex Audited Financial Statements have been
prepared from, and are in accordance with, the books and records
of VacTex and present fairly the financial position of VacTex as
of the dates and for the periods indicated, in each case in
conformity with generally accepted accounting principles,
consistently applied during such periods, and have been certified
without qualification by VacTex's independent public accountants
(except as to the Company's ability to continue as a going
concern). The VacTex Audited Financial Statements contain and
reflect adequate reserves with respect to the contracts and
commitments for the sale of goods or provision of services which
are consistent with previous reserves taken for all reasonably
anticipated material losses and costs and expenses; and the
amounts shown as accrued for current and deferred income and
other taxes in the VacTex Audited Financial Statements are
sufficient for the payment of all accrued and unpaid federal,
state and local income taxes, interest, penalties, assessments or
deficiencies applicable to VacTex, whether disputed or not, for
the applicable period then ended and periods prior thereto.
4.07 Absence of Undisclosed Liabilities. Except as and to
the extent reflected in the balance sheet dated as of
December 31, 1997, included in the VacTex Audited Financial
Statements (the "VacTex Balance Sheet") or in the notes to the
VacTex Financial Statements for the fiscal year then ended,
VacTex had at that date no liabilities or obligations of any
nature (whether accrued, absolute, contingent or otherwise and
whether due or to become due), which were material to VacTex.
Except as set forth on Schedule 4.07, since the date of the
VacTex Balance Sheet, VacTex has not incurred any liabilities or
obligations of any nature (whether accrued, absolute, contingent
or otherwise, and whether due or to become due) which are
material to VacTex except for those incurred in the ordinary
course of business and consistent with past practice.
4.08 Absence of Certain Changes. Since December 31, 1997,
VacTex has not (i) suffered any Material Adverse Effect or (ii)
entered into any material transaction or conducted its business
or operations, other than in the ordinary course of business
consistent with past practice.
4.09 Legal Proceedings, etc. (i) There are no suits,
actions, claims, proceedings, or to the best of VacTex's
knowledge after due inquiry of its officers, directors and
employees, investigations or inquiries pending, or threatened
against, relating to or involving VacTex (or any of its officers
or directors in connection with the business or affairs of VacTex
including any claims against officers and directors under which
such officer or director would be entitled to indemnification
from VacTex under the provision of the VacTex Charter or the
VacTex By-Laws) or any properties or rights of VacTex, before any
court, arbitrator or administrative or governmental body, United
States or foreign, which if adversely determined would have a
Material Adverse Effect on VacTex; (ii) there are no such suits,
actions, claims, proceedings or investigations pending, or, to
the best of VacTex's knowledge, threatened challenging the
validity or propriety of the transactions contemplated by this
Agreement; and (iii) VacTex is not subject to any judgment,
decree, injunction, rule or order of any court or, to the best of
VacTex's knowledge after due inquiry, any governmental
restriction which is reasonably likely to have a Material Adverse
Effect on VacTex, or which materially adversely affects the
ability of VacTex to acquire any property or conduct business in
any area.
4.10 Compliance with Applicable Law. Except for such
violations and defaults which in the aggregate would not have a
Material Adverse Effect on VacTex, (i) VacTex currently holds and
is in compliance with the terms of all licenses, permits and
authorizations necessary for the lawful conduct of its business,
and (ii) VacTex has complied with, and is not in violation of, or
in default in any respect under, the applicable statutes,
ordinances, rules, regulations, orders or decrees of all federal,
state, local and foreign governmental bodies, agencies and
authorities having, asserting or claiming jurisdiction over it or
over any part of its operations or assets.
4.11 No Default. To the best knowledge of VacTex after due
inquiry (a) VacTex is not in default under any agreement relating
to indebtedness for borrowed money to which it is a party, which
default, after notice or the passage of time, or both, would
permit the acceleration of such indebtedness for borrowed money,
(b) VacTex is not in default under any contract, lease or other
instrument or agreement to which it is a party, and (c) VacTex is
not in default or violation under any decree of any court or any
foreign, federal, state, municipal or other governmental or
regulatory department, agency or authority (including, without
limitation, applicable laws, rules and regulations relating to
environmental protection, anti-trust, labor and employment,
improper payments and civil rights) which default or violation
would have a Material Adverse Effect on VacTex.
4.12 Brokers and Finders. Neither VacTex nor any of its
officers, directors or employees has employed any broker or
finder or incurred any liability for any brokerage fees,
commissions, finder's fees or similar fees or expenses and no
broker or finder has acted directly or indirectly for VacTex in
connection with this Agreement or the transactions contemplated
hereby. No investment banking, financial advisor's or similar
fees have been incurred or are or will be payable by VacTex in
connection with this Agreement or the transactions contemplated
hereby.
4.13 Certain Tax Matters. VacTex has timely filed all
federal, state, county, local and foreign income and other tax
returns, reports and declarations which are required by
applicable law to be filed on or before the Effective Time.
VacTex has paid or will pay before the Effective Time, or where
payment is not required to be made, has made or will make
adequate provisions for the payment of, all material taxes,
including, but not limited to, income, withholding, unemployment,
social security, sales and use and personal property taxes,
interest and penalties due and payable, in respect of any taxable
period ending on or before the Effective Time. For purposes of
the preceding sentence, the Effective Time shall be treated as
the last day of a taxable period whether or not the Effective
Time is in fact the last day of such taxable period. To the best
knowledge of VacTex after due inquiry, it will not have any
material liability with respect to any taxes, in excess of the
amount so paid or the reserves for taxes so established on the
books of VacTex. VacTex is not delinquent in the payment of any
taxes required to be paid by it. VacTex has not filed a consent
to the application of Section 341(f) of the Code.
4.14 Employee Benefit Plans. VacTex has never maintained or
contributed to any "employee benefit plan" within the meaning of
Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"). VacTex has never maintained or
contributed to any employee benefit plan that is subject to Title
IV of ERISA or intended to be qualified under Section 401(a) of
the Code. VacTex has never participated in or contributed to a
"multi-employer plan" within the meaning of Section 4001(a)(13)
of ERISA. VacTex has never been related to any trade or business
(whether or not incorporated) that together with VacTex would be
deemed to be a "single employer" within the meaning of Section
4001(b) of ERISA or Section 414(m) of the Code.
4.15 Employee Matters.
(a) Except as set forth on Schedule 4.15, VacTex is in
compliance with all federal, state and municipal laws respecting
employment and employment practices, terms and conditions of
employment, and wages and hours, and is not engaged in any unfair
labor practice and there are no arrears in the payment of wages
or social security taxes; excluding such violations and
arrearages which in the aggregate would not have a Material
Adverse Effect on VacTex or on the ability of VacTex to
consummate the transactions contemplated hereby.
(b) Except as set forth on Schedule 4.15:
(i) none of the employees of VacTex is represented by
any labor union;
(ii) there is no unfair labor practice complaint
against VacTex pending before the National Labor Relations
Board or any state or local agency;
(iii) there is no pending labor strike or other material
labor trouble affecting VacTex (including, without
limitation, any organizational drive);
(iv) there is no material labor grievance pending
against VacTex;
(v) there is no pending representation question
respecting the employees of VacTex; and
(vi) there are no pending arbitration proceedings
arising out of or under any collective bargaining agreement
to which VacTex is a party, or to the best knowledge of
VacTex any basis for which a claim may be made under any
collective bargaining agreement to which VacTex is a party.
(c) Schedule 4.15 sets forth a true, correct and complete
list of all existing (i) employee benefits programs, arrangements
or commitments; including, without limitation, insurance
coverage, workers, compensation, supplemental unemployment
benefits, vacation benefits, retirement benefits, life, health,
disability or accident benefits, deferred compensation, incentive
compensation, tuition assistance plans, cafeteria plans, salary
reduction arrangements, pension, profit sharing and all other or
similar programs, arrangements, commitments or policies provided
by VacTex to its employees and all written employment or
independent contractor contracts or agreements between VacTex and
any of its employees, and (ii) VacTex's payroll, including the
job descriptions and salary or wage rates of each of its
employees.
(d) For purposes of this Subsection 4.15, the term
"employee" shall be construed to include sales agents and other
independent contractors who spend a majority of their working
time on VacTex's business.
4.16 Intellectual Properties. VacTex owns or is licensed to
use or otherwise has the right to use all patents, trademarks,
trade names, trade secrets and all technology and inventions,
know-how and processes material to the business of VacTex.
(a) Schedule 4.16 sets forth (i) a true and complete
schedule of each patent, invention, industrial model, method,
process, design and all disclosures, registrations and
applications for any of the foregoing owned, licensed, or used by
VacTex; (ii) a true and accurate identification of each business
name (other than VacTex), trademark, service mark, trade name,
copyright and all registrations and applications for any of the
foregoing owned or used by VacTex; and (iii) a true and complete
list, without extensive or revealing descriptions, of all trade
secrets of VacTex including all processes, know-how and other
technical data, (the properties described in subsection (i), (ii)
and (iii) above are collectively referred to as "VacTex
Intellectual Properties") and Schedule 4.16 sets forth a true and
complete list of all contracts and other agreements to which
VacTex is a party with respect to each such item of VacTex
Intellectual Property and right thereto.
(b) Except for those rights described in Schedule 4.16
which have been retained by or granted to those parties to the
contracts set forth in Schedule 4.16, VacTex is the exclusive
owner of all right, title and interest in and to each of the
VacTex Intellectual Properties, free and clear of all liens,
security interests, charges, encumbrances, equities and other
adverse claims, and except as set forth in Schedule 4.16 and
Schedule 4.04, VacTex has the full right to consummate the Merger
without the consent of any party, and all rights of VacTex in and
to the Intellectual Properties will be unaffected by the
transactions contemplated by this Agreement.
(c) All issued patents, copyrights, trademarks, state,
federal and foreign registrations thereof listed in Schedule 4.16
have been validly issued and are enforceable and in full force
and effect and are not subject to any taxes or maintenance fees
except as set forth on Schedule 4.16.
(d) There have not been nor are there presently any claims,
actions or judicial or other adversary proceedings involving
VacTex concerning the VacTex Intellectual Properties; there is no
basis for any such action or proceeding; and no such action or
proceeding is pending or, to the best knowledge of VacTex,
threatened.
(e) Except as set forth on Schedule 4.16, VacTex has the
full, exclusive and unrestricted right and authority to use each
and all of the rights and properties referenced in Schedule 4.16
in connection with the conduct of its business; to the knowledge
of VacTex, such use does not conflict with, infringe upon, or
violate any patent or other proprietary or intellectual property
right of any other person, and, to the knowledge of VacTex,
VacTex has not infringed and is not now infringing any patent or
other proprietary right belonging to any other person. VacTex
has not given or received any notice or claim from or to any
third party with respect to any infringement.
(f) Except as set forth on Schedule 4.16, there are no
outstanding, and to the best knowledge of VacTex, no threatened
disputes or disagreements with respect to any of the rights,
properties, licenses or similar agreements or arrangements
identified in Schedule 4.16.
(g) With respect to each trade secret and invention
disclosure referenced in Schedule 4.16, all documentation with
respect to such trade secret and such invention disclosure is
current, accurate, and sufficient in detail and content to
identify and explain such trade secret and/or such invention
disclosure, and to allow its full and proper use without reliance
on the special knowledge or memory of others.
(h) VacTex has taken all reasonable security measures to
protect the secrecy, confidentiality and value of its trade
secrets and its invention disclosures and patent applications
and all other proprietary information.
(i) All proprietary information of VacTex is presently
valid and protectible, and are not part of the public knowledge
or literature, nor to the best knowledge of VacTex have they been
used, divulged, or appropriated for the benefit of any person
other than VacTex or to the detriment of VacTex.
(j) To the knowledge of VacTex after due inquiry, none of
the activities of the employees or consultants of VacTex in
performing services for VacTex violates any agreements or
arrangements that such employees have with former employees or
other third parties, including those relating to use of
confidential information and/or trade secrets.
4.17 Environmental Compliance.
(a) VacTex has obtained all permits, licenses and other
authorizations (collectively "VacTex Environmental Permits")
which are material to, or necessary for, the operation of
VacTex's business (as previously or currently conducted by
VacTex) under federal, state and local laws relating to pollution
or protection of the environment, including laws relating to
emissions, discharges, releases or threatened release of
pollutants, contaminants, hazardous or toxic materials, other
wastes or materials into ambient air, surface water, ground water
or land, or otherwise relating to pollution control or the
manufacturing, processing, distribution, use, treatment, storage,
disposal, transport or handling of pollutants, contaminants,
hazardous or toxic materials or other wastes or materials
(collectively "Environmental Laws"). To the best knowledge of
VacTex after due inquiry of its officers and employees and except
as set forth in Schedule 4.17, VacTex is in full compliance with
all terms and conditions of any required VacTex Environmental
Permits and is also in full compliance with all other
limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables contained in
the Environmental Laws or contained in any regulation, code,
plan, order, decree, judgment, notice or demand letter issued,
entered, promulgated or approved thereunder which are material
to, or necessary for, operation of its business. Except as set
forth in Schedule 4.17, VacTex has not received any notice of,
nor is it aware of, any events, conditions, circumstances,
activities, practices, incidents, actions or plans which may
interfere with, or prevent continued compliance by Aquila with
respect to its continuation of the business of VacTex as
presently conducted with applicable Environmental Laws and VacTex
Environmental Permits, or which may give rise to any common law
or legal liability, or otherwise form the basis of any
nonfrivolous claim, action, suit, proceeding, hearing or
investigation under applicable Environmental Laws, based on or
related to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling, or the
emission, discharge, release or threatened release into the
environment, of pollutant, contaminant, or hazardous or toxic
material or other waste or material.
(b) All current VacTex Environmental Permits are listed on
Schedule 4.17 true copies of which have been previously delivered
to Aquila. Except as set forth on Schedule 4.17, all such VacTex
Environmental Permits are in full force and effect and fully
paid; VacTex has not received notice of any violation nor, after
due inquiry, is VacTex aware of any other violation in respect to
any VacTex Environmental Permit. No proceeding is pending, or to
the knowledge of VacTex threatened to revoke or limit any VacTex
Environmental Permit; and to the best knowledge of VacTex, no
material capital expenditure will be necessary to maintain such
compliance.
4.18 Insurance. VacTex maintains no insurance coverage,
except as set forth in Schedule 4.15.
4.19 Contracts and Commitments.
(a) Schedule 4.19 contains a true, complete and correct
list and description of the following material contracts and
agreements in force and effect, whether written or oral
(collectively, the "VacTex Contracts").
(i) all loan agreements, indentures, mortgages and
guaranties to which VacTex is a party by or by which VacTex
or any of its property is bound;
(ii) all pledges, conditional sale or title retention
agreements, security agreements, equipment obligations,
personal property leases and lease purchase agreements to
which VacTex is party or by which VacTex or any of its
property is bound;
(iii) all contracts, agreements, commitments, purchase
orders or other understandings or arrangements to which
VacTex is a party or by which VacTex or any of its property
is bound which (A) involve payments or receipts by VacTex of
more than $10,000 in the case of any single contract,
agreement, commitment, understanding or arrangement under
which full performance (including payment) has not been
rendered by all parties thereto or (B) which may have a
Material Adverse Effect on VacTex;
(iv) all agency, distributor, sales representative and
similar agreements to which VacTex is a party;
(v) all contracts, agreements or other understandings
or arrangements between VacTex and any shareholder or
Affiliate (as defined in Section 7.08) of VacTex;
(vi) all leases, whether operating, capital or
otherwise, under which VacTex is lessor or lessee;
(vii) all contracts agreements and other documents or
information relating to past disposal of waste (whether or
not hazardous); and
(viii) any other material agreement or contract entered
into by VacTex or by which VacTex or any of its property is
bound.
(b) Except as set forth on Schedule 4.19, VacTex is not a
party or subject to any in force and effect, oral or written:
(i) contract or agreement for the purchase by VacTex
of inventory, supplies, equipment or other real or personal
property, or the procurement of services, except individual
purchase orders or aggregate purchase orders to a single
vendor involving payments of less than $10,000;
(ii) lease of equipment, machinery or other personal
property involving aggregate annual payments in excess of
$10,000;
(iii) contract or agreements for the sale or lease of
products or furnishing of services by VacTex except
individual purchase orders, or aggregate purchase orders
from a single customer, involving payments of less than
$10,000;
(iv) joint venture, partnership or other contract or
arrangement involving royalties or the sharing of profits;
(v) contract or agreement, other than in the ordinary
course of business, relating to the purchase or acquisition,
by merger or otherwise, of a significant portion of the
business, assets or securities of VacTex by any other person
or of any other person by VacTex;
(vi) contract or agreement containing a covenant or
covenants which purport to limit to a material extent the
ability or right of VacTex to engage in any lawful business
activity or compete with any person or entity;
(vii) contract or agreement for the borrowing or lending
of money or the guarantee of the obligations of any other
person; or
(viii) material contract or agreement not otherwise
described in this Section 4.22 involving payments of $10,000
or more which is not terminable by and without penalty to
VacTex within six months after the date of this Agreement.
(c) Except as set forth on Schedule 4.19:
(i) each VacTex Contract is a valid and binding
agreement of VacTex enforceable against VacTex in accordance
with its terms, and VacTex does not have any knowledge that
any VacTex Contract is not a valid and binding agreement of
the other parties thereto;
(ii) VacTex has fulfilled all material obligations
required pursuant to the VacTex Contracts to have been
performed by VacTex on its part prior to the date hereof,
and VacTex has no reason to believe that it will not be able
to fulfill, when due, all of its obligations under the
VacTex Contracts which remain to be performed after the date
hereof;
(iii) VacTex is not in breach of or default under any
VacTex Contract, and no event has occurred which with the
passage of time or giving of notice or both would constitute
such a default, result in a loss of rights or result in the
creation of any lien, charge or encumbrance, thereunder or
pursuant thereto;
(iv) there is no existing breach or default by any
other party to any VacTex Contract, and no event has
occurred which with the passage of time or giving of notice
or both would constitute a default by such other party,
result in a loss of rights or result in the creation or any
lien, charge or encumbrance thereunder or pursuant thereto;
(v) VacTex is not restricted by any VacTex Contract
from carrying on its business anywhere in the world; and
(vi) VacTex has no written or oral VacTex Contracts to
sell products or perform services which are expected to be
performed at, or to result in a loss. Except that,
depending on overhead allocations, some of VacTex's
government contracts and grants may not be operating at a
profit.
(d) The continuation, validity and effectiveness of each
VacTex Contract will not be affected by the Merger.
(e) True, correct and complete copies of all VacTex
Contracts have previously been delivered by VacTex to Aquila.
4.20 Bank Accounts and Powers of Attorney. Schedule 4.20
sets forth all bank accounts held in the name of VacTex and all
bank accounts used in connection with the operations of VacTex
whether or not such accounts are held in the name of VacTex,
lists the respective signatories therefore and lists the names of
all persons holding a power of attorney from VacTex and a summary
statement of the terms thereof.
4.21 Transactions with Management. Except as set forth on
Schedule 4.21, no executive officer or director of VacTex has
(whether directly or indirectly through another entity in which
such person has a material interest, other than as the holder of
less than 5% of a class of securities of a publicly traded
company) any material interest: in (a) any property or assets of
VacTex (except as a shareholder), (b) any current competitor,
customer, supplier or agent of VacTex, or (c) any person which is
currently a party to any material contract or agreement with
VacTex.
4.22 Suppliers. Schedule 4.22 sets forth a true, correct
and complete list of the names and addresses of the ten suppliers
of VacTex which accounted for the largest dollar volume of
purchases by VacTex for the fiscal year ended 1997. None of such
suppliers has notified VacTex that it intends to discontinue its
relationship with VacTex.
4.23 Proprietary Information Agreements. Each employee and
each consultant at the time of hire was required to enter into
VacTex's standard proprietary information agreement, a copy of
which has been delivered to Aquila. Except as set forth in
Schedule 4.23, to the best knowledge of VacTex after due inquiry,
each employee and each consultant has entered into such
agreement, and each such employee or consultant of VacTex who is
or was involved in scientific research or product development has
entered into such agreement.
4.24 Disclosure. No representation or warranty of VacTex in
this Agreement or any certificate, schedule, document or other
instrument furnished or to be furnished to Aquila pursuant hereto
or in connection herewith contains, as of the date of such
representation, warranty or instrument, or will contain any
untrue statement of a material fact or, at the date thereof,
omits or will omit to state a material fact necessary to make any
statement herein or therein, in light of the circumstances under
which such statement is or will be made, not misleading.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF
AQUILA BIOPHARMACEUTICALS, INC.
Aquila represents, warrants and covenants to VacTex as of
the Effective Time and as of the date hereof as set forth below.
The information disclosed on any Schedule shall be deemed to
relate solely to the section of this Article V to which such
Schedule relates and shall not be deemed made for other sections
to which such disclosures may apply unless (i) it is readily
apparent that such information is clearly applicable to another
section of this Article V or (ii) such disclosure is cross-
referenced in the Schedule(s) relating to such other section(s),
and, in each such case, only to the extent that the applicable
information or risk is described.
5.01 Corporate Organization. Aquila (i) is a corporation
duly organized, validly existing and in good standing under the
laws of the State of Delaware, (ii) has all requisite power and
authority, corporate and otherwise, to own, operate and lease the
properties and assets it now owns, operates and leases and to
carry on its business as now being conducted and (iii) is
qualified or licensed to do business and in good standing in
every jurisdiction in which the ownership, operation or lease of
property by it or the conduct of its business requires such
qualification or licensing, except for such failures, if any, to
be so qualified and in good standing, which when taken together
with all other such failures, would not in the aggregate have a
Material Adverse Effect on Aquila. Aquila has previously
delivered to VacTex complete and correct copies of its Restated
Certificate of Incorporation ("Aquila Charter") and By-Laws
("Aquila By-Laws") as presently in effect, and Aquila is not in
default in the performance, observation or fulfillment of either
of its Certificate of Incorporation or By-Laws.
5.02 Authorization. Aquila has full corporate power and
authority to execute and deliver this Agreement and to consummate
the transactions contemplated hereby. The Board of Directors of
Aquila has duly approved the execution and delivery of this
Agreement and the consummation of the transactions contemplated
hereby and no other corporate proceedings on the part of Aquila
are necessary to authorize this Agreement or to consummate the
transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by Aquila and, subject to the
foregoing, this Agreement constitutes (assuming due
authorization, execution and delivery of this Agreement by VacTex
and Sub), the valid and binding agreement of Aquila, enforceable
against Aquila in accordance with its terms. The shares of
Aquila Common Stock and the Aquila Debentures to be issued in the
Merger have been duly authorized by all necessary action of the
Board of Directors of Aquila and when issued in the Merger
pursuant to the terms hereof, will not have any preemptive rights
of subscription or purchase in respect thereof, except for those
provided by the terms of the Aquila Debentures.
5.03 Capitalization. (a) The authorized capital stock of
Aquila consists of 35,500,000 shares of Aquila Common Stock of
which 5,828,671 shares are issued and outstanding and 5,000,000
shares of preferred stock, par value $.01 per share, of which no
shares are issued and outstanding. As of December 31, 1997, (i)
831,655 shares of Aquila Common Stock were reserved for issuance
pursuant to outstanding options granted under stock option plans;
and (ii) subscriptions were outstanding to purchase 3,900 shares
of Aquila Common Stock under Aquila's employee stock purchase
plan. All shares of Aquila Common Stock outstanding as of the
date hereof are duly authorized, validly issued, fully paid and
nonassessable and were not issued in violation of, or subject to,
any preemptive rights.
(b) Except as set forth above and on Schedule 5.03, there
are (i) no shares of capital stock or other voting securities of
Aquila authorized or outstanding and (ii) no subscriptions,
options, conversion or exchange rights, warrants, repurchase or
redemption agreements, or other agreements, claims or commitments
of any nature whatsoever obligating Aquila to issue, transfer,
deliver or sell, or cause to be issued, transferred, delivered,
sold, repurchased or redeemed, additional shares of its capital
stock or obligating Aquila to grant, extend or enter into any
such agreement or commitment. To the knowledge of Aquila, there
are no voting trusts or other agreements or understandings with
respect to the voting of the capital stock of Aquila. Aquila
does not own beneficially any shares of capital stock of VacTex.
5.04 Non-Contravention; Consents and Approvals. Except for
(a) the filing of the Certificate of Merger and other appropriate
merger documents, if any, as required by the laws of the State of
Delaware, the execution and delivery of this Agreement by Aquila
and the consummation of the transactions contemplated hereby,
will not (i) violate any provision of the Restated Certificate of
Incorporation or By-Laws of Aquila; (ii) violate any statute,
ordinance, rule, regulation, order or decree of any court or of
any public, governmental or regulatory body, agency or authority
applicable to Aquila or by which any of its properties or assets
may be bound; (iii) require any filing with or permit, consent or
approval of, or the giving of any notice to, any public,
governmental or regulatory body, agency or authority; or (iv)
result in a violation of, or constitute (with or without due
notice or lapse of time or both) a default (or give rise to any
right of termination, cancellation or acceleration) under, any of
the terms, conditions or provisions of any note, bond, mortgage,
indenture, license, franchise, permit, agreement or other
instrument or obligation to which Aquila is a party, or by which
Aquila or any of its properties or assets may be bound, excluding
from the foregoing clauses (ii), (iii) and (iv) violations,
breaches and defaults which, and filings, notices, permits,
consents and approvals the absence of which, in the aggregate
would not have a Material Adverse Effect on Aquila or the ability
of Aquila to consummate the transactions contemplated hereby.
5.05 SEC Reports. Aquila has heretofore delivered to VacTex
its (i) Annual Report on Form 10-K for the years ended
December 31, 1995, December 31, 1996 and December 31, 1997 as
filed with the Securities and Exchange Commission ("SEC"), and
(ii) all other reports or registration statements filed by Aquila
with the SEC since December 31, 1997. As of their respective
dates, such reports and statements complied in all material
respects with applicable SEC requirements (except for the failure
of such reports and registration statements to include selected
financial data for 1992 and 1993) and did not contain any untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were
made, not misleading.
5.06 Financial Statements. Aquila has previously delivered
to VacTex (i) the audited financial statements of Aquila as of
December 31, 1995, December 31, 1996 and December 31, 1997
including the notes thereto, in each case examined by and
accompanied by the report of Coopers & Lybrand, L.L.P.,
independent certified public accountants, (hereinafter
collectively referred to as the "Aquila Audited Financial
Statements"). The Aquila Audited Financial Statements have been
prepared from, and are in accordance with, the books and records
of Aquila and present fairly the financial position of Aquila as
of the dates and for the periods indicated, in each case in
conformity with generally accepted accounting principles,
consistently applied during such periods, and have been certified
without qualification by Aquila's independent public accountants.
The Aquila Audited Financial Statements contain and reflect
adequate reserves with respect to the contracts and commitments
for the sale of goods or provision of services which are
consistent with previous reserves taken for all reasonably
anticipated material losses and costs and expenses and the
amounts shown as accrued for current and deferred income and
other taxes in the Aquila Audited Financial Statements are
sufficient for the payment of all accrued and unpaid federal,
state and local income taxes, interest, penalties, assessments or
deficiencies applicable to Aquila, whether disputed or not, for
the applicable period then ended and periods prior thereto.
5.07 Absence of Undisclosed Liabilities. Except as and to
the extent reflected in the balance sheet dated as of December
31, 1997 included in the Aquila Audited Financial Statements (the
"Aquila Balance Sheet") or in the notes to the Aquila Audited
Financial Statements for the fiscal year then ended, Aquila had
at that date no liabilities or obligations of any nature (whether
accrued, absolute, contingent or otherwise, and whether due or to
become due) which are material to Aquila except for those
incurred in the ordinary course of business and consistent with
past practice.
5.08 Absence of Certain Changes. Except as set forth on
Schedule 5.08, since December 31, 1997, Aquila has not: (i) taken
any action which would cause Aquila to violate its covenants set
forth in Section 7.01 (ii) suffered any Material Adverse Effect
or (iii) entered into any material transaction or conducted its
business or operations, other than in the ordinary course of
business consistent with past practice.
5.09 Legal Proceedings; Etc. Except as set forth on
Schedule 5.09, there are no suits, actions, claims, proceedings
or, to the best of Aquila's knowledge after due inquiry,
investigations or congressional inquiries pending, or, to the
best knowledge of the officers of Aquila, threatened against,
relating to or involving Aquila (or any of its officers or
directors in connection with the business or affairs of Aquila)
or any properties or rights of Aquila, before any court,
arbitrator or administrative or governmental body, United States
or foreign, which if adversely determined would have a Material
Adverse Effect on Aquila. There are no such suits, actions,
claims, proceedings or investigations pending, or, to the best
knowledge of the officers of Aquila, threatened challenging the
validity or propriety of the transactions contemplated by this
Agreement. Aquila is not subject to any judgment, decree,
injunction, rule or order of any court or, to the best knowledge
of the officers of Aquila, any governmental restriction which is
reasonably likely to have a Material Adverse Effect on Aquila, or
which materially adversely affects the ability of Aquila to
acquire any property or conduct business in any area.
5.10 Compliance with Applicable Law. Except for such
violations and defaults which in the aggregate would not have a
Material Adverse Effect on Aquila, (i) Aquila currently holds and
is in compliance with the terms of all licenses, permits and
authorizations necessary for the lawful conduct of its business,
and (ii) Aquila has complied with, and is not in violation of, or
in default in any respect under, the applicable statutes,
ordinances, rules, regulations, orders or decrees of all federal,
state, local and foreign governmental bodies, agencies and
authorities having, asserting or claiming jurisdiction over it or
over any part of its operations or assets.
5.11 No Default. To the best knowledge of Aquila after due
inquiry, (a) Aquila is not in default or violation under any
agreement relating to indebtedness for borrowed money to which it
is a party, which default or violation, after notice or the
passage of time, or both, would permit the acceleration of
indebtedness for borrowed money in excess of $50,000 in the
aggregate and (b) Aquila is not in default or violation under any
contract, lease or other instrument or agreement to which it is a
party, (c) Aquila is not in default or violation under any decree
of any court or any foreign, federal, state, municipal or other
governmental or regulatory department, agency or authority
(including, without limitation, applicable laws, rules and
regulations relating to environmental protection, anti-trust,
labor and employment, improper payments and civil rights) which
default or violation would have a Material Adverse Effect on
Aquila.
5.12 Brokers and Finders. Neither Aquila nor any of its
officers, directors or employees has employed any broker or
finder or incurred any liability for any brokerage fees,
commissions, finder's fees or similar fees or expenses, and no
broker or finder has acted directly or indirectly for Aquila in
connection with this Agreement or the transactions contemplated
hereby. Except as set forth on Schedule 5.12, no investment
banking, financial advisor's or similar fees have been incurred
or are or will be payable by Aquila in connection with this
Agreement or the transactions contemplated hereby.
5.13 Certain Tax Matters. Aquila has timely filed all
federal, state, county, local and foreign income and other tax
returns, reports and declarations which are required by
applicable law to be filed on or before the Effective Time, other
than returns the failure to file which, in the aggregate, would
not have a Material Adverse Effect on Aquila. Aquila has paid or
will pay before the Effective Time, or where payment is not
required to be made, has made or will make adequate provisions
for the payment of, all material taxes, including but not limited
to income, withholding, unemployment, social security, sales and
use, and personal property taxes, interest and penalties due and
payable, in respect of any taxable period ending on or before the
Effective Time. For purposes of the preceding sentence, the
Effective Time shall be treated as the last day of a taxable
period whether or not the Effective Time is in fact the last day
of such taxable period. To the best knowledge of Aquila after
due inquiry, it will not have any material liability with respect
to any taxes, in excess of the amount so paid or the reserves for
taxes so established on the books of Aquila. Aquila is not
delinquent in the payment of any taxes required to be paid by it.
Aquila has not filed a consent to the application of Section
341(f) of the Code.
5.14 Disclosure. No representation or warranty of Aquila in
this Agreement or any certificate, schedule, document or other
instrument furnished or to be furnished to VacTex pursuant hereto
or in connection herewith contains, as of the date of such
representation, warranty or instrument, or will contain any
untrue statement of a material fact or, at the date thereof,
omits or will omit to state a material fact necessary to make any
statement herein or therein, in light of the circumstances under
which such statement is or will be made, not misleading.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF
AQUILA ACQUISITION, INC.
Sub represents, warrants and covenants to VacTex as of the
Effective Time and as of the date hereof as set forth below:
6.01 Corporate Organization. Sub (i) is a corporation duly
organized, validly existing and in good standing under the laws
of the State of Delaware, (ii) has all requisite power and
authority, corporate and otherwise, to own, operate and lease the
properties and assets it now owns, operates and leases and to
carry on its business as now being conducted and (iii) is
qualified or licensed to do business and in good standing in
every jurisdiction in which the ownership, operation or lease of
property by it or the conduct of its business requires such
qualification or licensing, except for such failures, if any, to
be so qualified and in good standing, which when taken together
with all other such failures, would not in the aggregate have a
Material Adverse Effect on Sub. Sub has previously delivered to
VacTex complete and correct copies of its Certificate of
Incorporation and By-Laws as presently in effect, and Sub is not
in default in the performance, observation or fulfillment of
either of its Certificate of Incorporation or By-Laws.
6.02 Authorization. Sub has full corporate power and
authority to execute and deliver this Agreement and to consummate
the transactions contemplated hereby. The Board of Directors of
Sub has duly approved the execution and delivery of this
Agreement and the consummation of the transactions contemplated
hereby, and no other corporate proceedings on the part of Sub are
necessary to authorize this Agreement or to consummate the
transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by Sub and, subject to the
foregoing, this Agreement constitutes (assuming due
authorization, execution and delivery of this Agreement by VacTex
and Aquila), the valid and binding agreement of Sub, enforceable
against Sub in accordance with its terms. The shares of Sub
Common Stock to be issued in the Merger have been duly authorized
by all necessary action of the Board of Directors of Sub; and
when issued in the Merger pursuant to the terms hereof, will not
have any preemptive rights of subscription or purchase in respect
thereof.
ARTICLE VII
COVENANTS
7.01 Conduct of Business. During the period commencing on
the date hereof and continuing until the Effective Time, except
as expressly contemplated by this Agreement or to the extent that
either Aquila or VacTex, as the case may be, shall otherwise
consent in writing, which consent may not be unreasonably
withheld:
(a) Aquila and VacTex Covenants. Each of Aquila and VacTex
agrees that it:
(i) will use all reasonable efforts to preserve intact
or improve its present business organization, properties and
relationships with customers, consultants, suppliers and
others having business dealings with it, all to the end that
its goodwill and ongoing business shall not be materially
impaired at the Effective Time.
(ii) will not declare any dividends on or make other
distributions in respect of its capital stock or amend the
VacTex Charter or VacTex By-Laws or the Aquila Charter or
Aquila By-Laws.
(iii) will not issue, authorize or propose the issuance
of, or purchase or propose the purchase of, any shares of
its capital stock or securities convertible into, or rights,
warrants or options to acquire, any such shares or other
convertible securities except: (A) the issuance by Aquila of
(x) options pursuant to employee benefit plans consistent
with prior practices and (y) Aquila Common Stock pursuant to
outstanding options, and (B) the issuance by VacTex of
VacTex Common Stock pursuant to outstanding options.
(iv) will not take, agree to take, or knowingly permit
to be taken any action or do or knowingly permit to be done
anything in the conduct of the business of VacTex or the
business of Aquila which would be contrary to or in breach
of any of the terms or provisions of this Agreement, or
which would cause any of the representations of Aquila or
VacTex contained herein to be or become untrue in any
material respect.
(b) VacTex Covenants. VacTex agrees that it:
(i) will carry on its business in, and only in, the
usual, regular and ordinary course in substantially the same
manner as heretofore conducted;
(ii) will not acquire or agree to acquire by merging or
consolidating with or into, purchasing substantially all of
the assets or stock of or otherwise, any business or any
corporation, partnership, association or other business or
organization or division thereof;
(iii) will use its best efforts to retain the services
of such officers and employees as may be requested by
Aquila;
(iv) will not change the compensation of any of its
officers, directors, employees or consultants;
(v) will not adopt, enter into or amend in any
material respect any collective bargaining, employee
pension, profit-sharing, retirement, insurance, incentive
compensation, severance, vacation or other plan, agreement,
trust, fund or arrangement for the benefit of employees;
(vi) will not enter into, modify or amend any license,
technology development or technology transfer agreement with
any other person or entity;
(vii) will not: (A) incur any long-term indebtedness for
borrowed money or issue any debt securities or assume,
guarantee or endorse the obligations of any other person;
(B) make any loans, advances or capital contributions to, or
investments in, any other person except for accounts
receivable created in the ordinary course of business; (C)
pledge or otherwise encumber shares of VacTex Common Stock
or shares of VacTex Preferred Stock; and (D) mortgage or
pledge any of its material assets, tangible or intangible,
or create or suffer to exist any material lien thereupon;
(viii) will not acquire, sell, lease or dispose of any
assets outside the ordinary course of business or any assets
which in the aggregate are material to VacTex;
(ix) will not change any of the accounting principles
or practices used by it;
(x) will not pay, discharge or satisfy any claims,
liabilities or obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise), other than the
payment, discharge or satisfaction in the ordinary course of
business consistent with past practice or in accordance with
their terms, of liabilities reflected or reserved against
in, or contemplated by, the VacTex Financial Statements (or
the notes thereto) incurred in the ordinary course of
business consistent with past practice, provided that in no
event shall VacTex repay any long-term indebtedness except
to the extent required by the terms thereof; or
(xi) will not directly or indirectly, including,
without limitation through its shareholders, officers,
directors, representatives, employees, agents, bankers,
attorneys or accountants, solicit, initiate or encourage
(including by way of furnishing information) any inquiries
or proposals by, or, except to the extent reasonably
required by fiduciary obligations under applicable law as
advised by legal counsel, engage in any discussions or
negotiations with any corporation, partnership, person or
other entity or group which it is reasonably expected may
lead to, or which relates to, any proposal for the sale of
any capital stock or assets of VacTex (other than in the
ordinary course of business) or the merger, consolidation or
other combination of VacTex or its business or assets with
any other person or entity. VacTex will promptly advise
Aquila orally and in writing of the receipt and content of
any such inquiries or proposals.
(c) Aquila Covenants. Aquila agrees that it will promptly
after the Effective Time increase the size of its Board of
Directors to create one vacancy for the class of directors whose
terms expire in 2000 and will elect or cause to be elected Robert
J. Carpenter to fill such vacancy.
7.02 Access to Properties and Records. Between the date of
this Agreement and the Effective Time, each of Aquila and VacTex
will provide the other and its accountants, counsel and other
authorized representatives such access, during reasonable
business hours and under reasonable circumstances, to its
premises, properties, contracts, commitments, books, records and
other information (including tax returns filed and those in
preparation) and those of its subsidiaries and will furnish to
the other's representatives such financial, technical and
operating data and other information pertaining to its business
as is reasonably necessary or appropriate in connection with the
transactions contemplated hereunder. Neither party will use any
such information obtained from the other in its business and each
will hold such documents and other material in confidence and, in
the event of the termination of this Agreement, upon request by
the other, will deliver to the other all documents and other
material so obtained by it, except that one copy may be
maintained in legal files for legal reference indefinitely.
7.03 Registration Rights Agreement. Aquila and VacTex shall
enter into a Registration Rights Agreement (the "Registration
Rights Agreement") in substantially the form attached hereto as
Exhibit E with respect to the registration of shares of Aquila
Common Stock to be issued in the Merger.
7.04 Shareholder Approval. VacTex shall call a meeting of
its shareholders (or shall seek action by written consent of its
shareholders) to be held or taken as promptly as practicable for
the purpose of obtaining shareholder approval or adoption of this
Agreement, the Merger and the transactions contemplated hereby,
to the extent required by applicable law. VacTex agrees that its
Board of Directors will recommend, subject to fiduciary duties,
that its shareholders approve the transactions referred to in the
preceding sentence.
7.05 Best Efforts; Etc. Subject to the terms and conditions
herein provided, each of the parties hereto agrees to use its
best effort's to take, or cause to be taken, all action, and to
do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations to consummate and
make effective the transaction contemplated by this Agreement,
including obtaining any consents, authorizations, exemptions and
approvals, including the Required Consents, (collectively
"Consents") from and making all filings with, any third party,
governmental regulatory or public body or authority, and waivers
of any violations, breaches and defaults that may be caused by
the consummation of the transactions contemplated hereby, which
in each case are necessary or, in the judgment of Aquila,
desirable in connection with the transactions contemplated by
this Agreement. In case at any time after the Effective Time,
any further action is necessary or, in the judgment of Aquila,
desirable to carry out the purposes of this Agreement, the proper
officers and directors of the parties shall take, or cause to be
taken, all such action.
7.06 Material Events. At all times prior to the Effective
Time, each party shall promptly notify the other in writing of
the occurrence of any event which will or may result in the
failure to satisfy any of the conditions specified in Article
VIII hereof.
7.07 Public Announcements. At all times until the Effective
Time, each party shall promptly advise and cooperate with the
other prior to issuing, or permitting any of its subsidiaries,
directors, officers, employees or agents to issue, any press
release or other information to the press or any third party with
respect to this Agreement or the transaction contemplated hereby.
7.08 Stockholders' Agreement. All of the stockholders of
VacTex shall have executed a certain stockholders agreement
substantially in the form attached hereto as Exhibit F pursuant
to which, among other things, each of the stockholders makes
certain representations to Aquila and appoints a representative
to act on his or her behalf.
ARTICLE VIII
CLOSING CONDITIONS
8.01 Conditions to the Obligation of Each Party. The
respective obligations of each party to consummate the Merger
shall be subject to the satisfaction or waiver, at or before the
Effective Time, of each of the following conditions:
(a) Approvals. All required approvals of the shareholders
of VacTex and all Consents and waivers required to be obtained
pursuant to Section 7.05 hereof, shall have been obtained;
provided, however, that if Aquila waives the obtaining of any
Consent or waiver the absence of which would not have a Material
Adverse Effect on Aquila, such Consent or waiver shall not be a
condition to VacTex's obligation to consummate the Merger.
(b) Absence of Order. No restraining order or injunction
of any court which prevents consummation of the Merger shall be
in effect.
8.02 Additional Conditions to the Obligation of Aquila and
Sub. The obligation of Aquila and Sub to consummate the Merger
shall also be subject to the satisfaction or waiver by Aquila and
Sub at or prior to the Effective Time of each of the following
conditions:
(a) Representation and Warranties True. The
representations and warranties of VacTex contained in this
Agreement shall be true and correct in all material respects as
of the date hereof and as of the Closing (as defined in Section
10.01) as if made at and as of the Closing, except as otherwise
contemplated by this Agreement, each of the obligations of VacTex
to be performed by it on or before the Effective Time pursuant to
the terms hereof, including obtaining the Consents, shall have
been duly performed in all material respects, and VacTex shall
have delivered to Aquila a certificate to that effect dated the
day of Closing and signed by the chief executive officer of
VacTex.
(b) Opinions of VacTex's Counsel. Aquila shall have been
furnished with (i) an opinion from Palmer & Dodge LLP, counsel to
VacTex, dated the Closing Date, substantially to the effect set
forth in Schedule 8.02A and (ii) an opinion from VacTex's patent
counsel dated the Closing Date substantially to the effect set
forth in Schedule 8.02B.
(d) Dissenting Shares. VacTex Dissenting Shares shall not
exceed one percent (1%) of the shares of VacTex Common Stock
issued and outstanding on the Effective Time.
(e) Certificates. VacTex shall have furnished Aquila with
such certificates of its officers and others to evidence
compliance with the conditions set forth in this Article VIII as
may be reasonably requested by Aquila.
8.03 Additional Conditions to the Obligation of VacTex. The
obligation of VacTex to consummate the Merger shall also be
subject to the satisfaction or waiver by VacTex at or prior to
the Effective Time of each of the following conditions:
(a) Representations and Warranties True. The
representations and warranties of Aquila contained in this
Agreement shall be true and correct in all material respects as
of the date hereof and as of the Effective Time (as if made at
and as of the Effective Time, except as otherwise contemplated by
this Agreement), each of the obligations of Aquila to be
performed by it on or before the Effective Time pursuant to the
terms hereof shall have been duly performed and complied with in
all material respects and Aquila shall have delivered to VacTex a
certificate to that effect dated the Effective Time and signed by
the chief executive officer of Aquila.
(b) Opinion of Aquila's Counsel. VacTex shall have been
furnished with an opinion from Bowditch & Dewey, LLP, counsel to
Aquila, dated the Closing Date, substantially to the effect set
forth in Schedule 8.03.
(c) Certificates. Aquila shall have furnished VacTex with
such certificates of its officers and others to evidence
compliance with the conditions set forth in this Article VIII as
may be reasonably requested by VacTex.
ARTICLE IX
TERMINATION AND ABANDONMENT
9.01 Termination. This Agreement may be terminated, and the
Merger abandoned, at any time prior to the Effective Time:
(a) by the mutual consent of the Boards of Directors of
Aquila and VacTex;
(b) by Aquila or by VacTex at any time after June 30, 1998,
if, by that date, through no breach of this Agreement on the part
of the terminating party, the conditions set forth in Article
VIII hereof shall not have been satisfied or waived;
(c) by Aquila if there shall have been a breach of any
representation or warranty on the part of VacTex set forth in
this Agreement or if any representation or warranty of VacTex
shall have become untrue in either case such that the conditions
set forth in Section 8.02 would be incapable of being satisfied
by June 30, 1998 (or as otherwise extended) or there shall have
been a breach by VacTex of its covenants or agreements hereunder
having a Material Adverse Effect on VacTex or materially
adversely affecting (or materially delaying) the consummation of
the Merger, and VacTex has not cured such breach within five (5)
business days following notice by Aquila thereof.
(d) by VacTex if there shall have been a breach of any
representation or warranty on the part of Aquila set forth in
this Agreement or if any representation or warranty of Aquila
shall have become untrue in either case such that the conditions
set forth in Section 8.03 would be incapable of being satisfied
by June 30, 1998 (or as otherwise extended) or there shall have
been a breach by Aquila of its covenants or agreements hereunder
having a Material Adverse Effect on Aquila or materially
adversely affecting (or materially delaying) the consummation of
the Merger, and Aquila has not cured such breach within five (5)
business days following notice by VacTex thereof.
9.02 Effect of Termination. In the event of the termination
of this Agreement pursuant to Section 9.01, this Agreement shall
become null and void and there shall be no liability hereunder on
the part of either party to the other except for fraud, willful
misconduct or bad faith and except as provided in the
confidentiality provisions of Section 6.02 and in Sections 9.03,
10.02 and 10.03 hereof, which Sections shall survive any such
termination and continue in effect thereafter.
9.03 Liability of Aquila Upon Termination. If this
Agreement shall be terminated pursuant to Section 901(d) then
Aquila shall pay VacTex within 5 business days of such
termination the sum of $800,000.00.
ARTICLE X
GENERAL PROVISIONS
10.01 Closing. Consummation of the transactions contemplated
by this Agreement and delivery of the documents required under
Article VIII (the "Closing") shall take place at the offices of
Bowditch & Dewey, 311 Main Street, Worcester, Massachusetts, at a
time and on a date (the "Effective Time") agreed to by the
parties which shall be as promptly as practicable after the
satisfaction or waiver of the conditions set forth in Article
VIII, but no later than June 30, 1998.
At the Closing: (i) there shall be delivered to Aquila and
VacTex the opinions, certificates and other documents and
instruments provided to be delivered under Article VIII hereof;
and (ii) upon surrender of certificates of VacTex Common Stock
and VacTex Preferred Stock, Aquila and Sub shall deliver or cause
to be delivered to the stockholders, or any of their
representatives surrendering such certificates, certificates
evidencing the number of shares of Aquila Common Stock and Aquila
Debentures to be received by each stockholder under Section 3.01
hereof.
10.02 Expenses. All costs and expenses incurred in
connection with this Agreement, and the transactions contemplated
hereby shall be paid by the party incurring such expenses.
10.03 Non-Survival of Representations, Warranties and
Agreements. The representations, warranties, covenants and
agreements contained herein or in any certificate delivered
pursuant to the provisions hereof shall not survive the Merger
and shall terminate at the Effective Time or upon any termination
of this Agreement except for the provisions of Article IX; the
confidentiality provisions of Section 7.02 and Section 10.03.
10.04 Headings. The descriptive headings of the
Articles and Sections of this Agreement are inserted for
convenience only and do not constitute a part of this Agreement.
10.05 Notices. Any notices or other communications
required or permitted hereunder shall be sufficiently given if
sent by certified or registered mail, postage prepaid, addressed
as follows:
(a) If to Aquila or to Sub, to:
Aquila Biopharmaceuticals, Inc.
365 Plantation Street
Biotechnology Research Park
Worcester, MA 01605
Attention: President
Copy to:
Attorney Jane V. Hawkes
Bowditch & Dewey, LLP
311 Main Street
Worcester, MA. 01608
(b) If to VacTex, to:
VacTex, Inc.
c/o Robert J. Carpenter, Chairman
9 Lowell Road
Wellesley Hills, MA 02181
Copy to:
Attorney Lynnette C. Fallon
Palmer & Dodge LLP
One Beacon Street
Boston, MA 02108
or such other address as shall be furnished in writing by either
party, and any such notice or communication shall be deemed to
have been given as of the date so mailed.
10.06 Assignment. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and
permitted assigns, but neither this Agreement nor any of the
rights, interests, or obligations hereunder, may be assigned
without the prior written consent of the other parties.
10.07 Complete Agreement. This Agreement, including the
schedules and exhibits hereto, and the other writings referred to
herein or delivered pursuant hereto contain the entire
understanding of the parties with respect to the Merger and the
related transactions and supersede all prior arrangements or
understandings with respect thereto.
10.08 Modifications, Amendments and Waivers. At any
time prior to the Effective Time, (i) the boards of directors of
Aquila and VacTex may, by written agreement, modify, amend or
supplement any term or provision of this Agreement or extend the
time for performance of any obligation hereunder and (ii) any
term or provision of this Agreement may be waived by the party
which is, or whose shareholders are, entitled to the benefits
thereof; provided, however, that after this Agreement is approved
by the shareholders of VacTex, no such amendment or modification
shall be made which would change the amount or the kind of Aquila
securities to be received in exchange for the shares of VacTex
Common Stock and VacTex Preferred Stock as provided in Article
III, alter or, except as provided herein, change any term of the
Certificate of Incorporation of the Surviving Corporation or
adversely affect the rights of such shareholders, without the
further approval of the shareholders so affected. Any written
instrument or agreement referred to in this paragraph shall be
validly and sufficiently authorized for the purposes of this
Agreement if signed on behalf of Aquila and VacTex by persons
authorized to sign this Agreement.
10.09 Counterparts. This Agreement may be executed in
two or more counterparts all of which shall be considered one and
the same agreement and each of which shall be deemed an original.
10.10 Governing Law. This Agreement shall be governed
by the laws of The Commonwealth of Massachusetts, regardless of
the laws that might be applicable under principles of conflicts
of law, (except for compliance with the GCL with respect to the
merger of Delaware corporations with respect to which Delaware
law shall govern) as to all matters, including but not limited to
matters of validity, construction, effect and performance.
10.11 Accounting Terms. All accounting terms used
herein which are not expressly defined in this Agreement shall
have the respective meanings given to them in accordance with
generally accepted accounting principles.
10.12 Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent
jurisdiction or other authority to be invalid, void,
unenforceable or against its regulatory policy, the remainder of
the terms, provisions, covenants and restrictions of this
Agreement shall remain in full force and effect and shall in no
way be affected, impaired or invalidated.
IN WITNESS WHEREOF, Aquila, Sub and VacTex have caused this
Agreement to be executed by their respective duly authorized
officers under seal as of the date first written above.
AQUILA BIOPHARMACEUTICALS, INC.
By:______________________________
Name
Title
AQUILA ACQUISITION, INC.
By:______________________________
Name
Title
VACTEX, INC.
By:______________________________
Name
Title
_______________________________________________________________
AGREEMENT AND PLAN OF MERGER
among
AQUILA BIOPHARMACEUTICALS, INC.
AQUILA ACQUISITION, INC.
and
VACTEX, INC.
Dated as of April ___, 1998
______________________________________________________________
TABLE OF CONTENTS
Page
INDEX OF TERMS iv
ARTICLE I - THE MERGER 1
1.01 The Merger 1
1.02 Effective Time of the Merger 2
ARTICLE II - THE SURVIVING CORPORATION 2
2.01 Certificate of Incorporation 2
2.02 By-Laws 2
2.03 Officers and Directors 2
ARTICLE III - CONVERSION OF SHARES 2
3.01 Conversion of Shares 2
3.02 Exchange of Certificates 3
3.03 No Fractional Securities 3
3.04 Closing of VacTex Transfer Books 3
3.05 Dissenting Shares 3
3.06 Transfer of Aquila Common Stock and
Aquila Debentures 4
3.07 Rights of Holders of VacTex Common Stock and
VacTex Preferred Stock 4
ARTICLE IV - REPRESENTATION AND WARRANTIES OF
VACTEX, INC. 4
4.01 Corporate Organization 4
4.02 Authorization 5
4.03 Capitalization 5
4.04 Non-Contravention; Consents and
Approvals 6
4.05 Equity Ownership 6
4.06 Financial Statements 6
4.07 Absence of Undisclosed Liabilities 7
4.08 Absence of Certain Changes 7
4.09 Legal Proceedings, etc 7
4.10 Compliance with Applicable Law 7
4.11 No Default 8
4.12 Brokers and Finders 8
4.13 Certain Tax Matters 8
4.14 Employee Benefit Plans 9
4.15 Employee Matters 9
4.16 Intellectual Properties 10
4.17 Environmental Compliance 11
4.18 Insurance 12
4.19 Contracts and Commitments 12
4.20 Bank Accounts and Powers of Attorney 14
4.21 Transactions with Management 15
4.22 Suppliers 15
4.23 Proprietary Information Agreements 15
4.24 Disclosure 15
ARTICLE V - REPRESENTATIONS AND WARRANTIES OF
AQUILA BIOPHARMACEUTICALS, INC.. 15
5.01 Corporation Organization 16
5.02 Authorization 16
5.03 Capitalization 16
5.04 Non-Contravention; Consents and
Approvals 17
5.05 SEC Reports 17
5.06 Financial Statements 17
5.07 Absence of Undisclosed Liabilities 18
5.08 Absence of Certain Changes 18
5.09 Legal Proceedings; Etc. 18
5.10 Compliance with Applicable Law 18
5.11 No Default 18
5.12 Brokers and Finders 19
5.13 Certain Tax Matters 19
5.14 Disclosure 19
ARTICLE VI - REPRESENTATIONS AND WARRANTIES OF
AQUILA ACQUISITION, INC. 19
6.01 Corporate Organization 20
6.02 Authorization 20
ARTICLE VII - COVENANTS 20
7.01 Conduct of Business 20
7.02 Access to Properties and Records 22
7.03 Registration Rights Agreement 23
7.04 Shareholder Approval 23
7.05 Best Efforts; Etc. 23
7.06 Material Events 23
7.07 Public Announcements 23
7.08 Stockholders' Agreement 23
ARTICLE VIII - CLOSING CONDITIONS 24
8.01 Conditions to the Obligation of Each Party 24
8.02 Additional Conditions to the Obligation
of Aquila and Sub 24
8.03 Additional Conditions to the Obligation
of VacTex 25
ARTICLE IX - TERMINATION AND ABANDONMENT 25
9.01 Termination 25
9.02 Effect of Termination 26
9.03 Liability of Aquila Upon Termination 26
ARTICLE X - GENERAL PROVISIONS 26
10.01 Closing 26
10.02 Expenses 26
10.03 Non-Survival of Representations,
Warranties and Agreements 26
10.04 Headings 27
10.05 Notices 27
10.06 Assignment 27
10.07 Complete Agreement 28
10.08 Modifications, Amendments and Waivers 28
10.09 Counterparts 28
10.10 Governing Law 28
10.11 Accounting Terms 28
10.12 Severability 28
SIGNATURES 29
Exhibit A Certificate of Incorporation of Surviving
Corporation
Exhibit B By Laws of Surviving Corporation
Exhibit C Officers and Directors of Surviving Corporation
Exhibit D Form of Aquila Debenture
Exhibit E Registration Rights Agreement
Exhibit F Stockholders' Agreement
INDEX OF TERMS
Affiliate
Aquila
Aquila Audited Financial Statements
Aquila Balance Sheet
Aquila By-Laws
Aquila Charter
Aquila Common Stock
Aquila Debentures
Certificate of Merger
Code
Consents
Constituent Corporations
Closing
Effective Time
Environmental Laws
ERISA
GCL
Material Adverse Effect
Merger
Registration Rights Agreement
Required Consents
SEC
Section 262
Sub
Sub Common Stock
Surviving Corporation
VacTex
VacTex Audited Financial Statements
VacTex Balance Sheet
VacTex By-Laws
VacTex Charter
VacTex Common Stock
VacTex Contracts
VacTex Dissenting Shares
VacTex Environmental Permits
VacTex Intellectual Properties
VacTex Preferred Stock
- - 30 -
EXHIBIT 4.1
THIS DEBENTURE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED OR ANY STATE SECURITIES LAWS, AND SUCH
DEBENTURE MAY NOT BE SOLD OR TRANSFERRED UNLESS SUCH SALE OR
TRANSFER IS IN ACCORDANCE WITH THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT OF 1933, AS AT THE TIME AMENDED, OR IN
CONFORMITY WITH THE LIMITATIONS OF RULE 144 OR SIMILAR RULE AS
THEN IN EFFECT UNDER SUCH ACT, OR UNLESS SOME OTHER EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT IS AVAILABLE WITH
RESPECT THERETO.
AQUILA BIOPHARMACEUTICALS, INC.
7% SUBORDINATED DEBENTURE
No. R-
Maturity Date: April 10, 2003
Principal Amount:
FOR VALUE RECEIVED, Aquila Biopharmaceuticals, Inc., a Delaware
corporation (herein called the "Company"), promises to pay to
_______, or its registered assigns (the "Holder"), the Principal
Amount upon presentation and surrender of this debenture at the
office of the Company on the Maturity Date, or earlier
acceleration or redemption, with interest to accrue on the unpaid
balance of said principal amount from time to time outstanding at
the rate of Seven Percent (7%) per annum, said interest to be
payable on the Maturity Date or earlier acceleration or
redemption.
1. Description of Debenture.
1.1 The Debenture. This debenture is one of a duly
authorized issue of debentures of the Company, designated as its
7% Subordinated Debentures (herein called the "Debenture(s)"),
limited to the aggregate principal amount of One Million Three
Hundred Thousand Dollars ($1,300,000.). The Debentures are
issuable in registered form, without coupons, in denominations of
One Thousand Dollars ($1,000.) and any amount in excess thereof.
1.2 Transfer. This Debenture is issuable only in
registered form and is transferable, only on the books of the
Company by the Holder or by its duly authorized attorney. The
Company may deem and treat the Holder of this Debenture as the
absolute owner hereof for all purposes notwithstanding any notice
to the contrary. All payments made to such Holder shall, to the
extent thereof, effectively satisfy and discharge the obligations
of the Company hereunder. The Holder will not directly or
indirectly or voluntarily offer, sell, pledge, transfer or
otherwise dispose of (or solicit any offers to buy, purchase or
otherwise acquire or take a pledge of) this Debenture, except in
compliance with the Securities Act of 1933, as amended and the
rules and regulations promulgated thereunder.
1.3 Payment of Principal and Interest. Interest and
principal on this Debenture shall be payable by the Company on
the Maturity Date or earlier on acceleration or redemption as set
forth herein, by the Company's check mailed to the Holder of the
Debenture at its address of record on the books of the Company.
In the event of any transfer of a Debenture pursuant to Section
1.2, the new Debenture or Debentures shall be dated as of the
date to which interest shall have been paid on the Debenture or
Debentures surrendered.
1.4 Lost or Destroyed Debentures. Upon receipt of
evidence satisfactory to the Company that any Debenture has been
mutilated, destroyed or lost, and upon proof of ownership and
receipt of indemnity from the holder of the Debenture
satisfactory in form and substance to the Company, the Company
shall execute and deliver a new Debenture stated to mature on the
same date and for the same principal amount as the Debenture so
mutilated, destroyed or lost, of like tenor with such notations,
if any, as the Company shall reasonably determine, upon surrender
and cancellation of, and in exchange and substitution for, such
mutilated Debenture, or in lieu of and in substitution for the
Debenture so destroyed or lost.
2. Redemption.
2.1 Optional Redemption. This Debenture is subject to
redemption prior to maturity, at the option of the Company, as a
whole or in part on any date after December 31, 1998, at a
redemption price equal to 100% of the principal amount to be
redeemed, plus accrued interest to the redemption date, without
premium. If this Debenture is to be redeemed, the Company shall
give notice to the Holder which notice shall state the date
effective for redemption and specify the office of the Company at
which the Debenture will be redeemed. On the redemption date
there shall become due and payable the redemption price together
with interest accrued to the redemption date, and after such date
interest hereon shall cease to accrue. The Company shall mail
the redemption notice no more than 60 days nor less than 30 days
prior to redemption date to the Holder at its address shown on
the registration books maintained by the Company.
2.2 Tender for Redemption. This Debenture is subject
to tender to the Company, as a whole only, at the election of the
Holder for redemption at a redemption price equal to 100% of the
principal amount hereof, plus accrued interest, to the redemption
date. In order to exercise the right to tender, the Holder must
deliver to the Company at any time after April 10, 1999, a
written irrevocable notice of tender in the form set forth on
Exhibit A hereto. The Company shall redeem the Debenture on the
business day specified in such election notice provided such date
is at least 30 calendar days after receipt by the Company of such
notice.
3. Subordination.
3.1 The Company, for itself, its successors and
assigns, covenants and agrees, and the Holder, by its acceptance
of this Debenture, likewise covenants and agrees, that the
payment of the principal of and interest on this Debenture is
hereby expressly subordinated, to the extent and in the manner
hereinafter in this Section 3 set forth, in right of payment, to
the prior payment in full of all Senior Debt.
The term "Senior Debt" shall mean the principal
of, premium, if any, interest on, and any other payment due
pursuant to any of the following, whether outstanding at the date
hereof or hereafter incurred or created:
(a) all indebtedness of the Company for money
borrowed (including any indebtedness secured by a mortgage or
other lien which is (i) given to secure all or part of the
purchase price of property subject thereto, whether given to the
vendor of such property or to another or (ii) existing on
property at the time of acquisition thereof);
(b) all indebtedness of the Company evidenced by
notes, debentures, bonds or other securities of the Company;
(c) all lease obligations of the Company which
are capitalized on the books of the Company in accordance with
generally accepted accounting principles;
(d) all indebtedness of others of the kinds
described in either of the preceding clauses (a) or (b) and all
lease obligations of others of the kind described in the
preceding clause (c) assumed by or guaranteed in any manner by
the Company or in effect guaranteed by the Company through an
agreement to purchase, contingent or otherwise; and
(e) all renewals, extensions or refundings of
indebtedness of the kinds described in any of the preceding
clauses (a), (b) and (d) and all renewals or extensions of lease
obligations of the kinds described in either of the preceding
clauses (c) and (d);
unless, in the case of any particular indebtedness, lease,
renewal, extension or refunding, the instrument or lease creating
or evidencing the same or the assumption or guarantee of the same
expressly provides that such indebtedness, lease, renewal,
extension or refunding is subordinate to any other indebtedness
of the Company or that such indebtedness, lease, renewal,
extension or refunding is not superior in right of payment to the
Debentures.
3.2 Upon any distribution of assets of the Company
upon any dissolution, winding up, liquidation or reorganization
of the Company, whether in bankruptcy, insolvency, reorganization
or receivership proceedings, or upon any assignment for the
benefit of creditors or any other marshaling of the assets and
liabilities of the Company or otherwise:
(a) all principal, premium, if any, and interest
due upon all Senior Debt shall first be paid in full, or payment
thereof provided for in money or money's worth, before the holder
of this Debenture shall be entitled to receive any payment upon
the principal of or interest on indebtedness evidenced by the
Debenture;
(b) any payment or distribution of assets of the
Company of any kind or character, whether in cash, property or
securities (other than shares of stock of the Company as
reorganized or readjusted, or securities of the Company or any
other corporation provided for by a plan of reorganization or
readjustment, the payment of which is subordinated to the payment
of all Senior Debt which may at the time be outstanding on terms
not less favorable to the holder thereof than those of this
Section) to which the holder of this Debenture would be entitled
except for the provisions of this Section 3 shall be paid by the
liquidating Company or agent or other person making such payment
or distribution, whether a Company in bankruptcy, a receiver or
liquidating Company or otherwise, directly to the holders of
Senior Debt (pro rata to each such holder on the basis of the
respective amounts of Senior Debt held by each such holder), to
the extent necessary to pay in full all Senior Debt remaining
unpaid after giving effect to any prior or concurrent payment or
distribution, or provision therefor, to the holders of Senior
Debt on the Senior Debt; and
(c) in the event that, notwithstanding the
foregoing, any payment or distribution of assets of the Company
of any kind or character, whether in cash, property or securities
(other than shares of stock of the Company as reorganized or
readjusted, or securities of the Company or any other corporation
provided for by a plan of reorganization or readjustment, the
payment of which is subordinated to the payment of all Senior
Debt which may at the time be outstanding on terms not less
favorable to the holders thereof than those of this Section)
shall be received by the holder of this Debenture before all
Senior Debt is paid in full, or provisions made for its payment,
such payment or distribution shall be paid over to holders of
Senior Debt (pro rata to each such holder on the basis of the
respective amounts of Senior Debt held by such holder), for
application to the payment of all Senior Debt remaining unpaid
until all such Senior Debt shall have been paid in full, or
provision made for its payment, after giving effect to any prior
or concurrent payment or distribution to the holders of the
Senior Debt on the Senior Debt.
3.3 In the event and during the continuance of any
default by the Company with respect to the payment of any Senior
Debt when due (whether at a stated maturity date, upon
acceleration or otherwise), no payment of principal or interest
on the Debenture shall be made by the Company without the written
consent of the holders of Senior Debt.
3.4 Subject to the payment in full of all Senior Debt,
the holder of this Debenture shall be subrogated to the rights of
the holders of the Senior Debt to receive payments or
distributions of assets of the Company applicable to the Senior
Debt until the principal of and interest on the Debenture shall
be paid in full. No such payments or distributions applicable to
the Senior Debt shall, as between the Company, its creditors
other than the holders of the Senior Debt, and the holder of this
Debenture, be deemed to be a payment by the Company to or on
account of the Debenture.
3.5 The provisions of this Section 3 are solely for
the purposes of defining the rights of the holder of this
Debenture, on the one hand, relative to the rights of the holders
of the Senior Debt, on the other hand, and nothing contained in
this Section 3 or elsewhere in the Debenture is intended to or
shall (i) impair, as between the Company, its creditors other
than the holders of the Senior Debt, and the holder of this
Debenture, the obligation of the Company, which is unconditional
and absolute, to pay to the holder of this Debenture the
principal of and interest on the Debenture, as and when the same
shall become due and payable in accordance with the terms of this
Debenture, or (ii) affect the rights of the holder of this
Debenture relative to creditors of the Company other than the
holders of the Senior Debt, nor shall anything herein prevent the
holder of this Debenture from exercising all remedies otherwise
permitted by applicable law upon default under this Debenture,
subject to the rights, if any, under this Section 3 of the
holders of the Senior Debt in respect of assets of the Company
received upon the exercise of any such remedy.
3.6 Upon any payment or distribution of assets of the
Company referred to in this Section 3, the holder of this
Debenture shall be entitled to rely upon any order or decree made
by any court of competent jurisdiction in which such dissolution,
winding up, liquidation or reorganization proceedings are pending
or upon a certificate of the liquidating Company or agent or
other person making any distribution to the holder of this
Debenture on the Debenture for the purpose of ascertaining the
amount of the Senior Debt, the holders thereof, the amount or
amounts paid or distributed thereon and all other facts pertinent
thereto or to this Section 3.
4. Default.
4.1 If the Company shall be in default in the payment
of the principal of, or interest on, this Debenture; or
4.2 If the Company shall default in the performance of
or compliance with any provision of this Debenture, and such
default shall not have been remedied within fifteen (15) days
after written notice by the Holder unless and for so long as the
Company is using due diligence to cure such default up to a
maximum of 45 days after such written notice from the Holder; or
4.3 If the Company shall make an assignment for the
benefit of creditors, or shall admit in writing its inability to
pay its debts as they become due, or shall file a voluntary
petition in bankruptcy, or shall be adjudicated a bankrupt or
insolvent, or shall file any petition or answer seeking for
itself any reorganization, arrangement, composition,
readjustment, dissolution or similar relief under any present or
future statute, law or regulation, or shall file any answer
admitting the material allegations of a petition filed against
the Company in any such proceeding, or shall seek or consent to
or acquiesce in the appointment of any Company, receiver or
liquidator of the Company or of all or any substantial part of
the properties of the Company, or the Company or its directors or
majority stockholders shall take any action to dissolve or
liquidate or suspend the business of the Company; or
4.4 If, within sixty (60) days after the commencement
of any proceeding against the Company seeking any reorganization,
arrangement, composition, readjustment, liquidation, dissolution
or similar relief under any present or future statute, law or
regulation, such proceeding shall not have been dismissed, or if,
within sixty (60) days after the appointment without the consent
or acquiescence of the Company of any Company, receiver or
liquidator of the Company or of all or any substantial part of
the properties of the Company, such appointment shall not have
been vacated;
then an Event of Default shall have occurred. In any such event,
subject to the limitations set forth in paragraph 5, the Holder
may at any time at its option by written notice to the Company
declare the principal of and the accrued interest on the
Debentures to be immediately due and payable, without
presentment, demand, protest or notice, all of which are hereby
waived by the Company.
5. Limit on Right of Action.
The Holder agrees for the benefit of the holders of the
Senior Debt that so long as any part of the Senior Debt remains
outstanding, the Holder will not take any action to accelerate or
demand the payment of the Debenture if it has received a notice
that the Senior Debt is in default.
6. Remedies and Notices of Default; Modifications.
In case any Event of Default shall occur, subject to
the limitations set forth in paragraph 5, the Holder may proceed
to protect and enforce its rights under this Debenture by a suit
in equity, action at law or other appropriate proceeding whether
for the specific performance of any agreement contained herein or
for an injunction against a violation of any of the terms or
provisions hereof or in aid of the exercise of any power granted
hereby or by law. In case of any Event of Default, the Company
will reimburse the Holder for its reasonable costs and expenses
incurred in connection with the enforcement of its rights under
this Debenture, including without limitation reasonable fees and
disbursements of its attorneys. No course of dealing or delay on
the part of the Holder in exercising any right shall operate as a
waiver thereof or otherwise prejudice the rights of the Holder
and no consent or waiver shall extend beyond the particular case
and purpose involved. No remedy conferred hereby shall be
exclusive of any other remedy referred to herein or therein or
now or hereafter available at law, in equity, by statute or
otherwise.
7. Miscellaneous.
7.1 Parties in Interest. All covenants, agreements,
and undertakings in this Debenture by and on behalf of any of the
parties hereto shall bind and inure to the benefit of the
respective successors and assigns of the parties hereto whether
so expressed or not.
7.2 Amendments and Waivers. Changes in or additions
to this Debenture may be made or compliance with any term,
covenant, agreement, condition or provision set forth herein may
be omitted or waived (either generally or in a particular
instance and either retroactively or prospectively), upon written
consent of (i) the Company, (ii) the Holder hereof and (iii) the
holders of Senior Debt, if any.
7.3 Governing Law. This Debenture shall be deemed a
contract made under the laws of The Commonwealth of Massachusetts
and its provisions and the rights and obligations of the parties
hereunder, shall be construed and enforced in accordance with and
governed by the laws of such Commonwealth.
7.4 Notices. All notices, requests, consents and
demands shall be in writing and shall be mailed, postage prepaid,
to the Company at 365 Plantation Street, Worcester, Massachusetts
or to the Holder at its address shown on the registration books
maintained by the Company or to such other address as may be
furnished in writing to the Company or the Holder.
IN WITNESS WHEREOF this Debenture has been executed and
delivered as a sealed instrument as of April ___, 1998, by the
duly authorized representatives of the Company.
AQUILA BIOPHARMACEUTICALS, INC.
By:_______________________________
Its
EXHIBIT A
TO DEBENTURE
DEBENTURE TENDER NOTICE
PRINCIPAL AMOUNT
DEBENTURE NUMBER
The undersigned hereby certifies that it is the registered owner
of the debenture described above (the "Debenture"), and hereby
agrees that the delivery of this instrument of transfer to the
Company constitutes an irrevocable offer to sell the Debenture to
the Company or its designee on the ________, which shall be a
business day at least thirty (30) calendar days following receipt
by the Company of this instrument, at a redemption price equal to
the unpaid principal balance thereof plus accrued and unpaid
interest thereon to the __________ (the "Redemption Price"). The
undersigned acknowledges and agrees that this election notice is
irrevocable and that the undersigned will have no further rights
with respect to the Debenture except payment, upon presentation
and surrender of the Debenture at the principal corporate office
of the Company, of the Redemption Price by wire or bank transfer
within the continental United States from the Company to the
undersigned at its address as shown on the registration books of
the Company.
Date: Signature(s)
______________________________
______________________________
______________________________
______________________________
Street City
State Zip
IMPORTANT: The above signature(s) must correspond with the
name(s) as set forth on the face of the Debenture(s) with respect
to which this notice is being delivered without any change
whatsoever.
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this Current Report on Form 8-K of our report,
which includes an explanatory paragraph regarding the circumstances which raise
substantial doubt about the ability of VacTex, Inc. to continue as a going
concern, dated March 16, 1998, on our audits of the financial statements of
VacTex, Inc. (a development stage enterprise) as of December 31, 1997 and 1996,
and for each of the two years in the period ended December 31, 1997, and for the
period from November 1, 1995 (date of inception) to December 31, 1997.
/s/Coopers & Lybrand, L.L.P
Boston, Massachusetts
April 24, 1998
