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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
Date of Report (Date of earliest event reported): May 21, 1997
CYTRX CORPORATION
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(Exact Name of Registrant as Specified in Charter)
Delaware 000-15327 58-1642740
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(State or Other (Commission (IRS Employer
Jurisdiction of File Number) Identification No.)
Incorporation)
154 Technology Parkway
Norcross, Georgia 30092
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(Addresses of Principal Executive Offices, including Zip Code)
(770) 368-9500
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(Registrant's Telephone Number, including Area Code)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On May 21, 1997 (the "Closing Date"), pursuant to the Agreement and
Plan of Merger and Contribution dated December 6, 1996 (the "Merger Agreement"
attached hereto as Exhibit 2.1 and incorporated herein by reference), among
Zynaxis, Inc., a Pennsylvania corporation ("Zynaxis"), CytRx Corporation, a
Delaware corporation ("CytRx"), Vaxcel, Inc., a Delaware corporation and a
wholly-owned subsidiary of CytRx ("Vaxcel"), and Vaxcel Merger Subsidiary, Inc.,
a Georgia corporation and a wholly-owned subsidiary of Vaxcel formed for the
purpose of consummating the transaction ("Merger Sub"), Merger Sub was merged
with and into Zynaxis (the "Merger") and each share of capital stock of Zynaxis
was converted into the right to receive shares of common stock of Vaxcel, par
value $.001 per share ("Vaxcel Common Stock"). Specifically, each share of
common stock of Zynaxis, par value $.01 per share ("Zynaxis Common Stock")
issued and outstanding immediately prior to the Closing Date (excluding certain
shares as set forth in the Merger Agreement), was exchanged for the right to
receive .0947 (the "Exchange Ratio" as further described in the Merger
Agreement) shares of Vaxcel Common Stock, with cash being paid in lieu of any
fractional shares. In addition, each share of Series A Convertible Preferred
Stock of Zynaxis, no par value ("Zynaxis Preferred Stock") issued and
outstanding immediately prior to the Closing Date (excluding certain shares as
set forth in the Merger Agreement), was exchanged for the right to receive .1894
(i.e., two times the Exchange Ratio) shares of Vaxcel Common Stock, with cash
being paid in lieu of any fractional shares.
Furthermore, on the Closing Date, CytRx contributed to Vaxcel a credit
facility (the "Senior Credit Facility") and a cash payment of $2,300,010 (the
"Cash Payment"). The Senior Credit Facility was delivered to CytRx concurrently
with the execution of the Merger Agreement in exchange for which CytRx provided
Zynaxis with working capital of up to $2,000,000 pending consummation of the
Merger. The Senior Credit Facility is comprised of a secured note, certain
security agreements, and a secured loan agreement. In exchange for the
contribution of the Senior Credit Facility and the Cash Payment, Vaxcel
delivered to CytRx a warrant to purchase shares of Vaxcel Common Stock (the
"CytRx Warrant") and 1,374,996 shares of Vaxcel Common Stock. The CytRx Warrant
has an exercise price equal to one-half of the Per Share Price of $.2754 (as
further described in the Merger Agreement) multiplied by the Exchange Ratio, and
may be exercised if, and only if, CytRx reasonably determines that Vaxcel's
total assets and capital and surplus are insufficient to satisfy the total
assets and capital surplus requirements for inclusion of Vaxcel Common Stock on
the Nasdaq SmallCap Market.
In addition to the foregoing, upon consummation of the Merger, holders
(the "Financing Warrantholders") of warrants to purchase shares of Zynaxis
Common Stock who were parties to that certain Preferred Stock and Warrant
Agreement, executed concurrently with the Merger Agreement, by and among
Zynaxis, CytRx, Vaxcel and each of the Financing Warrantholders (the "Preferred
Stock and Warrant Agreement" attached hereto as Exhibit 2.2 and incorporated
herein by reference), were granted the right to receive warrants to purchase
shares of Vaxcel Common Stock in accordance with the terms of the Preferred
Stock and Warrant Agreement.
Also, on the Closing Date holders of warrants (the "Non-Financing
Warrants") to purchase Zynaxis Common Stock who were not parties to the
Preferred Stock and Warrant Agreement were issued, in exchange therefor,
warrants to purchase Vaxcel Common Stock, substantially in the form of their
Non-Financing Warrants, except that (i) each Non-Financing Warrant assumed by
Vaxcel is exercisable solely for shares of Vaxcel Common Stock, (ii) the number
of shares of Vaxcel Common Stock subject to such Non-Financing Warrant is equal
to the number of shares of Zynaxis Common Stock subject to such Non-Financing
Warrant prior to the Closing Date multiplied by the Exchange Ratio, and (iii)
the per share
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exercise price under each such Non-Financing Warrant was adjusted by dividing
the per share exercise price under each such Non-Financing Warrant prior to
Closing by the Exchange Ratio and rounding up to the nearest cent.
Additionally, on the Closing Date, holders of options to purchase
shares of Zynaxis Common Stock ("Stock Options") granted pursuant to the
Zynaxis, Inc. Amended and Restated 1989 Stock Option Plan ("Stock Plan") were
granted rights with respect to the Vaxcel Common Stock, and Vaxcel assumed each
such Stock Option in accordance with the terms of the Stock Plan, except that
(i) Vaxcel and its compensation committee was substituted for Zynaxis and the
committee of Zynaxis' Board of Directors administering the Stock Plan, (ii) each
Stock Option assumed by Vaxcel is exercisable solely for shares of Vaxcel Common
Stock, (iii) the number of shares of Vaxcel Common Stock subject to the Stock
Option is equal to the number of shares of Zynaxis Common Stock subject to such
Stock Option immediately prior to the Closing Date multiplied by the Exchange
Ratio, and (iv) the per share exercise price under each such Stock Option was
adjusted by dividing the per share exercise price under each such Stock Option
immediately prior to the Closing Date by the Exchange Ratio and rounding up to
the nearest cent.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION, AND EXHIBITS.
(a) Financial Statements of Businesses Acquired.
1. Audited balance sheets of Zynaxis as of the end of
each of the two most recent fiscal years (including
1995 and 1996).
2. Audited statements of income and cash flows of
Zynaxis for each of the three fiscal years preceding
the date of the most recent audited balance sheet
(including 1994, 1995, 1996).
The required financial statements will be filed no later than
August 4, 1997 (sixty days after the initial report on Form
8-K must be filed, June 5, 1997)
(b) Pro Forma Financial Information.
1. Pro forma condensed balance sheet of Zynaxis as of
the end of the most recent period for which a
consolidated balance sheet of Zynaxis is required
(1996 to the present).
2. Pro forma condensed statements of income for only the
most recent fiscal year (1996).
The required pro forma financial information will be filed no
later than August 4, 1997.
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(c) Exhibits.
2.1 Agreement and Plan of Merger and Contribution dated
as of December 6, 1996, among the Registrant, Vaxcel,
Inc., Vaxcel Merger Subsidiary, Inc. and Zynaxis,
Inc.
2.2 Preferred Stock and Warrant Agreement dated as of
December 6, 1996, among the Registrant, Zynaxis,
Inc., Vaxcel, Inc. and each of the holders of
Zynaxis, Inc. warrants signatory thereto.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CYTRX CORPORATION
(REGISTRANT)
Date: June 3, 1997 By: /s/ Jack J. Luchese
--------------------
Jack J. Luchese, Chairman, President and Chief
Executive Officer (Principal Executive Officer)
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INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Sequential
Exhibit Page No.
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<S> <C> <C>
2.1 Agreement and Plan of Merger and Contribution dated as of December 6,
1997, among the Registrant, Vaxcel, Inc., Vaxcel Merger Subsidiary, Inc.
and Zynaxis, Inc.
2.2 Preferred Stock and Warrant Agreement dated as of December 6, 1996, among
the Registrant, Zynaxis, Inc. Vaxcel, Inc. and each of the holders of
Zynaxis, Inc. warrants signatory thereto.
</TABLE>
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Exhibit 2.1
Agreement and Plan of Merger and Contribution
dated as of December 6, 1996, among the Registrant, Vaxcel, Inc.,
Vaxcel Merger Subsidiary, Inc. and Zynaxis, Inc.
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AGREEMENT AND PLAN OF MERGER AND CONTRIBUTION
BY AND AMONG
CYTRX CORPORATION,
VAXCEL, INC.,
VAXCEL MERGER SUBSIDIARY, INC.,
AND
ZYNAXIS, INC.
DATED AS OF DECEMBER 6, 1996
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TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C>
Parties ........................................................................................ 1
Section 351 Plan................................................................................. 1
ARTICLE 1 - summary of the contribution and the merger........................................... 2
1.1 Contribution by CytRx.......................................................... 2
1.2 Issuance of Shares............................................................. 2
1.3 Merger......................................................................... 2
1.4 Time and Place of Closing...................................................... 2
1.5 Effective Time................................................................. 3
ARTICLE 2 - TERMS OF MERGER and management after the merger...................................... 3
2.1 Charter........................................................................ 3
2.2 Bylaws......................................................................... 3
2.3 Directors and Officers of Surviving Corporation................................ 3
2.4 Board of Directors of Vaxcel................................................... 3
2.5 Officers of Vaxcel............................................................. 3
ARTICLE 3 - MANNER OF CONVERTING SHARES.......................................................... 4
3.1 Conversion of Shares........................................................... 4
3.2 Shares Held by Zynaxis or Vaxcel............................................... 4
3.3 Dissenting Shareholders........................................................ 5
3.4 Fractional Shares.............................................................. 5
3.5 Conversion of Stock Options; Restricted Stock.................................. 6
3.6 Conversion of Financing Warrants............................................... 7
3.7 Conversion of Warrants Other Than Financing Warrants........................... 7
3.8 Conversion of Promissory Notes................................................. 8
ARTICLE 4 - EXCHANGE OF SHARES................................................................... 8
4.1 Exchange Procedures............................................................ 8
4.2 Rights of Former Zynaxis Shareholders.......................................... 9
ARTICLE 5 - REPRESENTATIONS AND WARRANTIES OF Zynaxis............................................ 10
5.1 Organization, Standing, and Power.............................................. 10
</TABLE>
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<TABLE>
<S> <C>
5.2 Authority; No Breach By Agreement.............................................. 10
5.3 Capital Stock.................................................................. 11
5.4 Zynaxis Subsidiaries........................................................... 11
5.5 SEC Filings; Financial Statements.............................................. 12
5.6 Absence of Undisclosed Liabilities............................................. 13
5.7 Absence of Certain Changes or Events........................................... 13
5.8 Tax Matters.................................................................... 13
5.9 Assets......................................................................... 15
5.10 Intellectual Property.......................................................... 15
5.11 Environmental Matters.......................................................... 16
5.12 Compliance with Laws........................................................... 17
5.13 Labor Relations................................................................ 17
5.14 Employee Benefit Plans......................................................... 18
5.15 Material Contracts............................................................. 19
5.16 Legal Proceedings.............................................................. 20
5.17 Reports........................................................................ 20
5.18 Statements True and Correct.................................................... 21
5.19 Regulatory Matters............................................................. 21
5.20 Charter Provisions............................................................. 21
ARTICLE 6 - REPRESENTATIONS AND WARRANTIES OF CYTRX, Vaxcel and vaxcel merger sub................ 22
6.1 Organization, Standing, and Power.............................................. 22
6.2 Authority; No Breach By Agreement.............................................. 22
6.3 Capital Stock.................................................................. 23
6.4 Vaxcel Subsidiaries............................................................ 24
6.5 Vaxcel Financial Statements.................................................... 25
6.6 Absence of Undisclosed Liabilities............................................. 25
6.7 Absence of Certain Changes or Events........................................... 25
6.8 Tax Matters.................................................................... 25
6.9 Assets......................................................................... 26
6.10 Intellectual Property.......................................................... 27
6.11 Environmental Matters.......................................................... 28
</TABLE>
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<TABLE>
<S> <C>
6.12 Compliance With Laws........................................................... 28
6.13 Labor Relations................................................................ 29
6.14 Employee Benefit Plans......................................................... 29
6.15 Material Contracts............................................................. 31
6.16 Legal Proceedings.............................................................. 31
6.17 Reports........................................................................ 32
6.18 Statements True and Correct.................................................... 32
6.19 Regulatory Matters............................................................. 33
ARTICLE 7 - CONDUCT OF BUSINESS PENDING CONSUMMATION............................................. 33
7.1 Affirmative Covenants of Zynaxis............................................... 33
7.2 Negative Covenants of Zynaxis.................................................. 33
7.3 Covenants of Vaxcel............................................................ 35
7.4 Adverse Changes in Condition................................................... 35
7.5 Reports........................................................................ 35
ARTICLE 8 - ADDITIONAL AGREEMENTS................................................................ 36
8.1 Registration Statement; Proxy Statement; Shareholder Approval.................. 36
8.2 Applications................................................................... 37
8.3 Filings with State Offices..................................................... 37
8.4 Agreement as to Efforts to Consummate.......................................... 37
8.5 Investigation and Confidentiality.............................................. 37
8.6 Press Releases................................................................. 38
8.7 Certain Actions................................................................ 38
8.8 State Antitakeover Laws........................................................ 39
8.9 Charter Provisions............................................................. 39
8.10 Cure of Defaults............................................................... 39
8.11 Negotiation of Malvern Lease Amendment......................................... 39
8.12 Nasdaq Listing................................................................. 40
8.13 Agreements of Affiliates....................................................... 40
8.14 Use of Proceeds of Senior Credit Facility...................................... 40
8.15 Registration Rights Agreement.................................................. 40
</TABLE>
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<TABLE>
<S> <C>
ARTICLE 9 - CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE.................................... 40
9.1 Conditions to Obligations of Each Party........................................ 40
9.2 Conditions to Obligations of CytRx, Vaxcel and Vaxcel Merger Sub............... 42
9.3 Conditions to Obligations of Zynaxis........................................... 44
ARTICLE 10 - TERMINATION......................................................................... 45
10.1 Termination.................................................................... 45
10.2 Effect of Termination.......................................................... 46
10.3 Non-Survival of Representations and Covenants.................................. 46
ARTICLE 11 - MISCELLANEOUS....................................................................... 46
11.1 Definitions.................................................................... 46
11.2 Expenses....................................................................... 58
11.3 Brokers and Finders............................................................ 59
11.4 Entire Agreement............................................................... 60
11.5 Amendments..................................................................... 60
11.6 Waivers........................................................................ 60
11.7 Assignment..................................................................... 61
11.8 Notices........................................................................ 61
11.9 Governing Law.................................................................. 62
11.10 Counterparts................................................................... 62
11.11 Captions; Articles and Sections................................................ 62
11.12 Interpretations................................................................ 62
11.13 Severability................................................................... 62
Signatures....................................................................................... 63
</TABLE>
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LIST OF EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
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<S> <C>
1. Warrant Agreement. (Section 1.2).
2. Agreement of Affiliates. (Section 8.13).
3. Matters as to which Morgan, Lewis & Bockius will opine. (Section 9.2(d)).
4. Matters as to which Alston & Bird will opine. (Section 9.3(d)).
5. Form of Charter Amendments. (Section 11.1(a)).
6. Example of Calculation of Exchange Ratio. (Section 11.1(a)).
7. Liquidation Agreement. (Section 11.1(a)).
8. Note Exchange Agreement. (Section 11.1(a)).
9. Preferred Stock and Warrant Agreement. (Section 11.1(a)).
10. Registration Rights Agreement. (Section 11.1(a)).
11. Secured Loan Agreement. (Section 11.1(a)).
12. Senior Secured Note. (Section 11.1(a)).
13. Shareholder Voting Agreement. (Section 11.1(a)).
14. Technology Development Agreement. (Section 11.1(a)).
15. Zynaxis Pledge Agreement. (Section 11.1(a)).
16. Zynaxis Security Agreement. (Section 11.1(a)).
17. Zynaxis Vaccine Technologies Collateral Assignment of License Agreement. (Section 11.1(a)).
18. Zynaxis Vaccine Technologies Guaranty. (Section 11.1(a)).
19. Zynaxis Vaccine Technologies Security Agreement. (Section 11.1(a)).
</TABLE>
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AGREEMENT AND PLAN OF MERGER AND CONTRIBUTION
THIS AGREEMENT AND PLAN OF MERGER AND CONTRIBUTION (this
"Agreement") is made and entered into as of December 6, 1996, by and among CYTRX
CORPORATION ("CytRx"), a Delaware corporation, VAXCEL, INC. ("Vaxcel"), a
Delaware corporation and a wholly owned subsidiary of CytRx, VAXCEL MERGER
SUBSIDIARY, INC. ("Vaxcel Merger Sub"), a Georgia corporation, and a newly
formed, wholly owned subsidiary of Vaxcel, and ZYNAXIS, INC. ("Zynaxis"), a
Pennsylvania corporation.
SECTION 351 PLAN
The respective Boards of Directors of CytRx, Vaxcel, Vaxcel
Merger Sub and Zynaxis are of the opinion that the transactions described herein
are in the best interests of the Parties to this Agreement and their respective
shareholders. This Agreement provides for the issuance to CytRx of shares of
Vaxcel Common Stock and a warrant to purchase shares of Vaxcel Common Stock in
exchange for CytRx's contribution to Vaxcel of the Senior Secured Note and an
amount of cash equal to the difference, as of the Closing Date, between the
aggregate principal and interest balance outstanding under the Senior Credit
Facility and Four Million Dollars ($4,000,000). This Agreement also provides for
the issuance of shares of Vaxcel Common Stock to the existing shareholders of
Zynaxis in exchange for the contribution to Vaxcel by the existing shareholders
of Zynaxis of all of the outstanding shares of Zynaxis Capital Stock by means of
a merger of Vaxcel Merger Sub with and into Zynaxis. At the Effective Time of
the Merger, the outstanding shares of the Zynaxis Capital Stock shall be
converted into the right to receive shares of Vaxcel Common Stock (except as
provided herein) and the outstanding shares of Vaxcel Merger Sub Common Stock
shall be converted into Zynaxis Common Stock. As a result, shareholders of
Zynaxis shall become shareholders of Vaxcel and Zynaxis shall continue to
conduct its business and operations as a wholly owned subsidiary of Vaxcel. The
transactions described in this Agreement are subject to the approval of the
shareholders of Zynaxis, and the satisfaction of certain other conditions
described in this Agreement. It is the intention of the Parties to this
Agreement that the transactions contemplated by this Agreement shall qualify for
federal income tax purposes for treatment under Section 351 of the Internal
Revenue Code. The execution of this Agreement by each of the Parties hereto
shall constitute its adoption by such Party.
Simultaneously with the execution of this Agreement: (i) CytRx
is extending the Senior Credit Facility to Zynaxis; (ii) CytRx and Zynaxis are
entering into a Liquidation Agreement pursuant to which CytRx will serve as
Zynaxis's agent and assist Zynaxis in selling its assets and settling its
liabilities prior to the Merger; (iii) holders of Zynaxis Preferred Stock,
warrants and convertible notes issued by Zynaxis are entering into agreements
regarding the exchange of their warrants and the exchange of their convertible
notes for shares of Zynaxis Common Stock in the Merger and certain other
matters; and (iv) Vaxcel and Zynaxis are entering into the Technology
Development Agreement.
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Certain terms used in this Agreement are defined in Section
11.1 of this Agreement.
NOW, THEREFORE, in consideration of the above and the mutual
warranties, representations, covenants, and agreements set forth herein, the
Parties agree as follows:
ARTICLE 1
SUMMARY OF THE CONTRIBUTION AND THE MERGER
1.1 CONTRIBUTION BY CYTRX. For the consideration
hereinafter provided and subject to the terms and conditions of this Agreement,
at the Closing, CytRx shall contribute to Vaxcel the Senior Credit Facility and
a cash payment (the "Cash Payment") in an amount equal to the difference, as of
the Closing Date, between Four Million Dollars ($4,000,000) and the sum of: (i)
the aggregate principal and interest balance outstanding under the Senior
Secured Note; and (ii) (A) the Per Share Price multiplied by (B) the number of
votes entitled to be cast by the holders of Zynaxis Capital Stock who elect to
exercise their statutory dissenters' rights or their objection rights, if any,
under Section 2545 of the PBCL in excess of three percent (3%) of the votes that
could be cast by all holders of Zynaxis Capital Stock voting together as a
single class. The Cash Payment shall be made by wire transfer of immediately
available funds to an account specified in writing by Vaxcel.
1.2 ISSUANCE OF SHARES. Subject to the terms and conditions
of this Agreement, at the Closing, Vaxcel shall: (i) deliver to CytRx, in
exchange for the contribution of the Senior Secured Note and the Cash Payment,
one warrant agreement substantially in the form of Exhibit 1 hereto (the "CytRx
Warrant") and one certificate representing One Million Three Hundred Seventy
Four Thousand Nine Hundred Ninety-Six (1,374,996) shares of Vaxcel Common Stock;
and (ii) deliver to CytRx one certificate representing a number of shares of
Vaxcel Common Stock equal to the product of the Exchange Ratio, as defined
below, times the number of votes entitled to be cast by the holders of Zynaxis
Capital Stock who elect to exercise their statutory dissenters' rights or their
objection rights, if any, under Section 2545 of the PBCL. Each certificate of
Vaxcel Common Stock issued pursuant to this Section 1.2 shall be registered in
the name of CytRx, free and clear of any Liens.
1.3 MERGER. Subject to the terms and conditions of this
Agreement, at the Effective Time, Vaxcel Merger Sub shall be merged with and
into Zynaxis in accordance with the provisions of Section 1921 et seq. of the
PBCL and Sections 14-2-1101 and 14-2-1107 of the GBCC and with the effects
provided in Section 1929 of the PBCL and Section 14-2-1106 of the GBCC (the
"Merger"). Zynaxis shall be the Surviving Corporation resulting from the Merger
and shall become a wholly owned Subsidiary of Vaxcel and shall continue to be
governed by the Laws of the Commonwealth of Pennsylvania. The Merger shall be
consummated pursuant to the terms of this Agreement, which has been approved and
adopted by the respective Boards of Directors of CytRx, Zynaxis, Vaxcel Merger
Sub, and Vaxcel and by Vaxcel, as the sole shareholder of Vaxcel Merger Sub.
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1.4 TIME AND PLACE OF CLOSING. The closing of the
transactions contemplated hereby (the "Closing") will take place at 10:00 A.M.
on the date on which the Effective Time occurs (or the immediately preceding day
if the Effective Time is earlier than 10:00 A.M.), or at such other time as the
Parties, acting through their authorized officers, may mutually agree. The
Closing shall be held at such location as may be mutually agreed upon by the
Parties.
1.5 EFFECTIVE TIME. The Merger and other transactions
contemplated by this Agreement shall become effective upon the last to occur of:
(i) the filing of the Articles of Merger in the Department of State of the
Commonwealth of Pennsylvania and (ii) the filing of the Certificate of Merger
with the Secretary of State of the State of Georgia (the "Effective Time").
Subject to the terms and conditions hereof, unless otherwise mutually agreed
upon in writing by the authorized officers of each Party, the Parties shall use
their reasonable efforts to cause the Effective Time to occur on the first
business day following the last to occur of (i) the effective date (including
expiration of any applicable waiting period) of the last required Consent of any
Regulatory Authority having authority over and approving or exempting the
Merger, and (ii) the date on which the shareholders of Zynaxis approve this
Agreement to the extent such approval is required by applicable Law.
ARTICLE 2
TERMS OF MERGER AND
MANAGEMENT AFTER THE MERGER
2.1 CHARTER. The Articles of Incorporation, as amended, of
Zynaxis in effect immediately prior to the Effective Time shall be the Articles
of Incorporation of the Surviving Corporation until duly amended or repealed.
2.2 BYLAWS. The Bylaws of Zynaxis in effect immediately
prior to the Effective Time shall be the Bylaws of the Surviving Corporation
until duly amended or repealed.
2.3 DIRECTORS AND OFFICERS OF SURVIVING CORPORATION.
Jack L. Bowman, Raymond C. Carnahan, Jr., Jack J. Luchese, Herbert H. McDade,
Jr., and Paul Wilson shall serve as the directors of the Surviving Corporation
from and after the Effective Time in accordance with the Bylaws of the Surviving
Corporation until their successors are elected and qualify. The following
persons shall serve as the officers of the Surviving Corporation from and after
the Effective Time in accordance with the Bylaws of the Surviving Corporation
until their successors are elected and qualify: Paul Wilson, President and Chief
Executive Officer; Mark Newman, Vice President - Research and Development; and
Mark W. Reynolds, Chief Financial Officer, Controller and Secretary.
2.4 BOARD OF DIRECTORS OF VAXCEL. Jack L. Bowman,
Raymond C. Carnahan, Jr., Lyle A. Hohnke, Jack J. Luchese, Herbert H. McDade,
Jr., and Paul Wilson shall serve as the directors of Vaxcel from and after the
Effective Time in accordance with the Bylaws of Vaxcel until their successors
are elected and qualify.
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2.5 OFFICERS OF VAXCEL. The officers of Vaxcel in office
immediately prior to the Effective Time, together with such additional persons
as may thereafter be elected, shall serve as the officers of Vaxcel from and
after the Effective Time in accordance with the Bylaws of Vaxcel until their
successors are elected and qualify.
ARTICLE 3
MANNER OF CONVERTING SHARES
3.1 CONVERSION OF SHARES. Subject to the provisions of this
Article 3, at the Effective Time, by virtue of the Merger and without any action
on the part of Vaxcel, Vaxcel Merger Sub or Zynaxis, or the shareholders of any
of the foregoing, the shares of the constituent corporations shall be converted
as follows:
(a) Each share of capital stock of Vaxcel issued and
outstanding immediately prior to the Effective Time shall remain issued
and outstanding from and after the Effective Time.
(b) Each share of Vaxcel Merger Sub Common Stock issued and
outstanding immediately prior to the Effective Time shall cease to be
outstanding and shall be converted into one share of Zynaxis Common
Stock.
(c) Each share of Zynaxis Common Stock (excluding shares
held by any Zynaxis Company or any Vaxcel Company, and excluding shares
held by shareholders who perfect their statutory dissenters' rights or
objection rights under Section 2545 of the PBCL as provided in Section
3.3) issued and outstanding immediately prior to the Effective Time shall
cease to be outstanding and shall be converted into and exchanged for the
right to receive a number of shares of Vaxcel Common Stock equal to the
Exchange Ratio.
(d) Each share of Zynaxis Preferred Stock (excluding shares
held by any Zynaxis Company or any Vaxcel Company, and excluding shares
held by shareholders who perfect their statutory dissenters' rights or
objection rights under Section 2545 of the PBCL as provided in Section
3.3) issued and outstanding immediately prior to the Effective Time shall
cease to be outstanding and shall be converted into and exchanged for the
right to receive a number of shares of Vaxcel Common Stock equal to two
times the Exchange Ratio.
3.2 SHARES HELD BY ZYNAXIS OR VAXCEL. Each of the shares of
Zynaxis Common Stock held by any Zynaxis Company or by any Vaxcel Company shall
be canceled and retired at the Effective Time and no consideration shall be
issued in exchange therefor.
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3.3 DISSENTING SHAREHOLDERS.
(a) Any holder of shares of Zynaxis Capital Stock
who perfects his or her dissenters' rights in accordance with and as
contemplated by Section 1930 of the PBCL shall be entitled to receive the value
of such shares in cash as determined pursuant to such provision of Law;
provided, that no such payment shall be made to any dissenting shareholder
unless and until such dissenting shareholder has complied with the applicable
provisions of the PBCL and surrendered to Zynaxis the certificate or
certificates representing the shares for which payment is being made. In the
event that after the Effective Time a dissenting shareholder of Zynaxis fails to
perfect, or effectively withdraws or loses, his right to appraisal and of
payment for his shares, Vaxcel shall issue and deliver the consideration to
which such holder of shares of Zynaxis Capital Stock is entitled under this
Article 3 (without interest) upon surrender by such holder of the certificate or
certificates representing shares of Zynaxis Capital Stock held by him. If and to
the extent required by applicable Law, Vaxcel will establish (or cause to be
established) an escrow account with an amount sufficient to satisfy the maximum
aggregate payment that may be required to be paid to dissenting shareholders.
Upon satisfaction of all claims of dissenting shareholders, the remaining
escrowed amount, reduced by payment of the fees and expenses of the escrow
agent, will be returned to Vaxcel.
(b) Any holder of shares of Zynaxis Capital Stock
who objects to the transaction and in accordance with and as contemplated by
Sections 2544 and 2546 of the PBCL shall be entitled to receive the value of
such shares in cash as determined pursuant to such provision of Law; provided,
that no such payment shall be made to any objecting shareholder unless and until
such objecting shareholder has complied with the applicable provisions of the
PBCL and surrendered to Zynaxis the certificate or certificates representing the
shares for which payment is being made. In the event that after the Effective
Time an objecting shareholder of Zynaxis fails to give proper notice and
surrender his certificates as required by Section 2547 of the PBCL, or otherwise
effectively withdraws or loses his right to appraisal and of payment for his
shares, Vaxcel shall issue and CytRx and Vaxcel shall deliver the consideration
to which such holder of shares of Zynaxis Capital Stock is entitled under this
Article 3 (without interest) upon surrender by such holder of the certificate or
certificates representing shares of Zynaxis Capital Stock held by him. If and to
the extent required by applicable Law, Vaxcel will establish (or cause to be
established) an escrow account with an amount sufficient to satisfy the maximum
aggregate payment that may be required to be paid to objecting shareholders.
Upon satisfaction of all claims of objecting shareholders, the remaining
escrowed amount, reduced by payment of the fees and expenses of the escrow
agent, will be returned to Vaxcel.
3.4 FRACTIONAL SHARES. Notwithstanding any other provision
of this Agreement, each holder of shares of Zynaxis Common Stock and each holder
of shares of Zynaxis Preferred Stock exchanged pursuant to the Merger who would
otherwise have been entitled to receive a fraction of a share of Vaxcel Common
Stock (after taking into account all whole shares delivered by such holder)
shall receive, in lieu thereof, cash (without interest) in an amount equal to
such fractional part of a share of Vaxcel Common Stock divided by the Exchange
Ratio and multiplied by the Per Share Price.
<PAGE> 13
3.5 CONVERSION OF STOCK OPTIONS; RESTRICTED STOCK.
(a) At the Effective Time, each option or other
Equity Right to purchase shares of Zynaxis Common Stock pursuant to stock
options or stock appreciation rights ("Zynaxis Options") granted by Zynaxis
under the Zynaxis Stock Plan which are outstanding at the Effective Time,
whether or not exercisable, shall be converted into and become rights with
respect to Vaxcel Common Stock, and Vaxcel shall assume each Zynaxis Option, in
accordance with the terms of the Zynaxis Stock Plan and stock option agreement
by which it is evidenced, except that from and after the Effective Time, (i)
Vaxcel and its Compensation Committee shall be substituted for Zynaxis and the
Committee of Zynaxis's Board of Directors (including, if applicable, the entire
Board of Directors of Zynaxis) administering such Zynaxis Stock Plan, (ii) each
Zynaxis Option assumed by Vaxcel may be exercised solely for shares of Vaxcel
Common Stock (or cash, if so provided under the terms of such Zynaxis Option),
(iii) the number of shares of Vaxcel Common Stock subject to such Zynaxis Option
shall be equal to the number of shares of Zynaxis Common Stock subject to such
Zynaxis Option immediately prior to the Effective Time multiplied by the
Exchange Ratio, and (iv) the per share exercise price under each such Zynaxis
Option shall be adjusted by dividing the per share exercise price under each
such Zynaxis Option by the Exchange Ratio and rounding up to the nearest cent.
Notwithstanding the provisions of clause (iii) of the preceding sentence, Vaxcel
shall not be obligated to issue any fraction of a share of Vaxcel Common Stock
upon exercise of Zynaxis Options and any fraction of a share of Vaxcel Common
Stock that otherwise would be subject to a converted Zynaxis Option shall
represent the right to receive a cash payment upon exercise of such converted
Zynaxis Option equal to the product of such fraction and the difference between
the market value of one share of Vaxcel Common Stock at the time of exercise of
such Option and the per share exercise price of such Zynaxis Option. The market
value of one share of Vaxcel Common Stock at the time of exercise of an Option
shall be the last sale price of a share of Vaxcel Common Stock on the Nasdaq
SmallCap Market (as reported by The Wall Street Journal or, if not reported
thereby, any other authoritative source selected by Vaxcel) on the last trading
day preceding the date of exercise. In addition, notwithstanding the provisions
of clauses (iii) and (iv) of the first sentence of this Section 3.5, each
Zynaxis Option which is an "incentive stock option" shall be adjusted as
required by Section 424 of the Internal Revenue Code, and the regulations
promulgated thereunder, so as not to constitute a modification, extension or
renewal of the option, within the meaning of Section 424(h) of the Internal
Revenue Code. Each of Zynaxis and Vaxcel agrees to take all necessary steps to
effectuate the foregoing provisions of this Section 3.5, including using its
reasonable efforts to obtain from each holder of a Zynaxis Option any Consent or
Contract that may be deemed necessary or advisable in order to effect the
transactions contemplated by this Section 3.5. Anything in this Agreement to the
contrary notwithstanding, Vaxcel shall have the right, in its sole discretion,
not to deliver the consideration provided in this Section 3.5 to a former holder
of a Zynaxis Option who has not delivered such Consent or Contract.
(b) As soon as practicable after the Effective
Time, Vaxcel shall deliver to the participants in the Zynaxis Stock Plan an
appropriate notice setting forth such participant's rights pursuant thereto and
the grants subject to the Zynaxis Stock Plan shall continue in effect on the
same terms and conditions (subject to the adjustments required by Section 3.5(a)
after giving
<PAGE> 14
effect to the Merger), and Vaxcel shall comply with the terms of the Zynaxis
Stock Plan to ensure, to the extent required by, and subject to the provisions
of, such Zynaxis Stock Plan, that Zynaxis Options which qualified as incentive
stock options prior to the Effective Time continue to qualify as incentive stock
options after the Effective Time. At or prior to the Effective Time, Vaxcel
shall take all corporate action necessary to reserve for issuance sufficient
shares of Vaxcel Common Stock for delivery upon exercise of Zynaxis Options
assumed by it in accordance with this Section 3.5. As soon as practicable after
the Effective Time, Vaxcel shall file a registration statement on Form S-3 or
Form S-8, as the case may be (or any successor or other appropriate forms), with
respect to the shares of Vaxcel Common Stock subject to such options and shall
use its reasonable efforts to maintain the effectiveness of such registration
statements (and maintain the current status of the prospectus or prospectuses
contained therein) for so long as such options remain outstanding.
(c) All contractual restrictions or limitations
on transfer with respect to Zynaxis Common Stock awarded under the Zynaxis Stock
Plan or any other plan, program, Contract or arrangement of any Zynaxis Company,
to the extent that such restrictions or limitations shall not have already
lapsed (whether as a result of the Merger or otherwise), and except as otherwise
expressly provided in such plan, program, Contract or arrangement, shall remain
in full force and effect with respect to shares of Vaxcel Common Stock into
which such restricted stock is converted pursuant to Section 3.1.
3.6 CONVERSION OF FINANCING WARRANTS. At the Effective
Time, each warrant to purchase shares of Zynaxis Common Stock which is
outstanding at the Effective Time and is held by a party to the Preferred Stock
and Warrant Agreement shall be exchanged for a warrant to purchase Vaxcel Common
Stock in accordance with the terms of the Preferred Stock and Warrant Agreement.
3.7 CONVERSION OF WARRANTS OTHER THAN FINANCING WARRANTS.
At the Effective Time, each warrant to purchase shares of Zynaxis Common Stock
which is outstanding at the Effective Time and is not being exchanged for a
warrant to purchase Vaxcel Common Stock in accordance with Section 3.6 and
pursuant to the Preferred Stock and Warrant Agreement (a "Non-Financing
Warrant") shall be converted into and become a warrant to purchase shares of
Vaxcel Common Stock, and Vaxcel shall assume each such warrant, in accordance
with the terms of the warrant agreement by which it is evidenced, except that
from and after the Effective Time, (i) each Non-Financing Warrant assumed by
Vaxcel may be exercised solely for shares of Vaxcel Common Stock, (ii) the
number of shares of Vaxcel Common Stock subject to such Non-Financing Warrant
shall be equal to the number of shares of Zynaxis Common Stock subject to such
Non-Financing Warrant immediately prior to the Effective Time multiplied by the
Exchange Ratio, and (iii) the per share exercise price under each such
Non-Financing Warrant shall be adjusted by dividing the per share exercise price
under each such Non-Financing Warrant by the Exchange Ratio and rounding up to
the nearest cent. Notwithstanding the provisions of clause (ii) of the preceding
sentence, Vaxcel shall not be obligated to issue any fraction of a share of
Vaxcel Common Stock upon exercise of such Non-Financing Warrants and any
fraction of a share of Vaxcel Common Stock that otherwise would be subject to a
converted Non-Financing Warrant shall represent the right to receive a cash
payment
<PAGE> 15
upon exercise of such converted Non-Financing Warrant equal to the product of
such fraction and the difference between the market value of one share of Vaxcel
Common Stock at the time of exercise of such converted Non-Financing Warrant and
the per share exercise price of such converted Non-Financing Warrant. The market
value of one share of Vaxcel Common Stock at the time of exercise of a converted
Non-Financing Warrant shall be the last sale price of a share of Vaxcel Common
Stock on the Nasdaq SmallCap Market (as reported by The Wall Street Journal or,
if not reported thereby, any other authoritative source selected by Vaxcel) on
the last trading day preceding the date of exercise.
(b) As soon as practicable after the Effective
Time, Vaxcel shall deliver to the holders of Non-Financing Warrants an
appropriate notice setting forth such participant's rights pursuant thereto and
the converted Non-Financing Warrants shall continue in effect on the same terms
and conditions (subject to the adjustments required by Section 3.7(a) after
giving effect to the Merger). At or prior to the Effective Time, Vaxcel shall
take all corporate action necessary to reserve for issuance sufficient shares of
Vaxcel Common Stock for delivery upon exercise of converted Non-Financing
Warrants assumed by it in accordance with this Section 3.7.
3.8 CONVERSION OF PROMISSORY NOTES. At the Effective Time,
each promissory note on which Zynaxis is the obligor and which is held by a
party to the Note Exchange Agreement shall be exchanged for shares of Vaxcel
Common Stock in accordance with the terms of the Note Exchange Agreement.
ARTICLE 4
EXCHANGE OF SHARES
4.1 EXCHANGE PROCEDURES. Promptly after the Effective Time,
Vaxcel and Zynaxis shall cause the exchange agent selected by Vaxcel (the
"Exchange Agent") to mail to each holder of record of a certificate or
certificates which represented shares of Zynaxis Capital Stock immediately prior
to the Effective Time (the "Certificates") appropriate transmittal materials and
instructions (which shall specify that delivery shall be effected, and risk of
loss and title to such Certificates shall pass, only upon proper delivery of
such Certificates to the Exchange Agent). The Certificate or Certificates of
Zynaxis Capital Stock so delivered shall be duly endorsed as the Exchange Agent
may require. In the event of a transfer of ownership of shares of Zynaxis
Capital Stock represented by Certificates that are not registered in the
transfer records of Zynaxis, the consideration provided in Section 3.1 may be
issued to a transferee if the Certificates representing such shares are
delivered to the Exchange Agent, accompanied by all documents required to
evidence such transfer and by evidence satisfactory to the Exchange Agent that
any applicable stock transfer taxes have been paid. If any Certificate shall
have been lost, stolen, mislaid or destroyed, upon receipt of (i) an affidavit
of that fact from the holder claiming such Certificate to be lost, mislaid,
stolen or destroyed, (ii) such bond, security or indemnity as Vaxcel and the
Exchange Agent may reasonably require and (iii) any other documents necessary to
evidence and effect the bona fide exchange thereof, the Exchange Agent shall
issue to such holder the consideration into which the shares represented by such
lost, stolen, mislaid or destroyed Certificate shall have been converted. The
Exchange Agent may establish such other reasonable
<PAGE> 16
and customary rules and procedures in connection with its duties as it may deem
appropriate. After the Effective Time, each holder of shares of Zynaxis Capital
Stock (other than shares to be canceled pursuant to Section 3.2, or as to which
statutory dissenters' rights have been perfected as provided in Section 3.3(a),
or as to which proper notice has been given as provided in Section 3.3(b))
issued and outstanding at the Effective Time shall surrender the Certificate or
Certificates representing such shares to the Exchange Agent and shall promptly
upon surrender thereof receive in exchange therefor the consideration provided
in Section 3.1, together with all undelivered dividends or distributions in
respect of such shares (without interest thereon) pursuant to Section 4.2. To
the extent required by Section 3.4, each holder of shares of Zynaxis Capital
Stock issued and outstanding at the Effective Time also shall receive, upon
surrender of the Certificate or Certificates, cash in lieu of any fractional
share of Vaxcel Common Stock to which such holder may be otherwise entitled
(without interest). Vaxcel shall not be obligated to deliver the consideration
to which any former holder of Zynaxis Capital Stock is entitled as a result of
the Merger until such holder surrenders such holder's Certificate or
Certificates for exchange as provided in this Section 4.1. Any other provision
of this Agreement notwithstanding, neither Vaxcel, the Surviving Corporation nor
the Exchange Agent shall be liable to a holder of Zynaxis Capital Stock for any
amounts paid or property delivered in good faith to a public official pursuant
to any applicable abandoned property, escheat or similar Law. Adoption of this
Agreement by the shareholders of Zynaxis shall constitute ratification of the
appointment of the Exchange Agent.
4.2 RIGHTS OF FORMER ZYNAXIS SHAREHOLDERS. At the Effective
Time, the stock transfer books of Zynaxis shall be closed as to holders of
Zynaxis Capital Stock immediately prior to the Effective Time and no transfer of
Zynaxis Capital Stock by any such holder shall thereafter be made or recognized.
Until surrendered for exchange in accordance with the provisions of Section 4.1,
each Certificate theretofore representing shares of Zynaxis Capital Stock (other
than shares to be canceled pursuant to Section 3.2, or as to which statutory
dissenters' rights have been perfected as provided in Section 3.3(a), or as to
which proper notice has been given as provided in Section 3.3(b)) shall from and
after the Effective Time represent for all purposes only the right to receive
the consideration provided in Sections 3.1 and 3.4 in exchange therefor,
subject, however, to the Surviving Corporation's obligation to pay any dividends
or make any other distributions with a record date prior to the Effective Time
which have been declared or made by Zynaxis in respect of such shares of Zynaxis
Capital Stock in accordance with the terms of this Agreement and which remain
unpaid at the Effective Time. To the extent permitted by Law, former
shareholders of record of Zynaxis shall be entitled to vote after the Effective
Time at any meeting of Vaxcel shareholders the number of whole shares of Vaxcel
Common Stock into which their respective shares of Zynaxis Capital Stock are
converted, regardless of whether such holders have exchanged their Certificates
for certificates representing Vaxcel Common Stock in accordance with the
provisions of this Agreement. Whenever a dividend or other distribution is
declared by Vaxcel on the Vaxcel Common Stock, the record date for which is at
or after the Effective Time, the declaration shall include dividends or other
distributions on all shares of Vaxcel Common Stock issuable pursuant to this
Agreement, but beginning 30 days after the Effective Time no dividend or other
distribution payable to the holders of record of Vaxcel Common Stock as of any
time subsequent to the Effective Time shall be delivered to the holder of any
Certificate until such holder surrenders such Certificate for
<PAGE> 17
exchange as provided in Section 4.1. However, upon surrender of such
Certificate, both the Vaxcel Common Stock certificate (together with all such
undelivered dividends or other distributions without interest) and any
undelivered dividends and cash payments payable hereunder (without interest)
shall be delivered and paid with respect to each share represented by such
Certificate.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF ZYNAXIS
Zynaxis hereby represents and warrants to Vaxcel as follows:
5.1 ORGANIZATION, STANDING, AND POWER. Zynaxis is a
corporation duly organized, validly existing, and in good standing under the
Laws of the Commonwealth of Pennsylvania, and has the corporate power and
authority to carry on its business as now conducted and to own, lease and
operate its Assets. Zynaxis is duly qualified or licensed to transact business
as a foreign corporation in good standing in the States of the United States and
foreign jurisdictions where the character of its Assets or the nature or conduct
of its business requires it to be so qualified or licensed, except for such
jurisdictions in which the failure to be so qualified or licensed is not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on Zynaxis. The minute book and other organizational documents for
Zynaxis have been made available to Vaxcel for its review and, except as
disclosed in Section 5.1 of the Zynaxis Disclosure Memorandum, are true and
complete in all material respects as of the date of this Agreement and
accurately reflect in all material respects all amendments thereto and all
proceedings of the Board of Directors and shareholders thereof.
5.2 AUTHORITY; NO BREACH BY AGREEMENT.
(a) Zynaxis has the corporate power and authority
necessary to execute, deliver, and perform its obligations under this Agreement
and to consummate the transactions contemplated hereby. The execution, delivery,
and performance of this Agreement and the consummation of the transactions
contemplated herein, including the Merger, have been duly and validly authorized
by all necessary corporate action in respect thereof on the part of Zynaxis,
subject to the adoption of this Agreement: (i) by a majority vote of the votes
cast by all shareholders entitled to vote thereon (the holders of shares of
Zynaxis Common Stock and the holders of shares of Zynaxis Preferred Stock,
voting on an as-converted basis), and (ii) by a majority of the votes cast by
all holders of Zynaxis Preferred Stock entitled to vote thereon, voting as a
class. These are the only shareholder votes required for approval of this
Agreement and consummation of the transactions contemplated herein, including
the Merger, by Zynaxis. Subject to approval of this Agreement by the
shareholders of Zynaxis, this Agreement represents a legal, valid, and binding
obligation of Zynaxis, enforceable against Zynaxis in accordance with its terms.
(b) The execution and delivery of this Agreement
by Zynaxis, and, upon approval of this Agreement and the transactions
contemplated hereby by the shareholders of
<PAGE> 18
Zynaxis, the consummation by Zynaxis of the transactions contemplated hereby and
the compliance by Zynaxis with any of the provisions hereof, will not (i)
conflict with or result in a breach of any provision of Zynaxis's Articles of
Incorporation, as amended, or Bylaws or the certificate or articles of
incorporation or bylaws of any Zynaxis Subsidiary or any resolution adopted by
the board of directors or the shareholders of any Zynaxis Company, or (ii)
except as disclosed in Section 5.2 of the Zynaxis Disclosure Memorandum,
constitute or result in a Default under, or require any Consent pursuant to, or
result in the creation of any Lien on any Asset of any Zynaxis Company under,
any Contract or Permit of any Zynaxis Company, or, (iii) subject to receipt of
the requisite Consents referred to in Section 9.1(b), constitute or result in a
Default under, or require any Consent pursuant to, any Law or Order applicable
to any Zynaxis Company or any of their respective material Assets (including any
Vaxcel Company or any Zynaxis Company becoming subject to or liable for the
payment of any Tax or any of the Assets owned by any Vaxcel Company or any
Zynaxis Company being reassessed or revalued by any Taxing authority).
(c) Other than in connection or compliance with
the provisions of the Securities Laws, applicable state corporate and securities
Laws, and rules of the NASD, and other than Consents required from Regulatory
Authorities, and other than notices to or filings with the Internal Revenue
Service or the Pension Benefit Guaranty Corporation with respect to any employee
benefit plans, no notice to, filing with, or Consent of, any public body or
authority is necessary for the execution, delivery and performance by Zynaxis of
its obligations under this Agreement.
5.3 CAPITAL STOCK.
(a) The authorized capital stock of Zynaxis
consists of (i) 25,000,000 shares of Zynaxis Common Stock, of which 10,338,768
shares are issued and outstanding, and (ii) 2,000,000 shares of preferred stock,
1,500,000 shares of which are designated Series A Convertible Preferred Stock
and of which 1,412,500 shares are issued and outstanding. The Conversion Price
(as that term is defined in the Statement With Respect to Shares) of the Zynaxis
Preferred Stock is One Dollar ($1.00) per share. All of the issued and
outstanding shares of capital stock of Zynaxis are duly and validly issued and
outstanding and are fully paid and nonassessable under the PBCL. None of the
outstanding shares of Zynaxis Capital Stock has been issued in violation of any
preemptive rights of the current or past shareholders of Zynaxis.
(b) Except as set forth in Section 5.3(a) or as
disclosed in Section 5.3 of the Zynaxis Disclosure Memorandum, there are no
shares of capital stock or other equity securities of Zynaxis outstanding and no
outstanding Equity Rights relating to the Zynaxis Capital Stock.
5.4 ZYNAXIS SUBSIDIARIES. Zynaxis has disclosed in
Section 5.4 of the Zynaxis Disclosure Memorandum all of the Zynaxis Subsidiaries
(in each case identifying its jurisdiction of incorporation, each jurisdiction
in which it is qualified and/or licensed to transact business, and the number of
shares owned by Zynaxis and percentage ownership interest represented by such
share ownership). Except as disclosed in Section 5.4 of the Zynaxis Disclosure
Memorandum, Zynaxis
<PAGE> 19
or one of its Subsidiaries owns all of the issued and outstanding shares of
capital stock (or other equity interests) of each Zynaxis Subsidiary. No capital
stock (or other equity interest) of any Zynaxis Subsidiary is or may become
required to be issued (other than to another Zynaxis Company) by reason of any
Equity Rights, and there are no Contracts by which any Zynaxis Subsidiary is
bound to issue (other than to another Zynaxis Company) additional shares of its
capital stock (or other equity interests) or Equity Rights or by which any
Zynaxis Company is or may be bound to transfer any shares of the capital stock
(or other equity interests) of any Zynaxis Subsidiary (other than to another
Zynaxis Company). There are no Contracts relating to the rights of any Zynaxis
Company to vote or to dispose of any shares of the capital stock (or other
equity interests) of any Zynaxis Subsidiary. All of the shares of capital stock
(or other equity interests) of each Zynaxis Subsidiary held by a Zynaxis Company
are fully paid and nonassessable under the applicable corporation Law of the
jurisdiction in which such Subsidiary is incorporated or organized and are owned
by the Zynaxis Company free and clear of any Lien, except as contemplated in the
Transaction Documents. Except as disclosed in Section 5.4 of the Zynaxis
Disclosure Memorandum, each Zynaxis Subsidiary is a corporation, and each such
Subsidiary is duly organized, validly existing, and (as to corporations) in good
standing under the Laws of the jurisdiction in which it is incorporated or
organized, and has the corporate power and authority necessary for it to own,
lease, and operate its Assets and to carry on its business as now conducted.
Each Zynaxis Subsidiary is duly qualified or licensed to transact business as a
foreign corporation in good standing in the States of the United States and
foreign jurisdictions where the character of its Assets or the nature or conduct
of its business requires it to be so qualified or licensed, except for such
jurisdictions in which the failure to be so qualified or licensed is not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on Zynaxis. The minute book and other organizational documents for each
Zynaxis Subsidiary have been made available to Vaxcel for its review, and,
except as disclosed in Section 5.4 of the Zynaxis Disclosure Memorandum, are
true and complete in all material respects as in effect as of the date of this
Agreement and accurately reflect in all material respects all amendments thereto
and all proceedings of the Board of Directors and shareholders thereof.
5.5 SEC FILINGS; FINANCIAL STATEMENTS.
(a) Zynaxis has timely filed and made available
to Vaxcel all SEC Documents required to be filed by Zynaxis since December 31,
1992 (the "Zynaxis SEC Reports"). The Zynaxis SEC Reports (i) at the time filed,
complied in all material respects with the applicable requirements of the
Securities Laws and (ii) did not, at the time they were filed (or, if amended or
superseded by a filing prior to the date of this Agreement, then on the date of
such filing) contain any untrue statement of a material fact or omit to state a
material fact required to be stated in such Zynaxis SEC Reports or necessary in
order to make the statements in such Zynaxis SEC Reports, in light of the
circumstances under which they were made, not misleading. No Zynaxis Subsidiary
is required to file any SEC Documents.
(b) Each of the Zynaxis Financial Statements
(including, in each case, any related notes) contained in the Zynaxis SEC
Reports, including any Zynaxis SEC Reports filed after the date of this
Agreement until the Effective Time, complied or will comply as to form in all
material respects with the applicable published rules and regulations of the SEC
with respect
<PAGE> 20
thereto, was prepared in accordance with GAAP applied on a consistent basis
throughout the periods involved (except as may be indicated in the notes to such
financial statements or, in the case of unaudited interim statements, as
permitted by Form 10-Q of the SEC), and fairly presented in all material
respects the consolidated financial position of Zynaxis and its Subsidiaries as
at the respective dates and the consolidated results of operations and cash
flows for the periods indicated, except that the unaudited interim financial
statements were or are subject to normal and recurring year-end adjustments
which were not or are not expected to be material in amount or effect.
5.6 ABSENCE OF UNDISCLOSED LIABILITIES. Except as disclosed
in Section 5.6 of the Zynaxis Disclosure Memorandum, no Zynaxis Company has any
Liabilities that are reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Zynaxis, except Liabilities which are
accrued or reserved against in the consolidated balance sheets of Zynaxis as of
December 31, 1995 and June 30, 1996, included in the Zynaxis Financial
Statements delivered prior to the date of this Agreement or reflected in the
notes thereto. Except as disclosed in Section 5.6 of the Zynaxis Disclosure
Memorandum, no Zynaxis Company has incurred or paid any Liability since June 30,
1996, except for such Liabilities incurred or paid (i) in the ordinary course of
business consistent with past business practice and which are not reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
Zynaxis or (ii) in connection with the transactions contemplated by this
Agreement. Except as disclosed in Section 5.6 of the Zynaxis Disclosure
Memorandum or in the Zynaxis Financial Statements, no Zynaxis Company is
directly or indirectly liable, by guarantee, indemnity, or otherwise, upon or
with respect to, or obligated, by discount or repurchase agreement or in any
other way, to provide funds in respect to, or obligated to guarantee or assume
any Liability of any Person for any amount in excess of $10,000.
5.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December
31, 1995, except as disclosed in the Zynaxis Financial Statements delivered
prior to the date of this Agreement or as disclosed in Section 5.7 of the
Zynaxis Disclosure Memorandum, (i) there have been no events, changes, or
occurrences which have had, or are reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on Zynaxis, and (ii) the Zynaxis
Companies have not taken any action, or failed to take any action, prior to the
date of this Agreement, which action or failure, if taken after the date of this
Agreement, would represent or result in a material breach or violation of any of
the covenants and agreements of Zynaxis provided in Article 7.
5.8 TAX MATTERS.
(a) All material Tax Returns required to be filed
by or on behalf of any of the Zynaxis Companies have been timely filed or
requests for extensions have been timely filed, granted, and have not expired
for periods ended on or before December 31, 1995, and on or before the date of
the most recent fiscal year end immediately preceding the Effective Time, and
all Tax Returns filed are complete and accurate. All Taxes shown on filed Tax
Returns have been paid. As of the date of this Agreement, there is no audit
examination, deficiency, or refund Litigation with respect to any Taxes, except
as reserved against in the Zynaxis Financial
<PAGE> 21
Statements delivered prior to the date of this Agreement. All Taxes and other
Liabilities due with respect to completed and settled examinations or concluded
Litigation have been paid. There are no Liens with respect to Taxes upon any of
the Assets of the Zynaxis Companies, except for any such Liens which are not
reasonably likely to have a Material Adverse Effect on Zynaxis.
(b) None of the Zynaxis Companies has executed an
extension or waiver of any statute of limitations on the assessment or
collection of any Tax due (excluding such statutes that relate to years
currently under examination by the Internal Revenue Service or other applicable
taxing authorities) that is currently in effect.
(c) The provision for any Taxes due or to become
due for any of the Zynaxis Companies for the period or periods through and
including the date of the respective Zynaxis Financial Statements that has been
made and is reflected on such Zynaxis Financial Statements is sufficient to
cover all such Taxes.
(d) Deferred Taxes of the Zynaxis Companies have
been provided for in accordance with GAAP.
(e) None of the Zynaxis Companies is a party to
any Tax allocation or sharing agreement and none of the Zynaxis Companies has
been a member of an affiliated group filing a consolidated federal income Tax
Return (other than a group the common parent of which was Zynaxis) or has any
Liability for Taxes of any Person (other than Zynaxis and its Subsidiaries)
under Treasury Regulation Section 1.1502-6 (or any similar provision of state,
local or foreign Law) as a transferee or successor or by Contract or otherwise.
(f) Each of the Zynaxis Companies is in
compliance with, and its records contain all information and documents
(including properly completed IRS Forms W-9) necessary to comply with, all
applicable information reporting and Tax withholding requirements under federal,
state, and local Tax Laws, and such records identify with specificity all
accounts subject to backup withholding under Section 3406 of the Internal
Revenue Code.
(g) Except as disclosed in Section 5.8 of the
Zynaxis Disclosure Memorandum, none of the Zynaxis Companies has made any
payments, is obligated to make any payments, or is a party to any Contract that
could obligate it to make any payments that would be disallowed as a deduction
under Section 280G or 162(m) of the Internal Revenue Code.
(h) There has not been an ownership change, as
defined in Internal Revenue Code Section 382(g), of the Zynaxis Companies that
occurred during or after any taxable period in which the Zynaxis Companies
incurred a net operating loss that carries over to any taxable period ending
after December 31, 1995.
(i) No Zynaxis Company has or has had in any
foreign country a permanent establishment, as defined in any applicable tax
treaty or convention between the United States and such foreign country.
<PAGE> 22
5.9 ASSETS.
(a) Except as disclosed in Section 5.9 of the
Zynaxis Disclosure Memorandum or as disclosed or reserved against in the Zynaxis
Financial Statements delivered prior to the date of this Agreement, the Zynaxis
Companies have good and marketable title, free and clear of all Liens, to all of
their respective Assets, except for any such Liens or other defects of title
which are not reasonably likely to have a Material Adverse Effect on Zynaxis.
(b) Except as disclosed in Section 5.9(b) of the
Zynaxis Disclosure Memorandum, the accounts receivable of the Zynaxis Companies
as set forth on the most recent balance sheet included in the Zynaxis Financial
Statements delivered prior to the date of this Agreement or arising since the
date thereof are valid and genuine; have arisen solely out of bona fide sales
and deliveries of goods, performance of services and other business transactions
in the ordinary course of business consistent with past practice; are not
subject to valid defenses, set-offs or counterclaims. The allowance for
collection losses on such balance sheet has been determined in accordance with
GAAP.
(c) All Assets which are material to Zynaxis's
business on a consolidated basis, held under leases or subleases by any of the
Zynaxis Companies, are held under valid Contracts enforceable in accordance with
their respective terms (except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, or other Laws affecting the
enforcement of creditors' rights generally and except that the availability of
the equitable remedy of specific performance or injunctive relief is subject to
the discretion of the court before which any proceedings may be brought), and
each such Contract is in full force and effect.
(d) Set forth in Section 5.9(d) of the Zynaxis
Disclosure Memorandum is a description of each insurance policy maintained by
any of the Zynaxis Companies, including the type of policy, the name of the
insurer, the coverage limits and the premiums. None of the Zynaxis Companies has
received notice from any insurance carrier that (i) any policy of insurance will
be canceled or that coverage thereunder will be reduced or eliminated, or (ii)
premium costs with respect to such policies of insurance will be substantially
increased. There are presently no claims for amounts exceeding in any individual
case $5,000 pending under such policies of insurance and no notices of claims in
excess of such amounts have been given by any Zynaxis Company under such
policies.
(f) The Assets of the Zynaxis Companies include
all Assets required to operate the business of the Zynaxis Companies as
presently conducted. The Zynaxis Companies have no Inventory.
5.10 INTELLECTUAL PROPERTY. Except as disclosed in Section
5.10 of the Zynaxis Disclosure Memorandum, each Zynaxis Company owns or has a
license to use all of the Intellectual Property used by such Zynaxis Company in
the course of its business. Each Zynaxis Company is the owner of or has a
license to any Intellectual Property sold or licensed to a third party by such
Zynaxis Company in connection with such Zynaxis Company's business operations,
<PAGE> 23
and such Zynaxis Company has the right to convey by sale or license any
Intellectual Property so conveyed. Except as disclosed in Section 5.10 of the
Zynaxis Disclosure Memorandum, no Zynaxis Company is in Default under any of its
Intellectual Property licenses. Except as disclosed in Section 5.10 of the
Zynaxis Disclosure Memorandum, no proceedings have been instituted, or are
pending or to the Knowledge of Zynaxis threatened, which challenge the rights of
any Zynaxis Company with respect to Intellectual Property used, sold or licensed
by such Zynaxis Company in the course of its business, nor has any person
claimed or alleged any rights to such Intellectual Property. To the Knowledge of
Zynaxis, the conduct of the business of the Zynaxis Companies does not infringe
any Intellectual Property of any other person. Except as disclosed in Section
5.10 of the Zynaxis Disclosure Memorandum, no Zynaxis Company is obligated to
pay any recurring royalties to any Person with respect to any such Intellectual
Property. Except as disclosed in Section 5.10 of the Zynaxis Disclosure
Memorandum, every officer, director, or employee of any Zynaxis Company is a
party to a Contract which requires such officer, director or employee to assign
any interest in any Intellectual Property to a Zynaxis Company and to keep
confidential any trade secrets, proprietary data, customer information, or other
business information of a Zynaxis Company, and, to the Knowledge of Zynaxis, no
such officer, director or employee is party to any Contract with any Person
other than a Zynaxis Company which requires such officer, director or employee
to assign any interest in any Intellectual Property to any Person other than a
Zynaxis Company or to keep confidential any trade secrets, proprietary data,
customer information, or other business information of any Person other than a
Zynaxis Company. Except as disclosed in Section 5.10 of the Zynaxis Disclosure
Memorandum, to the Knowledge of Zynaxis, no officer, director or employee of any
Zynaxis Company is party to any Contract which restricts or prohibits such
officer, director or employee from engaging in activities competitive with any
Person, including any Zynaxis Company.
5.11 ENVIRONMENTAL MATTERS.
(a) Each Zynaxis Company, its Participation
Facilities, and its Operating Properties are, and have been, in compliance with
all Environmental Laws.
(b) There is no Litigation pending or, to the
Knowledge of Zynaxis, threatened before any court, governmental agency, or
authority or other forum in which any Zynaxis Company or any of its Operating
Properties or Participation Facilities (or Zynaxis in respect of such Operating
Property or Participation Facility) has been or, with respect to threatened
Litigation, may be named as a defendant (i) for alleged noncompliance (including
by any predecessor) with any Environmental Law or (ii) relating to the release,
discharge, spillage, or disposal into the environment of any Hazardous Material,
whether or not occurring at, on, under, adjacent to, or affecting (or
potentially affecting) a site owned, leased, or operated by any Zynaxis Company
or any of its Operating Properties or Participation Facilities, nor is there any
reasonable basis for any Litigation of a type described in this sentence.
(c) During the period of (i) any Zynaxis
Company's ownership or operation of any of their respective current properties,
(ii) any Zynaxis Company's participation in the management of any Participation
Facility, or (iii) any Zynaxis Company's holding of a security interest in an
Operating Property, there have been no releases, discharges, spillages, or
disposals
<PAGE> 24
of Hazardous Material in, on, under, adjacent to, or affecting (or potentially
affecting) such properties. Prior to the period of (i) any Zynaxis Company's
ownership or operation of any of their respective current properties, (ii) any
Zynaxis Company's participation in the management of any Participation Facility,
or (iii) any Zynaxis Company's holding of a security interest in a Operating
Property, to the Knowledge of Zynaxis, there were no releases, discharges,
spillages, or disposals of Hazardous Material in, on, under, or affecting any
such property, Participation Facility or Operating Property.
5.12 COMPLIANCE WITH LAWS. Each Zynaxis Company has in
effect all Permits necessary for it to own, lease, or operate its material
Assets and to carry on its business as now conducted, except for those Permits
the absence of which are not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Zynaxis, and there has occurred no
Default under any such Permit other than Defaults which are not reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
Zynaxis. Except as disclosed in Section 5.12 of the Zynaxis Disclosure
Memorandum, none of the Zynaxis Companies:
(a) is in Default under any of the provisions of its
Articles of Incorporation, as amended, or Bylaws (or other governing
instruments);
(b) is in Default under any Laws, Orders, or Permits
applicable to its business or employees conducting its business, except
for Defaults which are not reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on Zynaxis; or
(c) since January 1, 1993, has received any notification or
communication from any agency or department of federal, state, or local
government or any Regulatory Authority or the staff thereof (i) asserting
that any Zynaxis Company is not in compliance with any of the Laws or
Orders which such governmental authority or Regulatory Authority
enforces, where such noncompliance is reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Zynaxis,
(ii) threatening to revoke any Permits, the revocation of which is
reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on Zynaxis, or (iii) requiring any Zynaxis Company to
enter into or consent to the issuance of a cease and desist order, formal
agreement, directive, commitment, or memorandum of understanding, or to
adopt any Board resolution or similar undertaking.
Copies of all material reports, correspondence, notices and other documents
relating to any inspection, audit, monitoring or other form of review or
enforcement action by a Regulatory Authority have been made available to Vaxcel.
5.13 LABOR RELATIONS. No Zynaxis Company is the subject of
any Litigation asserting that it or any other Zynaxis Company has committed an
unfair labor practice (within the meaning of the National Labor Relations Act or
comparable state Law) or seeking to compel it or any other Zynaxis Company to
bargain with any labor organization as to wages or conditions of employment, nor
is any Zynaxis Company party to any collective bargaining agreement, nor is
there any strike or other labor dispute involving any Zynaxis Company, pending
or threatened, nor
<PAGE> 25
to the Knowledge of Zynaxis, is there any activity involving any Zynaxis
Company's employees seeking to certify a collective bargaining unit or engaging
in any other organization activity.
5.14 EMPLOYEE BENEFIT PLANS.
(a) Zynaxis has disclosed in Section 5.14 of the
Zynaxis Disclosure Memorandum, and has delivered or made available to Vaxcel
prior to the execution of this Agreement, copies in each case of, all pension,
retirement, profit-sharing, deferred compensation, stock option, employee stock
ownership, severance pay, vacation, bonus, or other incentive plan, all other
written employee programs, arrangements, or agreements, all medical, vision,
dental, or other health plans, all life insurance plans, and all other employee
benefit plans or fringe benefit plans, including "employee benefit plans" as
that term is defined in Section 3(3) of ERISA, currently adopted, maintained by,
sponsored in whole or in part by, or contributed to by any Zynaxis Company or
ERISA Affiliate (as defined below) thereof for the benefit of employees,
retirees, dependents, spouses, directors, independent contractors, or other
beneficiaries and under which employees, retirees, dependents, spouses,
directors, independent contractors, or other beneficiaries are eligible to
participate (collectively, the "Zynaxis Benefit Plans"). Any of the Zynaxis
Benefit Plans which is an "employee pension benefit plan," as that term is
defined in Section 3(2) of ERISA, is referred to herein as a "Zynaxis ERISA
Plan." Each Zynaxis ERISA Plan which is also a "defined benefit plan" (as
defined in Section 414(j) of the Internal Revenue Code) is referred to herein as
a "Zynaxis Pension Plan." No Zynaxis Pension Plan is or has been a multiemployer
plan within the meaning of Section 3(37) of ERISA.
(b) All Zynaxis Benefit Plans are in compliance
with the applicable terms of ERISA, the Internal Revenue Code, and any other
applicable Laws the breach or violation of which are reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Zynaxis. Each
Zynaxis ERISA Plan which is intended to be qualified under Section 401(a) of the
Internal Revenue Code has received a favorable determination letter from the
Internal Revenue Service, and Zynaxis is not aware of any circumstances likely
to result in revocation of any such favorable determination letter. To the
Knowledge of Zynaxis, no Zynaxis Company has engaged in a transaction with
respect to any Zynaxis Benefit Plan that, assuming the taxable period of such
transaction expired as of the date hereof, would subject any Zynaxis Company to
a Tax imposed by either Section 4975 of the Internal Revenue Code or Section
502(i) of ERISA that, individually or in the aggregate, is reasonably likely to
have a Material Adverse Effect on Zynaxis.
(c) No Zynaxis Pension Plan has any "unfunded
current liability," as that term is defined in Section 302(d)(8)(A) of ERISA,
and the fair market value of the assets of any such plan exceeds the plan's
"benefit liabilities," as that term is defined in Section 4001(a)(16) of ERISA
when determined under actuarial factors that would apply if the Zynaxis Pension
Plan were terminated in accordance with all applicable legal requirements. Since
the date of the most recent actuarial valuation, there has been (i) no material
change in the financial position of any Zynaxis Pension Plan, (ii) no change in
the actuarial assumptions with respect to any Zynaxis Pension Plan, and (iii) no
increase in benefits under any Zynaxis Pension Plan as a result of plan
amendments or changes in applicable Law which is reasonably likely to have,
individually or in the
<PAGE> 26
aggregate, a Material Adverse Effect on Zynaxis or materially adversely affect
the funding status of any such plan. Neither any Zynaxis Pension Plan nor any
"single-employer plan," within the meaning of Section 4001(a)(15) of ERISA,
currently or formerly maintained by any Zynaxis Company, or the single-employer
plan of any entity which is considered one employer with Zynaxis under Section
4001 of ERISA or Section 414 of the Internal Revenue Code or Section 302 of
ERISA (whether or not waived) (an "ERISA Affiliate") has an "accumulated funding
deficiency" within the meaning of Section 412 of the Internal Revenue Code or
Section 302 of ERISA. No Zynaxis Company has provided, or is required to
provide, security to a Zynaxis Pension Plan or to any single-employer plan of an
ERISA Affiliate pursuant to Section 401(a)(29) of the Internal Revenue Code.
(d) No Liability under Subtitle C or D of Title
IV of ERISA has been or is expected to be incurred by any Zynaxis Company with
respect to any ongoing, frozen, or terminated single-employer plan or the
single-employer plan of any ERISA Affiliate. No Zynaxis Company has incurred any
withdrawal Liability with respect to a multiemployer plan under Subtitle B of
Title IV of ERISA (regardless of whether based on contributions of an ERISA
Affiliate). No notice of a "reportable event," within the meaning of Section
4043 of ERISA for which the 30-day reporting requirement has not been waived,
has been required to be filed for any Zynaxis Pension Plan or by any ERISA
Affiliate within the 12-month period ending on the date hereof.
(e) Except as disclosed in Section 5.14 of the
Zynaxis Disclosure Memorandum, no Zynaxis Company has any Liability for retiree
health and life benefits under any of the Zynaxis Benefit Plans and there are no
restrictions on the rights of such Zynaxis Company to amend or terminate any
such retiree health or benefit Plan without incurring any Liability thereunder.
(f) Except as disclosed in Section 5.14 of the
Zynaxis Disclosure Memorandum, neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will (i)
result in any payment (including severance, unemployment compensation, golden
parachute, or otherwise) becoming due to any director or any employee of any
Zynaxis Company from any Zynaxis Company under any Zynaxis Benefit Plan or
otherwise, (ii) increase any benefits otherwise payable under any Zynaxis
Benefit Plan, or (iii) result in any acceleration of the time of payment or
vesting of any such benefit.
(g) The actuarial present values of all accrued
deferred compensation entitlements (including entitlements under any executive
compensation, supplemental retirement, or employment agreement) of employees and
former employees of any Zynaxis Company and their respective beneficiaries,
other than entitlements accrued pursuant to funded retirement plans subject to
the provisions of Section 412 of the Internal Revenue Code or Section 302 of
ERISA, have been fully reflected on the Zynaxis Financial Statements to the
extent required by and in accordance with GAAP.
5.15 MATERIAL CONTRACTS. Except as disclosed in Section 5.15
of the Zynaxis Disclosure Memorandum or otherwise reflected in the Zynaxis
Financial Statements, none of the
<PAGE> 27
Zynaxis Companies, nor any of their respective Assets, businesses, or
operations, is a party to, or is bound or affected by, or receives benefits
under, (i) any employment, severance, termination, consulting, or retirement
Contract providing for aggregate payments to any Person in any calendar year in
excess of $10,000, (ii) any Contract relating to the borrowing of money by any
Zynaxis Company or the guarantee by any Zynaxis Company of any such obligation
(other than Contracts evidencing trade payables and Contracts relating to
borrowings or guarantees made in the ordinary course of business), (iii) any
Contract which prohibits or restricts any Zynaxis Company from engaging in any
business activities in any geographic area, line of business or otherwise in
competition with any other Person, (iv) any Contract between or among Zynaxis
Companies, (v) any Contract involving Intellectual Property (other than
Contracts entered into in the ordinary course with customers and "shrink-wrap"
software licenses), (vi) any Contract relating to the provision of data
processing, network communication, or other technical services to or by any
Zynaxis Company, (vii) any Contract relating to the purchase or sale of any
goods or services (other than Contracts entered into in the ordinary course of
business and involving payments under any individual Contract not in excess of
$20,000), and (viii) any other Contract or amendment thereto that would be
required to be filed as an exhibit to a Form 10-K filed by Zynaxis with the SEC
as of the date of this Agreement (together with all Contracts referred to in
Sections 5.9 and 5.14(a), the "Zynaxis Contracts"). With respect to each Zynaxis
Contract and except as disclosed in Section 5.15 of the Zynaxis Disclosure
Memorandum: (i) the Contract is in full force and effect; (ii) no Zynaxis
Company is in Default thereunder; (iii) no Zynaxis Company has repudiated or
waived any material provision of any such Contract; and (iv) no other party to
any such Contract is, to the Knowledge of Zynaxis, in Default in any respect or
has repudiated or waived any material provision thereunder. Except as disclosed
in Section 5.15 of the Zynaxis Disclosure Memorandum, all of the indebtedness of
any Zynaxis Company for money borrowed is prepayable at any time by such Zynaxis
Company without penalty or premium.
5.16 LEGAL PROCEEDINGS. Except as disclosed in Section 5.16
of the Zynaxis Disclosure Memorandum, there is no Litigation instituted or
pending, or, to the Knowledge of Zynaxis, threatened (or unasserted but
considered probable of assertion and which if asserted would have at least a
reasonable probability of an unfavorable outcome) against any Zynaxis Company,
or against any director, employee or employee benefit plan of any Zynaxis
Company, or against any Asset, interest, or right of any of them, that are
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on Zynaxis, nor are there any Orders of any Regulatory Authorities, other
governmental authorities, or arbitrators outstanding against any Zynaxis Company
that is reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on Zynaxis. Section 5.16 of the Zynaxis Disclosure Memorandum
contains a summary of all Litigation as of the date of this Agreement to which
any Zynaxis Company is a party and which names a Zynaxis Company as a defendant
or cross-defendant or for which any Zynaxis Company has any potential Liability.
5.17 REPORTS. Since January 1, 1993, or the date of
organization, if later, each Zynaxis Company has timely filed all reports and
statements, together with any amendments required to be made with respect
thereto, that it was required to file with Regulatory Authorities (except, in
the case of state securities authorities, failures to file which are not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on Zynaxis). As of their
<PAGE> 28
respective dates, each of such reports and documents, including the financial
statements, exhibits, and schedules thereto, complied in all material respects
with all applicable Laws. As of its respective date, each such report and
document did not, in all material respects, contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements made therein, in light of the circumstances
under which they were made, not misleading.
5.18 STATEMENTS TRUE AND CORRECT. No statement, certificate,
instrument, or other writing furnished or to be furnished by any Zynaxis Company
or any officer, director, employee or Subsidiary thereof to any Vaxcel Company
pursuant to this Agreement or any other document, agreement, or instrument
referred to herein contains or will contain any untrue statement of material
fact or will omit to state a material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. None of the information supplied or to be supplied by any Zynaxis
Company or any officer, director, employee or Subsidiary thereof for inclusion
in the Registration Statement to be filed by Vaxcel with the SEC will, when the
Registration Statement becomes effective, be false or misleading with respect to
any material fact, or omit to state any material fact necessary to make the
statements therein not misleading. None of the information supplied or to be
supplied by any Zynaxis Company or any officer, director, employee or Subsidiary
thereof for inclusion in the Proxy Statement to be mailed to Zynaxis's
shareholders in connection with the Shareholders' Meeting, and any other
documents to be filed by a Zynaxis Company or any officer, director, employee or
Subsidiary thereof with the SEC or any other Regulatory Authority in connection
with the transactions contemplated hereby, will, at the respective time such
documents are filed, and with respect to the Proxy Statement, when first mailed
to the shareholders of Zynaxis, be false or misleading with respect to any
material fact, or omit to state any material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, or, in the case of the Proxy Statement or any amendment thereof
or supplement thereto, at the time of the Shareholders' Meeting, be false or
misleading with respect to any material fact, or omit to state any material fact
necessary to correct any statement in any earlier communication with respect to
the solicitation of any proxy for the Shareholders' Meeting. All documents that
any Zynaxis Company or any officer, director, employee or Subsidiary thereof is
responsible for filing with any Regulatory Authority in connection with the
transactions contemplated hereby will comply as to form in all material respects
with the provisions of applicable Law.
5.19 REGULATORY MATTERS. No Zynaxis Company or any officer,
director, employee or Subsidiary thereof has taken or agreed to take any action
or has any Knowledge of any fact or circumstance that is reasonably likely to
materially impede or delay receipt of any Consents of Regulatory Authorities
referred to in Section 7.1(b) or result in the imposition of a condition or
restriction of the type referred to in the last sentence of such Section.
5.20 CHARTER PROVISIONS. Each Zynaxis Company has taken all
action so that the entering into of this Agreement and the consummation of the
Merger and the other transactions contemplated by this Agreement do not and will
not result in the grant of any rights to any Person under the Articles of
Incorporation, as amended, Bylaws or other governing instruments of any Zynaxis
Company, except such rights as exist on the date hereof, or restrict or
<PAGE> 29
impair the ability of Vaxcel or any of its Subsidiaries to vote, or otherwise to
exercise the rights of a shareholder with respect to, shares of any Zynaxis
Company that may be directly or indirectly acquired or controlled by them.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF CYTRX, VAXCEL AND VAXCEL MERGER SUB
CytRx, Vaxcel and Vaxcel Merger Sub hereby represent and
warrant to Zynaxis as follows:
6.1 ORGANIZATION, STANDING, AND POWER.
(a) CytRx is a corporation duly organized,
validly existing, and in good standing under the Laws of the State of Delaware,
and has the corporate power and authority to carry on its business as now
conducted and to own, lease and operate its Assets. CytRx is duly qualified or
licensed to transact business as a foreign corporation in good standing in the
states of the United States and foreign jurisdictions where the character of its
Assets or the nature or conduct of its business requires it to be so qualified
or licensed, except for such jurisdictions in which the failure to be so
qualified or licensed is not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on CytRx.
(b) Vaxcel is a corporation duly organized,
validly existing, and in good standing under the Laws of the State of Delaware,
and has the corporate power and authority to carry on its business as now
conducted and to own, lease and operate its Assets. Vaxcel is duly qualified or
licensed to transact business as a foreign corporation in good standing in the
States of the United States and foreign jurisdictions where the character of its
Assets or the nature or conduct of its business requires it to be so qualified
or licensed, except for such jurisdictions in which the failure to be so
qualified or licensed is not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Vaxcel. The minute book and other
organizational documents for Vaxcel have been made available to Zynaxis for its
review and, except as disclosed in Section 6.1 of the Vaxcel Disclosure
Memorandum, are true and complete in all material respects as of the date of
this Agreement and accurately reflect in all material respects all amendments
thereto and all proceedings of the Board of Directors and shareholders thereof.
<PAGE> 30
(c) Vaxcel Merger Sub is a corporation duly
organized, validly existing, and in good standing under the Laws of the State of
Georgia, and has the corporate power and authority to carry on its business as
now conducted and to own, lease and operate its Assets. The minute book and
other organizational documents for Vaxcel Merger Sub have been made available to
Zynaxis for its review and are true and complete in all material respects as of
the date of this Agreement and accurately reflect in all material respects all
amendments thereto and all proceedings of the Board of Directors and
shareholders thereof.
6.2 AUTHORITY; NO BREACH BY AGREEMENT.
(a) Each of CytRx, Vaxcel and Vaxcel Merger Sub
has the corporate power and authority necessary to execute, deliver and perform
its obligations under this Agreement and to consummate the transactions
contemplated hereby. The execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated herein, including the
Merger, have been duly and validly authorized by all necessary corporate action
in respect thereof on the part of such corporations. Vaxcel, as the sole
shareholder of Vaxcel Merger Sub, has voted all outstanding shares of Vaxcel
Merger Sub Common Stock in favor of adoption of this Agreement, as and to the
extent required by applicable Law. This Agreement represents a legal, valid, and
binding obligation of each of CytRx, Vaxcel and Vaxcel Merger Sub, enforceable
against each of CytRx, Vaxcel and Vaxcel Merger Sub in accordance with its
terms.
(b) Neither the execution and delivery of this
Agreement by CytRx, Vaxcel and Vaxcel Merger Sub, nor the consummation by CytRx,
Vaxcel and Vaxcel Merger Sub of the transactions contemplated hereby, nor
compliance by CytRx, Vaxcel and Vaxcel Merger Sub with any of the provisions
hereof, will (i) conflict with or result in a breach of any provision of the
Certificate of Incorporation or Bylaws of any of CytRx, Vaxcel or Vaxcel Merger
Sub, or any resolution adopted by the Board of Directors or the Shareholders of
any Vaxcel Company, or (ii) constitute or result in a Default under, or require
any Consent pursuant to, or result in the creation of any Lien on any Asset of
any Vaxcel Company under, any Contract or Permit of any Vaxcel Company, or,
(iii) subject to receipt of the requisite Consents referred to in Section
9.1(b), constitute or result in a Default under, or require any Consent pursuant
to, any Law or Order applicable to any Vaxcel Company or any of their respective
material Assets (including any Vaxcel Company or any Zynaxis Company becoming
subject to or liable for the payment of any Tax or any of the Assets owned by
any Vaxcel Company or any Zynaxis Company being reassessed or revalued by any
Taxing authority).
(c) Other than in connection or compliance with
the provisions of the Securities Laws, applicable state corporate and securities
Laws, and rules of the NASD, and other than Consents required from Regulatory
Authorities, and other than notices to or filings with the Internal Revenue
Service or the Pension Benefit Guaranty Corporation with respect to any employee
benefit plans, no notice to, filing with, or Consent of, any public body or
authority is necessary for the execution, delivery and performance by CytRx,
Vaxcel and Vaxcel Merger Sub of their obligations under this Agreement.
<PAGE> 31
6.3 CAPITAL STOCK.
(a) The authorized capital stock of Vaxcel
consists of (i) 30,000,000 shares of Vaxcel Common Stock, of which 8,250,004 are
issued and outstanding, and (ii) 2,000,000 shares of Vaxcel Preferred Stock,
none of which are issued and outstanding. All of the issued and outstanding
shares of Vaxcel Capital Stock are, and all of the shares of Vaxcel Common Stock
to be issued in exchange for shares of Zynaxis Common Stock upon consummation of
the Merger, when issued in accordance with the terms of this Agreement, will be,
duly and validly issued and outstanding and fully paid and nonassessable under
the DGCL. None of the outstanding shares of Vaxcel Capital Stock has been, and
none of the shares of Vaxcel Common Stock to be issued in exchange for shares of
Zynaxis Common Stock upon consummation of the Merger will be, issued in
violation of any preemptive rights of the current or past stockholders of
Vaxcel.
(b) The authorized capital stock of Vaxcel Merger
Sub consists of (i) 1,000 shares of Common Stock, of which 500 shares are issued
and outstanding as of the date of this Agreement. All of the issued and
outstanding shares of Vaxcel Merger Sub Common Stock are duly and validly issued
and fully paid and nonassessable under the GBCC. None of the outstanding shares
of Vaxcel Merger Sub Common Stock has been issued in violation of any preemptive
rights of the current or past shareholders of Vaxcel Merger Sub.
(c) Except as set forth in Sections 6.3(a) and
6.3(b), or as disclosed in Section 6.3 of the Vaxcel Disclosure Memorandum,
there are no shares of capital stock or other equity securities of Vaxcel or
Vaxcel Merger Sub outstanding and no outstanding Equity Rights relating to
Vaxcel or Vaxcel Merger Sub Capital Stock.
Vaxcel and Vaxcel Merger Sub hereby represent and warrant to
Zynaxis as follows:
6.4 VAXCEL SUBSIDIARIES. Vaxcel has disclosed in Section
6.4 of the Vaxcel Disclosure Memorandum all of the Vaxcel Subsidiaries as of the
date of this Agreement that are corporations (identifying its jurisdiction of
incorporation, each jurisdiction in which the character of its Assets or the
nature or conduct of its business requires it to be qualified and/or licensed to
transact business, and the number of shares owned and percentage ownership
interest represented by such share ownership) and all of the Vaxcel Subsidiaries
that are general or limited partnerships or other non-corporate entities
(identifying the Law under which such entity is organized, each jurisdiction in
which the character of its Assets or the nature or conduct of its business
requires it to be qualified and/or licensed to transact business, and the amount
and nature of the ownership interest therein). Except as disclosed in Section
6.4 of the Vaxcel Disclosure Memorandum, Vaxcel or one of its Subsidiaries owns
all of the issued and outstanding shares of capital stock (or other equity
interests) of each Vaxcel Subsidiary. No capital stock (or other equity
interest) of any Vaxcel Subsidiary is or may become required to be issued (other
than to another Vaxcel Company) by reason of any Equity Rights, and there are no
Contracts by which any Vaxcel Subsidiary is bound to issue (other than to
another Vaxcel Company) additional shares
<PAGE> 32
of its capital stock (or other equity interests) or Equity Rights or by which
any Vaxcel Company is or may be bound to transfer any shares of the capital
stock (or other equity interests) of any Vaxcel Subsidiary (other than to
another Vaxcel Company). There are no Contracts relating to the rights of any
Vaxcel Company to vote or to dispose of any shares of the capital stock (or
other equity interests) of any Vaxcel Subsidiary. All of the shares of capital
stock (or other equity interests) of each Vaxcel Subsidiary held by a Vaxcel
Company are fully paid and nonassessable under the applicable corporation Law of
the jurisdiction in which such Subsidiary is incorporated or organized and are
owned by the Vaxcel Company free and clear of any Lien. Each Vaxcel Subsidiary
is duly organized, validly existing, and (as to corporations) in good standing
under the Laws of the jurisdiction in which it is incorporated or organized, and
has the power and authority necessary for it to own, lease and operate its
Assets and to carry on its business as now conducted. Each Vaxcel Subsidiary is
duly qualified or licensed to transact business as a foreign corporation in good
standing in the States of the United States and foreign jurisdictions where the
character of its Assets or the nature or conduct of its business requires it to
be so qualified or licensed, except for such jurisdictions in which the failure
to be so qualified or licensed is not reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect on Vaxcel. The minute book and other
organizational documents for each Vaxcel Subsidiary have been made available to
Zynaxis for its review, and are true and complete in all material respects as in
effect as of the date of this Agreement and accurately reflect in all material
respects all amendments thereto and all proceedings of the Board of Directors
and shareholders thereof.
6.5 VAXCEL FINANCIAL STATEMENTS. The books and records of
Vaxcel are accurate and complete. The Vaxcel Financial Statements have been
prepared from such books and records and reflect, in all material respects and
in reasonable detail, the transactions and assets and liabilities of Vaxcel.
6.6 ABSENCE OF UNDISCLOSED LIABILITIES. No Vaxcel Company
has any Liabilities that are reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Vaxcel, except Liabilities which are
accrued or reserved against in the consolidated balance sheets of Vaxcel as of
December 31, 1995 and September 30, 1996, included in the Vaxcel Financial
Statements delivered prior to the date of this Agreement or reflected in the
notes thereto. No Vaxcel Company has incurred or paid any Liability since
September 30, 1996, except for such Liabilities incurred or paid (i) in the
ordinary course of business consistent with past business practice and which are
not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on Vaxcel or (ii) in connection with the transactions
contemplated by this Agreement. Except as disclosed in the Vaxcel Financial
Statements, no Vaxcel Company is directly or indirectly liable, by guarantee,
indemnity, or otherwise, upon or with respect to, or obligated, by discount or
repurchase agreement or in any other way, to provide funds in respect to, or
obligated to guarantee or assume any Liability of any Person for any amount in
excess of $10,000.
6.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December
31, 1995, except as disclosed in the Vaxcel Financial Statements delivered prior
to the date of this Agreement, (i) there have been no events, changes or
occurrences which have had, or are reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on Vaxcel,
<PAGE> 33
and (ii) the Vaxcel Companies have not taken any action, or failed to take any
action, prior to the date of this Agreement, which action or failure, if taken
after the date of this Agreement, would represent or result in a material breach
or violation of any of the covenants and agreements of Vaxcel provided in
Article 7.
6.8 TAX MATTERS.
(a) All material Tax Returns required to be
filed by or on behalf of any of the Vaxcel Companies have been timely filed or
requests for extensions have been timely filed, granted, and have not expired
for periods ended on or before December 31, 1995, and on or before the date of
the most recent fiscal year end immediately preceding the Effective Time and all
Tax Returns filed are complete and accurate. All material Taxes shown on filed
Tax Returns have been paid. As of the date of this Agreement, there is no audit
examination, deficiency, or refund Litigation with respect to any Taxes except
as reserved against in the Vaxcel Financial Statements delivered prior to the
date of this Agreement. All Taxes and other Liabilities due with respect to
completed and settled examinations or concluded Litigation have been paid. There
are no Liens with respect to Taxes upon any of the Assets of the Vaxcel
Companies, except for such Liens which are not reasonably likely to have a
Material Adverse Effect on Vaxcel.
(b) None of the Vaxcel Companies has executed an
extension or waiver of any statute of limitations on the assessment or
collection of any Tax due (excluding such statutes that relate to years
currently under examination by the Internal Revenue Service or other applicable
taxing authorities) that is currently in effect.
(c) The provision for any Taxes due or to become
due for any of the Vaxcel Companies for the period or periods through and
including the date of the respective Vaxcel Financial Statements that has been
made and is reflected on such Vaxcel Financial Statements is sufficient to cover
all such Taxes.
(d) Deferred Taxes of the Vaxcel Companies have
been provided for in accordance with GAAP.
(e) None of the Vaxcel Companies is a party to
any Tax allocation or sharing agreement and none of the Vaxcel Companies has
been a member of an affiliated group filing a consolidated federal income Tax
Return (other than a group the common parent of which was Vaxcel) has any
Liability for Taxes of any Person (other than Vaxcel and its Subsidiaries) under
Treasury Regulation Section 1.1502-6 (or any similar provision of state, local
or foreign Law) as a transferee or successor or by Contract or otherwise.
(f) Each of the Vaxcel Companies is in compliance
with, and its records contain all information and documents (including properly
completed IRS Forms W-9) necessary to comply with, all applicable information
reporting and Tax withholding requirements under federal, state, and local Tax
Laws, and such records identify with specificity all accounts subject to backup
withholding under Section 3406 of the Internal Revenue Code.
<PAGE> 34
6.9 ASSETS.
(a) Except as reserved against in the Vaxcel
Financial Statements delivered prior to the date of this Agreement, the Vaxcel
Companies have good and marketable title, free and clear of all Liens, to all of
their respective Assets, except for any such Liens or other defects of title
which are not reasonably likely to have a Material Adverse Effect on Vaxcel. All
tangible properties used in the businesses of the Vaxcel Companies are in good
condition, reasonable wear and tear excepted, and are usable in the ordinary
course of business consistent with Vaxcel's past practices of the Vaxcel
Companies.
(b) The Vaxcel Companies have no Inventory.
(c) The accounts receivable of the Vaxcel
Companies as set forth on the most recent balance sheet included in the Vaxcel
Financial Statements delivered prior to the date of this Agreement or arising
since the date thereof are valid and genuine; have arisen solely out of bona
fide sales and deliveries of goods, performance of services and other business
transactions in the ordinary course of business consistent with past practice;
are not subject to valid defenses, set-offs or counterclaims; and are
collectible within 90 days after billing at the full recorded amount thereof
less, in the case of accounts receivable appearing on the most recent balance
sheet included in the Vaxcel Financial Statements delivered prior to the date of
this Agreement, the recorded allowance for collection losses on such balance
sheet. The allowance for collection losses on such balance sheet has been
determined in accordance with GAAP.
(d) All Assets which are material to Vaxcel's
business on a consolidated basis, held under leases or subleases by any of the
Vaxcel Companies, are held under valid Contracts enforceable in accordance with
their respective terms (except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other Laws affecting the
enforcement of creditors' rights generally and except that the availability of
the equitable remedy of specific performance or injunctive relief is subject to
the discretion of the court before which any proceedings may be brought), and
each such Contract is in full force and effect.
(e) The Vaxcel Companies currently maintain
insurance similar in amounts, scope and coverage to that maintained by other
peer companies. None of the Vaxcel Companies has received notice from any
insurance carrier that (i) such insurance will be canceled or that coverage
thereunder will be reduced or eliminated, or (ii) premium costs with respect to
such policies of insurance will be substantially increased. There are presently
no claims for amounts exceeding in any individual case $5,000 pending under such
policies of insurance and no notices of claims in excess of such amount have
been given by any Vaxcel Company under such policies.
(f) The Assets of the Vaxcel Companies include
all Assets required to operate the business of the Vaxcel Companies as presently
conducted.
6.10 INTELLECTUAL PROPERTY. Each Vaxcel Company owns or
has a license to use all of the Intellectual Property used by such Vaxcel
Company in the course of its business. Each
<PAGE> 35
Vaxcel Company is the owner of or has a license to any Intellectual Property
sold or licensed to a third party by such Vaxcel Company in connection with such
Vaxcel Company's business operations, and such Vaxcel Company has the right to
convey by sale or license any Intellectual Property so conveyed. No Vaxcel
Company is in Default under any of its Intellectual Property licenses. No
proceedings have been instituted, or are pending or, to the Knowledge of Vaxcel,
threatened, which challenge the rights of any Vaxcel Company with respect to
Intellectual Property used, sold or licensed by such Vaxcel Company in the
course of its business, nor has any person claimed or alleged any rights to such
Intellectual Property. To the knowledge of Vaxcel and Vaxcel Merger Sub, the
conduct of the business of the Vaxcel Companies does not infringe any
Intellectual Property of any other person. Except as disclosed in Section 6.10
of the Vaxcel Disclosure Memorandum, no Vaxcel Company is obligated to pay any
recurring royalties to any Person with respect to any such Intellectual
Property. Every officer, director, or employee of any Vaxcel Company is a party
to a Contract which requires such officer, director or employee to assign any
interest in any Intellectual Property to a Vaxcel Company and to keep
confidential any trade secrets, proprietary data, customer information, or other
business information of a Vaxcel Company, and to the Knowledge of Vaxcel and
Vaxcel Merger Sub, no such officer, director or employee is party to any
Contract with any Person other than a Vaxcel Company which requires such
officer, director or employee to assign any interest in any Intellectual
Property to any Person other than a Vaxcel Company or to keep confidential any
trade secrets, proprietary data, customer information, or other business
information of any Person other than a Vaxcel Company. To the Knowledge of
Vaxcel and Vaxcel Merger Sub, no officer, director or employee of any Vaxcel
Company is party to any Contract which restricts or prohibits such officer,
director or employee from engaging in activities competitive with any Person,
including any Vaxcel Company.
6.11 ENVIRONMENTAL MATTERS.
(a) Each Vaxcel Company, its Participation
Facilities, and its Operating Properties are, and have been, in compliance with
all Environmental Laws.
(b) There is no Litigation pending or, to the
Knowledge of Vaxcel and Vaxcel Merger Sub, threatened before any court,
governmental agency, or authority or other forum in which any Vaxcel Company or
any of its Operating Properties or Participation Facilities (or Vaxcel in
respect of such Operating Property or Participation Facility) has been or, with
respect to threatened Litigation, may be named as a defendant (i) for alleged
noncompliance (including by any predecessor) with any Environmental Law or (ii)
relating to the release, discharge, spillage, or disposal into the environment
of any Hazardous Material, whether or not occurring at, on, under, adjacent to,
or affecting (or potentially affecting) a site owned, leased, or operated by any
Vaxcel Company or any of its Operating Properties or Participation Facilities
nor is there any reasonable basis for any Litigation of a type described in this
sentence.
(c) During the period of (i) any Vaxcel Company's
ownership or operation of any of their respective current properties, (ii) any
Vaxcel Company's participation in the management of any Participation Facility,
or (iii) any Vaxcel Company's holding of a security interest in a Operating
Property, there have been no releases, discharges, spillages, or disposals of
Hazardous Material in, on, under, adjacent to, or affecting (or potentially
affecting) such
<PAGE> 36
properties. Prior to the period of (i) any Vaxcel Company's ownership or
operation of any of their respective current properties, (ii) any Vaxcel
Company's participation in the management of any Participation Facility, or
(iii) any Vaxcel Company's holding of a security interest in a Operating
Property, to the Knowledge of Vaxcel, there were no releases, discharges,
spillages, or disposals of Hazardous Material in, on, under, or affecting any
such property, Participation Facility or Operating Property.
6.12 COMPLIANCE WITH LAWS. Each Vaxcel Company has in effect
all Permits necessary for it to own, lease or operate its material Assets and to
carry on its business as now conducted, except for those Permits the absence of
which are not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on Vaxcel, and there has occurred no Default under any
such Permit, other than Defaults which are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Vaxcel. None of
the Vaxcel Companies:
(a) is in Default under its Certificate of Incorporation
or Bylaws (or other governing instruments); or
(b) is in Default under any Laws, Orders or Permits
applicable to its business or employees conducting its business, except
for Defaults which are not reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on Vaxcel; or
(c) since January 1, 1993, has received any notification or
communication from any agency or department of federal, state, or local
government or any Regulatory Authority or the staff thereof (i) asserting
that any Vaxcel Company is not in compliance with any of the Laws or
Orders which such governmental authority or Regulatory Authority
enforces, where such noncompliance is reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Vaxcel,
(ii) threatening to revoke any Permits, the revocation of which is
reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on Vaxcel, or (iii) requiring any Vaxcel Company to enter
into or consent to the issuance of a cease and desist order, formal
agreement, directive, commitment or memorandum of understanding, or to
adopt any Board resolution or similar undertaking.
6.13 LABOR RELATIONS. No Vaxcel Company is the subject of
any Litigation asserting that it or any other Vaxcel Company has committed an
unfair labor practice (within the meaning of the National Labor Relations Act or
comparable state Law) or seeking to compel it or any other Vaxcel Company to
bargain with any labor organization as to wages or conditions of employment, nor
is any Vaxcel Company party to any collective bargaining agreement, nor is there
any strike or other labor dispute involving any Vaxcel Company, pending or
threatened, nor to the Knowledge of Vaxcel, is there any activity involving any
Vaxcel Company's employees seeking to certify a collective bargaining unit or
engaging in any other organization activity.
<PAGE> 37
6.14 EMPLOYEE BENEFIT PLANS.
(a) Vaxcel has delivered or made available to
Zynaxis prior to the execution of this Agreement copies in each case of all
pension, retirement, profit-sharing, deferred compensation, stock option,
employee stock ownership, severance pay, vacation, bonus, or other incentive
plan, all other written employee programs, arrangements, or agreements, all
medical, vision, dental, or other health plans, all life insurance plans, and
all other employee benefit plans or fringe benefit plans, including "employee
benefit plans" as that term is defined in Section 3(3) of ERISA, currently
adopted, maintained by, sponsored in whole or in part by, or contributed to by
any Vaxcel Company or ERISA Affiliate thereof for the benefit of employees,
retirees, dependents, spouses, directors, independent contractors, or other
beneficiaries and under which employees, retirees, dependents, spouses,
directors, independent contractors, or other beneficiaries are eligible to
participate (collectively, the "Vaxcel Benefit Plans"). Any of the Vaxcel
Benefit Plans which is an "employee pension benefit plan," as that term is
defined in Section 3(2) of ERISA, is referred to herein as a "Vaxcel ERISA
Plan." Each Vaxcel ERISA Plan which is also a "defined benefit plan" (as defined
in Section 414(j) of the Internal Revenue Code) is referred to herein as a
"Vaxcel Pension Plan." No Vaxcel Pension Plan is or has been a multiemployer
plan within the meaning of Section 3(37) of ERISA.
(b) All Vaxcel Benefit Plans are in compliance
with the applicable terms of ERISA, the Internal Revenue Code, and any other
applicable Laws the breach or violation of which are reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Vaxcel. Each
Vaxcel ERISA Plan which is intended to be qualified under Section 401(a) of the
Internal Revenue Code has received a favorable determination letter from the
Internal Revenue Service, and Vaxcel is not aware of any circumstances likely to
result in revocation of any such favorable determination letter. To the
Knowledge of Vaxcel, no Vaxcel Company has engaged in a transaction with respect
to any Vaxcel Benefit Plan that, assuming the taxable period of such transaction
expired as of the date hereof, would subject any Vaxcel Company to a Tax imposed
by either Section 4975 of the Internal Revenue Code or Section 502(i) of ERISA
that, individually or in the aggregate, is reasonably likely to have a Material
Adverse Effect on Vaxcel.
(c) No Vaxcel Pension Plan has any "unfunded
current liability," as that term is defined in Section 302(d)(8)(A) of ERISA,
and the fair market value of the assets of any such plan exceeds the plan's
"benefit liabilities," as that term is defined in Section 4001(a)(16) of ERISA
when determined under actuarial factors that would apply if the Vaxcel Pension
Plan were terminated in accordance with all applicable legal requirements. Since
the date of the most recent actuarial valuation, there has been (i) no material
change in the financial position of a Vaxcel Pension Plan, (ii) no change in the
actuarial assumptions with respect to any Vaxcel Pension Plan, and (iii) no
increase in benefits under any Vaxcel Pension Plan as a result of plan
amendments or changes in applicable Law which is reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Vaxcel or
materially adversely affect the funding status of any such plan. Neither any
Vaxcel Pension Plan nor any "single-employer plan," within the meaning of
Section 4001(a)(15) of ERISA, currently or formerly maintained by any Vaxcel
Company, or the single-employer plan of any ERISA Affiliate has an "accumulated
funding deficiency" within the
<PAGE> 38
meaning of Section 412 of the Internal Revenue Code or Section 302 of ERISA. No
Vaxcel Company has provided, or is required to provide, security to a Vaxcel
Pension Plan or to any single-employer plan of an ERISA Affiliate pursuant to
Section 401(a)(29) of the Internal Revenue Code.
(d) No Liability under Subtitle C or D of Title
IV of ERISA has been or is expected to be incurred by any Vaxcel Company with
respect to any ongoing, frozen or terminated single-employer plan or the
single-employer plan of any ERISA Affiliate. No Vaxcel Company has incurred any
withdrawal Liability with respect to a multiemployer plan under Subtitle B of
Title IV of ERISA (regardless of whether based on contributions of an ERISA
Affiliate). No notice of a "reportable event," within the meaning of Section
4043 of ERISA for which the 30-day reporting requirement has not been waived,
has been required to be filed for any Vaxcel Pension Plan or by any ERISA
Affiliate within the 12-month period ending on the date hereof.
(e) No Vaxcel Company has any Liability for
retiree health and life benefits under any of the Vaxcel Benefit Plans and there
are no restrictions on the rights of such Vaxcel Company to amend or terminate
any such retiree health or benefit Plan without incurring any Liability
thereunder.
(f) Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will (i)
result in any payment (including severance, unemployment compensation, golden
parachute, or otherwise) becoming due to any director or any employee of any
Vaxcel Company from any Vaxcel Company under any Vaxcel Benefit Plan or
otherwise, (ii) increase any benefits otherwise payable under any Vaxcel Benefit
Plan, or (iii) result in any acceleration of the time of payment or vesting of
any such benefit.
(g) The actuarial present values of all accrued
deferred compensation entitlements (including entitlements under any executive
compensation, supplemental retirement, or employment agreement) of employees and
former employees of any Vaxcel Company and their respective beneficiaries, other
than entitlements accrued pursuant to funded retirement plans subject to the
provisions of Section 412 of the Internal Revenue Code or Section 302 of ERISA,
have been fully reflected on the Vaxcel Financial Statements to the extent
required by and in accordance with GAAP.
6.15 MATERIAL CONTRACTS. Except as disclosed in Section 6.15
of the Vaxcel Disclosure Memorandum or otherwise reflected in the Vaxcel
Financial Statements, none of the Vaxcel Companies, nor any of their respective
Assets, businesses, or operations, is a party to, or is bound or affected by, or
receives benefits under, (i) any employment, severance, termination, consulting
or retirement Contract providing for aggregate payments to any Person in any
calendar year in excess of $10,000, (ii) any Contract relating to the borrowing
of money by any Vaxcel Company or the guarantee by any Vaxcel Company of any
such obligation (other than Contracts evidencing trade payables and Contracts
relating to borrowings or guarantees made in the ordinary course of business),
(iii) any Contract which prohibits or restricts any Vaxcel Company from engaging
in any business activities in any geographic area, line of business or otherwise
in
<PAGE> 39
competition with any other Person, (iv) any Contract between or among Vaxcel
Companies, (v) any Contract involving Intellectual Property (other than
Contracts entered into in the ordinary course with customers and "shrink-wrap"
software licenses), (vi) any Contract relating to the provision of data
processing, network communication, or other technical services to or by any
Vaxcel Company, and (vii) any Contract relating to the purchase or sale of any
goods or services (other than Contracts entered into in the ordinary course of
business and involving payments under any individual Contract not in excess of
$20,000) (together with all Contracts referred to in Sections 6.9 and 6.14(a),
the "Vaxcel Contracts"). With respect to each Vaxcel Contract: (i) the Contract
is in full force and effect; (ii) no Vaxcel Company is in Default thereunder;
(iii) no Vaxcel Company has repudiated or waived any material provision of any
such Contract; and (iv) no other party to any such Contract is, to the Knowledge
of Vaxcel, in Default in any respect or has repudiated or waived any material
provision thereunder. All of the indebtedness of any Vaxcel Company for money
borrowed is prepayable at any time by such Vaxcel Company without penalty or
premium.
6.16 LEGAL PROCEEDINGS. There is no Litigation instituted or
pending, or, to the Knowledge of Vaxcel, threatened (or unasserted but
considered probable of assertion and which if asserted would have at least a
reasonable probability of an unfavorable outcome) against any Vaxcel Company, or
against any director, employee or employee benefit plan of any Vaxcel Company,
or against any Asset, interest, or right of any of them, that is reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
Vaxcel, nor are there any Orders of any Regulatory Authorities, other
governmental authorities, or arbitrators outstanding against any Vaxcel Company,
that are reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on Vaxcel.
6.17 REPORTS. Since January 1, 1993, or the date of
organization if later, each Vaxcel Company has timely filed all reports and
statements, together with any amendments required to be made with respect
thereto, that it was required to file with Regulatory Authorities (except, in
the case of state securities authorities, failures to file which are not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on Vaxcel). As of their respective dates, each of such reports and
documents, including the financial statements, exhibits, and schedules thereto,
complied in all material respects with all applicable Laws. As of its respective
date, each such report and document did not, in all material respects, contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements made therein,
in light of the circumstances under which they were made, not misleading.
6.18 STATEMENTS TRUE AND CORRECT. No statement, certificate,
instrument or other writing furnished or to be furnished by any Vaxcel Company
or any officer, director, employee or Subsidiary thereof to Zynaxis pursuant to
this Agreement or any other document, agreement or instrument referred to herein
contains or will contain any untrue statement of material fact or will omit to
state a material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. None of the
information supplied or to be supplied by any Vaxcel Company or any officer,
director, employee or Subsidiary thereof for inclusion in the Registration
Statement to be filed by Vaxcel with the SEC,
<PAGE> 40
will, when the Registration Statement becomes effective, be false or misleading
with respect to any material fact, or omit to state any material fact necessary
to make the statements therein not misleading. None of the information supplied
or to be supplied by any Vaxcel Company or any officer, director, employee or
Subsidiary thereof for inclusion in the Proxy Statement to be mailed to
Zynaxis's shareholders in connection with the Shareholders' Meeting, and any
other documents to be filed by any Vaxcel Company or any officer, director,
employee or Subsidiary thereof with any Regulatory Authority in connection with
the transactions contemplated hereby, will, at the respective time such
documents are filed, and with respect to the Proxy Statement, when first mailed
to the shareholders of Zynaxis, be false or misleading with respect to any
material fact, or omit to state any material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, or, in the case of the Proxy Statement or any amendment thereof
or supplement thereto, at the time of the Shareholders' Meeting, be false or
misleading with respect to any material fact, or omit to state any material fact
necessary to correct any statement in any earlier communication with respect to
the solicitation of any proxy for the Shareholders' Meeting. All documents that
any Vaxcel Company or any officer, director, employee or Subsidiary thereof is
responsible for filing with any Regulatory Authority in connection with the
transactions contemplated hereby will comply as to form in all material respects
with the provisions of applicable Law.
6.19 REGULATORY MATTERS. Neither CytRx nor any Vaxcel
Company or any officer, director, employee or Subsidiary thereof has taken or
agreed to take any action or has any Knowledge of any fact or circumstance that
is reasonably likely to materially impede or delay receipt of any Consents of
Regulatory Authorities referred to in Section 9.1(b) or result in the imposition
of a condition or restriction of the type referred to in the last sentence of
such Section.
ARTICLE 7
CONDUCT OF BUSINESS PENDING CONSUMMATION
7.1 AFFIRMATIVE COVENANTS OF ZYNAXIS. From the date of this
Agreement until the earlier of the Effective Time or the termination of this
Agreement, unless the prior written consent of Vaxcel shall have been obtained,
and except as otherwise expressly contemplated by the Transaction Documents or
disclosed in the Zynaxis Disclosure Memorandum, Zynaxis shall and shall cause
each of its Subsidiaries to (a) operate its business only in the usual, regular,
and ordinary course, (b) preserve intact its business organization and Assets
and maintain its rights and franchises, and (c) take no action which would (i)
materially adversely affect the ability of any Party to obtain any Consents
required for the transactions contemplated hereby without imposition of a
condition or restriction of the type referred to in the last sentences of
Section 9.1(b) or 9.1(c), or (ii) materially adversely affect the ability of any
Party to perform its covenants and agreements under this Agreement.
7.2 NEGATIVE COVENANTS OF ZYNAXIS. From the date of this
Agreement until the earlier of the Effective Time or the termination of this
Agreement, unless the prior written consent of Vaxcel shall have been obtained,
and except as otherwise expressly contemplated by the Transaction Documents or
disclosed in the Zynaxis Disclosure Memorandum, Zynaxis
<PAGE> 41
covenants and agrees that it will not do or agree or commit to do, or permit any
of its Subsidiaries to do or agree or commit to do, any of the following:
(a) amend the Articles of Incorporation, as amended,
Bylaws, or other governing instruments of any Zynaxis Company; or
(b) incur any additional debt obligation or other
obligation for borrowed money except in the ordinary course of the
business of the Zynaxis Companies consistent with past practices, or
impose, or suffer the imposition, on any Asset of any Zynaxis Company of
any Lien or permit any such Lien to exist; or
(c) repurchase, redeem, or otherwise acquire or exchange
(other than exchanges in the ordinary course under employee benefit
plans), directly or indirectly, any shares, or any securities convertible
into any shares, of the capital stock of any Zynaxis Company, or declare
or pay any dividend or make any other distribution in respect of
Zynaxis's capital stock; or
(d) except as pursuant to the conversion of Zynaxis
Preferred Stock or the exercise of stock options or warrants listed in
Section 5.3 of the Zynaxis Disclosure Memorandum, issue, sell, pledge,
encumber, authorize the issuance of, enter into any Contract to issue,
sell, pledge, encumber, or authorize the issuance of, or otherwise permit
to become outstanding, any additional shares of capital stock of any
Zynaxis Company, or any stock appreciation rights, or any option,
warrant, or other Equity Right; or
(e) adjust, split, combine or reclassify any capital
stock of any Zynaxis Company or issue or authorize the issuance of any
other securities in respect of or in substitution for shares of Zynaxis
Capital Stock, or sell, lease, mortgage or otherwise dispose of or
otherwise encumber any shares of capital stock of any Zynaxis Subsidiary
(unless any such shares of stock are sold or otherwise transferred to
another Zynaxis Company); or
(f) sell, lease, mortgage or otherwise dispose of or
otherwise encumber any Asset other than in the ordinary course of
business for reasonable and adequate consideration; or
(g) except for purchases of U.S. Treasury securities or
U.S. Government agency securities, which in either case have maturities
of three years or less, purchase any securities or make any material
investment, either by purchase of stock or securities, contributions to
capital, Asset transfers, or purchase of any Assets, in any Person other
than a wholly owned Zynaxis Subsidiary, or otherwise acquire direct or
indirect control over any Person, other than in connection with
foreclosures in the ordinary course of business; or
(h) grant any increase in compensation or benefits to the
employees or officers of any Zynaxis Company, except in accordance with
past practice disclosed in Section 7.2(h) of the Zynaxis Disclosure
Memorandum or as required by Law; pay any severance or
<PAGE> 42
termination pay or any bonus other than pursuant to written policies or
Contracts in effect on the date of this Agreement and disclosed in
Section 7.2(h) of the Zynaxis Disclosure Memorandum or as required by
Law; and enter into or amend any severance agreements with officers of
any Zynaxis Company; grant any material increase in fees or other
increases in compensation or other benefits to directors of any Zynaxis
Company except in accordance with past practice disclosed in Section
7.2(h) of the Zynaxis Disclosure Memorandum; or
(i) enter into or amend any employment Contract between any
Zynaxis Company and any Person (unless such amendment is required by Law)
that the Zynaxis Company does not have the unconditional right to
terminate without Liability (other than Liability for services already
rendered), at any time on or after the Closing; or
(j) adopt any new employee benefit plan of any Zynaxis
Company or terminate or withdraw from, or make any material change in or
to, any existing employee benefit plans of any Zynaxis Company other than
any such change that is required by Law or that, in the opinion of
counsel, is necessary or advisable to maintain the tax qualified status
of any such plan, or make any distributions from such employee benefit
plans, except as required by Law, the terms of such plans or consistent
with past practice; or
(k) make any significant change in any Tax or accounting
methods or systems of internal accounting controls, except as may be
appropriate to conform to changes in Tax Laws or regulatory accounting
requirements or GAAP; or
(l) commence any Litigation other than in accordance with
past practice, settle any Litigation involving any Liability of any
Zynaxis Company for material money damages or restrictions upon the
operations of any Zynaxis Company; or
(m) enter into, modify, amend or terminate any material
Contract (including any loan Contract with an unpaid balance exceeding
$10,000) or waive, release, compromise or assign any material rights or
claims.
7.3 COVENANTS OF VAXCEL. From the date of this Agreement
until the earlier of the Effective Time or the termination of this Agreement,
unless the prior written consent of Zynaxis shall have been obtained, and except
as otherwise expressly contemplated herein, Vaxcel covenants and agrees that it
shall (a) continue to conduct its business and the business of its Subsidiaries
in a manner designed, in its reasonable judgment, to enhance the long-term value
of the Vaxcel Common Stock and the business prospects of the Vaxcel Companies
and to the extent consistent therewith use all reasonable efforts to preserve
intact the Vaxcel Companies' core businesses and goodwill with their respective
employees and the communities they serve, and (b) take no action which would (i)
materially adversely affect the ability of any Party to obtain any Consents
required for the transactions contemplated hereby without imposition of a
condition or restriction of the type referred to in the last sentences of
Section 9.1(b) or 9.1(c), or (ii) materially adversely affect the ability of any
Party to perform its covenants and agreements under this Agreement; provided,
that the foregoing shall not prevent any Vaxcel Company from acquiring
<PAGE> 43
any Assets or other businesses or from discontinuing or disposing of any of its
Assets or business if such action is, in the reasonable judgment of Vaxcel,
desirable in the conduct of the business of Vaxcel and its Subsidiaries,
provided that such actions shall not materially delay the Effective Time or
materially hinder consummation of the Merger. Vaxcel further covenants and
agrees that it will not, without the prior written consent of Zynaxis, which
consent shall not be unreasonably withheld, amend the Certificate of
Incorporation or Bylaws of Vaxcel or, except as expressly contemplated by this
Agreement or the Transaction Documents, in any manner adverse to the holders of
Zynaxis Capital Stock as compared to rights of holders of Vaxcel Common Stock
generally as of the date of this Agreement.
7.4 ADVERSE CHANGES IN CONDITION. Each Party agrees to give
written notice promptly to the other Party upon becoming aware of the occurrence
or impending occurrence of any event or circumstance relating to it or any of
its Subsidiaries which (i) is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on it or (ii) would cause or constitute a
material breach of any of its representations, warranties, or covenants
contained herein, and to use its reasonable efforts to prevent or promptly to
remedy the same.
7.5 REPORTS. Each Party and its Subsidiaries shall file all
reports required to be filed by it with Regulatory Authorities between the date
of this Agreement and the Effective Time and shall deliver to the other Party
copies of all such reports promptly after the same are filed. If financial
statements are contained in any such reports filed with the SEC, such financial
statements will fairly present the consolidated financial position of the entity
filing such statements as of the dates indicated and the consolidated results of
operations, changes in shareholders' equity, and cash flows for the periods then
ended in accordance with GAAP (subject in the case of interim financial
statements to normal recurring year-end adjustments that are not material). As
of their respective dates, such reports filed with the SEC will comply in all
material respects with the Securities Laws and will not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. Any financial
statements contained in any other reports to another Regulatory Authority shall
be prepared in accordance with Laws applicable to such reports.
ARTICLE 8
ADDITIONAL AGREEMENTS
8.1 REGISTRATION STATEMENT; PROXY STATEMENT;
SHAREHOLDER APPROVAL.
(a) As soon as practicable after the date hereof Vaxcel
shall prepare and file the Registration Statement with the SEC to register the
issuance of the Merger Shares and to register for resale by the holders thereof
the Affiliate Shares, the Lock-Up Shares and the Warrant Shares (collectively,
the "Resale Shares"), and shall use its reasonable efforts to cause the
Registration Statement to become effective under the 1933 Act and take any
action required to be taken under the applicable state Blue Sky or securities
Laws in connection with the issuance of the Merger Shares and the resale of the
Resale Shares upon consummation of the transactions
<PAGE> 44
contemplated by the Transaction Documents. Zynaxis shall cooperate in the
preparation and filing of the Registration Statement and shall furnish all
information concerning it and the holders of Zynaxis Capital Stock and Equity
Rights of Zynaxis as Vaxcel may reasonably request in connection with such
action. Zynaxis shall call a Shareholders' Meeting, to be held as soon as
reasonably practicable after the Registration Statement is declared effective by
the SEC, for the purpose of voting upon adoption of this Agreement and such
other related matters as it deems appropriate. In connection with the
Shareholders' Meeting, (i) Zynaxis and Vaxcel shall prepare and file with the
SEC a Proxy Statement and mail such Proxy Statement to the shareholders of
Zynaxis, (ii) the Parties shall furnish to each other all information concerning
them that they may reasonably request in connection with such Proxy Statement,
(iii) the Board of Directors of Zynaxis shall recommend to its shareholders the
approval of the matters submitted for approval (subject to the Board of
Directors of Zynaxis, after having consulted with and considered the advice of
outside counsel, reasonably determining in good faith that the making of such
recommendation, or the failure to withdraw or modify its recommendation, would
constitute a breach of fiduciary duties of the members of such Board of
Directors to Zynaxis's shareholders under applicable Law), and (iv) the Board of
Directors and officers of Zynaxis shall use their reasonable efforts to obtain
such shareholders' approval (subject to the Board of Directors of Zynaxis after
having consulted with and considered the advice of outside counsel, reasonably
determining in good faith that the taking of such actions would constitute a
breach of fiduciary duties of the members of such Board of Directors to
Zynaxis's shareholders under applicable Law). Vaxcel and Zynaxis shall make all
necessary filings with respect to the Merger under the Securities Laws.
(b) Vaxcel shall use its best efforts to maintain the
effectiveness of the Registration Statement until the earlier of (i) the date on
which the Resale Shares may be sold without restriction under the 1933 Act or
(ii) the fifth anniversary of the Closing Date subject to such periods of time
when Vaxcel must suspend the use of the prospectus forming a part of the
Registration Statement until such time as an amendment is filed and declared
effective or an appropriate report is filed by Vaxcel with the SEC.
8.2 APPLICATIONS. The Parties shall promptly prepare and
file, and each of the Parties shall cooperate with each of the other Parties in
the preparation and, where appropriate, filing of, applications with all
Regulatory Authorities having jurisdiction over the transactions contemplated by
this Agreement seeking the requisite Consents necessary to consummate the
transactions contemplated by this Agreement. The Parties shall deliver to each
other copies of all filings, correspondence and orders to and from all
Regulatory Authorities in connection with the transactions contemplated hereby.
8.3 FILINGS WITH STATE OFFICES. Upon the terms and subject
to the conditions of this Agreement, Zynaxis and Vaxcel Merger Sub shall execute
and file the Articles of Merger in the Department of State of the Commonwealth
of Pennsylvania and the Certificate of Merger with the Secretary of State of the
State of Georgia in connection with the Merger.
8.4 AGREEMENT AS TO EFFORTS TO CONSUMMATE. Subject to the
terms and conditions of this Agreement, each Party agrees to use, and to cause
its Subsidiaries to use, its
<PAGE> 45
reasonable efforts to take, or cause to be taken, all actions, and to do, or
cause to be done, all things necessary, proper, or advisable under applicable
Laws to consummate and make effective, as soon as reasonably practicable after
the date of this Agreement, the transactions contemplated by this Agreement,
including using its reasonable efforts to lift or rescind any Order adversely
affecting its ability to consummate the transactions contemplated herein and to
cause to be satisfied the conditions referred to in Article 9; provided, that
nothing herein shall preclude either Party from exercising its rights under this
Agreement. Each Party shall use, and shall cause each of its Subsidiaries to
use, its reasonable efforts to obtain all Consents necessary or desirable for
the consummation of the transactions contemplated by this Agreement.
8.5 INVESTIGATION AND CONFIDENTIALITY.
(a) Prior to the Effective Time, each Party shall
keep the other Parties advised of all material developments relevant to its
business and the consummation of the Merger and shall permit the other Parties
to make or cause to be made such investigation of the business and properties of
it and its Subsidiaries and of their respective financial and legal conditions
as the other Party reasonably requests, provided that such investigation shall
be reasonably related to the transactions contemplated hereby and shall not
interfere unnecessarily with normal operations. No investigation by a Party
shall affect the representations and warranties of the other Party.
(b) In addition to the Parties' respective
obligations under the Confidentiality Agreement, which is hereby reaffirmed and
adopted, and incorporated by reference herein each Party shall, and shall cause
its advisers and agents to, maintain the confidentiality of all confidential
information furnished to it by the other Party concerning its and its
Subsidiaries' businesses, operations, and financial positions and shall not use
such information for any purpose except in furtherance of the transactions
contemplated by this Agreement. If this Agreement is terminated prior to the
Effective Time, each Party shall promptly return or certify the destruction of
all documents and copies thereof, and all work papers containing confidential
information received from the other Party.
(c) Each Party agrees to give the other Party
notice as soon as practicable after any determination by it of any fact or
occurrence relating to the other Party which it has discovered through the
course of its investigation and which represents, or is reasonably likely to
represent, either a material breach of any representation, warranty, covenant or
agreement of the other Party or which has had or is reasonably likely to have a
Material Adverse Effect on the other Party.
8.6 PRESS RELEASES. Prior to the Effective Time, each of
the Parties shall consult with the other Parties as to the form and substance of
any press release or other public disclosure materially related to this
Agreement or any other transaction contemplated hereby; provided, that nothing
in this Section 8.6 shall be deemed to prohibit any Party from making any
disclosure which its counsel deems necessary or advisable in order to satisfy
such Party's disclosure obligations imposed by Law.
<PAGE> 46
8.7 CERTAIN ACTIONS. Except with respect to the Transaction
Documents, no Zynaxis Company nor any officer, director, employee or Subsidiary
thereof nor any Representatives thereof retained by any Zynaxis Company shall
directly or indirectly solicit any Acquisition Proposal by any Person. Except to
the extent the Board of Directors of Zynaxis, after having consulted with and
considered the advice of outside counsel, reasonably determines in good faith
that the failure to take such actions would constitute a breach of fiduciary
duties of the members of such Board of Directors to Zynaxis's shareholders under
applicable Law, no Zynaxis Company or any officer, director, employee or
Subsidiary or Representative thereof shall furnish any non-public information
that it is not legally obligated to furnish, negotiate with respect to, or enter
into any Contract with respect to, any Acquisition Proposal, but Zynaxis may
communicate information about such an Acquisition Proposal to its shareholders
if and to the extent that it is required to do so in order to comply with its
legal obligations as advised by outside counsel. Zynaxis shall promptly advise
Vaxcel following the receipt of any Acquisition Proposal and the details
thereof, and advise Vaxcel of any developments with respect to such Acquisition
Proposal promptly upon the occurrence thereof. Zynaxis shall (i) immediately
cease and cause to be terminated any existing activities, discussions or
negotiations with any Persons conducted heretofore with respect to any of the
foregoing, and (ii) direct and use its reasonable efforts to cause all of its
officer, director, employee or Subsidiaries and Representatives not to engage in
any of the foregoing.
8.8 STATE ANTITAKEOVER LAWS. Each Zynaxis Company shall
exerts its best efforts to take all necessary and reasonably possible steps to
assure that the entering into of the Transaction Documents will not and, upon
performance of the covenants set forth in the Transaction Documents, no facet of
the consummation of the transactions contemplated by the Transaction Documents
will:
(a) be prohibited by any provision of the PBCL, including
Chapter 25 of the PBCL (the "Antitakeover Laws");
(b) cause any shareholder of Zynaxis to exercise any right
or remedy under the Antitakeover Laws;
(c) cause the rights of CytRx to vote the shares of Vaxcel
Common Stock issued pursuant to this Agreement or to exercise its rights
as a shareholder of Vaxcel with respect to such shares to be impaired by
action of any provision of the Antitakeover Laws or otherwise;
(d) cause CytRx to be subject to any Liability, including
any obligation or potential obligation to pay money or disgorge profits
(other than an obligation to make payments pursuant to Subchapter E of
the Antitakeover Laws), under the provisions of the Antitakeover Laws; or
(e) cause the termination, impairment, modification, or
extension of any Contract to which Zynaxis is a party by action of the
provisions of the Antitakeover Laws.
<PAGE> 47
8.9 CHARTER PROVISIONS. Each Zynaxis Company shall take all
necessary action to ensure that the entering into of this Agreement and the
consummation of the Merger and the other transactions contemplated by the
Transaction Documents do not and will not result in the grant of any rights to
any Person under the Articles of Incorporation, as amended, Bylaws or other
governing instruments of any Zynaxis Company, except such rights as exist on the
date hereof, or restrict or impair the ability of Vaxcel or any of its
Subsidiaries to vote, or otherwise to exercise the rights of a shareholder with
respect to, shares of any Zynaxis Company that may be directly or indirectly
acquired or controlled by them.
8.10 CURE OF DEFAULTS. Zynaxis shall use proceeds from its
initial loan under the Senior Credit Facility to cure all Defaults under the
Secretech License Agreement and the Malvern Lease by 5:00 p.m. on the earlier
of: (i) November 27, 1996 or (ii) the fifth (5th) business day after Zynaxis
first receives money from CytRx pursuant to the Senior Credit Facility, and
after such cure shall not Default under the Secretech License Agreement.
8.11 NEGOTIATION OF MALVERN LEASE AMENDMENT. Zynaxis shall
negotiate in good faith to obtain an amendment to the Malvern Lease and releases
from the Adolor Sublease that are reasonably satisfactory to CytRx.
8.12 NASDAQ LISTING. Vaxcel shall use its reasonable efforts
to list, prior to the Effective Time, on the Nasdaq SmallCap Market, the shares
of Vaxcel Common Stock to be issued pursuant to this Agreement and upon exercise
of outstanding warrants and options to purchase shares of Zynaxis Common Stock
that are assumed by Vaxcel in the Merger, and Vaxcel shall give all notices and
make all required filings with the NASD in connection with the transactions
contemplated herein.
8.13 AGREEMENTS OF AFFILIATES. Zynaxis has disclosed in
Section 8.13 of the Zynaxis Disclosure Memorandum all Persons whom it reasonably
believes is an "affiliate" of Zynaxis for purposes of Rule 145 under the 1933
Act. Zynaxis shall use its reasonable efforts to cause each such Person to
deliver to Vaxcel not later than 30 days after the date of this Agreement, a
written agreement, substantially in the form of Exhibit 2, providing that such
Person will not sell, pledge, transfer, or otherwise dispose of the shares of
Zynaxis Capital Stock held by such Person except as contemplated by such
agreement or by this Agreement and will not sell, pledge, transfer, or otherwise
dispose of the shares of Vaxcel Common Stock to be received by such Person upon
consummation of the Merger except in compliance with applicable provisions of
the 1933 Act and the rules and regulations thereunder.
8.14 USE OF PROCEEDS OF SENIOR CREDIT FACILITY. Zynaxis
shall use proceeds of loans made under the Senior Credit Facility only in
accordance with the Secured Loan Agreement.
8.15 REGISTRATION RIGHTS AGREEMENT. At the Closing CytRx
and Vaxcel shall enter into the Registration Rights Agreement.
<PAGE> 48
ARTICLE 9
CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE
9.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY. The respective
obligations of each Party to perform this Agreement and consummate the Merger
and the other transactions contemplated by the Transaction Documents are subject
to the satisfaction of the following conditions, unless waived by both Parties
pursuant to Section 11.6:
(A) SHAREHOLDER APPROVAL. The holders of Zynaxis Common
Stock voting together with holders of Zynaxis Preferred Stock (on an
as-converted basis) and the holders of Zynaxis Preferred Stock voting as
a separate class of Zynaxis shall have approved (i) the Charter
Amendments, (ii) this Agreement and the consummation of the transactions
contemplated hereby, including the Merger, as and to the extent required
by Law, by the provisions of any governing instruments or by the rules of
the NASD, (iii) the sale of substantially all of the Assets of Zynaxis as
contemplated in the Liquidation Agreement as and to the extent required
by Law, the provisions of any governing instruments, or by the rules of
the NASD, and (iv) such other related matters deemed necessary by the
Parties to assure that the transactions contemplated by the Transaction
Documents are permitted under the Law as and to the extent required by
Law, by the provisions of any governing instruments, or by the rules of
the NASD.
(B) REGULATORY APPROVALS. All Consents of, filings and
registrations with, and notifications to, all Regulatory Authorities
required for consummation of the Merger shall have been obtained or made
and shall be in full force and effect and all waiting periods required by
Law shall have expired. No Consent obtained from any Regulatory Authority
which is necessary to consummate the transactions contemplated hereby
shall be conditioned or restricted in a manner (including requirements
relating to the raising of additional capital or the disposition of
Assets) which in the reasonable judgment of the Boards of Directors of
either CytRx or Vaxcel would so materially adversely impact the economic
or business benefits of the transactions contemplated by this Agreement
that, had such condition or requirement been known, such Party would not,
in its reasonable judgment, have entered into this Agreement.
(C) CONSENTS AND APPROVALS. Each Party shall have obtained
any and all Consents required for consummation of the Merger (other than
those referred to in Section 9.1(b)) or for the preventing of any Default
under any Contract or Permit of such Party which, if not obtained or
made, is reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on such Party. No Consent so obtained which is
necessary to consummate the transactions contemplated hereby shall be
conditioned or restricted in a manner which in the reasonable judgment of
the Boards of Directors of either CytRx or Vaxcel would so materially
adversely impact the economic or business benefits of the transactions
contemplated by this Agreement that, had such condition or requirement
been known, such Party would not, in its reasonable judgment, have
entered into this Agreement.
<PAGE> 49
(D) LEGAL PROCEEDINGS. No court or governmental or
regulatory authority of competent jurisdiction shall have enacted,
issued, promulgated, enforced or entered any Law or Order (whether
temporary, preliminary or permanent) or taken any other action which
prohibits, restricts or makes illegal consummation of the transactions
contemplated by this Agreement.
(E) REGISTRATION STATEMENT. The Registration Statement
shall be effective under the 1933 Act, no stop orders suspending the
effectiveness of the Registration Statement shall have been issued, no
action, suit, proceeding or investigation by the SEC to suspend the
effectiveness thereof shall have been initiated and be continuing, and
all necessary approvals under state securities Laws or the 1933 Act or
1934 Act relating to the issuance or trading of the shares of Vaxcel
Common Stock issuable pursuant to the transaction contemplated by this
Agreement shall have been received.
(F) EXCHANGE LISTING. The shares of Vaxcel Common Stock
issuable pursuant to the Merger shall have been approved for listing on
the Nasdaq SmallCap Market.
(G) TAX MATTERS. Each Party shall have received a written
opinion of counsel from Alston & Bird, in form reasonably satisfactory to
such Parties (the "Tax Opinion"), to the effect that for federal income
tax purposes the Contributions in exchange for Vaxcel Common Stock will
constitute a transaction described in Section 351 of the Internal Revenue
Code. In rendering such Tax Opinion, such counsel shall be entitled to
rely upon representations of CytRx, Vaxcel, and Zynaxis reasonably
satisfactory in form and substance to such counsel.
<PAGE> 50
(H) ANTITAKEOVER LAWS. No facet of the consummation of the
transactions contemplated by the Transaction Documents shall have been
found to:
(i) be prohibited by any provision of the PBCL,
including the Antitakeover Laws;
(ii) cause the rights of CytRx to vote the shares of
Vaxcel Common Stock issued pursuant to this Agreement or to
exercise its rights as a shareholder of Vaxcel with respect to
such shares to be impaired by action of any provision of the
Antitakeover Laws or otherwise;
(iii) cause CytRx to be subject to any Liability,
including any obligation or potential obligation to pay money or
disgorge profits (other than an obligation to make payments
pursuant to Subchapter E of the Antitakeover Laws), under the
provisions of the Antitakeover Laws;
(iv) cause the termination, impairment, modification or
extension of any Contract to which Zynaxis is a party by action of
the provisions of the Antitakeover Laws; or
(v) except as set forth in Section 8.9 of the Zynaxis
Disclosure Memorandum, result in the grant of any rights to any
Person under the Articles of Incorporation, Bylaws, or other
governing instruments of any Zynaxis Company.
9.2 CONDITIONS TO OBLIGATIONS OF CYTRX, VAXCEL AND VAXCEL MERGER
SUB. The obligations of CytRx, Vaxcel and Vaxcel Merger Sub to perform this
Agreement and consummate the Merger and the other transactions contemplated
hereby are subject to the satisfaction of the following conditions, unless
waived by CytRx, Vaxcel and Vaxcel Merger Sub pursuant to Section 11.6(a):
(A) REPRESENTATIONS AND WARRANTIES. For purposes of this
Section 9.2(a), the accuracy of the representations and warranties of
Zynaxis set forth in this Agreement shall be assessed as of the date of
this Agreement and as of the Effective Time with the same effect as
though all such representations and warranties had been made on and as of
the Effective Time (provided that representations and warranties which
are confined to a specified date shall speak only as of such date). The
representations and warranties made in Sections 5.18 and 5.19 with
respect to officers, directors, employees and Subsidiaries of Zynaxis
shall be true and correct with respect to all Affiliates of Zynaxis. The
representations and warranties set forth in Section 5.3 shall be true and
correct (except for inaccuracies which are de minimus in amount). The
representations and warranties set forth in Sections 5.19 and 5.20 shall
be true and correct in all material respects. There shall not exist
inaccuracies in the representations and warranties of Zynaxis set forth
in this Agreement (including the representations and warranties set forth
in Sections 5.3, 5.19 and 5.20) such that the aggregate effect of such
inaccuracies has, or is reasonably likely to have, a Material Adverse
Effect on Zynaxis; provided that, for purposes of this sentence only,
<PAGE> 51
those representations and warranties which are qualified by references to
"material" or "Material Adverse Effect" or to the "Knowledge" of any
Person shall be deemed not to include such qualifications.
(B) PERFORMANCE OF AGREEMENTS AND COVENANTS. Each and all
of the agreements and covenants of Zynaxis to be performed and complied
with pursuant to , the Transaction Documents prior to the Effective Time
shall have been duly performed and complied with in all material
respects.
(C) CERTIFICATES. Zynaxis shall have delivered to Vaxcel
(i) a certificate, dated as of the Effective Time and signed on its
behalf by its chief executive officer, to the effect that the conditions
set forth in Section 9.1 as relates to Zynaxis and in Section 9.2(a) and
9.2(b) have been satisfied, and (ii) certified copies of resolutions duly
adopted by Zynaxis's Board of Directors and shareholders evidencing the
taking of all corporate action necessary to authorize the execution,
delivery and performance of this Agreement, and the consummation of the
transactions contemplated hereby, all in such reasonable detail as Vaxcel
and its counsel shall request.
(D) OPINION OF COUNSEL. CytRx and Vaxcel shall have
received an opinion of Morgan, Lewis & Bockius LLP, counsel to Zynaxis,
dated as of the Closing, in form reasonably satisfactory to Vaxcel, as to
the matters set forth in Exhibit 3.
(E) AFFILIATES AGREEMENTS. Vaxcel shall have received from
each affiliate of Zynaxis the affiliates letter referred to in Section
8.13.
(F) EXECUTION OF AGREEMENTS. The Transaction Documents
shall have been executed and delivered by each of the intended Parties
thereto and no Party shall be in Default thereunder.
(G) EXECUTION OF MALVERN LEASE AMENDMENT. Zynaxis shall
have entered into an amendment to the Malvern Lease that is reasonably
satisfactory to CytRx, Vaxcel and Vaxcel Merger Sub.
(H) RELEASES FROM ADOLOR LEASE. Zynaxis shall have obtained
releases from liability under the Adolor Sublease that are satisfactory
to CytRx, Vaxcel and Vaxcel Merger Sub.
(I) BOARD RESOLUTIONS REGARDING ZYNAXIS OPTIONS. The Board
of Directors of Zynaxis and all relevant committees thereof shall have
adopted resolutions that in the judgment of CytRx and its counsel are
sufficient to prevent immediate vesting of outstanding Zynaxis Options,
to approve the treatment of outstanding Zynaxis Options in the Merger and
to find the options to be received "comparable" to currently outstanding
Zynaxis Options within the meaning of the Zynaxis Stock Plan.
<PAGE> 52
(J) DISSENTERS. The holders of shares of Zynaxis Capital
Stock having the right to vote no more than ten percent (10%) of the
votes that could be cast by all holders of Zynaxis Capital Stock voting
together as a single class shall have elected to exercise their statutory
dissenters' rights or their objection rights, if any, under Section 2545
of the PBCL.
(K) EXECUTION OF PREFERRED STOCK AND WARRANT AGREEMENT.
Every holder of shares of Zynaxis Preferred Stock or of Warrants
referenced in the Preferred Stock and Warrant Agreement shall have
executed the Preferred Stock and Warrant Agreement.
9.3 CONDITIONS TO OBLIGATIONS OF ZYNAXIS. The obligations
of Zynaxis to perform this Agreement and consummate the Merger and the other
transactions contemplated hereby are subject to the satisfaction of the
following conditions, unless waived by Zynaxis pursuant to Section 11.6(b):
(A) REPRESENTATIONS AND WARRANTIES. For purposes of this
Section 9.3(a), the accuracy of the representations and warranties of
Vaxcel set forth in this Agreement shall be assessed as of the date of
this Agreement and as of the Effective Time with the same effect as
though all such representations and warranties had been made on and as of
the Effective Time (provided that representations and warranties which
are confined to a specified date shall speak only as of such date). The
representations and warranties set forth in Section 6.3 shall be true and
correct (except for inaccuracies which are de minimus in amount). There
shall not exist inaccuracies in the representations and warranties of
Vaxcel set forth in this Agreement (including the representations and
warranties set forth in Section 6.3) such that the aggregate effect of
such inaccuracies has, or is reasonably likely to have, a Material
Adverse Effect on Vaxcel; provided that, for purposes of this sentence
only, those representations and warranties which are qualified by
references to "material" or "Material Adverse Effect" or to the
"Knowledge" of any Person shall be deemed not to include such
qualifications.
(B) PERFORMANCE OF AGREEMENTS AND COVENANTS. Each and all
of the agreements and covenants of Vaxcel to be performed and complied
with pursuant to , the Transaction Documents prior to the Effective Time
shall have been duly performed and complied with in all material
respects.
(C) CERTIFICATES. Vaxcel shall have delivered to Zynaxis
(i) a certificate, dated as of the Effective Time and signed on its
behalf by its chief executive officer, to the effect that the conditions
set forth in Section 9.1 as relates to Vaxcel and in Section 9.3(a) and
9.3(b) have been satisfied, and (ii) certified copies of resolutions duly
adopted by CytRx's Board of Directors, Vaxcel's Board of Directors, CytRx
as sole shareholder of Vaxcel, Vaxcel Merger Sub's Board of Directors and
Vaxcel as sole shareholder of Vaxcel Merger Sub evidencing the taking of
all corporate action necessary to authorize the execution, delivery and
performance of this Agreement, and the consummation of the transactions
contemplated hereby, all in such reasonable detail as Zynaxis and its
counsel shall request.
<PAGE> 53
(D) OPINION OF COUNSEL. Zynaxis shall have received an
opinion of Alston & Bird, counsel to CytRx and Vaxcel, dated as of the
Effective Time, in form reasonably acceptable to Zynaxis, as to the
matters set forth in Exhibit 4.
ARTICLE 10
TERMINATION
10.1 TERMINATION. Notwithstanding any other provision of
this Agreement, and notwithstanding the approval of this Agreement by the
shareholders of Zynaxis, this Agreement may be terminated and the Merger
abandoned at any time prior to the Effective Time:
(a) By mutual consent of CytRx and Zynaxis; or
(b) By either CytRx or Zynaxis (provided that the
terminating Party is not then in material breach of any representation,
warranty, covenant, or other agreement contained in this Agreement) in
the event of a material breach by the other Party of any representation
or warranty contained in this Agreement which cannot be or has not been
cured within 30 days after the giving of written notice to the breaching
Party of such breach and which breach is reasonably likely, in the
opinion of the non-breaching Party, to have, individually or in the
aggregate, a Material Adverse Effect on the breaching Party; or
(c) By either CytRx or Zynaxis (provided that the
terminating Party is not then in material breach of any representation,
warranty, covenant, or other agreement contained in this Agreement) in
the event of a material breach by the other Party of any covenant or
agreement contained in this Agreement which cannot be or has not been
cured within 30 days after the giving of written notice to the breaching
Party of such breach; or
(d) By either CytRx or Zynaxis (provided that the
terminating Party is not then in material breach of any representation,
warranty, covenant, or other agreement contained in this Agreement) in
the event (i) any Consent of any Regulatory Authority required for
consummation of the Merger and the other transactions contemplated hereby
shall have been denied by final nonappealable action of such authority or
if any action taken by such authority is not appealed within the time
limit for appeal, or (ii) the shareholders of Zynaxis fail to vote their
approval of the matters relating to this Agreement and the transactions
contemplated hereby at the Shareholders' Meeting where such matters were
presented to such shareholders for approval and voted upon; or
(e) By any Party in the event that the Merger shall not
have been consummated by March 31, 1997, if the failure to consummate the
transactions contemplated hereby on or before such date is not caused by
any breach of this Agreement by the Party electing to terminate pursuant
to this Section 10.1(e); or
(f) By either CytRx or Zynaxis (provided that the
terminating Party is not then in material breach of any representation,
warranty, covenant, or other agreement contained
<PAGE> 54
in this Agreement) in the event that any of the conditions precedent to
the obligations of such Party to consummate the Merger cannot be
satisfied or fulfilled by the date specified in Section 10.1(e).
10.2 EFFECT OF TERMINATION. In the event of the termination
and abandonment of this Agreement pursuant to Section 10.1, this Agreement shall
become void and have no effect, except that (i) the provisions of this Section
10.2 and Article 11 and Section 8.5(b) shall survive any such termination and
abandonment, and (ii) a termination pursuant to Sections 10.1(b), 10.1(c) or
10.1(f) shall not relieve the breaching Party from Liability for an uncured
willful breach of a representation, warranty, covenant, or agreement giving rise
to such termination.
10.3 NON-SURVIVAL OF REPRESENTATIONS AND COVENANTS. The
respective representations, warranties, obligations, covenants, and agreements
of the Parties shall not survive the Effective Time except this Section 10.3 and
Articles 1, 2, 3, 4 and 11.
ARTICLE 11
MISCELLANEOUS
11.1 DEFINITIONS.
(a) Except as otherwise provided herein, the
capitalized terms set forth below shall have the following meanings:
"1933 ACT" shall mean the Securities Act of 1933, as amended.
"1934 ACT" shall mean the Securities Exchange Act of 1934, as
amended.
"ACQUISITION PROPOSAL" with respect to a Party shall mean any
tender offer or exchange offer or any proposal for a merger,
acquisition of all of the stock or assets of, or other business
combination involving the acquisition of such Party or any of its
Subsidiaries or the acquisition of a substantial equity interest in, or
a substantial portion of the assets of, such Party or any of its
Subsidiaries.
"ADOLOR SUBLEASE" shall mean that certain Sublease Agreement
dated May 15, 1996 between Zynaxis, Inc. and Adolor Corporation, as
amended.
"AFFILIATE" of a Person shall mean: (i) any other Person
directly, or indirectly through one or more intermediaries,
controlling, controlled by or under common control with such Person;
(ii) any officer, director, partner, employer, or direct or indirect
beneficial owner of any 10% or greater equity or voting interest of
such Person; or (iii) any other Person for which a Person described in
clause (ii) acts in any such capacity.
"AFFILIATE SHARES" shall mean the shares of Vaxcel Common
Stock to be issued to the holders of Zynaxis Common Stock and Zynaxis
Preferred Stock in accordance with
<PAGE> 55
Section 3.1 hereof who are "affiliates" of Zynaxis for purposes of Rule
145 under the 1933 Act as set forth in Section 8.13 of the Zynaxis
Disclosure Memorandum.
"AGREEMENT" shall mean this Agreement and Plan of Merger and
Contribution, including the Exhibits and Disclosure Memoranda delivered
pursuant hereto and incorporated herein by reference.
"ARTICLES OF MERGER" shall mean the Articles of Merger to be
executed by Zynaxis and filed in the Department of State of the
Commonwealth of Pennsylvania relating to the Merger as contemplated by
Section 1.5.
"ASSETS" of a Person shall mean all of the assets, properties,
businesses and rights of such Person of every kind, nature, character
and description, whether real, personal or mixed, tangible or
intangible, accrued or contingent, or otherwise relating to or utilized
in such Person's business, directly or indirectly, in whole or in part,
whether or not carried on the books and records of such Person, and
whether or not owned in the name of such Person or any Affiliate of
such Person and wherever located.
"CERTIFICATE OF MERGER" shall mean the Certificate of Merger
to be executed by Zynaxis and filed with the Secretary of State of the
State of Georgia relating to the Merger as contemplated by Section 1.5.
"CHARTER AMENDMENTS" shall mean the proposals substantially in
the form attached hereto at Exhibit 5 to be submitted to the
shareholders of Zynaxis in connection with the transactions
contemplated by this Agreement.
"CLOSING DATE" shall mean the date on which the Closing
occurs.
"CONFIDENTIALITY AGREEMENT" shall mean that certain
Confidentiality Agreement, dated September 18, 1996, between Zynaxis
and CytRx.
"CONSENT" shall mean any consent, approval, authorization,
clearance, exemption, waiver, or similar affirmation by any Person
pursuant to any Contract, Law, Order, or Permit.
"CONTRACT" shall mean any written or oral agreement,
arrangement, authorization, commitment, contract, indenture,
instrument, lease, obligation, plan, practice, restriction,
understanding, or undertaking of any kind or character, or other
document to which any Person is a party or that is binding on any
Person or its capital stock, Assets or business.
"CONTRIBUTIONS" shall mean the contribution of the Cash
Payment and the Senior Credit Facility and conversion of the Zynaxis
shares, as provided in Section 1.1 hereof.
"DEFAULT" shall mean (i) any breach or violation of, default
under, contravention of, or conflict with, any Contract, Law, Order, or
Permit, (ii) any occurrence of any event that with the passage of time
or the giving of notice or both would constitute a breach or violation
of, default under, contravention of, or conflict with, any Contract,
Law, Order, or
<PAGE> 56
Permit, or (iii) any occurrence of any event that with or without the
passage of time or the giving of notice would give rise to a right of
any Person to exercise any remedy or obtain any relief under, terminate
or revoke, suspend, cancel, or modify or change the current terms of,
or renegotiate, or to accelerate the maturity or performance of, or to
increase or impose any Liability under, any Contract, Law, Order, or
Permit, where, in any such event, such Default is reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on a
Party.
"DGCL" shall mean the Delaware General Corporation Law, as
amended.
"ENVIRONMENTAL LAWS" shall mean all Laws relating to pollution
or protection of human health or the environment (including ambient
air, surface water, ground water, land surface, or subsurface strata)
and which are administered, interpreted, or enforced by the United
States Environmental Protection Agency and state and local agencies
with jurisdiction over, and including common law in respect of,
pollution or protection of the environment, including the Comprehensive
Environmental Response Compensation and Liability Act, as amended, 42
U.S.C. 9601 et seq. ("CERCLA"), the Resource Conservation and Recovery
Act, as amended, 42 U.S.C. 6901 et seq. ("RCRA"), and other Laws
relating to emissions, discharges, releases, or threatened releases of
any Hazardous Material, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport,
or handling of any Hazardous Material.
"EQUITY RIGHTS" shall mean all arrangements, calls,
commitments, Contracts, options, rights to subscribe to, scrip,
understandings, warrants, or other binding obligations of any character
whatsoever relating to, or securities or rights convertible into or
exchangeable for, shares of the capital stock of a Person or by which a
Person is or may be bound to issue additional shares of its capital
stock or other Equity Rights.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended.
"EXCHANGE RATIO" shall mean: (i) the number of shares of
Vaxcel Common Stock held by CytRx immediately prior to the Closing,
giving effect to the issuance of shares to CytRx in connection with the
Closing pursuant to Section 1.2 of this Agreement, divided by (ii)
seven (7) and further divided by (iii) the sum of (A) the number of
shares of Zynaxis Common Stock outstanding immediately prior to the
Closing, giving effect to all issuances of common stock to which
Zynaxis is committed as of the time of Closing other than issuances to
occur upon the exercise of outstanding stock options and warrants
including but not limited to: (I) the delivery of Thirty Four Thousand
Five Hundred Forty-Eight (34,548) shares of common stock of Zynaxis to
John Chappell pursuant to the settlement agreement set forth in the
letter from Zynaxis to John Chappell dated October 10, 1996, and (II)
the issuance of approximately Six Thousand (6,000) additional shares of
Zynaxis common stock to the Zynaxis 401(k) plan for the fourth quarter
of 1996, (B) two times the number of shares of Zynaxis Preferred Stock
outstanding as of the Closing, and (C) 1,320,706. The number 1,320,706
will be adjusted for splits and reverse splits of Vaxcel Common Stock,
e.g., if Vaxcel effects a 1-for-2 reverse stock split the number
1,320,706
<PAGE> 57
shall be deemed changed to 660,353, etc. An example calculation of the
Exchange Ratio based on current information is attached as Exhibit 6.
"EXHIBITS" 1 through 19, inclusive, shall mean the Exhibits so
marked, copies of which are attached to this Agreement. Such Exhibits
are hereby incorporated by reference herein and made a part hereof, and
may be referred to in this Agreement and any other related instrument
or document without being attached hereto.
"GAAP" shall mean generally accepted accounting principles,
consistently applied during the periods involved.
"GBCC" shall mean the Georgia Business Corporation Code, as
amended.
"HAZARDOUS MATERIAL" shall mean (i) any hazardous substance,
hazardous material, hazardous waste, regulated substance, or toxic
substance (as those terms are defined by any applicable Environmental
Laws) and (ii) any chemicals, pollutants, contaminants, petroleum,
petroleum products, or oil (and specifically shall include asbestos
requiring abatement, removal, or encapsulation pursuant to the
requirements of governmental authorities and any polychlorinated
biphenyls).
"INTELLECTUAL PROPERTY" shall mean copyrights, patents,
trademarks, service marks, service names, trade names, applications
therefor, technology rights and licenses, computer software (including
any source or object codes therefor or documentation relating thereto),
trade secrets, franchises, know-how, inventions, and other intellectual
property rights.
"INTERNAL REVENUE CODE" shall mean the Internal Revenue Code
of 1986, as amended, and the rules and regulations promulgated
thereunder.
"INVENTORY" shall mean (a) all inventory of Zynaxis and all
goods intended for sale or lease by Zynaxis, or for display or
demonstration; (b) all work-in-process; (c) all raw materials and other
materials and supplies of every nature and description used or which
might be used in connection with the manufacture, packing, shipping,
advertising, selling, leasing or furnishing of such goods or otherwise
used or consumed in Zynaxis's business; and (d) all documents relating
to any of the foregoing.
"KNOWLEDGE" as used with respect to a Person (including
references to such Person being aware of a particular matter) shall
mean the personal knowledge after due inquiry of the chairman,
president, chief financial officer, chief accounting officer, chief
operating officer, general counsel, any assistant or deputy general
counsel, or any senior, executive or other vice president of such
Person and the knowledge of any such persons obtained or which would
have been obtained from a reasonable investigation.
"LAW" shall mean any code, law (including common law),
ordinance, regulation, reporting or licensing requirement, rule, or
statute applicable to a Person or its Assets,
<PAGE> 58
Liabilities, or business, including those promulgated, interpreted or
enforced by any Regulatory Authority.
"LIABILITY" shall mean any direct or indirect, primary or
secondary, liability, indebtedness, obligation, penalty, cost or
expense (including costs of investigation, collection and defense),
claim, deficiency, guaranty or endorsement of or by any Person (other
than endorsements of notes, bills, checks, and drafts presented for
collection or deposit in the ordinary course of business) of any type,
whether accrued, absolute or contingent, liquidated or unliquidated,
matured or unmatured, or otherwise.
"LIEN" shall mean any conditional sale agreement, default of
title, easement, encroachment, encumbrance, hypothecation,
infringement, lien, mortgage, pledge, reservation, restriction,
security interest, title retention or other security arrangement, or
any adverse right or interest, charge, or claim of any nature
whatsoever of, on, or with respect to any property or property
interest, other than (i) Liens for current property Taxes not yet due
and payable, and (iii) Liens which do not materially impair the use of
or title to the Assets subject to such Lien.
"LIQUIDATION AGREEMENT" shall mean that certain agreement in
the form attached hereto as Exhibit 7 being entered into simultaneously
with the execution of this Agreement between Zynaxis and CytRx
regarding the sale of assets and settlement of liabilities of Zynaxis.
"LITIGATION" shall mean any action, arbitration, cause of
action, claim, complaint, criminal prosecution, governmental or other
examination or investigation, hearing, administrative or other
proceeding relating to or affecting a Party, its business, its Assets
(including Contracts related to it), or the transactions contemplated
by this Agreement.
"LOCK-UP SHARES" shall mean the shares of Vaxcel Common Stock
to be issued to the holders of Zynaxis Common Stock and Zynaxis
Preferred Stock in accordance with Section 3.1 hereof who are parties
to the Shareholder Voting Agreement.
"MALVERN LEASE" shall mean that certain Agreement of Lease
dated August 30, 1988 between Rouse & Associates and Zynaxis Cell
Science, Inc., as amended.
"MATERIAL" for purposes of this Agreement shall be determined
in light of the facts and circumstances of the matter in question;
provided that any specific monetary amount stated in this Agreement
shall determine materiality in that instance.
"MATERIAL ADVERSE EFFECT" on a Party shall mean an event,
change or occurrence which, individually or together with any other
event, change or occurrence, has a material adverse impact on (i) the
financial position, business, or results of operations of such Party
and its Subsidiaries, taken as a whole, or (ii) the ability of such
Party to perform its obligations under this Agreement or to consummate
the Merger or the other transactions contemplated by this Agreement,
provided that "Material Adverse Effect" shall not be deemed to include
the impact of (a) changes in Laws of general applicability or
<PAGE> 59
interpretations thereof by courts or governmental authorities, (b)
changes in generally accepted accounting principles or regulatory
accounting principles, (c) actions and omissions of a Party (or any of
its Subsidiaries) taken with the prior informed written Consent of the
other Party in contemplation of the transactions contemplated hereby,
and (d) the direct effects of compliance with this Agreement on the
operating performance of the Parties, including expenses incurred by
the Parties in consummating the transactions contemplated by this
Agreement.
"MERGER SHARES" shall mean the shares of Vaxcel Common Stock
to be issued to the holders of Zynaxis Common Stock and Zynaxis
Preferred Stock in accordance with Section 3.1 hereof.
"NASD" shall mean the National Association of Securities
Dealers, Inc.
"NASDAQ SMALLCAP MARKET" shall mean the SmallCap Market System
of the National Association of Securities Dealers Automated Quotations
System.
"NOTE EXCHANGE AGREEMENT" shall mean that certain Note
Exchange Agreement on the form attached hereto as Exhibit 8 being
entered into simultaneously with the execution of this Agreement by and
among Zynaxis, CytRx, Vaxcel, Euclid Partners III, L.P. and S.R. One,
Ltd.
"OPERATING PROPERTY" shall mean any property owned, leased, or
operated by the Party in question or by any of its Subsidiaries or in
which such Party or Subsidiary holds a security interest or other
interest (including an interest in a fiduciary capacity), and, where
required by the context, includes the owner or operator of such
property, but only with respect to such property.
"ORDER" shall mean any administrative decision or award,
decree, injunction, judgment, order, quasi-judicial decision or award,
ruling, or writ of any federal, state, local or foreign or other court,
arbitrator, mediator, tribunal, administrative agency, or Regulatory
Authority.
"PARTICIPATION FACILITY" shall mean any facility or property
in which the Party in question or any of its Subsidiaries participates
in the management and, where required by the context, said term means
the owner or operator of such facility or property, but only with
respect to such facility or property.
"PARTY" shall mean any of CytRx, Zynaxis, Vaxcel, or Vaxcel
Merger Sub, and "PARTIES" shall mean CytRx, Zynaxis, Vaxcel, and Vaxcel
Merger Sub.
"PBCL" shall mean the Pennsylvania Business Corporation Law,
as amended.
"PERMIT" shall mean any federal, state, local, and foreign
governmental approval, authorization, certificate, easement, filing,
franchise, license, notice, permit, or right to which any Person is a
party or that is or may be binding upon or inure to the benefit of any
Person or its securities, Assets, or business.
<PAGE> 60
"PER SHARE PRICE" shall mean: (i) Four Million Dollars
($4,000,000.00), divided by (ii) the sum of (A) the number of shares of
Zynaxis Common Stock outstanding immediately prior to the Closing,
giving effect to all issuances of common stock to which Zynaxis is
committed as of the time of Closing other than issuances to occur upon
the exercise of outstanding stock options and warrants including but
not limited to: (I) the delivery of Thirty Four Thousand Five Hundred
Forty-Eight (34,548) shares of common stock of Zynaxis to John Chappell
pursuant to the settlement agreement set forth in the letter from
Zynaxis to John Chappell dated October 10, 1996, and (II) the issuance
of approximately Six Thousand (6,000) additional shares of Zynaxis
common stock to the Zynaxis 401(k) plan for the fourth quarter of 1996,
(B) two times the number of shares of Zynaxis Preferred Stock
outstanding immediately prior to the Closing, and (C) 1,320,706. The
number 1,320,706 will be adjusted for splits and reverse splits of
Vaxcel Common Stock, e.g., if Vaxcel effects a 1-for-2 reverse stock
split the number 1,320,706 shall be deemed changed to 660,353, etc.
"PERSON" shall mean a natural person or any legal, commercial
or governmental entity, such as, but not limited to, a corporation,
general partnership, joint venture, limited partnership, limited
liability company, trust, business association, group acting in
concert, or any person acting in a representative capacity.
"PREFERRED STOCK AND WARRANT AGREEMENT" shall mean the
Preferred Stock and Warrant Agreement in the form attached hereto as
Exhibit 9.
"PROXY STATEMENT" shall mean the proxy statement used by
Zynaxis to solicit the approval of its shareholders of the transactions
contemplated by this Agreement, which shall include the prospectus of
Vaxcel relating to the issuance of the Vaxcel Common Stock to holders
of Zynaxis Common Stock.
"REGISTRATION RIGHTS AGREEMENT" shall mean that certain
Registration Rights Agreement in the form attached hereto as Exhibit 10
to be entered into at the Closing between CytRx and Vaxcel, pursuant to
which CytRx and Vaxcel make certain agreements regarding the
registration for resale under the 1933 Act of Shares of Vaxcel Common
Stock held by CytRx.
"REGISTRATION STATEMENT" shall mean the Registration
Statement(s) on Form S-4, or other appropriate form, including any
pre-effective or post-effective amendments or supplements thereto,
filed with the SEC by Vaxcel under the 1933 Act to register the
issuance of the Merger Shares and to register the resale of the Resale
Shares..
"REGULATORY AUTHORITIES" shall mean, collectively, the SEC,
the NASD, the Federal Trade Commission, the United States Department of
Justice, and all other federal, state, county, local or other
governmental or regulatory agencies, authorities (including
self-regulatory authorities), instrumentalities, commissions, boards or
bodies having jurisdiction over the Parties and their respective
Subsidiaries.
<PAGE> 61
"REPRESENTATIVE" shall mean any investment banker, financial
advisor, attorney, accountant, consultant, or other representative
engaged by a Person.
"SEC" shall mean the United States Securities and Exchange
Commission.
"SEC DOCUMENTS" shall mean all forms, proxy statements,
registration statements, reports, schedules, and other documents filed,
or required to be filed, by a Party or any of its Subsidiaries with any
Regulatory Authority pursuant to the Securities Laws.
"SECRETECH LICENSE AGREEMENT" shall mean that certain License
Agreement dated July 1, 1987 between Southern Research Institute and
Molecular Engineering Associates, Ltd.
"SECURED LOAN AGREEMENT" shall mean that certain Secured Loan
Agreement in the form attached hereto as Exhibit 11 being entered into
simultaneously with the execution of this Agreement between CytRx and
Zynaxis.
"SECURITIES LAWS" shall mean the 1933 Act, the 1934 Act, the
Investment Company Act of 1940, as amended, the Investment Advisors Act
of 1940, as amended, the Trust Indenture Act of 1939, as amended, and
the rules and regulations of any Regulatory Authority promulgated
thereunder.
"SENIOR CREDIT FACILITY" shall mean, collectively, the Secured
Loan Agreement, the Senior Secured Note, the Zynaxis Pledge Agreement,
the Zynaxis Security Agreement, the Zynaxis Vaccine Technologies
Guaranty, the Zynaxis Vaccine Technologies Security Agreement and the
Zynaxis Vaccine Technologies Collateral Assignment of License
Agreement.
"SENIOR SECURED NOTE" shall mean that certain Secured
Promissory Note in the form attached hereto as Exhibit 12 being entered
into simultaneously with the execution of this Agreement by Zynaxis, as
the maker, and CytRx, as the holder, outlining the terms governing the
lending of up to Two Million Dollars ($2,000,000) by CytRx to Zynaxis.
"SHAREHOLDER VOTING AGREEMENT" shall mean the Shareholder
Voting Agreement in the form attached hereto as Exhibit 13 being
entered into simultaneously with the execution of this Agreement.
"SHAREHOLDERS' MEETING" shall mean the meeting of the
shareholders of Zynaxis to be held pursuant to Section 8.1, including
any adjournment or adjournments thereof.
"STATEMENT WITH RESPECT TO SHARES" shall mean the Statement
With Respect to Shares filed by Zynaxis in the Department of State of
the Commonwealth of Pennsylvania on April 6, 1995.
"SUBSIDIARIES" shall mean all those corporations,
associations, or other business entities of which the entity in
question either (i) owns or controls 50% or more of the outstanding
equity securities either directly or through an unbroken chain of
entities as to
<PAGE> 62
each of which 50% or more of the outstanding equity securities is owned
directly or indirectly by its parent (provided, there shall not be
included any such entity the equity securities of which are owned or
controlled in a fiduciary capacity), (ii) in the case of partnerships,
serves as a general partner, (iii) in the case of a limited liability
company, serves as a managing member, or (iv) otherwise has the ability
to elect a majority of the directors, trustees or managing members
thereof.
"SURVIVING CORPORATION" shall mean Zynaxis as the surviving
corporation resulting from the Merger.
"TAX RETURN" shall mean any report, return, information
return, or other information required to be supplied to a taxing
authority in connection with Taxes, including any return of an
affiliated or combined or unitary group that includes a Party or its
Subsidiaries.
"TAX" or "TAXES" shall mean any federal, state, county, local,
or foreign taxes, charges, fees, levies, imposts, duties, or other
assessments, including income, gross receipts, excise, employment,
sales, use, transfer, license, payroll, franchise, severance, stamp,
occupation, windfall profits, environmental, federal highway use,
commercial rent, customs duties, capital stock, paid-up capital,
profits, withholding, Social Security, single business and
unemployment, disability, real property, personal property,
registration, ad valorem, value added, alternative or add-on minimum,
estimated, or other tax or governmental fee of any kind whatsoever,
imposed or required to be withheld by the United States or any state,
county, local or foreign government or subdivision or agency thereof,
including any interest, penalties, and additions imposed thereon or
with respect thereto.
"TECHNOLOGY DEVELOPMENT AGREEMENT" shall mean that certain
Technology Development Agreement in the form attached hereto as Exhibit
14 being entered into simultaneously with the execution of this
Agreement between Vaxcel and Zynaxis regarding the joint development of
the technology that is the subject of the Secretech License Agreement
by Vaxcel and Zynaxis.
"TRANSACTION DOCUMENTS" shall mean this Agreement and the
other documents executed by any of CytRx, Vaxcel, Vaxcel Merger Sub or
Zynaxis that are referenced by this Agreement.
"VAXCEL CAPITAL STOCK" shall mean, collectively, the Vaxcel
Common Stock and any other class or series of capital stock of Vaxcel.
"VAXCEL COMMON STOCK" shall mean the $0.001 par value common
stock of Vaxcel.
"VAXCEL COMPANIES" shall mean, collectively, Vaxcel and all
Vaxcel Subsidiaries.
"VAXCEL DISCLOSURE MEMORANDUM" shall mean the written
information entitled "Vaxcel, Inc. Disclosure Memorandum" delivered
prior to the date of this Agreement to
<PAGE> 63
Zynaxis describing in reasonable detail the matters contained therein
and, with respect to each disclosure made therein, specifically
referencing each Section of this Agreement under which such disclosure
is being made. Information disclosed with respect to one Section shall
not be deemed to be disclosed for purposes of any other Section not
specifically referenced with respect thereto.
"VAXCEL FINANCIAL STATEMENTS" shall mean (i) the balance
sheets of Vaxcel as of December 31, 1995 and 1994, and the related
statements of operations, changes in shareholders' equity, and cash
flows for each of the three fiscal years ended December 31, 1995, 1994
and 1993, and (ii) the balance sheet of Vaxcel as of September 30, 1996
and the related statements of operations, changes in shareholders'
equity, and cash flows with respect to the nine-month period then
ended.
"VAXCEL MERGER SUB COMMON STOCK" shall mean the $0.01 par
value common stock of Vaxcel Merger Sub.
"VAXCEL PREFERRED STOCK" shall mean the $.001 par value
preferred stock of Vaxcel.
"VAXCEL SUBSIDIARIES" shall mean the Subsidiaries of Vaxcel,
which shall include the Vaxcel Subsidiaries described in Section 6.4
and any corporation or other organization acquired as a Subsidiary of
Vaxcel in the future and held as a Subsidiary by Vaxcel at the
Effective Time.
"WARRANT SHARES" shall mean the shares of Vaxcel Common Stock
issuable upon the exercise of warrants to purchase Vaxcel Common Stock
to be assumed by Vaxcel or issued by Vaxcel, as the case may be, in
accordance with Sections 3.6 and 3.7 hereof.
"ZYNAXIS CAPITAL STOCK" shall mean, collectively, the Zynaxis
Common Stock, the Zynaxis Preferred Stock, and any other class or
series of capital stock of Zynaxis.
"ZYNAXIS COMMON STOCK" shall mean the $0.01 par value common
stock of Zynaxis.
"ZYNAXIS COMPANIES" shall mean, collectively, Zynaxis and all
Zynaxis Subsidiaries.
"ZYNAXIS DISCLOSURE MEMORANDUM" shall mean the written
information entitled "Zynaxis, Inc. Disclosure Memorandum" delivered
prior to the date of this Agreement to Vaxcel describing in reasonable
detail the matters contained therein and, with respect to each
disclosure made therein, specifically referencing each Section of this
Agreement under which such disclosure is being made. Information
disclosed with respect to one Section shall not be deemed to be
disclosed for purposes of any other Section not specifically referenced
with respect thereto.
"ZYNAXIS FINANCIAL STATEMENTS" shall mean (i) the consolidated
balance sheets (including related notes and schedules, if any) of
Zynaxis as of June 30, 1996, and as of
<PAGE> 64
December 31, 1995 and 1994, and the related statements of operations,
changes in stockholders' equity, and cash flows (including related
notes and schedules, if any) for the six months ended June 30, 1996,
and for each of the three fiscal years ended December 31, 1995, 1994
and 1993, as filed by Zynaxis in SEC Documents, and (ii) the
consolidated balance sheets of Zynaxis (including related notes and
schedules, if any) and related statements of operations, changes in
shareholders' equity, and cash flows (including related notes and
schedules, if any) included in SEC Documents filed with respect to
periods ended subsequent to June 30, 1996.
"ZYNAXIS PLEDGE AGREEMENT" shall mean that certain Pledge
Agreement in the form attached hereto as Exhibit 15 being entered into
simultaneously with the execution of this Agreement between Zynaxis, as
pledgor, and CytRx, as pledgee, pursuant to which Zynaxis pledges the
stock of its Subsidiaries to CytRx as security in connection with the
lending of funds under the Senior Secured Note.
"ZYNAXIS PREFERRED STOCK" shall mean the no par value Series A
Convertible Preferred Stock of Zynaxis.
"ZYNAXIS SECURITY AGREEMENT" shall mean that certain Security
Agreement in the form attached hereto as Exhibit 16 being entered into
simultaneously with the execution of this Agreement between Zynaxis, as
debtor, and CytRx, as secured party, pursuant to which Zynaxis grants
to CytRx a security interest in certain of Zynaxis assets in connection
with the lending of funds under the Senior Secured Note.
"ZYNAXIS STOCK PLAN" shall mean the Zynaxis, Inc. Amended and
Restated 1989 Stock Option Plan.
"ZYNAXIS SUBSIDIARIES" shall mean the Subsidiaries of Zynaxis,
which shall include the Zynaxis Subsidiaries described in Section 5.4
and any corporation or other organization acquired as a Subsidiary of
Zynaxis in the future and held as a Subsidiary by Zynaxis at the
Effective Time.
"ZYNAXIS VACCINE TECHNOLOGIES COLLATERAL ASSIGNMENT OF LICENSE
AGREEMENT" shall mean that certain Collateral Assignment of License
Agreement in the form attached hereto as Exhibit 17 being entered into
simultaneously with the execution of this Agreement between CytRx and
Zynaxis Vaccine Technologies, Inc., pursuant to which Zynaxis Vaccine
Technologies, Inc. grants to CytRx a security interest in its license
of certain technology from Southern Research Institute.
"ZYNAXIS VACCINE TECHNOLOGIES GUARANTY" shall mean that
certain Guaranty in the form attached hereto as Exhibit 18 being
entered into simultaneously with the execution of this Agreement
between Zynaxis Vaccine Technologies, Inc., as guarantor and CytRx
Corporation.
"ZYNAXIS VACCINE TECHNOLOGIES SECURITY AGREEMENT" shall mean
that certain Security Agreement in the form attached hereto as Exhibit
19 being entered into
<PAGE> 65
simultaneously with the execution of this Agreement between Zynaxis
Vaccine Technologies, Inc., as guarantor and CytRx Corporation.
(b) The terms set forth below shall have the
meanings ascribed thereto in the referenced sections:
<TABLE>
<S> <C>
Cash Payment Section 1.1
Certificates Section 4.1
Closing Section 1.4
CytRx Warrant Section 1.2
Effective Time Section 1.5
ERISA Affiliate Section 5.14(c)
Exchange Agent Section 4.1
Merger Section 1.3
Non-Financing Warrants Section 3.7
Resale Shares Section 8.1
Tax Opinion Section 9.1(g)
Vaxcel Benefit Plans Section 6.14
Vaxcel Contracts Section 6.15
Vaxcel ERISA Plan Section 6.142
Vaxcel Pension Plan Section 6.14
Zynaxis Benefit Plans Section 5.14
Zynaxis Contracts Section 5.15
Zynaxis ERISA Plan Section 5.14
Zynaxis Options Section 3.5
Zynaxis Pension Plan Section 5.14
Zynaxis SEC Reports Section 5.5(a)
</TABLE>
(c) Any singular term in this Agreement shall be
deemed to include the plural, and any plural term the singular. Any masculine or
neuter personal pronoun shall be considered to mean the corresponding masculine,
feminine or neuter personal pronoun, as the context requires. Whenever the words
"include," "includes" or "including" are used in this Agreement, they shall be
deemed followed by the words "without limitation."
11.2 EXPENSES.
(a) Except as otherwise provided in this Section
11.2, each of the Parties shall bear and pay all direct costs and expenses
incurred by it or on its behalf in connection with the transactions contemplated
hereunder, including filing, registration and application fees, printing fees,
and fees and expenses of its own financial or other consultants, investment
bankers, accountants, and counsel, except that: (i) each of the Parties shall
bear and pay one-half of the filing fees payable in connection with the
Registration Statement and the Proxy Statement and printing costs incurred in
connection with the printing of the Registration Statement and the Proxy
Statement; and (ii) Zynaxis shall pay all fees and expenses of counsel to CytRx
and Vaxcel.
<PAGE> 66
Notwithstanding the foregoing, if this Agreement is terminated for any reason
other than as set forth in Section 11.2(b) below then the amount of fees and
expenses of Alston & Bird paid by Zynaxis through the date of termination shall
be deducted from the balance due under the Senior Credit Facility.
(b) Notwithstanding the foregoing,
(i) if this Agreement is terminated by CytRx pursuant
to Section 10.1(d)(ii) (as relates to approval of Zynaxis's
shareholders), or
(ii) if the Merger is not consummated as a result of
the failure, due to intentional action or inaction on the part
of Zynaxis or any of its officers, directors, employees or
agents of Zynaxis to satisfy any of the conditions set forth
in Section 9.2, other than Section 9.2(d), or,
(iii) if this Agreement is terminated for any reason
after the Board of Directors of Zynaxis takes any action in
reliance upon the first clause of the second sentence of
Section 8.7 or either of the parenthetical phrases in clauses
(iii) and (iv) of the penultimate sentence of Section 8.1,
then Zynaxis shall promptly pay CytRx all the out-of-pocket costs and expenses
of CytRx and its Subsidiaries, including reasonable costs of counsel, investment
bankers, actuaries and accountants, incurred in connection with the transactions
contemplated by this Agreement.
(c) In addition to the foregoing, if, after the
date of this Agreement and within twelve (12) months following
(i) any termination of this Agreement
(1) by CytRx pursuant to Sections 10.1(b),
10.1(c), 10.1(f) (but only on the basis of the
failure of Zynaxis to satisfy any of the conditions
enumerated in Section 9.2, other than Section
9.2(d)), or
(2) by either Party pursuant to Section
10.1(d)(ii) (with respect to approval of the
shareholders of Zynaxis), or
(ii) failure to consummate the Merger by reason of
any failure of Zynaxis to satisfy the conditions enumerated in
Section 9.2, other than Section 9.2(d), or 9.1(a) (as such
section relates to approval by the shareholders of Zynaxis),
any third-party shall acquire, merge with, combine with, purchase a substantial
part of the Assets of, or engage in any other business combination with, or
purchase any equity securities involving an acquisition of 20% or more of the
voting stock of, Zynaxis, or enter into any binding agreement to do any of the
foregoing (collectively, a "Business Combination"), such third-party that is a
party to the Business Combination shall pay to CytRx, prior to the earlier of
<PAGE> 67
consummation of the Business Combination or execution of any letter of intent or
definitive agreement with Zynaxis relating to such Business Combination, an
amount in cash equal to the sum of
(x) the direct costs and expenses or portion thereof
referred to in subsection (a) above incurred by or on behalf
of CytRx or Vaxcel in connection with the transactions
contemplated by this Agreement, plus
(y) 5% of the aggregate fair market value of the
consideration received by the shareholders of Zynaxis in such
Business Combination, less
(z) any amounts previously paid by Zynaxis to CytRx
or Vaxcel pursuant to subsection (b) of this Section 11.2,
which sum represents additional compensation for CytRx's loss as the result of
the transactions contemplated by this Agreement not being consummated. In the
event such third-party shall refuse to pay such amounts within ten days of
demand therefor by CytRx, the amounts shall be an obligation of Zynaxis and
shall be paid by Zynaxis promptly upon notice to Zynaxis by CytRx.
(d) The Parties acknowledge that the loss to
either Party resulting from breach of this Agreement by the other Party or other
failure of the transactions contemplated by this Agreement to be consummated is
not susceptible of ready measurement and, therefore, that the payments provided
in this Section 11.2 are intended by the Parties to constitute liquidated
damages for any breach by a Party of the terms of this Agreement, and not a
penalty.
11.3 BROKERS AND FINDERS. With the exception of the
agreement established by a letter dated June 17, 1996 from QED Technologies,
L.P., to CytRx Corporation, as amended by that letter dated November 8, 1996
From Vaxcel, Inc. to QED Technologies, L.P., for which Vaxcel shall be
responsible, each of the Parties represents and warrants that neither it nor any
of its officers, directors, employees, or Affiliates has employed any broker or
finder or incurred any Liability for any financial advisory fees, investment
bankers' fees, brokerage fees, commissions, or finders' fees in connection with
this Agreement or the transactions contemplated hereby. In the event of a claim
by any broker or finder based upon his or its representing or being retained by
or allegedly representing or being retained by Zynaxis or Vaxcel, each of
Zynaxis and Vaxcel, as the case may be, agrees to indemnify and hold the other
Party harmless of and from any Liability in respect of any such claim.
11.4 ENTIRE AGREEMENT. Except as otherwise expressly
provided herein, this Agreement (including the documents and instruments
referred to herein) constitutes the entire agreement between the Parties with
respect to the transactions contemplated hereunder and supersedes all prior
arrangements or understandings with respect thereto, written or oral (except, as
to Section 8.5(b), for the Confidentiality Agreement). Nothing in this Agreement
expressed or implied, is intended to confer upon any Person, other than the
Parties or their respective successors, any rights, remedies, obligations, or
liabilities under or by reason of this Agreement.
<PAGE> 68
11.5 AMENDMENTS. To the extent permitted by Law, this
Agreement may be amended by a subsequent writing signed by each of the Parties
upon the approval of each of the Parties, whether before or after shareholder
approval of this Agreement has been obtained; provided, that after any such
approval by the holders of Zynaxis Capital Stock, there shall be made no
amendment that reduces or modifies in any material respect the consideration to
be received by holders of Zynaxis Capital Stock or pursuant to applicable Law
requires the further approval by such shareholders without the further approval
of such shareholders.
11.6 WAIVERS.
(a) Prior to or at the Effective Time, Vaxcel,
acting through its Board of Directors, chief executive officer or other
authorized officer, shall have the right to waive any Default in the performance
of any term of this Agreement by Zynaxis, to waive or extend the time for the
compliance or fulfillment by Zynaxis of any and all of its obligations under
this Agreement, and to waive any or all of the conditions precedent to the
obligations of Vaxcel under this Agreement, except any condition which, if not
satisfied, would result in the violation of any Law. No such waiver shall be
effective unless in writing signed by a duly authorized officer of Vaxcel.
(b) Prior to or at the Effective Time, Zynaxis,
acting through its Board of Directors, chief executive officer or other
authorized officer, shall have the right to waive any Default in the performance
of any term of this Agreement by Vaxcel, to waive or extend the time for the
compliance or fulfillment by Vaxcel of any and all of its obligations under this
Agreement, and to waive any or all of the conditions precedent to the
obligations of Zynaxis under this Agreement, except any condition which, if not
satisfied, would result in the violation of any Law. No such waiver shall be
effective unless in writing signed by a duly authorized officer of Zynaxis.
(c) The failure of any Party at any time or times
to require performance of any provision hereof shall in no manner affect the
right of such Party at a later time to enforce the same or any other provision
of this Agreement. No waiver of any condition or of the breach of any term
contained in this Agreement in one or more instances shall be deemed to be or
construed as a further or continuing waiver of such condition or breach or a
waiver of any other condition or of the breach of any other term of this
Agreement.
11.7 ASSIGNMENT. Except as expressly contemplated hereby,
neither this Agreement nor any of the rights, interests or obligations hereunder
shall be assigned by any Party hereto (whether by operation of Law or otherwise)
without the prior written consent of the other Party. Subject to the preceding
sentence, this Agreement will be binding upon, inure to the benefit of and be
enforceable by the Parties and their respective successors and assigns.
11.8 NOTICES. All notices or other communications which are
required or permitted hereunder shall be in writing and sufficient if delivered
by hand, by facsimile transmission, by registered or certified mail, postage
pre-paid, or by courier or overnight carrier, to the persons at the addresses
set forth below (or at such other address as may be provided hereunder), and
shall be deemed to have been delivered as of the date so delivered:
<PAGE> 69
Zynaxis: Zynaxis, Inc.
371 Phoenixville Pike
Malvern, Pennsylvania 19355
Telecopy Number: (610) 889-2222
Attention: Martyn D. Greenacre
Chairman, President and
Chief Executive Officer
Copy to Counsel: Morgan, Lewis & Bockius LLP
2000 One Logan Square
Philadelphia, Pennsylvania 19103-6993
Telecopy Number: (215) 963-5299
Attention: Debra J. Poul
CytRx: CytRx Corporation
154 Technology Parkway
Norcross, Georgia 30092
Telecopy Number: (770) 448-3357
Attention: Jack J. Luchese
Chairman, President and
Chief Executive Officer
Copy to Counsel: Alston & Bird
1201 West Peachtree Street
Atlanta, Georgia 30309-3424
Telecopy Number: (404) 881-7777
Attention: George M. Maxwell, Jr.
Vaxcel: Vaxcel, Inc.
154 Technology Parkway
Norcross, Georgia 30092
Telecopy Number: (770) 368-9500
Attention: Paul Wilson
<PAGE> 70
Copy to Counsel: Alston & Bird
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309
Telecopy Number: (404) 881-7777
Attention: George M. Maxwell, Jr.
11.9 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the Laws of the State of Georgia, without regard to
any applicable conflicts of Laws.
11.10 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
11.11 CAPTIONS; ARTICLES AND SECTIONS. The captions contained in
this Agreement are for reference purposes only and are not part of this
Agreement. Unless otherwise indicated, all references to particular Articles or
Sections shall mean and refer to the referenced Articles and Sections of this
Agreement.
11.12 INTERPRETATIONS. Neither this Agreement nor any uncertainty
or ambiguity herein shall be construed or resolved against any Party, whether
under any rule of construction or otherwise. No Party to this Agreement shall be
considered the draftsman. The Parties acknowledge and agree that this Agreement
has been reviewed, negotiated, and accepted by all Parties and their attorneys
and shall be construed and interpreted according to the ordinary meaning of the
words used so as fairly to accomplish the purposes and intentions of all Parties
hereto.
11.13 SEVERABILITY. Any term or provision of this Agreement which
is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction,
be ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
<PAGE> 71
IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be executed
on its behalf and its corporate seal to be hereunto affixed and attested by
officers thereunto as of the day and year first above written.
ATTEST: VAXCEL, INC.
By:
---------------------------------
- ------------------------- Paul J. Wilson, III
Secretary President and Chief Executive Officer
[CORPORATE SEAL]
ATTEST: VAXCEL MERGER SUBSIDIARY, INC.
By:
----------------------------------
- ------------------------- Paul J. Wilson, III
Secretary President and Chief Executive Officer
[CORPORATE SEAL]
<PAGE> 72
ATTEST: ZYNAXIS, INC.
By:
-------------------------------
- ------------------------- Martyn D. Greenacre
Secretary Chairman, President and Chief
Executive Officer
[CORPORATE SEAL]
ATTEST: CYTRX CORPORATION
By:
-------------------------------
- ------------------------- Jack J. Luchese
Secretary Chairman, President and Chief
Executive Officer
[CORPORATE SEAL]
<PAGE> 1
Exhibit 2.2
Preferred Stock and Warrant Agreement dated as of December 6, 1996,
among the Registrant, Zynaxis, Inc., Vaxcel, Inc. and each of the holders of
Zynaxis, Inc. warrants signatory thereto.
<PAGE> 2
PREFERRED STOCK AND WARRANT AGREEMENT
THIS AGREEMENT (this "Agreement") is made and entered into as of
December 6, 1996, by and among ZYNAXIS, INC., a Pennsylvania corporation
("Zynaxis"), CYTRX CORPORATION, a Delaware corporation ("CytRx"), Vaxcel, Inc.,
a Delaware corporation and a wholly owned subsidiary of CytRx ("Vaxcel") and
the persons listed in Exhibit A (the "Securityholders").
W I T N E S S E T H:
WHEREAS, the Securityholders collectively hold all of the outstanding
shares of Series A Convertible Preferred Stock of Zynaxis (the "Series A
Stock") and each Securityholder holds the number of shares of Series A Stock
and the number of warrants to purchase additional shares of Common Stock of
Zynaxis set forth beside such Securityholder's name in Exhibit A (the
"Warrants");
WHEREAS, the Series A Stock and the Warrants were issued pursuant to
that certain Preferred Stock and Warrant Purchase Agreement dated March 29,
1995, as amended (the "Preferred Stock and Warrant Purchase Agreement"), and in
connection with bridge loans extended by certain of the Securityholders to
Zynaxis;
WHEREAS, simultaneously with the execution of this Agreement Zynaxis
is entering into an Agreement and Plan of Merger and Contribution (the "Merger
and Contribution Agreement") with CytRx, Vaxcel, and Vaxcel Merger Sub, Inc., a
Georgia corporation and a newly formed, wholly owned subsidiary of Vaxcel
("Vaxcel Merger Sub"), and certain other agreements, including, among other
things, a Liquidation Agreement (the "Liquidation Agreement") contemplating the
sale of Assets (as defined therein) of Zynaxis and documents (the "Secured Loan
Documents") relating to a secured loan being extended to Zynaxis by CytRx (the
"Secured Loan"). The Merger and Contribution Agreement provides for the
issuance of shares of Vaxcel Common Stock and a warrant to purchase shares of
Vaxcel Common Stock to CytRx in exchange for CytRx's contribution to Vaxcel of
the Secured Loan and a cash payment in an amount equal to Four Million Dollars
($4,000,000) minus the aggregate principal and interest balance outstanding
under the Secured Loan, subject to adjustment for payments made to shareholders
of Zynaxis pursuant to Section 3.3 of the Merger and Contribution Agreement.
The Merger and Contribution Agreement also provides for the issuance of shares
of Vaxcel Common Stock to the existing shareholders of Zynaxis in exchange for
the contribution to Vaxcel by the existing shareholders of Zynaxis of all of
the outstanding shares of capital stock of Zynaxis by means of a merger of
Vaxcel Merger Sub with and into Zynaxis. At the effective time of such merger,
the outstanding shares of the capital stock of Zynaxis will be converted into
the right to receive shares of the common stock of Vaxcel (except as provided
herein). As a result, shareholders of Zynaxis will become shareholders of
Vaxcel and Zynaxis will continue to conduct its business and operations as a
wholly owned subsidiary of Vaxcel.
<PAGE> 3
WHEREAS, CytRx is unwilling to enter into the Merger and Contribution
Agreement unless the rights of the Securityholders are modified as set forth in
this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises, covenants, and agreements contained herein and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound, hereby agree
as follows:
1. Treatment of Transactions. Each of the undersigned elects
that the consummation of the transactions contemplated by the Merger and
Contribution Agreement and the other agreements contemplated by the Merger and
Contribution Agreement, including but not limited to the Liquidation Agreement,
will not be deemed a liquidation for purposes of Sections 3.1 and 3.2 of the
Statement with Respect to Shares filed by Zynaxis in the Department of State of
the Commonwealth of Pennsylvania on April 6, 1995.
2. Consent to Secured Loan. Each of the undersigned consents
to the Secured Loan and all liens, pledges, mortgages, security interests and
other encumbrances to which the assets or properties of Zynaxis may become
subject as part of the Secured Loan.
3. Exchange of Warrants. Each of the undersigned agrees that
upon consummation of the merger between Zynaxis and Vaxcel Merger Sub pursuant
to the Merger and Contribution Agreement (the "Merger"), each Warrant held by
the undersigned shall be exchanged for a new warrant substantially in the form
attached hereto as Exhibit B to purchase a number of shares of Vaxcel Common
Stock equal to: (i) the number of shares of Common Stock of Zynaxis as the
Warrants held by such undersigned are exercisable to purchase at that time
multiplied by (ii) the Exchange Ratio (the "New Warrant"). Each of the
undersigned Securityholders agrees that such undersigned Securityholder shall
surrender the Warrants held by such undersigned Securityholder and shall
receive in exchange therefor a New Warrant. Zynaxis shall not honor any warrant
agreement representing a Warrant after the Merger.
4. Termination of Preferred Stock and Warrant Purchase
Agreement and Registration Rights. Each of the undersigned agrees that the
Preferred Stock and Warrant Purchase Agreement and all rights of the
Securityholders thereunder shall terminate upon the Merger. Each of the
undersigned further agrees that: (i) upon execution of this Agreement all
rights that the undersigned Securityholder may have to require Zynaxis to
register securities of Zynaxis for sale under applicable state and federal
securities laws, whether granted pursuant to the Preferred Stock and Warrant
Agreement or otherwise ("Registration Rights"), are suspended pending the
Merger, and (ii) upon occurrence of the Merger all such Registration Rights
will be terminated and such Securityholder will have such Registration Rights
as are provided for such Securityholder in the Merger and Contribution
Agreement. If the Merger and Contribution Agreement is terminated for any
reason, beginning at the time of such termination the undersigned
Securityholder shall have such Registration Rights as such Securityholder would
have had at such time if such Registration Rights had not been suspended
pursuant to the preceding sentence.
-3-
<PAGE> 4
5. Accredited Investor Status of Securityholder. Each of the
undersigned Securityholders represents and warrants to CytRx, Vaxcel and
Zynaxis that he or it is an "accredited investor" within the meaning of
Regulation D promulgated under the Securities Act of 1933, as amended (the
"Securities Act"), and that he or it is acquiring New Warrants for himself or
itself and not for other persons. Each Securityholder understands that the New
Warrants and any Securities purchased upon exercise of New Warrants (the
"Warrant Securities") have not been registered under the Securities Act and,
therefore, cannot be resold unless such Warrant Securities are registered under
the Securities Act or unless an exemption from such registration is available.
6. Notices. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given if delivered personally or sent by overnight courier (providing proof of
delivery) to the parties at the following addresses (or at such other address
for a party as shall be specified by like notice): (i) if to Zynaxis, CytRx or
Vaxcel, to the address set forth in Section 11.8 of the Merger and Contribution
Agreement; and (ii) if to a Securityholder, to its address shown below its
signature on the last page hereof.
7. Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
8. Counterparts. This Agreement may be executed in two or
more counterparts, all of which shall be considered one and the same agreement.
9. Entire Agreement. This Agreement (including the documents
and instruments referred to herein) constitutes the entire agreement, and
supersedes all prior agreements and understandings, both written and oral,
among the parties with respect to the subject matter hereof.
10.Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the Commonwealth of Pennsylvania,
regardless of the laws that might otherwise govern under applicable principles
of conflicts of laws thereof.
11.Assignment. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement shall be assigned, in whole or in
part, by operation of law or otherwise, by any of the parties without the prior
written consent of the other parties. Any assignment in violation of the
foregoing shall be void.
12. Equitable Remedies. Each Securityholder agrees that
irreparable damage would occur and that CytRx and Vaxcel would not have any
adequate remedy at law in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that CytRx and Vaxcel shall be
entitled to an injunction or injunctions to prevent breaches by a
Securityholder of this Agreement and to enforce specifically the terms and
provisions of this Agreement.
-4-
<PAGE> 5
13. Severability. If any term, provision, covenant or
restriction herein, or the application thereof to any circumstance, shall, to
any extent, be held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions herein and the application thereof to any other circumstances,
shall remain in full force and effect, shall not in any way be affected,
impaired or invalidated, and shall be enforced to the fullest extent permitted
by law.
14. Defined Terms. Capitalized terms used in this Agreement
but not defined herein shall have the meanings given such terms in the Merger
and Contribution Agreement.
[Remainder of page intentionally left blank.]
-5-
<PAGE> 6
[FIRST OF THREE SIGNATURE PAGES TO PREFERRED STOCK AND WARRANT AGREEMENT DATED
NOVEMBER _, 1996]
IN WITNESS WHEREOF, the undersigned have duly executed this Agreement
under seal as of the day and year first above written.
ZYNAXIS, INC. CYTRX CORPORATION
By: By:
------------------------------ --------------------------------
Name: Name:
---------------------------- ------------------------------
Title: Title:
--------------------------- -----------------------------
VAXCEL, INC. S.R. ONE, LTD.
By: By:
------------------------------ --------------------------------
Name: Name:
---------------------------- ------------------------------
Title: Title:
--------------------------- -----------------------------
Address:
---------------------------
---------------------------
---------------------------
EUCLID PARTNERS III, L.P. ALPHI FUND L.P.
By: By: Alphi Investment
------------------------------ Management Company,
Name: General Partner
----------------------------
Title:
---------------------------
By:
--------------------------------
Address: Name:
------------------------- ------------------------------
Title:
------------------------- -----------------------------
Address:
------------------------- ---------------------------
------------------------- ---------------------------
---------------------------
JAVELIN CAPITAL FUND, L.P.
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
Address:
-------------------------
-------------------------
-------------------------
-------------------------
-6-
<PAGE> 7
[SECOND OF THREE SIGNATURE PAGES TO PREFERRED STOCK AND WARRANT AGREEMENT DATED
NOVEMBER _, 1996]
SENMED MEDICAL VENTURES CIP CAPITAL L.P.
By: CIP Capital Management
Inc.,
General Partner
By: By:
----------------------------------- -------------------------------
Name: Name:
---------------------------------- -----------------------------
Title: Title:
--------------------------------- ----------------------------
Address: Address:
------------------------------- --------------------------
------------------------------- --------------------------
------------------------------- --------------------------
------------------------------- --------------------------
THE WEST COMPANY WILLIAM M. SPENCER, III
By: By:
------------------------------------ -------------------------------
Name: Name:
---------------------------------- ------------------------------
Title: Title:
--------------------------------- ----------------------------
Address: Address:
------------------------------- --------------------------
------------------------------- --------------------------
------------------------------- --------------------------
------------------------------- --------------------------
BIOTECHNOLOGY VENTURE COMMONWEALTH VENTURE
FUND S.A. PARTNERS I, L.P.
By: By:
------------------------------------ -------------------------------
Name: Name:
---------------------------------- ------------------------------
Title: Title:
--------------------------------- ----------------------------
Address: Address:
------------------------------- -------------------------
------------------------------- -------------------------
------------------------------- -------------------------
------------------------------- -------------------------
-7-
<PAGE> 8
[THIRD OF THREE SIGNATURE PAGES TO PREFERRED STOCK AND WARRANT AGREEMENT DATED
NOVEMBER _, 1996]
PLEXUS VENTURES, INC. PHILADELPHIA VENTURES - JAPAN I,
L.P.
By: By:
------------------------------------ -------------------------------
Name: Name:
---------------------------------- ------------------------------
Title: Title:
--------------------------------- ----------------------------
Address: Address:
------------------------------- ---------------------------
------------------------------- ---------------------------
------------------------------- ---------------------------
------------------------------- ---------------------------
GROTECH PARTNERS II, L.P. GROTECH PARTNERS III, L.P.
GROTECH III
COMPANION FUND, L.P.
By: Mid Atlantic Ventures II, L.P., GROTECH III PENNSYLVANIA FUND, L.P.
General Partner
By: Grotech Capital Group, Inc., By: Grotech Capital Group, Inc.,
General Partner General Partner
By: By:
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Name: Name:
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Title: Title:
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Address: Address:
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Dr. Gus G. Casten
Address:
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<PAGE> 9
EXHIBIT A
HOLDERS OF PREFERRED STOCK AND WARRANTS ISSUED BY
ZYNAXIS, INC.
<TABLE>
<CAPTION>
SERIES A
NAME SHARES WARRANTS
---- ------ --------
<S> <C> <C>
Euclid Partners III, L.P. 260,000 680,775
S.R. One, Ltd. 257,500 540,000
Javelin Capital Fund, L.P. 250,000 500,000
Alphi Fund L.P. 150,000 300,000
Senmed Medical Ventures 135,000 270,000
The West Company 125,000 250,000
William M. Spencer, III 55,000 110,000
Biotechnology Venture Fund S.A. 50,000 100,000
CIP Capital L.P. 45,000 265,000
Grotech Partners III, L.P. 26,490 52,980
Plexus Ventures, Inc. 25,000 150,000
Dr. Gus G. Casten 12,500 25,000
Commonwealth Venture Partners I, L.P. 10,000 20,000
Grotech Partners II, L.P. 3,455 6,910
Grotech III Companion Fund, L.P. 3,155 6,310
Philadelphia Ventures - Japan I, L.P. 2,500 5,000
Grotech III Pennsylvania Fund, L.P. 1,900 3,800
Totals 1,412,500 3,285,775
</TABLE>
