UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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 11, 1998
SERAGEN, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 0-19855 04-2662345
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
97 South Street, Hopkinton, Massachusetts 01748
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (508) 435-2331
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Item 5. Other Events.
Settlement Agreement
Effective as of May 1, 1998, the Registrant entered into a
Settlement Agreement (the "Seragen Canada Settlement Agreement") with its
Canadian affiliate, Seragen Biopharmaceuticals Ltd./Seragen Biopharmaceutique
Ltee ("Seragen Canada"), and Sofinov Societe Financiere d'Innovation Inc.,
Societe Inovatech du Grand Montreal, MDS Health Ventures Inc., Canadian
Medical Discoveries Fund Inc., Royal Bank Capital Corporation, and Health Care
and Biotechnology Venture Fund (collectively, the "Investor Shareholders").
The Seragen Canada Settlement Agreement provides for the purchase by Seragen
Canada of all shares of Seragen Canada capital stock currently held by the
Investor Shareholders for an aggregate amount equal to Seragen Canada's cash
and liquid investments on hand after the payment of specified expenses. As of
February 28, 1998, Seragen Canada held approximately $9,400,000 in cash and
liquid investments. Such purchase transaction is expected to occur on or
prior to June 15, 1998. Upon the consummation of Seragen Canada's purchase of
the Investor Shareholders' Seragen Canada shares, mutual releases among the
Registrant, Seragen Canada, and the Investor Shareholders will become
effective and a November 22, 1995 Shareholders Agreement and other specified
agreements executed in connection with the original organization of Seragen
Canada in November 1995 will be terminated. The Seragen Canada Settlement
Agreement also provides for issuance by the Registrant of an aggregate of
$2,400,000 worth of its common stock upon the later to occur of (a) the
closing date for Seragen Canada's purchase of the Investor Shareholders'
Seragen Canada shares and (b) the earliest to occur of (i) an offering by the
Registrant of additional shares of its capital stock with net proceeds to the
Registrant of $10,000,000, (ii) the consummation of a disposition of the
Registrant, whether by way of a merger or otherwise, or substantially all of
the Registrant's assets, and (iii) January 31, 1999, subject to certain
qualifications. The Investor Shareholders are accorded certain registration
rights with respect to the shares of the Registrant's common stock to be
issued to them.
Agreement to be Acquired
On May 11, 1998, the Registrant entered into an Agreement and Plan
of Reorganization (the "Merger Agreement") with Ligand Pharmaceuticals
Incorporated ("Ligand") and its wholly-owned special purpose subsidiary Knight
Acquisition Corporation ("Merger Sub"). The Merger Agreement provides for the
merger, subject to approval by the Registrant's shareholders entitled to vote
thereon, of Merger Sub into the Registrant with the result that the Registrant
will become a wholly-owned subsidiary of Ligand. In connection with the
execution and delivery of the Merger Agreement, shareholders of the Registrant
holding between 55 and 59 percent of the voting power of the Registrant's
outstanding voting capital stock, including all officers and directors of the
Registrant, entered into agreements with Ligand, which agreements are
supported by irrevocable proxies, to vote their shares in favor of the
transactions contemplated by the Merger Agreement and against competing
proposals.
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In connection with the execution and delivery of the Merger
Agreement, the Registrant and its subsidiary Seragen Technology, Inc. ("STI")
entered into an Accord and Satisfaction Agreement, dated as of May 11, 1998
(the "Accord Agreement"), with certain creditors and preferred shareholders of
the Registrant. Pursuant to the Accord Agreement, the parties thereto other
than the Registrant and STI agreed to accept merger consideration allocated to
them pursuant to the Merger Agreement as full and complete satisfaction of
certain of their rights and claims against the Registrant and STI.
Simultaneously with the execution and delivery of the Merger
Agreement, Ligand entered into an Option and Asset Purchase Agreement, dated
May 11, 1998 (the "Marathon Purchase Agreement"), with Marathon
Biopharmaceuticals LLC ("Marathon"), 520 Commonwealth Avenue Real Estate
Corporation ("520 Commonwealth"), and 660 Corporation ("660 Corp.") providing
for the purchase by Ligand of substantially all of the assets of Marathon on
or before January 31, 1999, but in any event not earlier than the closing of
the transactions contemplated by the Merger Agreement. Marathon provides
manufacturing, clinical trial, and product research and development services
to the Registrant pursuant to a Service Agreement, dated as of February 14,
1997, as amended (the "Service Agreement"), between the Registrant and
Trustees of Boston University.
In connection with the execution and delivery of the Merger
Agreement and the Marathon Purchase Agreement, the Registrant, Ligand,
Marathon, 520 Commonwealth, and 660 Corp. entered into an Extension Option
Agreement, dated May 11, 1998 (the "Extension Option Agreement"), providing
each of the Registrant and Ligand with the right to extend the termination
dates of the Merger Agreement and the Marathon Purchase Agreement in certain
circumstances.
The Registrant and Ligand issued a joint press release on May 11,
1998, announcing the signing of the Merger Agreement and related agreements.
A copy of the press release is included as an exhibit hereto.
Merger Agreement
The Merger Agreement provides for Merger Sub to be merged into the
Registrant, with the Registrant as the surviving corporation in the merger
(the "Surviving Corporation"). In connection with the consummation of the
merger (the "Merger Closing"), Ligand will deliver cash and shares of its
common stock to the shareholders and certain creditors of the Registrant,
thereby extinguishing the interest of the Registrant's existing shareholders
in the Registrant. At the same time, the shares of the Merger Sub will be
converted into shares of the Surviving Corporation, with the result that the
Surviving Corporation will be a wholly-owned subsidiary of Ligand following
the Merger Closing. Existing shareholders of the Registrant who dissent from
the merger transaction may, under Delaware law, pursue appraisal rights if
they so choose.
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The Merger Agreement provides for a total payment by Ligand to the
Registrant's shareholders and creditors of $67,000,000, with a portion of this
amount payable only upon certain conditions, as described below. Of this,
Ligand will pay $30,000,000 at the Merger Closing, payable in the form of cash
in the amount of $4,000,000 and shares of Ligand common stock in the amount of
$26,000,000 (the "Closing Consideration"). The cash portion of the Closing
Consideration will be used primarily to satisfy accounts payable and certain
other obligations of the Registrant. Ligand may, at its option, increase the
amount of cash payable at the Merger Closing to satisfy certain of the
Registrant's payables, in which case the amount of stock consideration
included in the Closing Consideration will be correspondingly reduced. The
shares of Ligand common stock to be delivered by Ligand at the Merger Closing
will be valued at $13.9875 per share, which is based on the trailing average
market price for the five trading days prior to May 11, 1998, the date on
which the Merger Agreement was executed.
The remaining $37,000,000 of the merger consideration (the
"Milestone Consideration"; the Closing Consideration and Milestone
Consideration together, the "Merger Consideration") will be paid by Ligand six
months following the receipt by the Surviving Corporation of FDA approval for
the marketing, distribution and selling of DAB389IL-2 in the United States for
CTCL if such approval is supported to any material extent by clinical and
development efforts of the Registrant prior to the consummation of the merger.
The Milestone Consideration will, however, only be payable by Ligand if the
required FDA approval is obtained within two years of the Merger Closing;
otherwise, Ligand is relieved of any obligation to pay the Milestone
Consideration. Ligand may pay the Milestone Consideration in the form of cash
or Ligand common stock or a combination thereof. Any stock delivered as part
of the Milestone Consideration will be valued on a trailing average market
price for the ten trading days prior to issuance.
Ligand has agreed to take certain steps following the consummation
of the merger to facilitate the required approval of DAB389IL-2. Those steps
include, among other things, the conduct of certain additional tests and
studies necessary to obtain such approval, and the avoidance of any changes in
the operations, personnel and facilities of Marathon if such changes could be
expected to adversely affect the prospects for FDA approval. More generally,
Ligand has agreed to use commercially reasonable efforts to take all actions
after the Merger Closing that are necessary or appropriate to obtain the
required FDA approval of DAB389IL-2 by the second anniversary of the Merger
Closing.
The Merger Consideration is to be distributed first to the holders
of Registrant's common stock and Series D preferred stock, next to certain
creditors of the Registrant, and finally to the preferred shareholders and
certain other creditors of the Registrant, all as set forth in Section 1.7 of
the Merger Agreement. The holders of the Registrant's common stock and Series
D preferred stock are entitled to receive for each share of Registrant common
stock (for purposes of this distribution, shares of Series D preferred stock
will be deemed to have been converted into the number of shares of common
stock of the Registrant that such shares of Series D preferred stock would
have been converted into had the conversion been effected immediately prior to
the effective date of the merger) (a) in connection with the Merger Closing,
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0.035746 shares of common stock of Ligand and, (b) if and only if the
Milestone Consideration is paid, cash or Ligand stock, as applicable, valued
at $0.23.
Certain creditors and obligees of the Registrant, including United
States Surgical Corporation and, to the extent of amounts payable by the
Registrant pursuant to the Service Agreement, Boston University and Marathon,
are entitled to receive a fixed amount of Merger Consideration in satisfaction
of the Registrant's obligations to such creditors and obligees. The holders
of the Registrant's Series B preferred shares, the Registrant's executive
officers, and the Registrant's financial advisers will receive the amount of
Merger Consideration remaining after the distribution to the holders of the
Registrant's common stock and Series D preferred stock and the satisfaction of
the Registrant's financial obligations as of the Merger Closing. These
distribution arrangements are reflected in Section 1.7 of the Merger
Agreement.
Ligand common stock to be delivered as part of the Merger
Consideration is required to be registered under federal securities laws so as
to permit immediate resale of the shares, subject to prospectus delivery
requirements under applicable SEC rules and certain trading volume limitations
that may be applicable under the SEC's Rule 145. Boston University will be
prohibited from transferring Ligand common shares that it receives in the
merger until the later of the second anniversary of the Merger Closing and the
first anniversary of the issuance of such shares. The restrictions described
in the foregoing sentence will not, however, apply to the Ligand common
shares, if any, that Boston University receives in respect of approximately
$5,900,000 owed to it and Marathon by the Registrant under the Service
Agreement between the Registrant and Marathon. Executive officers of the
Registrant and the Registrant's financial advisers, Lehman Brothers Inc. and
Shoreline Pacific Institutional Finance ("Shoreline Pacific"), will be
prohibited from transferring 50 percent and 100 percent, respectively, of the
Ligand common shares that they receive in the merger until the ninetieth day
following issuance. The right of Eli Lilly and Company ("Lilly") to transfer
Ligand common shares that it receives as Merger Consideration will be
restricted to the same extent as Ligand common shares previously issued to
Lilly by Ligand.
The Registrant provides certain representations and warranties
regarding its business, financial condition, and assets. In general,
representations and warranties given by the Registrant are given both as of
the date of the Merger Agreement and as of the date of the Merger Closing.
Ligand provides certain representations and warranties regarding its
business, financial condition, and assets. In general, representations and
warranties given by Ligand relating to its business and financial condition
are given only as of the date of the Merger Agreement; representations and
warranties given by Ligand relating to its ability to consummate the Merger
Closing, such as the legal existence and authority of Ligand and Merger Sub,
are given both as of the date of the Merger Agreement and the date of the
Merger Closing.
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A number of covenants apply to the Registrant's conduct of its
business between the date of the Merger Agreement and the Merger Closing.
These covenants require the Registrant, among other things, to carry on its
business only in the usual and ordinary course and impose restrictions on,
among other things, the Registrant's ability to dispose of assets, enter into
licenses of its intellectual property, satisfy payables other than in the
ordinary course, or increase employee compensation.
A $200,000 cash portion of the Closing Consideration will be placed
in escrow with State Street Bank and Trust Company. In addition, revenues
received by the Surviving Corporation after the Merger Closing that are
attributable to the operation of the Registrant prior to the Merger Closing
will be deposited in the escrow account. The escrow account will be used to
pay certain obligations of the Surviving Corporation that are attributable to
the operation of the Registrant prior to the Merger Closing. Any amounts
remaining in the escrow account on the 120th day after the Merger Closing will
be distributed as additional Closing Consideration to those persons receiving
variable amounts of Closing Consideration under the Merger Agreement.
The obligations of the Registrant, on the one hand, and Ligand and
Merger Sub, on the other hand, to proceed with the consummation of the Merger
are conditioned, among other things, upon the approval of the merger by the
Registrant's stockholders, the receipt of required government approvals
(including clearance under the Hart-Scott-Rodino Antitrust Improvements Act)
and the effectiveness of Ligand's registration statement relating to the
Ligand common shares to be issued as Merger Consideration. In addition, the
approval of the transaction by the Public Charities Division of the
Massachusetts Attorney General's office must be in full force and effect. The
Registrant's obligations to consummate the merger are further conditioned on,
among other things, the accuracy of Ligand's representations and warranties as
of the date given and the satisfaction by Ligand of certain obligations to be
satisfied by it by the Merger Closing. Ligand's obligation to consummate the
merger is further conditioned on, among other things, the accuracy of the
Registrant's representations and warranties as of the date given, the
satisfaction by the Registrant of obligations to be satisfied by it by the
Merger Closing, the absence of any general adverse development in the
Registrant's business (other than an adverse development relating to the FDA's
review of DAB389IL-2) resulting in a diminution of the value of the Registrant
by $5,000,000 or more, the accuracy of Marathon's representations and
warranties contained in the Marathon Purchase Agreement, the satisfaction by
Marathon of all obligations to be satisfied by it pursuant to the Marathon
Purchase Agreement by the Merger Closing, and no more than ten percent of the
Registrant's outstanding capital stock being the subject of dissenters' or
appraisal rights under Delaware law.
The Registrant has agreed that it will not take any action to
solicit or encourage a competing proposal; however, the board of the
Registrant may engage in negotiations with, or disclose any nonpublic
information relating to the Registrant or afford access to the properties,
books or records of the Registrant to, any person or entity that informs the
Registrant that it is considering making, or has made, a competing proposal.
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The Merger Agreement may be terminated by either the Registrant or
Ligand if the Merger Closing has not occurred by January 31, 1999. However,
each of the Registrant and Ligand is provided with an option to extend this
expiration date subject to certain conditions, as described below in the
summary of the Extension Option Agreement. In addition, the Merger Agreement
may be terminated by either the Registrant or Ligand if, among other things, a
final court order is entered prohibiting the merger, the Registrant's
stockholders at a meeting of the Registrant's stockholders fail to approve the
merger or approve a competing proposal, the other party breaches its
obligations under the Merger Agreement and such breach is not promptly cured,
or the other party becomes insolvent or seeks protection under the bankruptcy
laws. Ligand also may terminate the Merger Agreement in the event any court
order or applicable law would prohibit Ligand from owning its assets and the
assets of the Registrant following the Merger Closing, in the event of an
occurrence of any general adverse development in the Registrant's business
(other than an adverse development relating to the FDA's review of DAB389IL-2)
resulting in a diminution of the value of the Registrant by $5,000,000 or
more, if any person purchases a majority of the Registrant's common stock, or
if the Registrant's board of directors withdraws its recommendation in favor
of the merger. The Registrant may terminate the Merger Agreement if it
receives a competing proposal that the Registrant's board determines, after
consultation with counsel, to recommend to the Registrant's stockholders in
order to comply with the fiduciary duty of the board.
Ligand is provided with the right to set off against Merger
Consideration payable to those persons receiving variable amounts of Merger
Consideration any damages that it may incur as a result of a breach of the
Registrant's representations, warranties or covenants under the Merger
Agreement. However, Ligand may pursue such a set off only to the extent its
damages exceed an aggregate of $250,000, and in no event may the amount of set
off exceed an aggregate of $2,900,000. Above the set off amount, Ligand is
permitted to pursue claims against persons receiving variable amounts of
Merger Consideration for damages as aforesaid, but only up to an amount of
$8,700,000. Ligand is prohibited from pursuing claims under the Merger
Agreement against the Registrant common shareholders and from recovering
Merger Consideration paid to the Registrant common shareholders. Ligand is
prohibited from pursuing claims under the Registrant's representations,
warranties and covenants of which it has not given notice prior to their
termination. Except for certain representations and warranties relating to
matters of the Registrant's ability to validly consummate the merger and tax
matters, which survive, respectively, indefinitely and until the expiration of
the applicable statute of limitations, the Registrant's representations,
warranties and covenants under the Merger Agreement expire on the third
anniversary of the Merger Closing.
In the event that Ligand terminates the Merger Agreement because of
a bankruptcy or the Registrant terminates the agreement because it has
received a competing proposal that the Registrant's board determines, after
consultation with counsel, to recommend to the Registrant's stockholders in
order to comply with its fiduciary duty, the Registrant is obligated to pay
Ligand a fee equal to $5,000,000 plus five percent of any additional value,
over the $67,000,000 contemplated by the Merger Agreement, realized by the
Registrant or its stockholders in connection with the consummation of a
competing acquisition proposal. Such fee is, in addition, to be increased by
any Marathon losses assumed by Ligand in connection with its exercise of its
option under the Extension Option Agreement (described below) to extend the
term of the Merger Agreement beyond January 31, 1999.
Ligand is required to maintain the Registrant's existing directors
and officers insurance policy in effect for the remainder of its term and, for
one year after the expiration of such policy, to use reasonable efforts either
to extend such policy or to cause current directors and officers of the
Registrant to be covered by directors and officers insurance comparable to
that maintained for Ligand's directors. In addition, Ligand is required to
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cause the Surviving Corporation to maintain the Registrant's existing
indemnification obligations in effect for the benefit of current and past
directors and officers of the Registrant.
Accord Agreement
The Accord Agreement provides that the signatories other than the
Registrant and STI will accept the amount of Merger Consideration allocated to
them in the Merger Agreement as full and complete satisfaction for their
specified claims against the Registrant, as follows:
(1) Boston University, Leon Hirsch, Turi Josefsen, and Gerald
and Loretta Cassidy agree to accept the right to receive the Merger
Consideration as satisfaction of all claims that they may have with respect to
the Registrant's outstanding Series B preferred stock and, at the Merger
Closing, to surrender their shares of Series B preferred stock for termination
and cancellation.
(2) Boston University agrees to accept the right to receive the
Merger Consideration as satisfaction of all claims that it may have to a cash
payment in the amount of $4,600,000 arising from the automatic conversion of
the Registrant's outstanding Series C preferred stock that occurred on March
30, 1998 and agrees to surrender immediately prior to the effective time of
the merger, without additional compensation, to the Registrant for
cancellation the 3,360,625 shares of the Registrant's common stock that it
received in connection with the March 30, 1998 conversion of the Registrant's
outstanding Series C preferred stock.
(3) Boston University, Leon Hirsch, Turi Josefsen, Gerald and
Loretta Cassidy, and United States Surgical Corporation agree to accept the
right to receive the Merger Consideration as satisfaction of all claims that
they may have with respect to outstanding warrants for the purchase of the
Registrant common stock and, at the Merger Closing, to surrender their
warrants for termination and cancellation.
(4) Boston University agrees to accept the right to receive the
Merger Consideration as satisfaction of all claims that it may have for fees
and other amounts payable to it under the Service Agreement between Marathon
and the Registrant for the period from February 14, 1997, through December 31,
1997.
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(5) Marathon agrees to accept the right to receive the Merger
Consideration as satisfaction of all claims that it may have for fees and
other amounts payable to it under the Service Agreement between Marathon and
the Registrant for the period from December 31, 1997, through the Merger
Closing.
(6) United States Surgical Corporation agrees to accept the
right to receive the Merger Consideration as satisfaction of all claims that
it may have under the July 31, 1997 Evaluation License and Option Agreement
between the Registrant and United States Surgical Corporation and, in
connection therewith, agrees to the termination of such agreement as of the
Merger Closing.
(7) Reed Prior, Jean Nichols, Elizabeth Chen and Robert Crane
agree to accept the right to receive the Merger Consideration as satisfaction
of all claims that they may have under their respective employment agreements
to receive asset value realization bonus payments in connection with the
merger transaction. In addition, they agree to accept the right to receive
the Merger Consideration as satisfaction of all claims that they may have
under non-qualified stock options granted to them by the Registrant and, at
the Merger Closing, to surrender their non-qualified stock options for
termination and cancellation.
(8) Lehman Brothers Inc. and Shoreline Pacific agreed to accept
the right to receive the Merger Consideration as satisfaction of all claims
that they may have to fees in respect of the merger transaction.
Each of the parties to the Accord Agreement that is allocated Merger
Consideration under the Merger Agreement is referred to herein as a "Third
Party." The Registrant covenants not to alter the terms of the Merger
Agreement relating to the allocation of Merger Consideration or otherwise
adversely affecting the rights of any Third Party without the written consent
of all of the Third Parties.
Each of the Third Parties releases the Registrant and STI and their
current and past directors, officers, employees, agents, representatives,
successors and assigns from any and all claims relating to any act, omission
or circumstance through the date of the Accord Agreement. The release will
not, however, extend to claims under the Merger Agreement or the Accord
Agreement, to claims for directors' or officers' indemnification, or to claims
for unpaid salary, reimbursable business expenses, employee benefits, or the
like. The release becomes effective only upon the Merger Closing.
The Accord Agreement will terminate only upon the termination of the
Merger Agreement.
Until the termination of the Accord Agreement, each of the parties
thereto agrees to forbear from exercising any right or remedy that is the
subject of the Accord Agreement or any stock option or warrant that any such
party may hold.
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Each of the parties to the Accord Agreement gives certain
representations and warranties regarding its right and authority to enter into
the Accord Agreement.
Marathon and the other affiliates of Boston University that are
parties to the Marathon Purchase Agreement (the "BU Parties") represent and
warrant that each of the representations and warranties made by the BU Parties
in the Marathon Purchase Agreement are true and correct and agree to comply
with the terms of the Marathon Purchase Agreement through the date of the
Merger Closing.
Each of the Third Parties other than Lehman Brothers Inc. and
Shoreline Pacific agree to indemnify the BU Parties against claims made
against them pursuant to certain representations and warranties made by the BU
Parties in the Marathon Purchase Agreement through the Merger Closing, but
only to the extent such claims arise as a result of or relate to matters not
known to Kenneth G. Condon or other officers of Boston University or its
subsidiaries other than Marathon, up to $1,000,000 in the aggregate.
Marathon Purchase Agreement
Under the Marathon Purchase Agreement, Ligand has an option to
purchase Marathon's assets after the Merger Closing, and is obligated to do so
on January 31, 1999, unless the merger has not closed, in which case either
the Registrant and Ligand may extend the closing date subject to certain
conditions, as described below in the summary of the Extension Option
Agreement. Upon the closing of the purchase of Marathon's assets by Ligand
(the "Marathon Closing"), Ligand will purchase substantially all of Marathon's
assets other than cash and assume certain limited liabilities.
In consideration for Marathon's grant to Ligand of the option to
consummate the Marathon Closing prior to January 31, 1999, Ligand agrees to
pay Marathon $3,000,000 in cash or Ligand common stock, at Ligand's option, if
and when the Milestone Consideration is paid under the Merger Agreement. Upon
the Marathon Closing, Ligand agrees to pay Marathon an additional $5,000,000
in cash or Ligand common stock. Any stock delivered as part of such
consideration will be valued on a trailing average market price for the ten
trading days prior to issuance.
The BU Parties provide certain representations and warranties
regarding Marathon's business, financial condition, and assets. In general,
representations and warranties by Marathon are given as of the date of the
Marathon Purchase Agreement and as of the date of the Merger Closing. Certain
limited representations and warranties also are given by Marathon as of the
date of the Marathon Closing.
A number of covenants apply to Marathon's conduct of its business
between the date of the Marathon Purchase Agreement and the Marathon Closing.
These covenants require Marathon, among other things, to carry on its business
only in the usual and ordinary course and impose restrictions on, among other
things, Marathon's ability to dispose of assets, enter into licenses of its
intellectual property, satisfy payables otherwise in the ordinary course, or
increase employee compensation.
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The Marathon Purchase Agreement may be terminated by either Marathon
or Ligand if, among other things, the other party breaches its obligations
under the Marathon Purchase Agreement and such breach is not promptly cured,
or the other party becomes insolvent or seeks protection under the bankruptcy
laws.
Extension Option Agreement
The Extension Option Agreement permits either Ligand or the
Registrant to extend the term of the Merger Agreement, the Marathon Purchase
Agreement and the Service Agreement past January 31, 1999.
Under the Extension Option Agreement, Ligand will have the first
right to extend the term of the agreements for one or more additional sixty-
day periods. If, with respect to the initial term or any extension period,
Ligand declines to extend the agreements, Ligand's option will terminate.
Thereafter, the Registrant will have the sole right to extend the agreements
for one or more additional sixty-day periods, subject to the approval of the
BU Parties.
Marathon and the Registrant are obligated to perform their
respective obligations under the Service Agreement during any extension
period; however, the party that elected to extend the agreements during such
period will be responsible for all "Operating Losses" incurred, and will
benefit from any "Cash Revenue" generated, by Marathon during such period, as
such terms are defined in the Extension Option Agreement, subject to certain
limitations.
The Extension Option Agreement will terminate if, with respect to
the expiration of the initial term or an extension period, neither the
Registrant nor Ligand elects to extend the Merger Agreement and Marathon
Purchase Agreement.
Assignment of Lilly Agreements
In connection with the execution and delivery of the Merger
Agreement, the Registrant, Ligand and Lilly entered into an agreement
providing Lilly with the right to assign all of its rights and obligations
under the Sales and Distribution Agreement, dated August 3, 1994, as amended,
and the Development Agreement, dated August 3, 1994, as amended, both between
the Registrant and Lilly, to Ligand (a) upon the consummation of the
transactions contemplated by the Merger Agreement or, (b) prior to the
consummation of the transactions contemplated by the Merger Agreement, in the
event that all authorizations by the appropriate governmental entities
necessary for commercial sale of the Registrant's DAB389IL-2 product
(including exports) in a jurisdiction, including approval of labeling, price,
reimbursement and manufacturing, are obtained, so long as Ligand is in
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compliance with its obligations to use its best efforts to satisfy the
conditions to the Registrant's obligations to consummate the transactions
contemplated by the Merger Agreement at the time the relevant governmental
authorizations are obtained. In addition, Lilly and the Registrant agreed
that the milestone payment required to be made by Lilly to the Registrant
under the Sales and Distribution Agreement will be (a) due upon FDA approval
of DAB389IL-2, rather than sixty days thereafter, and (b) reduced in amount.
* * * * * *
The summaries set forth above are qualified in their entirety by
reference to the documents attached hereto as exhibits. Readers of this
report on Form 8-K are advised to refer to such exhibits for complete
information regarding the matters addressed herein.
Safe Harbor Information
Some of the statements contained in this document are forward-
looking, including statements relating directly or by implication to the
Registrant's products, the prospects of regulatory approval for the
Registrant's products, and the Registrant's ability to fund its operations or
to consummate the transactions contemplated by the agreements described
herein. These statements are based on current expectations and involve a
number of uncertainties and risks, including, but not limited to, the
Registrant's ability to proceed with successful development, testing, and
licensing of its products, the Registrant's ability to continue to fund its
operations, and the Registrant's ability to consummate the transactions
contemplated by the agreements described herein. For further information,
refer to the "Business Outlook" section in the Registrant's Form 10-K as filed
with the Securities and Exchange Commission. Actual results may vary
materially from such expectations.
ITEM 7. Exhibits
99.1 The Registrant's joint press release with Ligand Pharmaceuticals
Incorporated, dated May 11, 1998 (filed herewith)
99.2 Settlement Agreement, dated as of May 1, 1998, between the
Registrant, Seragen Biopharmaceuticals Ltd./Seragen
Biopharmaceutique Ltee, and the Investor Shareholders named
therein (filed herewith)
99.3 Agreement and Plan of Reorganization, dated May 11, 1998,
between the Registrant, Ligand Pharmaceuticals Incorporated, and
Knight Acquisition Corporation (filed herewith) (1) (2)
11
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99.4 Accord and Satisfaction Agreement, dated May 11, 1998, between
the Registrant, Seragen Technology, Inc., the Third Parties
named therein, 520 Commonwealth Avenue Real Estate Corporation,
and 660 Corporation (filed herewith)
99.5 Extension Option Agreement, dated May 11, 1998, between the
Registrant, Ligand Pharmaceuticals Incorporated, Marathon
Biopharmaceuticals LLC, 520 Commonwealth Real Estate
Corporation, and 660 Corporation (filed herewith)
99.6 Letter agreement, dated May 11, 1998, between the Registrant,
Ligand Pharmaceuticals Incorporated, and Eli Lilly and Company
(filed herewith)
(1) Confidential treatment has been requested for portions of this
exhibit, which portions have been omitted form the attached exhibit
and filed seperately with the Commission.
(2) The schedules referenced in this agreement have not been included
because they are either disclosed in the agreement or do not contain
information which is material to an investment decision. The
Registrant agrees to furnish to the Commission a copy of such
schedules upon request.
12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SERAGEN, INC.
(Registrant)
Date: May 14, 1998 /s/ Reed R. Prior
__________________
Reed R. Prior
Chairman of the Board and
Chief Executive Officer
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For more information contact:
Ligand -- Susan Atkins Seragen -- Lora Maurer
(619) 550-7687 (508) 435-2331
LIGAND ANNOUNCES TRANSFER OF ONTAK TRADEMARK RIGHTS FROM ELI LILLY AND
COMPANY, MERGER WITH SERAGEN, PURCHASE OF MARATHON BIOPHARMACEUTICALS ASSETS
MERGER RESULTS EXPECTED TO BE ACCRETIVE TO LIGAND EPS
SAN DIEGO, CALIF. and HOPKINTON, MASS. -2, Interleukin-2 Fusion Protein
or denileukin diftitox ).
"The transfer of product rights from Lilly, the merger with Seragen, and
the acquisition of Marathon consolidate important rights to ONTAK previously
held by Lilly, Seragen and Ligand. We believe that this consolidation will
unlock and increase Ligand's shareholder value by facilitating global sourcing
and commercialization of the product in a strategic cancer market niche
central to our business plan," said Ligand Chairman, President and CEO David
E. Robinson. "ONTAK will bring to five the number of oncology products Ligand
targets to launch in 1998/1999 if regulatory approvals are received.
"In addition, intellectual property assets of potential commercial value
from several current and possible future royalty bearing agreements will be
placed in more secure hands. We believe that the net effect, following closing
of the merger, transfer of ONTAK rights from Lilly to Ligand, and launch of
ONTAK following regulatory approval, is significantly accretive to Ligand
earnings in 1999 and beyond," Mr. Robinson said.
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<PAGE>
The merger agreement has been approved by the Board of Directors of each
company and is subject to approval by a majority of stockholders of Seragen.
In connection with the agreement, certain stockholders of Seragen have
delivered irrevocable proxies representing between 55 and 59 percent of the
voting power of Seragen's currently outstanding capital stock. The
transaction, which is expected to close in the third quarter of 1998, is
subject to, among other things, the receipt of SEC and Hart-Scott-Rodino
approvals and the effectiveness of a registration statement covering the
issuance of Ligand stock in the merger and related asset acquisition.
The Board of Ligand has received an opinion from Bear, Stearns & Co.
Inc., its financial advisor, that the aggregate consideration paid in
connection with the Seragen and Marathon transactions is fair to Ligand from a
financial point of view. Seragen has received an opinion from Lehman
Brothers, its financial advisor, that the aggregate consideration paid in
connection with the Seragen transaction is fair to Seragen's common
shareholders from a financial point of view.
Under the terms of the merger agreement, Ligand will pay merger
consideration at closing in the amount of $30 million, $4 million of which
will be in cash and $26 million of which will be in the form of approximately
1,858,800 shares of Ligand Common Stock at $13.99 per share. Ligand's stock
price for this portion of the transaction is based on the average closing
share price for the five trading days prior to signing. From the upfront
payment, Seragen's common shareholders will receive at the time of closing
approximately .036 of a share of Ligand stock for every share of Seragen
common stock owned immediately prior to closing. This represents a 2 percent
premium over Seragen's last reported trading price of $.49 per share, and a 27
percent premium over Seragen's average closing share price of $.394 per share
for the five trading days prior to signing. The remainder of the $30 million
in merger consideration to be paid at closing will be used to settle claims of
Seragen's creditors and preferred shareholders. Of this portion of the merger
consideration, Ligand has the option, exercisable at closing, to pay an
additional $5.9 million in cash instead of stock.
The merger agreement also calls for an additional $37 million payment in
cash and/or Ligand Common Stock, at Ligand's option, to be paid six months
after the date of receipt of final U.S. Food and Drug Administration (FDA)
clearance to market ONTAK for cutaneous T-cell lymphoma (CTCL). The $37
million payment will not be made, however, if ONTAK is not cleared by the FDA
2
<PAGE>
within two years of the initial closing. From the $37 million, Seragen's
common and Series D Preferred shareholders will receive $0.23 in, at Ligand's
option, cash or the equivalent value of Ligand Common Stock (based on the
average closing share price for the 10 trading days immediately preceding the
second closing), for every Seragen common share owned. The remainder of the
$37 million payment will be used to settle claims of Seragen's creditors and
preferred shareholders. If the $37 million payment is made, Seragen's common
shareholders will, as a result of the $30 million and $37 million payments
together, have received a 49 percent premium over the closing price for
Seragen's common stock on Monday, May 11.
Additionally, Ligand's agreement with Lilly calls for up to $10 million,
payable in cash or Ligand Common Stock, at Ligand's option, in potential
milestone payments to Lilly, if ONTAK is approved by the FDA, and upon certain
other events. Upon certain other events, Lilly could receive an additional $10
million in milestones.
Seragen submitted a Biologics License Application (BLA) for ONTAK to the
FDA in December 1997, and in February 1998, the FDA informed Seragen that the
BLA had been given "priority review" designation. The BLA is scheduled for
review at the June 2nd Oncologic Drug Advisory Committee (ODAC) meeting. ONTAK
is also in a Phase II program for the treatment of psoriasis and an additional
Phase II trial in non-Hodgkin's lymphoma is planned.
In a related transaction, Ligand and Marathon Biopharmaceuticals, LLC,
the organization which has a service contract with Seragen for manufacturing
and development services, executed an agreement providing for Ligand's
acquisition of substantially all of Marathon assets for $5 million, and an
additional $3 million to be paid six months after FDA approval of ONTAK.
Ligand may purchase the assets of Marathon at any time before Jan. 31, 1999,
and has the option to extend the closing date in certain circumstances, though
Ligand may not purchase Marathon's assets prior to the closing of the Seragen
merger transaction. The purchase payments for Marathon can be paid in cash or
Ligand common stock, at Ligand's option.
"We are pleased that our efforts to strategically and financially
restructure Seragen, to gain a more secure home for our fusion protein
technology, and to realize the global asset value of ONTAK has resulted in our
merger with Ligand," said Reed R. Prior, Seragen Chairman and CEO. "We believe
3
<PAGE>
that our late-stage product assets will add to the strength of Ligand in the
near term and that Seragen shareholders will benefit from the medium to long-
term upside potential that the depth and breadth of Ligand's technology,
product portfolio and financial strength may offer."
The proposed transactions will provide Ligand with worldwide rights to
Seragen's six fusion proteins, including ONTAK, DAB389EGF, DAB389IL-4,
DAB389IL-6, DAB389CD-4 and DAB389MSH, as well as Seragen's intellectual
property, which includes a potential royalty stream on U.S. sales of Simulect
registered trademark, a product used for the treatment of acute organ
transplant rejection for which Novartis Pharmaceuticals filed an NDA in
November 1997. Novartis sub-licensed rights to certain patents from Seragen in
March 1996 in the development of the product.
In February 1998, Seragen licensed rights to certain patents to
DiagnoCure Inc. to develop highly selective drugs which exploit
nanoerythrosomes as drug vectors. Seragen will earn a royalty on products
commercialized by DiagnoCure.
A second Seragen product, DAB389EGF, or EGF Fusion Protein, is currently
in a Phase I/II clinical trial for non-small cell lung cancer and other solid
tumors.
LIGAND'S EMERGING DISEASE MANAGEMENT FRANCHISE IN SKIN AND OTHER LYMPHOMAS
"The proposed transactions among Seragen, Marathon and Lilly, along with
Seragen's products and patents, will diversify Ligand's product portfolio and
commercial risk, and following regulatory approval, may provide us with an
incremental sales stream and permit sales force synergies which will allow us
to better serve patients and physicians. This product acquisition provides us
with a unique disease management platform in CTCL and a possible entry into
non-Hodgkin's lymphoma.
"The addition of ONTAK to our Targretin trademark capsules (bexarotene)
and Targretin trademark gel (bexarotene) 1.0% products provides us with three
potential products to offer CTCL patients and treating physicians in 1998 and
1999, with the goal of providing a full spectrum of therapeutic options at
each stage of this progressively devastating disease," said James R. Mirto,
Ligand Vice President, Marketing and Business Development.
ONTAK trademark Phase III Results
In clinical trials, ONTAK has been studied for use as a systemic
treatment for adults with refractory CTCL. If approved, ONTAK will be
recognized as the first of a new class of cytotoxic biologic agents - a fusion
4
<PAGE>
protein. Seragen's fusion proteins have three functional components - a
targeting domain that binds with target receptor cells; a "molecular syringe"
that pierces the cell membrane; and the toxic portion, which slips inside the
cell and destroys it.
The BLA submitted in December 1997 is based on accumulated data from
Phase I/II and Phase III clinical trials of ONTAK in patients with CTCL who
were no longer benefiting from other therapy. The Phase III protocol included
in the BLA consists of a randomized, double-blind evaluation of two dose
levels of ONTAK in 71 patients. Response information from 35 patients in
Phase I/II was also included, as well as safety information from 206 lymphoma
patients, including 168 CTCL patients.
The Phase III study included 71 patients who had failed an average of
five previous therapies. The Phase III intent-to-treat analysis showed that
overall, 30 percent of patients treated with ONTAK demonstrated responses of
50 percent or greater reduction in tumor burden -- a response rate consistent
with the earlier Phase I/II study. Approximately 10 percent of the patients
(7 of 71) showed a complete resolution of all evidence of tumor for at least
six weeks. The median time of first response for all patients occurred during
the second cycle of therapy, and seven patients with partial responses
continued to evolve with further treatment to complete responses. These
patients received an additional one to seven courses of treatment following
partial response prior to reaching their complete response.
In addition, the study included secondary endpoints that included
assessment of CTCL disease symptoms that were independently evaluated by
patients themselves. Symptom improvement was reported by all patients
identified as responders. Symptomatic improvement was also reported in 80
percent of patients who did not achieve an objective clinical response.
Side effects were reported in both dose groups. More frequent side
effects included flu-like symptoms, hypersensitivity reactions, development of
a vascular leak disorder, infectious complications and rashes. Investigators
pointed out that, in general, the study enrolled older patients who had
advanced-stage disease and who had received multiple prior therapies. They
also said that CTCL patients are particularly susceptible to infections
because of the compromised condition of their skin.
"We believe that ONTAK represents an important therapeutic option for
patients with CTCL and their physicians, and we look forward to our upcoming
review with the ODAC," said Jean Nichols, Ph.D., Seragen President and Chief
Technology Officer. "We are pleased that if successful in gaining FDA
approval, we will be able to provide through Ligand a rapid availability of
ONTAK to CTCL patients in the U.S. and abroad, a goal many of us at Seragen
have pursued for many years."
5
<PAGE>
Two additional trials are currently in progress to evaluate the use of
ONTAK in patients with CTCL who have been less extensively pre-treated.
Additionally, Seragen has conducted clinical trials of ONTAK for psoriasis.
CUTANEOUS T-CELL LYMPHOMA (CTCL)
CTCL is a form of non-Hodgkin's lymphoma that manifests initially in the
skin, but with time, the disease can become systemic. CTCL is disfiguring and
debilitating; median survival for late-stage patients with organ or lymph node
involvement is less than three years. Various drugs are used in treating the
disease, but no drug is specifically approved by the FDA for its treatment.
CTCL can cover over 50 percent of a person's skin with dark, dry itching
lesions and can eventually spread to the lymph nodes and other organs in the
body, including spleen, lungs and liver. There are approximately 16,000 CTCL
patients in the U.S. alone.
The prognosis for CTCL is based on the stage of the disease when
diagnosed. Because diagnosis of this disease is very difficult, the average
patient has the disease for eight to 10 years before an accurate diagnosis is
made. Because this is an indolent lymphoma (a slow-growing cancer), many
patients live 10 to 25 years after diagnosis. While there are a variety of
treatments available to patients with CTCL, patients are often refractory and
new drug therapies are needed. The treatments which are most effective cost
between $5,000 and $60,000 per year.
FINANCIAL TERMS & CONDITIONS FOR ONTAK TRADEMARK RIGHTS & MERGER
In October 1997, Ligand and Eli Lilly entered into a collaborative
agreement in metabolic disease, which included an option for Ligand to acquire
selected rights to ONTAK. Ligand and Lilly have agreed to modifications in
the Lilly/Seragen and Lilly/Ligand agreements on ONTAK designed to facilitate
the merger.
"Through this merger with Seragen, acquisition of Marathon assets and
our agreement with Lilly, Ligand will strategically consolidate assets that
have been held separately by Lilly, by Seragen and by Marathon. When
combined, these resources will provide more favorable economic terms and
control over the manufacturing source for ONTAK," said Paul V. Maier, Ligand
Senior Vice President and Chief Financial Officer.
"We believe we have negotiated a fair value for our shareholders in
developing a contingent price structure which adjusts for risk while allowing
6
<PAGE>
Ligand to maintain the flexibility of using cash or stock, at our option,
based on Ligand's future share price for downstream payments. If stock is
used, up to 53 percent could be subject to lock-up agreements. Furthermore,
the successful merger and launch of ONTAK, if regulatory approval is received,
is expected to be accretive to Ligand's earnings in 1999 and beyond," Mr.
Maier said.
Since 1989, Ligand Pharmaceuticals Incorporated has established a
leadership position in gene transcription technology, particularly
intracellular receptor (IR) technology and STATs technology. Ligand has
applied IR and STATs technology to the discovery and development of small
molecule drugs to enhance therapeutic and safety profiles and to address major
unmet patient needs in cancer, women's and men's health, skin diseases,
osteoporosis, cardiovascular and inflammatory disease.
Seragen is a biopharmaceutical company developing a proprietary portfolio
of therapeutic products. The company's receptor-active fusion proteins consist
of a toxin fragment genetically fused to a hormone, or growth factor, that
targets specific receptors on the surface of disease-causing cells.
Marathon is a full-service contract development and manufacturing
company. Marathon's current clients include Seragen, BioChem Vaccines, Inc. of
Quebec, and Alexion Pharmaceuticals, Inc. of New Haven, CT.
This news release may contain certain forward looking statements by
Ligand and actual results could differ materially from those described as a
result of factors including, but not limited to, the following. There can be
no assurance that ONTAK, Targretin gel (bexarotene) 1.0%, Targretin capsules
(bexarotene) or any product in the Ligand or Seragen pipeline, will be
successfully developed, that final data will be consistent with interim data,
that regulatory approvals will be granted in a timely manner, or at all, that
patient and physician acceptance of these products will be achieved, that
final results will be supportive of regulatory approvals required to market
products, that Ligand will be able to build and timely deploy its sales
support for product launch, that future financial results will meet current
expectations, that Ligand will be successful in closing the proposed
transactions or that following the closing, third parties on which Ligand will
rely for crucial components of commercialization will perform adequately.
Ligand undertakes no obligation to update the statements contained in this
press release after the date hereof.
###
7
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SERAGEN BACKGROUND
Seragen is a biopharmaceutical company developing a proprietary portfolio
of therapeutic products called fusion proteins or fusion toxins. The company's
unique receptor-active fusion proteins consist of a toxin fragment genetically
fused to a hormone, or growth factor, that targets specific receptors on the
surface of disease-causing cells.
Seragen and Lilly Collaboration for ONTAK trademark (terminates at time of
merger)
Seragen entered into a strategic alliance with Eli Lilly and Company in
1994 to develop ONTAK for cancer. The Lilly alliance provided Seragen with
funding to take its first product through Phase III clinical trials for CTCL.
Through this alliance, as amended to date, Lilly has exclusive worldwide
rights to develop and promote ONTAK for the treatment of cancer, as well as to
serve as Seragen's sole distributor for intravenous and intramuscular
formulations of ONTAK for cancer indications, except in certain Asian
countries. Lilly also has the right to serve as the sole distributor for
intravenous and intramuscular formulations of ONTAK for non-cancer indications
except in certain Asian countries and member countries of the European Union.
All pre-clinical and clinical programs other than those covered by the Lilly
alliance have been funded by Seragen independently.
Seragen's Agreement with Boston University & Marathon Biopharmaceuticals, LLC
In February 1997, Seragen entered into an agreement to sell its
manufacturing and clinical operations facilities to Boston University (BU).
Simultaneously, Seragen also entered into a service agreement with BU
providing for certain services rendered by BU to Seragen related to product
research, development, manufacturing, clinical trials, quality control and
quality assurance. This service contract expires Jan. 31, 1999.
In December 1997, Marathon Biopharmaceuticals, LLC, a for-profit contract
service organization, was created by BU following the purchase of Seragen's
manufacturing and development facilities to perform services for Seragen and
other pharmaceutical and biotechnology companies. This transaction was
approved by the shareholders of Seragen and completed on Dec. 31, 1997.
8
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As of Dec. 31, 1997, Seragen had 13 employees. When Seragen sold its
manufacturing and clinical operations to BU on Dec. 31, 1997, 90 Seragen
employees involved in those operations became employees of Marathon.
Seragen's Agreement with United States Surgical Corporation (terminates at
time of merger)
In July 1997, Seragen Inc. entered into an agreement with United States
Surgical Corporation (NYSE:USS) in Norwalk, Connecticut, granting USS an
option to obtain exclusive worldwide rights to Seragen's fusion protein
(DAB389EGF) to treat restenosis, a re-narrowing of the arteries following
angioplasty. USS made an initial $5 million payment to Seragen for the option,
and is entitled to acquire an exclusive license to the technology at any time
during a 15-month evaluation period upon payment of an additional $5 million.
9
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ANY SECURITIES OFFERED HEREBY HAVE NOT BEEN, AND WILL NOT BE, EXCEPT TO
THE EXTENT EXPLICITLY SPECIFIED HEREIN, REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED, AND THE RULES AND REGULATIONS
PROMULGATED THEREUNDER (THE "1933 ACT"), AND MAY NOT BE OFFERED OR SOLD
WITHIN THE UNITED STATES (AS DEFINED IN REGULATION S OF THE 1933 ACT) OR
TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS (AS DEFINED IN
REGULATION S OF THE 1933 ACT) EXCEPT PURSUANT TO REGISTRATION UNDER
OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE 1933 ACT.
NO PROSPECTUS HAS BEEN FILED TO QUALIFY THE DISTRIBUTION OF THE SECURITIES
OFFERED HEREBY IN CANADA. SUCH SECURITIES MAY NOT BE OFFERED, SOLD,
ASSIGNED, RENOUNCED OR TRANSFERRED, DIRECTLY OR INDIRECTLY, IN CANADA, OR
TO ANY RESIDENT OF ANY PROVINCE OR TERRITORY OF CANADA, EXCEPT IN
COMPLIANCE WITH APPLICABLE CANADIAN PROVINCIAL SECURITIES LAWS.
SETTLEMENT AGREEMENT
among
SERAGEN, INC.
SERAGEN BIOPHARMACEUTICALS LTD./
SERAGEN BIOPHARMACEUTIQUE LTEE
and
SOFINOV SOCIETE FINANCIERE D'INNOVATION INC.
SOCIETE INNOVATECH DU GRAND MONTREAL
MDS HEALTH VENTURES INC.
CANADIAN MEDICAL DISCOVERIES FUND INC.
ROYAL BANK CAPITAL CORPORATION
HEALTH CARE AND BIOTECHNOLOGY VENTURE FUND
dated as of May 1, 1998
<PAGE>
TABLE OF CONTENTS
Page
1. Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . 2
2. Representations and Warranties of
Seragen US. . . . . . . . . . . . . . . . . . . . . . . 4
(a) Organization and Standing . . . . . . . . . . . . . . . 4
(b) Validity. . . . . . . . . . . . . . . . . . . . . . . . 4
(c) No Conflicts. . . . . . . . . . . . . . . . . . . . . . 4
(d) Governmental Consent. . . . . . . . . . . . . . . . . . 5
(e) Compliance with Other Agreements and
Instruments . . . . . . . . . . . . . . . . . . . . . . 5
(f) Valid Issuance of Offered Shares. . . . . . . . . . . . 5
(g) Accuracy of SEC Reports . . . . . . . . . . . . . . . . 5
(h) Financial Statements. . . . . . . . . . . . . . . . . . 6
(i) Seragen Canada Balance Sheet. . . . . . . . . . . . . . 6
(j) Technology Agreement. . . . . . . . . . . . . . . . . . 6
(k) Offered Shares Reserved . . . . . . . . . . . . . . . . 6
3. [Reserved]. . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4. Representations and Warranties of Investor
Shareholders . . . . . . . . . . . . . . . . . . . . . 6
(a) Organization and Standing . . . . . . . . . . . . . . . 6
(b) Validity . . . . . . . . . . . . . . . . . . . . . . . 7
(c) No Conflicts . . . . . . . . . . . . . . . . . . . . . 7
(d) Governmental Consent . . . . . . . . . . . . . . . . . 7
(e) Title . . . . . . . . . . . . . . . . . . . . . . . . . 7
(f) Seragen Canada Balance Sheet . . . . . . . . . . . . . 8
5. Seragen US Release . . . . . . . . . . . . . . . . . . . . . . 8
6. Seragen Canada Release . . . . . . . . . . . . . . . . . . . . 8
7. Investor Shareholders Release . . . . . . . . . . . . . . . . 9
8. No Assignment of Claims; No Transfer of Seragen
Canada Stock; Operation of Seragen Canada . . . . . . . 9
(a) No Assignment of Claims . . . . . . . . . . . . . . . . 9
<PAGE>
- ii -
(b) No Transfer of Seragen Canada Stock
or Warrants . . . . . . . . . . . . . . . . . . . . . . 9
(c) Operation of Seragen Canada . . . . . . . . . . . . . . 10
9. Forbearance . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(a) Forbearance by the Investor
Shareholders. . . . . . . . . . . . . . . . . . . . . 10
(b) Forbearance by Seragen Canada . . . . . . . . . . . . . 10
(c) Forbearance by Seragen US . . . . . . . . . . . . . . . 10
10. Termination of Certain Agreements and
Instruments . . . . . . . . . . . . . . . . . . . . . . 10
11. [Reserved]. . . . . . . . . . . . . . . . . . . . . . . . . . . 10
12. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . 11
(a) Indemnification by the Investor
Shareholders . . . . . . . . . . . . . . . . . . . . . 11
(b) Indemnification by Seragen US . . . . . . . . . . . . . 11
(c) Indemnification Procedure . . . . . . . . . . . . . . . 11
(d) Certain Limitations . . . . . . . . . . . . . . . . . . 12
13. Stock Issuance to Investor Shareholders . . . . . . . . . . . . 12
(a) Issuance of Common Stock . . . . . . . . . . . . . . . 12
(b) Determination of Qualified Offering Price . . . . . . . 13
(c) Delivery of Stock Certificates . . . . . . . . . . . . 14
(d) Fractional Shares . . . . . . . . . . . . . . . . . . . 14
(e) Certain Covenants . . . . . . . . . . . . . . . . . . . 14
(f) Guaranty by Seragen Canada. . . . . . . . . . . . . . . 15
(g) Certain Adjustments . . . . . . . . . . . . . . . . . . 15
(h) Certain Definitions . . . . . . . . . . . . . . . . . . 16
14. Restricted Stock; Offshore Transaction . . . . . . . . . . . . 17
(a) Restricted Stock . . . . . . . . . . . . . . . . . . . 17
(b) Offshore Transaction . . . . . . . . . . . . . . . . . 17
15 Certain Securities Law Matters . . . . . . . . . . . . . . . . 17
16 Limitation on Transfers . . . . . . . . . . . . . . . . . . . . 18
<PAGE>
- iii -
(a) Compliance with U.S. Securities Laws . . . . . . . . . 18
(b) Compliance with Canadian Securities Laws. . . . . . . . 18
17. Stock Legend . . . . . . . . . . . . . . . . . . . . . . . . . 18
18. Registration Under the 1933 Act . . . . . . . . . . . . . . . . 19
(a) Definitions . . . . . . . . . . . . . . . . . . . . . . 19
(b) Benefits . . . . . . . . . . . . . . . . . . . . . . . 20
(c) Demand Registration Under the 1933 Act . . . . . . . . 20
(d) Piggyback Registration . . . . . . . . . . . . . . . . 22
(e) Registration Procedures . . . . . . . . . . . . . . . . 24
19. Certain Actions . . . . . . . . . . . . . . . . . . . . . . . 29
(a) Continuation of Seragen Canada
in British Columbia . . . . . . . . . . . . . . . . . . 29
(b) Reorganization of Capital . . . . . . . . . . . . . . 29
(c) Exchange Agreement . . . . . . . . . . . . . . . . . . 29
(d) Redemption Transactions . . . . . . . . . . . . . . . 29
(e) Timing . . . . . . . . . . . . . . . . . . . . . . . . 30
(f) Expenses and Liabilities. . . . . . . . . . . . . . . . 30
(g) Dissolution of Seragen Canada . . . . . . . . . . . . . 30
19A Certain Conditions . . . . . . . . . . . . . . . . . . . . . . 30
(a) Conditions to the Investor
Shareholders' Obligations . . . . . . . . . . . . . 30
(b) Conditions to Seragen US' Obligations . . . . . . . . . 31
(c) Seragen Canada . . . . . . . . . . . . . . . . . . . . 32
20. Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
(a) Term . . . . . . . . . . . . . . . . . . . . . . . . . 33
(b) Termination . . . . . . . . . . . . . . . . . . . . . 33
(c) Limitations on Termination . . . . . . . . . . . . . . 33
(d) Effect of Termination . . . . . . . . . . . . . . . . 33
21. Best Efforts . . . . . . . . . . . . . . . . . . . . . . . . . 33
22. No Admission . . . . . . . . . . . . . . . . . . . . . . . . . 34
23. Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . 34
<PAGE>
- iv -
24. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . 34
25. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . 34
26. Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . 34
27. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
28. Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . 35
29. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . 35
30. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
31. Further Assurances . . . . . . . . . . . . . . . . . . . . . . 38
32. Language Clause . . . . . . . . . . . . . . . . . . . . . . . . 38
List of Schedules
<PAGE>
SETTLEMENT AGREEMENT
This Settlement Agreement is made as of the 1st day of May, 1998, by
and between SERAGEN, INC. ("Seragen US"), SERAGEN BIOPHARMACEUTICALS
LTD./SERAGEN BIOPHARMACEUTIQUE LTEE ("Seragen Canada"), SOFINOV SOCIETE
FINANCIERE D'INNOVATION INC. ("Sofinov"), SOCIETE INNOVATECH DU GRAND MONTREAL
("Innovatech"), MDS HEALTH VENTURES INC. ("MDS"), CANADIAN MEDICAL DISCOVERIES
FUND INC. ("CMDF"), ROYAL BANK CAPITAL CORPORATION ("RBCC"), and HEALTH CARE
AND BIOTECHNOLOGY VENTURE FUND ("HCBVF"; together with Sofinov, Innovatech,
MDS, CMDF, and RBCC, collectively, the "Investor Shareholders").
WHEREAS, the parties hereto participated in 1995 in a private
placement of investment units by Seragen Canada (the "Private Placement"),
which included the issuance by Seragen Canada to each of the parties hereto
(other than Seragen Canada) of certain shares of the capital stock of Seragen
Canada (the "Seragen Canada Stock"); and
WHEREAS, as a result of the Private Placement, the parties hereto
(other than Seragen Canada) are the sole shareholders of Seragen Canada; and
WHEREAS, the parties hereto are parties to that certain
Shareholders' Agreement, dated November 22, 1995 (the "Shareholders'
Agreement"); and
WHEREAS, Seragen US and Seragen Canada are parties to that certain
Technology Rights and Marketing Agreement, dated as of November 21, 1995 (the
"Technology Agreement"); and
WHEREAS, Seragen US and The R-M Trust Co. are parties to that
certain Warrant Indenture, dated as of November 21, 1995 (the "Warrant
Indenture"); and
WHEREAS, pursuant to the Technology Agreement, Seragen US has issued
519,033 warrants (the "Warrants") to Seragen Canada for the purchase of
519,033 shares of common stock of Seragen US in accordance with the terms of
the Warrant Indenture, which warrants are now owned beneficially and of record
(except for the Warrants of CMDF, which are owned of record by the Canada
Trust Company) by the Investor Shareholders as set forth in the recitals to
the Shareholders' Agreement; and
WHEREAS, Seragen US, Seragen Canada, and Eli Lilly and Company are
parties to that certain Agreement, dated as of November 21, 1995 (the "Eli
Lilly Agreement"); and
WHEREAS, Seragen US desires to issue certain shares of capital stock
in connection with a new financing and in connection therewith to convert
certain outstanding shares of its Series D Preferred Stock, Series B Preferred
Stock, and Series C Preferred Stock into shares of capital stock offered by
Seragen US in the new financing or into shares of Seragen US' common stock,
par value U.S.$.01 per share (the "Common Stock"); and
<PAGE>
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WHEREAS, certain disputes or differences among Seragen US, the
Investor Shareholders and Seragen Canada in respect of their respective rights
may interfere with the ability of Seragen US to complete the contemplated
financing and conversions; and
WHEREAS, the parties desire to settle all disputes and differences
among them in accordance with the terms of this Agreement;
NOW THEREFORE, in consideration of the mutual promises herein
contained, and for 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. Definitions. Terms used herein and not otherwise defined
shall, except where the context otherwise requires, have the meanings given to
them in the Shareholders' Agreement. The following terms, when used in this
Agreement, shall, except where the context otherwise requires, have the
following meanings:
"Average Closing Price Per Share" means the average closing
sale price per share of Common Stock, for the specified period, on the Nasdaq
Stock Market or, if the Common Stock is not listed on the Nasdaq Stock Market,
on any stock exchange on which the Common Stock is listed that the directors
of Seragen US may select for this purpose, or if the Common Stock is not
listed on either the Nasdaq Stock Market or any stock exchange, the average of
the arithmetic mean of the closing bid price and the closing asked price per
share of Common Stock or, if lesser, 110 percent of the closing bid price, for
the specified period, in the over-the-counter market.
"Can$" means Canadian dollars.
"Claims" means all actions, causes of action, suits, debts,
liens, sums of money, guarantees, warranties, demands, expenses, costs,
attorneys' fees, judgments, obligations and liabilities of any nature
whatsoever, liquidated or unliquidated, fixed or contingent, whether or not
matured.
"Disposition Transaction" means (a) any transaction involving
the acquisition by any "person" or "group of persons" (as defined in Section
13(d)(3) of the 1934 Act), whether by way of merger, sale of assets, stock
purchase, tender offer or otherwise, of (i) all or substantially all of the
assets of Seragen US; provided, however, that the contemplated sale by Seragen
US of its operating assets to Boston University pursuant to that certain Asset
Purchase Agreement, dated as of February 14, 1997, between Seragen US and
Boston University shall not constitute a Disposition Transaction; or (ii) all
or substantially all of Seragen US' outstanding voting capital stock; or (b)
any transaction involving the sale or out-licensing of the majority (in value)
of Seragen US' technology assets.
"Effective Date" means the date on which the Redemption
Transactions are consummated in accordance with the provisions hereof.
<PAGE>
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"Effective Closing" means the consummation of the Redemption
Transactions in accordance with the terms hereof.
"Issuance Date" means the later of (a) the Effective Date and
(b) the earliest of (i) the date on which Seragen US completes a Qualified
Offering, (ii) the date on which a Disposition Transaction is completed, it
being understood that the issuance of Common Stock to the Investor
Shareholders pursuant to Section 13(a) hereof shall occur immediately prior to
the completion of the Disposition Transaction, and (iii) the Outside Date.
"Liabilities" means all losses, damages, costs, expenses, taxes
(or penalties or interest charges assessed in connection therewith), or other
liabilities, including, without limitation, attorneys' fees and court costs.
"1933 Act" means the U.S. Securities Act of 1933, as amended.
"1934 Act" means the U.S. Securities Exchange of 1934, as
amended.
"Outside Date" means January 31, 1999; provided, however, that
if Seragen US has as of January 31, 1999, entered into binding agreements
providing for a Qualified Offering, the consummation of which is subject only
to customary conditions, but such offering has not yet been consummated, then
"Outside Date" means the earlier of (i) the date on which the said agreements
providing for the Qualified Offering are terminated as a result of the failure
of conditions to the consummation of the Qualified Offering to be satisfied in
a timely manner and (ii) March 31, 1999.
"Qualified Offering" means the issuance by Seragen US, after
the date hereof, of additional shares of its capital stock, authorized or to
be authorized, in a public or private offering or series of public or private
offerings with net proceeds to Seragen US of at least U.S.$10,000,000. An
issuance by Seragen US of shares of its capital stock pursuant to the USSC
Agreement shall not be deemed to constitute a Qualified Offering or any part
thereof.
"Redemption Transactions" means the purchase and sale
transactions contemplated by SECTION 19(D) hereof.
"Related Claim" means any Claim arising from or relating to (a)
any of the Related Documents and (b) the organization and operation of, and
the issuance and sale of equity and debt securities by, Seragen Canada.
"Related Documents" means the Shareholders' Agreement, the
Warrant Indenture, the Warrants, the confidential offering memorandum issued
in connection with the Private Placement, the subscription agreements issued
in connection with the Private Placement, the Technology Agreement, the Eli
Lilly Agreement, and any document, instrument, agreement, contract,
representation, warranty or opinion delivered or rendered in connection with,
arising out of, or related to any of the foregoing.
"SEC" means the U.S. Securities and Exchange Commission.
<PAGE>
- 4 -
"Seragen Canada Balance Sheet" means the balance sheet of
Seragen Canada as of February 28, 1998, that is set forth as SCHEDULE 1
hereto.
"Transactional Documents" means (a) this Agreement, (b) the
Guaranty, Security Agreement, and financing statement contemplated by SECTION
13(F) hereof, (c) all documents to be executed, delivered or filed in
connection with the continuation of Seragen Canada under the laws of British
Columbia pursuant to the provisions of SECTION 19(A) hereof, (d) all documents
to be executed, delivered or filed in connection with the reorganization of
the capital of Seragen Canada pursuant to the provisions of SECTION 19(B)
hereof, (e) the Exchange Agreement contemplated by SECTION 19(C) hereof, and
(f) the Purchase and Sale Agreements contemplated by SECTION 19(D) hereof.
"USSC" means United States Surgical Corporation, a Delaware
corporation.
"USSC Agreement" means that certain Evaluation License and
Option Agreement, dated July 31, 1997, between USSC and Seragen US.
"U.S.$" means United States dollars.
"U.S. Person" has the meaning given that term in Rule 902(o) of
Regulation S under the 1933 Act.
2. Representations and Warranties of Seragen US. Seragen US
hereby represents and warrants to the Investor Shareholders as follows:
(a) Organization and Standing. It is a corporation, duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has the corporate power and authority to
enter into, deliver and perform its obligations and undertakings under this
Agreement and each other Transactional Document to which it will be a party.
(b) Validity. The execution, delivery and performance by
it of this Agreement and the other Transactional Documents to which it will be
a party have been duly authorized and approved by all necessary corporate
action. This Agreement has been, and each other Transactional Document to
which it will be a party will upon the execution and delivery of such document
by it have been, duly executed and delivered by it. This Agreement
constitutes, and each other Transactional Document to which it is a party will
upon execution and delivery of such document by it constitute, its valid and
binding obligation, enforceable against it in accordance with its terms,
subject to laws of general application affecting creditors' rights and the
exercise of judicial discretion in accordance with general equitable
principles.
(c) No Conflicts. The execution, delivery and performance
of this Agreement and the other Transactional Documents to which it will be a
party, and the consummation of the transactions contemplated hereby and
thereby, by it do not and will not
<PAGE>
- 5 -
(i) conflict with, or result in a breach of any of the
terms of, or constitute a default under, its certificate of incorporation or
by-laws,
(ii) conflict with or result in a breach of any of the
terms of, or constitute a default under, any agreement, instrument, covenant
or other restriction to which it is a party or by which any of its properties
or assets are bound, or
(iii) conflict with any law, rule, regulation, order or
decree or any rule of the Nasdaq Stock Market applicable to it or by which it
is bound;
except, in each instance, for such conflicts, breaches or defaults as would
not, individually or in the aggregate, adversely affect its ability to
consummate the transactions contemplated hereby or thereby or materially and
adversely affect its financial condition, business or assets.
(d) Governmental Consent. Except for filings, consents,
permits, approvals, registrations, qualifications, and authorizations which
have been made or obtained by it, no filing, consent, permit, approval,
registration, qualification or authorization of any governmental authority is
required under existing laws, rules and regulations in connection with its
execution and delivery of this Agreement. Except for the issuance of a
certificate under section 116 of the Income Tax Act (Canada), no filing,
consent, permit, approval, registration, qualification or authorization with
or of any governmental authority is required to be made by Seragen US under
existing laws, rules or regulations in connection with its consummation of the
transactions contemplated hereby to be consummated at or prior to the
Effective Closing. Except for filings, consents, permits, approvals,
registrations, qualifications and authorizations which will have been made or
obtained by Seragen US by the Issuance Date, no filing, consent, permit,
approval, registration, qualification or authorization with or of any
governmental authority will be required to be made by Seragen US under any
laws, rules or regulations in connection with its consummation of the
transactions contemplated hereby to be consummated on the Issuance Date.
(e) Compliance with Other Agreements and Instruments. It
is not in violation of any provisions of its certificate of incorporation or
bylaws or, to its knowledge, any provision of any federal or state law, rule,
regulation, judgment, writ, decree or order, which violation materially and
adversely affects its business or financial condition.
(f) Valid Issuance of Offered Shares. When issued and
delivered on the Issuance Date, the Offered Shares (as defined in SECTION 13
hereof) so issued and delivered will be duly authorized, validly issued, fully
paid and nonassessable, and not subject to any preemptive rights, liens,
claims or encumbrances. The issuance of the Offered Shares will be exempt
from the registration requirements of the 1933 Act and will have been
registered or qualified (or is exempt from registration or qualification)
under the registration, permit or qualification requirements of all applicable
state securities laws.
(g) Accuracy of SEC Reports. All reports (the "SEC
Reports") required to be filed by Seragen US since April 1, 1995, pursuant to
Sections 13 and 15(d) of the 1934 Act have been duly filed, were in compliance
with the requirements of their respective forms, and were
<PAGE>
- 6 -
complete and correct in all material respects as of the date at which the
information contained therein was furnished.
(h) Financial Statements. Included in the report on Form
10-K filed by Seragen US with the SEC for the year ended December 31, 1997 is
the balance sheet of Seragen US as at December 31, 1997 and statements of
income of Seragen US for the year then ended, audited by Arthur Andersen LLP,
whose report thereon is included with such financial statements in the said
report on Form 10-K. Such balance sheet fairly presents the financial
condition and assets and liabilities (whether absolute, accrued, contingent or
otherwise) of Seragen US as of the date thereof, and such statement of income
fairly presents the results of operations of Seragen US for the period
indicated, in each case in accordance with generally accepted accounting
principles applied on a consistent basis.
(i) Seragen Canada Balance Sheet. To the actual knowledge
of Seragen US, (a) the Seragen Canada Balance Sheet correctly sets forth each
asset of Seragen Canada and each Claim to which Seragen Canada is subject as
of February 28, 1998; and (b) Seragen Canada has no assets and is not subject
to any Claims not reflected on the Seragen Canada Balance Sheet except for (i)
additional cash assets arising from interest paid on deposit accounts held by
Seragen Canada, (ii) the rights of Seragen Canada pursuant to the Technology
Agreement, and (iii) Claims arising pursuant to the terms of this Agreement.
(j) Technology Agreement. To the actual knowledge of
Seragen US, the Technology Agreement is in full force and effect as of the
date hereof, no notice or other document for the purpose of termination of
said agreement having been given or received by Seragen US and no agreement
terminating the said agreement having been executed by the parties thereto.
(k) Offered Shares Reserved. On the basis of the Average
Closing Price Per Share effective for 20 consecutive trading days ending on
the last trading day prior to the date hereof and assuming that the Offered
Shares will be issued pursuant to the third sentence of SECTION 13(A), Seragen
US has reserved a sufficient number of shares of Common Stock for the purpose
of enabling it to satisfy its obligations to issue the Offered Shares pursuant
hereto.
3. [Reserved]
4. Representations and Warranties of Investor Shareholders.
The Investor Shareholders each, for itself, hereby represents and warrants to
Seragen US as follows:
(a) Organization and Standing. It is a corporation or
other legal entity duly organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation or other organization and
has the corporate or other power and authority to enter into, deliver and
perform its obligations and undertakings under this Agreement and each other
Transactional Document to which it will be a party.
<PAGE>
- 7 -
(b) Validity. The execution, delivery and performance by
it of this Agreement and the other Transactional Documents to which it will be
a party have been duly authorized and approved by all necessary corporate
action. This Agreement has been, and each other Transactional Document to
which it will be a party will upon the execution and delivery of such document
by it have been, duly executed and delivered by it. This Agreement
constitutes, and each other Transactional Document to which it will be a party
will upon execution and delivery of such document by it constitute, its valid
and binding obligation, enforceable against it in accordance with its terms,
subject to laws of general application affecting creditors' rights and the
exercise of judicial discretion in accordance with general equitable
principles.
(c) No Conflicts. The execution, delivery and performance
of this Agreement and the other Transactional Documents to which it will be a
party, and the consummation of the transactions contemplated hereby and
thereby, by it do not and will not
(i) conflict with, or result in a breach of any of the
terms of, or constitute a default under, its certificate of incorporation,
statute of organization, or by-laws,
(ii) conflict with or result in a breach of any of the
terms of, or constitute a default under, any agreement, instrument, covenant
or other restriction to which it is a party or by which any of its properties
or assets are bound, or
(iii) conflict with any law, rule, regulation, order or
decree applicable to it or by which it is bound;
except, in each instance, for such conflicts, breaches or defaults as would
not, individually or in the aggregate, adversely affect its ability to
consummate the transactions contemplated hereby or thereby or materially and
adversely affect its financial condition, business or assets.
(d) Governmental Consent. Except for filings, consents,
permits, approvals, registrations, qualifications and authorizations which
have been made or obtained by it, no filing, consent, approval, registration,
qualification or authorization with or of any governmental authority is
required under existing laws, rules and regulations in connection with its
execution and delivery of this Agreement. No filing, consent, approval,
registration, qualification or authorization with or of any governmental
authority is required to be made by it under existing laws, rules or
regulations in connection with its consummation of the transactions
contemplated hereby to be consummated at or prior to the Effective Closing.
Except for filings, consents, permits, approvals, registrations,
qualifications and authorizations which will have been made or obtained by it
by the time of the Issuance Date, no filing, consent, approval, registration,
qualification or authorization with or of any governmental authority will be
required to be made by it under any laws, rules or regulations in connection
with its consummation of the transactions contemplated hereby to be
consummated at the Issuance Date.
(e) Title.
(i) For Investor Shareholders other than CMDF, it is the
registered and beneficial owner of the Warrant transferred to it by
<PAGE>
- 8 -
Seragen Canada and its title to such Warrant is good, valid and enforceable,
free and clear of any claims, liens, hypothecs, encumbrances or charges of any
nature whatsoever.
(ii) For CMDF, it is the beneficial owner and The Canada
Trust Company is the registered owner of the Warrant transferred to it by
Seragen Canada and its title to such Warrant is good, valid and enforceable,
free and clear of any claims, liens, hypothecs, encumbrances or charges of any
nature whatsoever.
(iii) For Investor Shareholders other than CMDF, it is the
registered and beneficial owner of the shares of Seragen Canada Stock
indicated beside its name in SCHEDULE 4(E) and its title to such shares is
good, valid and enforceable, free and clear of any claims, liens, hypothecs,
encumbrances or charges of any nature whatsoever.
(iv) For CMDF, it is the beneficial owner and The Canada
Trust Company is the registered owner of the shares of Seragen Canada Stock
indicated beside its name in SCHEDULE 4(E) and its title to such shares is
good, valid and enforceable, free and clear of any claims, liens, hypothecs,
encumbrances or charges of any nature whatsoever.
(f) Seragen Canada Balance Sheet. To the actual knowledge
of such Investor Shareholder, (a) the Seragen Canada Balance Sheet correctly
sets forth each asset of Seragen Canada and each Claim to which Seragen Canada
is subject as of February 28, 1998; and (b) Seragen Canada has no assets and
is not subject to any Claims not reflected on the Seragen Canada Balance Sheet
except for (i) additional cash assets arising from interest paid on deposit
accounts held by Seragen Canada, (ii) the rights of Seragen Canada pursuant to
the Technology Agreement, and (iii) Claims arising pursuant to the terms of
this Agreement.
5. Seragen US Release. Seragen US hereby releases the Investor
Shareholders and their respective directors, officers, employees, agents,
representatives, successors and assigns, directors of Seragen Canada nominated
by the Investors Shareholders pursuant to the Shareholders' Agreement, and Z.
Sam Ruttonsha and their respective heirs, successors and assigns, and Seragen
Canada from all Related Claims relating to any act, omission or circumstance
whatsoever from the beginning of time to the date of this Agreement. The
release for which provision is made in this SECTION 5 shall become effective
upon, and only upon, the occurrence of the Effective Closing, failing which
this release shall be deemed never to have occurred. Notwithstanding the
foregoing provisions of this Section 5, the release set forth in this SECTION
5 (a) shall not extend to any Claim arising under or pursuant to the terms of
any Transactional Document, including the provisions of SECTION 12, (b) shall
not effect the termination of any Related Document or any other agreement or
instrument whatsoever as the same may apply from and after the date of this
Agreement, and (c) shall not effect the termination of any Transactional
Document.
6. Seragen Canada Release. Upon the consummation of the
Effective Closing, and simultaneously therewith, Seragen Canada shall be
deemed to have released Seragen US and the Investor Shareholders, and their
respective directors, officers, employees, agents, representatives,
<PAGE>
- 9 -
successors and assigns, from all Related Claims relating to any act, omission
or circumstance whatsoever from the beginning of time to the Effective Date.
The release for which provision is made in this SECTION 6 shall become
effective upon, and only upon, the occurrence of the Effective Closing,
failing which this release shall be deemed never to have occurred.
Notwithstanding the foregoing provisions of this Section 6, the release set
forth in this Section 6 (a) shall not extend to any Claim arising under or
pursuant to the terms of any Transactional Document, (b) shall not effect the
termination of any Related Document or any other agreement or instrument
whatsoever as the same may apply from and after the Effective Date, and (c)
shall not effect the termination of any Transactional Document.
7. Investor Shareholders Release. Each of the Investor
Shareholders hereby releases Seragen US and its directors, officers,
employees, agents, representatives, successors and assigns, directors of
Seragen Canada nominated by Seragen US pursuant to the Shareholders'
Agreement, other than Z. Sam Ruttonsha, and their respective heirs, successors
and assigns, and Seragen Canada from all Related Claims relating to any act,
omission or circumstance whatsoever from the beginning of time to the date of
this Agreement. The release for which provision is made in this SECTION 7
shall become effective upon, and only upon, the occurrence of the Effective
Closing, failing which this release shall be deemed never to have occurred.
Notwithstanding the foregoing provisions of this Section 7, the release set
forth in this SECTION 7 (a) shall not extend to any Claim arising under or
pursuant to the terms of any Transactional Document, including the provisions
of SECTIONS 12, 13 and 18, (b) shall not effect the termination of any Related
Document or any other agreement or instrument whatsoever as the same may apply
from and after the date of this Agreement, and (c) shall not effect the
termination of any Transactional Document.
8. No Assignment of Claims; No Transfer of Seragen Canada Stock;
Operation of Seragen Canada.
(a) No Assignment of Claims. Each of the parties hereto
represents and warrants to the other parties that it has not assigned any
Claims to be released pursuant to the provisions hereof or any rights under
any agreement to be terminated pursuant to the provisions hereof to any third
parties or another party to this Agreement. Each of the parties hereto
covenants and agrees that it shall not, until the earlier to occur of the
termination of this Agreement or the Effective Closing, assign any Claims to
be released pursuant to the provisions hereof or any rights under any
agreement to be terminated pursuant to the provisions hereof to any third
party or another party to this Agreement.
(b) No Transfer of Seragen Canada Stock or Warrants.
Except as contemplated by SECTION 19, until the earlier to occur of the
termination of this Agreement or the Effective Closing, no party hereto shall
sell, transfer, assign, hypothecate or otherwise convey any right, title or
interest in or to any shares of the capital stock of Seragen Canada or any
Warrant held by it on the date hereof or enter into any agreement to do any of
the foregoing.
<PAGE>
- 10 -
(c) Operation of Seragen Canada. Until the earlier to
occur of the termination of this Agreement or the Effective Closing, Seragen
Canada shall be operated solely for the purposes of prosecuting and defending
suits, whether civil, criminal or administrative, by or against it, taking
such steps as may be necessary to continue its corporate existence and comply
with law, discharging its liabilities, and consummating the transactions
contemplated hereby, including, without limitation, the transactions
contemplated by SECTION 19 hereof, but not for the purpose of continuing the
business for which it was organized, disposing of its assets, or otherwise
taking any action otherwise than as contemplated by this Agreement. Each of
Seragen US and the Investor Shareholders agrees to take such actions as may be
necessary to ensure the compliance of the board of directors of Seragen Canada
with this CLAUSE (C).
9. Forbearance.
(a) Forbearance by the Investor Shareholders. The Investor
Shareholders agree, until the earlier of the Effective Closing and the
termination of this Agreement, (i) to forbear from exercising their Put Rights
and any other right or remedy that they may now or in the future have under or
pursuant to Articles 6, 7 and 10 of the Shareholders' Agreement and (ii) to
forbear from exercising any Warrant or any right or remedy that they may now
or in the future have under or pursuant to any Warrant or any provision of the
Warrant Indenture.
(b) Forbearance by Seragen Canada. Seragen Canada agrees,
until the earlier of the Effective Closing and the termination of this
Agreement, to forbear from exercising any right or remedy that it may have
under or pursuant to the Technology Agreement, including the right to
terminate such agreement.
(c) Forbearance by Seragen US. Seragen US agrees, until
the earlier of the Effective Closing and the termination of this Agreement, to
forbear from exercising any right or remedy that it may have under or pursuant
to the Technology Agreement, including the right to terminate such agreement.
10. Termination of Certain Agreements and Instruments.
Simultaneously with the Effective Closing, the Shareholders' Agreement and
Warrants shall, automatically and without the need for further action by any
person, be terminated, and at and after the time of the Effective Closing such
agreements and instruments shall be null, void, and have no further force or
effect whatsoever. At the Effective Closing, each of the Investor
Shareholders shall deliver to Seragen US all Warrants that were transferred to
it by Seragen Canada. The parties hereto acknowledge and agree that the
cancellation of the Warrants pursuant to this Section 10 finally and
completely terminates the trust created under the Warrant Indenture and that,
accordingly, the Warrant Indenture shall have no further force or effect.
11. [Reserved]
<PAGE>
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12. Indemnification.
(a) Indemnification by the Investor Shareholders. Each of
the Investor Shareholders, individually and not solidarily (jointly and
severally) on the basis of each such Investor Shareholder's proportionate
entitlement to receive shares of the Common Stock of Seragen US pursuant to
SECTION 13(A), shall indemnify Seragen US and its directors, officers,
employees and agents and directors of Seragen Canada nominated by Seragen US
pursuant to the Shareholders' Agreement, other than Z. Sam Ruttonsha, and hold
them harmless from and against any and all Liabilities (including, without
limitation, Liabilities incurred by any of the aforesaid indemnified parties
in their capacity as a shareholder, creditor or obligee of Seragen Canada and
any Liability arising from or attributable to any encumbrance, of whatever
nature, on the rights granted by Seragen US to Seragen Canada pursuant to the
Technology Agreement) arising from or relating to, directly or indirectly, (i)
the organization, funding, operation, or any other act or activity of or
relating to Seragen Canada from the beginning of time to the Effective Date
(including, without limitation, the transactions contemplated hereby to occur
at the Effective Closing) and (ii) the winding up, dissolution or liquidation
of Seragen Canada and the termination of Seragen Canada's rights under the
Technology Agreement in connection therewith; excluding, however, in the case
of both clauses (i) and (ii), any Liabilities to the extent the same arise
pursuant to or are otherwise attributable to the Eli Lilly Agreement or any
breach or inaccuracy of a representation, warranty or covenant of Seragen US
contained in this Agreement. The provisions of this SECTION 12(A) shall
become effective upon, and only upon, the occurrence of the Effective Closing.
(b) Indemnification by Seragen US. Seragen US shall
indemnify Seragen Canada and its directors, officers, employees and agents and
hold them harmless from and against any and all Liabilities arising from or
pursuant to the Eli Lilly Agreement in respect of any act or circumstance
whatsoever from the beginning of time to the Effective Date (including,
without limitation, the transactions contemplated hereby to occur at the
Effective Closing). The provisions of this SECTION 12(B) shall become
effective upon, and only upon, the occurrence of the Effective Closing.
(c) Indemnification Procedure. Any party that proposes to
assert the right to be indemnified under this SECTION 12 shall, promptly after
receipt of notice of commencement of any action, suit or proceeding in respect
of which a claim is to be made against an indemnifying party or parties under
this SECTION 12, notify each such indemnifying party of the commencement of
such action, suit or proceeding, enclosing a copy of all papers served. No
indemnification provided for in this SECTION 12 shall be available to any
party who shall fail to give notice as provided in this CLAUSE (C) to the
extent the indemnifying party was prejudiced by the failure to give such
notice, but the omission so to notify such indemnifying party of any such
action, suit or proceeding shall not relieve it from any liability that it may
have to any indemnified party otherwise than under this SECTION 12. In case
any such action, suit or proceeding shall be brought against any indemnified
party and it shall notify the indemnifying party of the commencement thereof,
the indemnifying party shall be entitled to participate in, and, to the extent
that it shall wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel reasonably satisfactory
to such indemnified party, and after notice from the indemnifying party to
such indemnified party of its election so to assume
<PAGE>
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the defense thereof and the approval by the indemnified party to such
indemnifying party of indemnifying party's counsel, the indemnifying party
shall not be liable to such indemnified party for any legal or other expenses,
except as provided below and except for the reasonable costs of investigation
subsequently incurred by such indemnified party in connection with the defense
thereof. The indemnified party shall have the right to employ its own counsel
in any such action, but, after the assumption of the defense of such action by
an indemnifying party, the fees and expenses of such counsel shall be at the
expense of such indemnified party unless (i) the employment of counsel by such
indemnified party has been authorized in writing by the indemnifying parties,
(ii) the indemnified party shall have reasonably concluded that there may be a
conflict of interest between the indemnifying parties and the indemnified
party in the conduct of the defense of such action (in which case the
indemnifying parties shall not have the right to direct the defense of such
action on behalf of the indemnified party) or (iii) the indemnifying parties
shall not have employed counsel to assume the defense of such action within a
reasonable time after notice of the commencement thereof, in each of which
cases the fees and expenses of counsel shall be at the expense of the
indemnifying parties. An indemnifying party shall not be liable for any
settlement of any action, suit, proceeding or claim effected without its
written consent.
(d) Certain Limitations. Amounts payable by any Investor
Shareholder pursuant to the provisions of this SECTION 12, exclusive of
attorneys' fees and court costs payable pursuant to such provisions, shall be
limited to an amount that is, when taken together with all other payments made
by such Investor Shareholder pursuant to this SECTION 12, not in excess of the
amount paid in the Redemption Transactions by Seragen Canada for such Investor
Shareholder's shares of Seragen Canada Stock. In addition, the aggregate
indemnity payable by the Investor Shareholders pursuant to CLAUSE (II) of the
first sentence of SECTION 12(A) shall be limited to the amount of Liabilities
that would have arisen had the value of Seragen Canada's rights under the
Technology Agreement as of the time of the winding up, dissolution or
liquidation of Seragen Canada giving rise to the indemnity obligation been
equal to the value of Seragen Canada's rights under the Technology Agreement
on the Effective Date.
13. Stock Issuance to Investor Shareholders.
(a) Issuance of Common Stock. In consideration of the
entering into of this Agreement by the Investor Shareholders, on the Issuance
Date Seragen US shall issue to each of the Investor Shareholders that number
of shares of Common Stock (collectively, the "Offered Shares") specified in
this SECTION 13(A). In the event that a Qualified Offering has occurred by
the Issuance Date, the number of shares of Common Stock to be issued by
Seragen US to each Investor Shareholder shall equal the dollar amount set
forth opposite such Investor Shareholder's name on SCHEDULE 13(A) divided by
the Qualified Offering Price (as hereinafter defined). In the event that no
Qualified Offering has occurred by the Issuance Date, the number of shares of
Common Stock to be issued by Seragen US to each Investor Shareholder shall
equal the dollar amount set forth opposite such Investor Shareholder's name on
SCHEDULE 13(A) divided by the Average Closing Price Per Share for the 20
consecutive trading days ending on the last trading day prior to the Issuance
Date. Notwithstanding the provisions of the foregoing sentence, in the event
that a Disposition Transaction should be consummated between Seragen US
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and Ligand Pharmaceuticals Incorporated ("Ligand"), which Disposition
Transaction is in the form of a merger of a wholly-owned subsidiary of Ligand
into Seragen US in which
(i) the aggregate per share consideration to be delivered to holders
of Common Stock outstanding immediately prior to the effective time of such
merger, both fixed and contingent and whether at the effective time of the
merger or at a later date, is not less than an aggregate of U.S.$0.73 in
freely tradable common stock of Ligand valued, (A) in the case of Ligand
common stock to be issued at the effective time of the merger, at the average
closing per share sale price for the five trading days immediately preceding
the date of the execution of the definitive merger agreement (with Ligand to
have the option, but with such option to be exercised prior to the signing and
announcement of the definitive merger agreement, to provide all or part of
such consideration in cash) and, (B) in the case of Ligand common stock to be
issued subsequently to the effective date of the merger, at the average
closing per share sale price for the ten trading days immediately preceding
the issuance date (with Ligand to have the option, which may be exercised at
any time up to the date of issuance, to provide all or part of such
consideration in cash), and
(ii) the Investor Shareholders will be entitled to receive, pursuant
to the terms of the definitive merger agreement in respect of shares of Common
Stock to be issued to the Investor Shareholders pursuant hereto not less than
an aggregate of U.S.$2,400,000, of which not less than U.S.$1,643,835 will be
payable at the effective time of the merger with the balance to be payable,
subject to such contingencies as shall be generally applicable to shares of
Common Stock issued and outstanding immediately prior to the effective time of
the merger, at a later date, in freely tradable common stock of Ligand valued,
(A) in the case of Ligand common stock to be issued at the effective time of
the merger, at the average closing per share sale price for the five trading
days immediately preceding the date of the execution of the definitive merger
agreement (with Ligand to have the option, but with such option to be
exercised prior to the signing and announcement of the definitive merger
agreement, to provide all or part of such consideration in cash) and, (B) in
the case of Ligand common stock to be issued subsequently to the effective
date of the merger, at the average closing per share sale price for the ten
trading days immediately preceding the issuance date (with Ligand to have the
option, which may be exercised at any time up to the date of issuance, to
provide all or part of such consideration in cash),
the number of shares of Common Stock to be issued by Seragen US to each
Investor Shareholder in connection with such Disposition Transaction shall
equal the dollar amount set forth opposite such Investor Shareholder's name on
SCHEDULE 13(A) divided by U.S. $0.73.
(b) Determination of Qualified Offering Price. The
Qualified Offering Price shall be determined in the initial instance by the
board of directors of Seragen US in accordance with the definitions set forth
in SECTION 13(H) and notice thereof (the "Valuation Notice") shall be given to
the Investor Shareholders not less than seven days prior to the Issuance Date.
The Valuation Notice shall include final versions of all agreements and other
documents setting forth the terms of the Qualified Offering and shall set
forth in reasonable detail the basis for the board of directors' determination
of the Qualified Offering Price. In the event that none of the Investor
Shareholders gives notice to Seragen US within seven days of the date of the
Valuation Notice that it disputes
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the Valuation Notice, the Qualified Offering Price as set forth in the
Valuation Notice shall be final and binding on the parties hereto. In the
event that any of the Investor Shareholders at any time within seven days of
the date of the Valuation Notice gives notice (the "Dispute Notice") to
Seragen US that it disputes the Valuation Notice, the Qualified Offering Price
shall be determined by the Boston, Massachusetts office of Arthur Andersen LLP
(the "Accountant") in accordance with the definitions set forth in SECTION
13(H). The determination of the Qualified Offering Price shall be submitted
to the Accountant by Seragen US within five days following the date of the
Dispute Notice. In connection with such submission, Seragen US shall deliver
to the Accountant final versions of all agreements and other documents setting
forth the terms of the Qualified Offering and shall simultaneously, by
facsimile transmission, give notice of such submission (indicating the partner
of the Accountant responsible for the matter and the address to which written
submissions to the Accountant may be sent) to each of the other parties
hereto. Any party hereto may, during the seven day period following the
submission of the determination of the Qualified Offering Price to the
Accountant, make such written submissions as it wishes to the Accountant
regarding the determination of the Qualified Offering Price. Copies of any
such submission shall be sent to all other parties hereto by facsimile
transmission. The Accountant shall determine the Qualified Offering Price in
accordance with the provisions hereof within fourteen days following the date
on which the determination of the Qualified Offering Price was submitted to it
by Seragen US. The Accountant shall assume for purposes of such determination
that the Issuance Date will occur on the fourteenth day following the date on
which the determination of the Qualified Offering Price was submitted to the
Accountant. The Qualified Offering Price as determined by the Accountant may
be higher, lower, or equal to the determination of the Qualified Offering
Price made by the board of directors of Seragen US. The determination of the
Accountant shall be final and binding upon each of the parties hereto. The
fees and disbursements of the Accountant in connection with the determination
of the Qualified Offering Price shall be paid one-half by Seragen US and one-
half collectively by the Investor Shareholders. The Qualified Offering Price
as determined pursuant to this SECTION 13(B) shall apply with respect to any
Issuance Date that occurs by virtue of the closing of a Qualified Offering
within 40 days of the date of the Valuation Notice. A Qualified Offering
Price for an Issuance Date that occurs by virtue of the closing of a Qualified
Offering after such 40-day period shall again be determined in accordance with
this SECTION 13(B).
(c) Delivery of Stock Certificates. On the Issuance
Date, Seragen US shall deliver to each Investor Shareholder certificates
evidencing the Offered Shares to which such Investor Shareholder is entitled
pursuant to the provisions of this SECTION 13.
(d) Fractional Shares. No fractional shares or scrip
representing fractions of shares shall be issued in connection with the
Offered Shares, but the number of shares issuable to each of the Investor
Shareholders shall be rounded down or up, as the case may be, to the nearest
whole number of shares.
(e) Certain Covenants.
(i) Seragen US shall, from the date hereof
through the earlier of the Issuance Date and the termination of this
Agreement:
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(A) deliver to each Investor Shareholder a copy
of all information and disclosure documents which Seragen US sends by way of
general distribution to holders of Common Stock contemporaneously with
delivery of the same to the holders of Common Stock;
(B) deliver to each Investor Shareholder a copy
of each report that it is required to prepare and file with the SEC pursuant
to Sections 13 and 15(d) of the 1934 Act and that is made publicly available
pursuant to the rules of the SEC upon filing within ten days of such document
being filed with the SEC;
(C) ensure that all reports required to be filed
by Seragen US on or after the date of this Agreement pursuant to Sections 13
and 15(d) of the 1934 Act are duly and timely filed, are in compliance with
the requirements of their respective forms, and are complete and correct in
all material respects as of the date at which the information contained
therein is furnished;
(D) within ten days of the last day of each
calendar quarter (an "Adjustment Date"), make such adjustments in the number
of shares of Common Stock reserved by it for the purpose of enabling it to
satisfy its obligations to issue the Offered Shares pursuant hereto as may be
necessary to ensure that it has sufficient shares of Common Stock reserved for
that purpose, assuming that the Offered Shares were to be issued pursuant to
the third sentence of SECTION 13(A) as of the Adjustment Date; and
(E) forbear, and, following the Effective
Closing, cause Seragen Canada to forbear, from exercising any right or remedy
that it may have under or pursuant to the Technology Agreement to terminate
such Agreement.
(ii) Seragen US, on the Issuance Date and in any
event within ten days thereof, shall file:
(A) with the Ontario Securities Commission,
a Form 20 with respect to the issuance of the Offered Shares to such of the
Investor Shareholders who are residents of the Province of Ontario, together
with the applicable filing fee; and
(B) with the Quebec Securities Commission, a
report of distribution with respect to the issuance of the Offered Shares to
such of the Investor Shareholders who are residents of the Province of Quebec,
together with the applicable filing fee.
(f) Guaranty by Seragen Canada. At the Effective
Closing, Seragen Canada shall execute and deliver to the Investor Shareholders
(i) a Guaranty in the form of SCHEDULE 13(F)(I) hereto, (ii) a Security
Agreement in the form of SCHEDULE 13(F)(II) hereto, and (iii) a financing
statement in the form of SCHEDULE 13(F)(III) hereto.
(g) Certain Adjustments. In the event that a
Disposition Transaction or Qualified Offering has been consummated prior to
the Effective Date, the board of directors of Seragen US shall make and/or
negotiate such adjustments to the rights accorded to the Investor
<PAGE>
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Shareholders pursuant to this SECTION 13 and SECTION 18 as it may, in its
reasonable discretion, determine to be necessary and appropriate to place the
Investor Shareholders in the same position (i.e., the right to receive shares
of Common Stock worth in the aggregate U.S.$ 2,400,000 and registration rights
in connection therewith) they would have been in had the Issuance Date
occurred (and had the Common Stock contemplated in SECTION 13(A) been issued
to the Investor Shareholders), in the case of a Disposition Transaction,
immediately prior to the consummation of the Disposition Transaction or, in
the case of a Qualified Offering, simultaneously with the completion of the
Qualified Offering.
(h) Certain Definitions. For purposes hereof,
(i) "Qualified Offering Price" means (A) the sum of
(I) the pre-money valuation of Seragen US as of the Issuance Date, as
indicated by the terms upon which Seragen US securities are to be issued in
the Qualified Offering, plus (II) the amount that would be received by Seragen
US in the event that all Relevant Stock Rights (as hereinafter defined) were
to be exercised immediately prior to the Qualified Offering, divided by (B)
the sum of (I) the number of shares of Common Stock issued and outstanding
immediately prior to the Qualified Offering, plus (II) the number of shares of
Common Stock that would be issuable immediately prior to the closing of the
Qualified Offering were all Relevant Stock Rights and Free Stock Rights (as
hereinafter defined) to be exercised as of such time.
(ii) "Relevant Stock Rights" means all options,
warrants or other securities (convertible, exchangeable or otherwise) issued
by Seragen US entitling the holder thereof to acquire a share of Common Stock
for a specified consideration that is greater than zero but less than or equal
to (A) the pre-money valuation of Seragen US as of the Issuance Date indicated
by the terms upon which Seragen US securities are to be issued in the
Qualified Offering, divided by (B) the sum of (I) number of shares of Common
Stock issued and outstanding immediately prior to the Qualified Offering, plus
(II) the number of shares of Common Stock that would be issuable immediately
prior to the closing of the Qualified Offering were all Free Stock Rights to
be exercised as of such time. "Relevant Stock Rights" shall not include any
options, warrants or other securities that are not by their terms fully vested
and currently exercisable as of the Issuance Date or such rights as USSC has
pursuant to section 5.2 of the USSC Agreement to acquire shares of Common
Stock in connection with a decision by it not to exercise the Option (as
defined in the USSC Agreement).
(iii) "Free Stock Rights" means all options,
warrants, or other securities (convertible, exchangeable or otherwise)
entitling the holder thereof to acquire shares of Common Stock without the
payment of any additional consideration to Seragen US in connection therewith.
Without limiting the foregoing, "Free Stock Rights" shall include the Series A
Preferred Stock, the Series B Preferred Stock, and the Series C Preferred
Stock of Seragen US and any other series of the Preferred Stock of Seragen US
that may be issued by Seragen US in the future having terms substantially
identical to the terms of any of the aforesaid series of the Preferred Stock
of Seragen US. "Free Stock Rights" shall not include any options, warrants or
other securities that are not by their terms fully vested and currently
exercisable as of the Issuance Date or such rights as USSC has pursuant to
section 5.2 of the USSC Agreement to acquire shares of Common Stock in
connection with a decision by it not to exercise the Option.
<PAGE>
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14. Restricted Stock; Offshore Transaction
(a) Restricted Stock. Each of the Investor Shareholders
understands that, except to the extent explicitly set forth in SECTION 18
hereof, (a) the Offered Shares to be delivered to it hereunder will not have
been registered under the 1933 Act or the securities laws of any state or
other jurisdiction and will not be included in any registration statement
filed by Seragen US under the 1933 Act or otherwise registered for reoffer or
resale and (b) it will have to hold such shares indefinitely unless they are
transferred in accordance with an effective registration statement under the
1933 Act and appropriately registered (or qualified) under applicable
securities laws of any state or foreign jurisdiction or pursuant to an
exemption from registration or qualification under the 1933 Act or any other
applicable securities legislation.
(b) Offshore Transaction. Each of the Investor
Shareholders understands that the offering and sale of the Offered Shares
hereunder is intended to be exempt from registration under the 1933 Act by
virtue of Regulation S promulgated thereunder, based, in part, upon the
representations, warranties and agreements contained in this Agreement, and
Seragen US may rely upon such representations, warranties and agreements in
connection therewith. Each of the Investor Shareholders represents that it is
not a U.S. Person and is not acquiring the Offered Shares for the benefit of a
U.S. Person. Each of the Investor Shareholders represents that it is outside
the U.S. as of the date of execution and delivery of this Agreement. The
Investor Shareholders will not transfer the Offered Shares in violation of the
provisions of any applicable securities laws and acknowledge that Seragen US
will refuse to register any transfer of the Offered Shares which fails to
comply with the provisions of this SECTION 14 and SECTION 16.
15. Certain Securities Law Matters. Each of the Investor
Shareholders, for itself, represents and warrants to Seragen US as follows:
(a) The Investor Shareholder is acquiring the Offered
Shares to be issued to it hereunder for investment, and not with a view to the
resale or distribution thereof, and it does not now have any intention of
selling or otherwise disposing of any of the Offered Shares. The Investor
Shareholder's financial condition and investments are such that it is in a
financial position to hold the Offered Shares to be issued to it hereunder for
an indefinite period and to bear the economic risk of, and withstand a
complete loss of, its investment in such Offered Shares. By virtue of the
expertise of the Investor Shareholder, the advice available to it, and its
previous financial experience, it has extensive knowledge and experience in
financial and business matters, investments, securities and private placements
and the capability to evaluate the merits and risks of the transactions,
contemplated by this Agreement.
(b) The Investor Shareholder has obtained and carefully
examined the SEC Reports and the financial statements contained therein and
acknowledges that Seragen US has made available to it all documents and
information that it has requested relating to Seragen US and has provided
answers to all of its questions concerning Seragen US and its capital stock,
business and financial affairs.
<PAGE>
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(c) The Offered Shares are being received by the Investor
Shareholder as principal for its own account for investment, not for the
benefit of any other person, and not with a view to the sale or distribution
of all or any part of the Offered Shares, and, except in the case of HCBVF,
the Offered Shares have an aggregate acquisition cost to the Investor
Shareholder of not less than Can$150,000.
(d) The Investor Shareholder was not created or established
solely to acquire the Offered Shares, or to permit purchases of securities
without a prospectus, in reliance on an exemption from the prospectus
requirements of applicable securities legislation.
(e) HCBVF represents and warrants to Seragen US that it is
an "exempt purchaser" for purposes of the Securities Act (Ontario).
16. Limitation on Transfers.
(a) Compliance with U.S. Securities Laws. None of the
Investor Shareholders shall sell, pledge, distribute, offer for sale, transfer
or otherwise dispose of any of the Offered Shares in the United States of
America in the absence of (i) an effective registration statement under the
1933 Act in respect of such shares and the registration or qualification of
such shares under any applicable securities laws of any state or foreign
jurisdiction then in effect or (ii) an opinion of counsel, satisfactory to
Seragen US, that such registration and qualification are not required.
(b) Compliance with Canadian Securities Laws. None of the
Investor Shareholders shall offer, sell, assign, renounce or transfer any of
the Offered Shares in Canada or to any resident of any province or territory
of Canada except in compliance with applicable Canadian provincial securities
laws.
17. Stock Legend. The following legend, or a legend in
substantially similar form, shall be endorsed upon the certificate(s)
evidencing the Offered Shares:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR STATE SECURITIES LAWS, AND MAY NOT BE OFFERED OR SOLD IN
THE UNITED STATES EXCEPT IN ACCORDANCE WITH REGULATION S UNDER THE SECURITIES
ACT OR SUCH STATE LAWS OR PURSUANT TO REGISTRATION UNDER, OR AN EXEMPTION
FROM, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, AS EVIDENCED BY AN
OPINION (WHICH SHALL BE IN FORM AND SUBSTANCE SATISFACTORY TO THE COMPANY)
<PAGE>
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OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
NO PROSPECTUS HAS BEEN FILED TO QUALIFY THE DISTRIBUTION OF THE
SECURITIES EVIDENCED BY THIS CERTIFICATE IN CANADA. SUCH SECURITIES MAY NOT
BE OFFERED, SOLD, ASSIGNED, RENOUNCED OR TRANSFERRED, DIRECTLY OR INDIRECTLY,
IN CANADA, OR TO ANY RESIDENT OF ANY PROVINCE OR TERRITORY OF CANADA, EXCEPT
IN COMPLIANCE WITH APPLICABLE CANADIAN PROVINCIAL SECURITIES LAWS.
18. Registration Under the 1933 Act
(a) Definitions. In this SECTION 18:
(i) "Business Day" means a day other than a Saturday,
Sunday or other day on which banks in the State of New York, the Province of
Quebec, or the Province of Ontario are authorized by law to remain closed.
(ii) "Holder" means the person or persons to whom Seragen
US has issued Offered Shares and their respective permitted transferees,
successors and assigns. If there is more than one Holder at any time, each
such Holder shall be entitled to the rights and privileges granted hereunder.
All Holders of record shall receive the notices contemplated in SECTION 18(C)
and (D) below.
(iii) "Qualifying Registration" means any registration of
securities by Seragen US with respect to which it is required, pursuant to the
terms of SECTION 18(D)(I), to given written notice of its intention to effect
such registration to the Holders. For the avoidance of doubt, no registration
of securities by Seragen US shall constitute a Qualifying Registration unless
such registration is effected following the date of this Agreement.
(iv) "Registrable Securities" means the Offered Shares and
any securities issued or issuable with respect to the Offered Shares by way of
a stock dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization.
(v) Except as otherwise expressly excluded herein,
"Registration Expenses" means any and all expenses incurred in connection with
any registration or action incident to performance of or compliance by Seragen
US with this SECTION 18, including, without limitation, (A) all SEC, national
securities exchange and NASD registration and filing fees; (B) all listing
fees and all transfer agent fees; (C) all fees and
<PAGE>
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expenses of complying with state securities or blue sky laws (including the
fees and disbursements of counsel for the underwriters in connection with blue
sky qualifications of the Registrable Securities), excluding all fees and
expenses of complying with state securities or blue sky laws, compliance with
which is requested by the Holder but not by any underwriter in connection with
blue sky qualifications of the Registrable Securities; (D) all printing,
mailing, messenger and delivery expenses; and (E) all fees and disbursements
of counsel for Seragen US and of its accountants, including the expenses of
any special audits or procedures or any reviews and/or "cold comfort" letters
required by or incident to such performance and compliance; but excluding
underwriting discounts and commissions, brokerage fees and transfer taxes due
in connection with the sale of the Registrable Securities by the Holders
thereof, if any, and fees of counsel or accountants retained by the Holders of
Registrable Securities to advise them in their capacity as Holders.
(vi) "Restricted Securities" means the Registrable
Securities upon original issuance thereof. A Registrable Security ceases to
be a Restricted Security when (A) it has been effectively registered under the
1933 Act and disposed of in accordance with the registration statement
covering it; (B) it is distributed to the public pursuant to Rule 144 (or any
similar provision then in force) under the 1933 Act; or (C) it has otherwise
been transferred and a new certificate or other evidence of ownership for it
not bearing legends restricting the free transferability thereof and not
subject to any stop transfer order has been delivered by or on behalf of
Seragen US and no other restriction on transfer exists.
(vii) "Underwritten registration" or "underwritten
offering" means a registration in which securities of Seragen US are sold
pursuant to a firm commitment underwriting.
(b) Benefits. The securities entitled to the benefits of
this Agreement are the Registrable Securities, but, with respect to any
particular Registrable Security, only so long as such security continues to be
a Restricted Security.
(c) Demand Registration Under the 1933 Act.
(i) Requests for Demand Registration. At any time
after Seragen US has effected a Qualifying Registration, the Holder or Holders
of 50% or more of the outstanding Registrable Securities, by written request
delivered to Seragen US, may request registration under the 1933 Act of all or
any portion of the Registrable Securities held by the Holder or Holders for
sale in the manner specified in such request. Notwithstanding the provisions
of the foregoing sentence, Seragen US shall not be required to effect a Demand
Registration pursuant to this SECTION 18(C) unless one or more Holders has
previously sought to have Registrable Securities included in a Piggyback
Registration pursuant to SECTION 18(D) and all of such Registrable Securities
were not included in such registration as a result of Seragen US' having
invoked the provisions of SECTION 18(D)(V). Each initial request for a
registration pursuant to this SECTION 18(C) shall specify the number of
Registrable Securities requested to be registered and sold by each Holder, the
method of disposition to be employed, and the anticipated per share price
range for such offering. Within 10 days after receipt of any request for
registration under this SECTION 18(C), Seragen US shall promptly give written
notice to any other Holders of Registrable Securities from whom
<PAGE>
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notice has not been received. Seragen US shall include in such registration
(for sale in accordance with the method of disposition specified in the
initial request) all Registrable Securities specified in the initial request
and all Registrable Securities with respect to which Seragen US has received
written requests for inclusion therein within 20 days after the receipt of the
notice from Seragen US contemplated by the foregoing sentence, which written
requests shall specify the number of Registrable Securities to be included.
Any requests for registration pursuant to this SECTION 18(C)(I), including any
requests made in response to the written notice from Seragen US referred to in
the preceding sentence, shall be referred to herein as a "Demand Registration
Request," and all registrations requested pursuant to this SECTION 18(C) are
referred to herein as "Demand Registrations". In the case of any Demand
Registration, Seragen US shall file an appropriate registration statement as
provided herein within 60 days following the initial request for such Demand
Registration pursuant to the first sentence of this SECTION 18(C)(I) and shall
use its best efforts to have such registration declared effective as soon as
possible following such filing; provided, however, that if, in connection with
any Demand Registration requested more than 90 days following a Piggyback
Registration in which one or more Holders sought to have Registrable
Securities included pursuant to SECTION 18(D) but all of which Registrable
Securities were not included in such Piggyback Registration as a result of
Seragen US' having invoked the provisions of SECTION 18(D)(V), Seragen US
shall furnish to the requesting Holders a certificate signed by its chief
executive officer stating that in the good faith judgment of Seragen US' board
of directors it would be seriously detrimental to Seragen US or its
shareholders for a registration statement to be filed in the near future, then
Seragen US' obligation to file such a Demand Registration shall be deferred
for a period not to exceed 180 days from the date of the initial request for
such Demand Registration pursuant to the first sentence of this SECTION
18(C)(I).
(ii) Number of Demand Registrations. Seragen US shall
not be required to effect more than one Demand Registration pursuant to this
SECTION 18(C). Demand Registrations shall be registered on Form S-2, Form S-3
or on any similar short-form registration statement if Seragen US is at the
time of the Demand Registration permitted to use any such short form.
Notwithstanding anything to the contrary contained herein, a registration
shall count as a Demand Registration only when a registration statement
covering all Registrable Securities covered by Demand Registration Requests
shall have become effective (except that if, after it has become effective,
the offering of Registrable Securities pursuant to such registration statement
is interfered with by any stop order, injunction or other order or requirement
of the SEC, such registration shall be deemed not to have been effected unless
such stop order, injunction or other order or request shall subsequently have
been vacated or otherwise removed); provided, however, that if a registration
statement filed by Seragen US pursuant to a Demand Registration Request shall
be abandoned or withdrawn at the request of the selling Holder or Holders or
interfered with by any stop order, injunction or other order or requirement of
the SEC due solely and exclusively to the fault of any selling Holder, then,
unless one or more of such Holders shall, promptly upon receipt of a request
by Seragen US therefor, supported by an invoice setting forth the expenses in
reasonable detail, reimburse Seragen US for the Registration Expenses in
respect of such registration statement, Seragen US shall be deemed to have
effected a Demand Registration.
<PAGE>
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(iii) Selection of Underwriters. If the method of
disposition specified by the Holders initiating the Demand Registration shall
be an underwritten public offering, Seragen US shall designate the managing
underwriter of such offering.
(iv) Priority on Demand Registrations. Seragen US
shall be entitled to include in any registration statement referred to in this
SECTION 18(C), for sale in accordance with the method of disposition specified
by the Holders requesting a Demand Registration, securities of the same class
and series as those requested to be registered by the Holders to be sold by
Seragen US for its own account or by other stockholders of Seragen US for
their account, except that if the managing underwriters advise Seragen US in
writing that in their opinion the number of such securities requested to be
included in such registration exceeds the number which can be sold in such
offering without adversely affecting the marketability of the offering (the
"Maximum Number"), then Seragen US will limit the number of securities
included in such registration to the Maximum Number, and the shares registered
shall be selected in the following order of priority: (A) first, the
Registrable Securities covered by Demand Registration Requests, which shall be
pro rata among the Holders thereof on the basis of the number of Registrable
Securities requested to be registered by each such Holder, (B) second,
securities Seragen US proposes to sell, and (C) third, other securities
requested to be included in such registration.
(v) Exception. Anything in this SECTION 18(C) to the
contrary notwithstanding, Seragen US shall not be required to file a
registration statement requested pursuant to this SECTION 18(C) if counsel for
Seragen US shall deliver an opinion that, pursuant to Rule 144 under the 1933
Act ("Rule 144") or otherwise, the Holder or Holders making the Demand
Registration Requests can publicly sell immediately all of the Registrable
Securities covered by the Demand Registration Requests without registration
under the 1933 Act and without limitation on the manner of sale or the number
of Registrable Securities sold.
(vi) Payment of Registration Expenses for Demand
Registration. Seragen US shall pay all Registration Expenses in connection
with the registration of Registrable Securities requested pursuant to a Demand
Registration Request.
(d) Piggyback Registration.
(i) Right to Include Registrable Securities. If at
any time Seragen US proposes to register any of its securities under the 1933
Act on any form for the registration of securities under such Act, whether or
not for its own account (other than (A) by a registration statement which
would not by law be available for the Registrable Securities, (B) any
registration effected solely to implement an employee benefit plan, or (C) any
registration effected solely to implement a transaction to which Rule 145 of
the SEC is applicable) (a "Piggyback Registration"), it shall as expeditiously
as possible give written notice to all Holders of its intention to do so.
Upon the written request of any Holder made within 20 days after receipt of
any such notice (which request shall specify the Registrable Securities
intended to be disposed of by such Holder), Seragen US shall include in the
registration statement the Registrable Securities which Seragen US has been so
requested to register
<PAGE>
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by the Holders thereof. The rights set forth in this SECTION 18(D)(I) are
hereinafter sometimes referred to as "Piggyback Registration Rights."
(ii) Withdrawal of Piggyback Registration by Seragen
US. If, at any time after giving written notice of its intention to register
any securities in a Piggyback Registration but prior to the effective date of
the related registration statement, Seragen US shall determine for any reason
not to proceed with the Piggyback Registration, Seragen US shall give written
notice of such determination to each Holder and, thereupon, shall be relieved
of its obligation to register any Registrable Securities in connection with
such Piggyback Registration. All best efforts obligations of Seragen US
pursuant to SECTION 18(E)(II) and (III) shall cease if Seragen US determines
to terminate prior to such effective date any Piggyback Registration.
(iii) Piggyback Registration of Underwritten Public
Offerings. If a Piggyback Registration involves an offering by or through
underwriters, then (A) all Holders requesting to have their Registrable
Securities included in Seragen US' registration statement must sell their
Registrable Securities to the underwriters selected by Seragen US on the same
terms and conditions as apply to all other selling shareholders or, if none,
to Seragen US and (B) any Holder requesting to have such Holder's Registrable
Securities included in such registration statement may elect in writing, not
later than five Business Days prior to the effectiveness of the registration
statement filed in connection with such registration, not to have such
Holder's Registrable Securities so included in connection with such
registration.
(iv) Payment of Registration Expenses for Piggyback
Registration. Seragen US shall pay all Registration Expenses in connection
with each registration of Registrable Securities requested pursuant to a
Piggyback Registration Right.
(v) Priority in Piggyback Registration. If a
Piggyback Registration involves an offering by or through underwriters,
Seragen US shall not be required to include Registrable Securities therein if
and to the extent the underwriter managing the offering reasonably believes in
good faith and advises each Holder requesting to have Registrable Securities
included in Seragen US' registration statement that such inclusion would
materially adversely affect such offering; provided, however, that (A) if
other selling shareholders who are employees, officers, directors or
affiliates of Seragen US have requested registration of securities in the
proposed offering, such reduction or elimination shall, except as may be
required by any registration rights granted by Seragen US prior to the date
hereof, be first applied to shares sought to be registered by such persons and
(B) if other selling shareholders who are exercising "piggyback registration
rights" similar to those set forth herein have requested registration of
securities in the proposed offering, such reduction or elimination shall,
except as may be required by any registration rights granted by Seragen US
prior to the date hereof and as may otherwise be provided by CLAUSE (A) of
this sentence, be pro rata among such other shareholders' securities and the
Holders' Registrable Securities in proportion to the respective number of
securities requested to be registered by each shareholder; and provided,
further, that if Seragen US in the future grants "piggyback registration
rights" to other shareholders or holders of rights to subscribe for or
otherwise acquire securities of Seragen US that provide more favorable
treatment to such shareholders' securities in any registration involving the
reduction or elimination of securities than the treatment provided herein with
respect to the Registrable Securities, the Holders of
<PAGE>
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Registrable Securities shall be accorded priority in any registration
involving the reduction or elimination of securities sought to be registered
therein equal to the priority accorded to such other shareholders' securities
under the terms of their "piggyback registration rights."
(e) Registration Procedures.
(i) Lockup Agreement. If Seragen US or the managing
underwriters so request in connection with an underwritten registration in
which Registrable Securities are included, and the directors, officers,
employees and affiliates of Seragen US similarly agree, each Holder of
Registrable Securities whose Registrable Securities are included therein shall
not, without the prior written consent of Seragen US or such underwriters,
effect any public sale or other distribution of any equity securities of
Seragen US, including any sale pursuant to Rule 144, during the seven days
prior to, and during the 90-day period commencing on, the effective date of
such underwritten registration, except in connection with such underwritten
registration.
(ii) Effective Registration Statements. In the case
of each registration effected by Seragen US pursuant to this SECTION 18,
Seragen US shall use its best efforts
(A) to keep such registration effective for a period
of 120 days, or until the Holder or Holders have completed the distribution
described in the registration statement relating thereto, whichever first
occurs; provided, however, that (I) such 120-day period shall be extended for
a period of time equal to the period the Holder refrains from selling any
securities included in such registration at the request of an underwriter of
securities of Seragen US; and (II) in the case of any registration of
Registrable Securities on Form S-3 which are intended to be offered on a
continuous or delayed basis, the applicable period shall be extended, if
necessary, to keep the registration statement effective until all such
Registrable Securities are sold, provided that, in the case of this CLAUSE
(II), applicable rules under the 1933 Act governing the obligation to file a
post-effective amendment permit, in lieu of filing a post-effective amendment
that (1) includes any prospectus required by Section 10(a)(3) of the 1933 Act
or (2) reflects facts or events representing a material or fundamental change
in the information set forth in the registration statement, the incorporation
by reference in the registration statement of information of the type set
forth in clauses (1) and (2), above, that is contained in periodic reports
filed pursuant to Section 13 or 15(d) of the Exchange Act; and
(B) to prepare and file with the SEC such amendments
and supplements to such registration statement and the prospectus used in
connection with such registration statement as may be necessary to comply with
the provisions of the 1933 Act with respect to the disposition of all
Registrable Securities covered by such registration statement.
(iii) Certain Procedures. If and whenever Seragen US
is required to use its best efforts to effect or cause the registration of any
Registrable Securities under the 1933 Act as provided in this SECTION 18,
Seragen US shall:
<PAGE>
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(A) furnish to each selling Holder of Registrable
Securities and the underwriters, if any, without charge, as many copies of the
registration statement, the prospectus or prospectuses (including each
preliminary prospectus) relating to the Piggyback Registration and any
amendment or supplement thereto as they may reasonably request;
(B) enter into such agreements (including an
underwriting agreement) and take all such other actions reasonably required in
connection therewith in order to expedite or facilitate the disposition of
such Registrable Securities and in such connection, if the registration is in
connection with an underwritten offering, (I) make such representations and
warranties to the underwriters in such form, substance and scope as are
customarily made by issuers to underwriters in underwritten offerings and
confirm the same if and when requested; (II) obtain opinions of counsel to
Seragen US and updates thereof (which counsel and opinions in form, scope and
substance shall be reasonably satisfactory to the underwriters) addressed to
the underwriters covering the matters customarily covered in opinions
requested in underwritten offerings and such other matters as may be
reasonably requested by such underwriters; (III) obtain "cold comfort" letters
and updates thereof from Seragen US' accountants addressed to the
underwriters, such letters to be in customary form and covering matters of the
type customarily covered in "cold comfort" letters to underwriters in
connection with underwritten offerings; (IV) set forth in full in any
underwriting agreement entered into the indemnification provisions and
procedures of SECTION 18(E)(V) hereof with respect to all parties to be
indemnified pursuant to said Section; and (V) deliver such documents and
certificates as may be reasonably requested by the underwriters to evidence
compliance with clause (I) of this SECTION 18(E)(III)(B) and with any
customary conditions contained in the underwriting agreement or other
agreement entered into by Seragen US; the above shall be done at each closing
under such underwriting or similar agreement or as and to the extent required
thereunder;
(C) make available for inspection by one or more
representatives of the Holders of Registrable Securities being sold, any
underwriter participating in any disposition pursuant to such registration,
and any attorney or accountant retained by such Holders or underwriter, all
financial and other records, pertinent corporate documents and properties of
Seragen US, and cause Seragen US' officers, directors and employees to supply
all information reasonably requested by any such representatives in connection
with such disposition;
(D) otherwise (I) use its best efforts to comply
with all applicable federal and state regulations and (II) take such other
action as may be reasonably necessary or advisable to enable each such Holder
and each such underwriter to consummate the sale or disposition in such
jurisdiction or jurisdictions in which any such Holder or underwriter shall
have requested that the Registrable Securities be sold; provided, however,
that Seragen US shall not be required to register or qualify Registrable
Securities in any jurisdiction outside of the United States of America or
where such registration or qualification would require Seragen US to qualify
to do business or give a general consent to service of process or otherwise
impose an unreasonable burden on Seragen US.
Except as otherwise provided in this Agreement, Seragen US shall have sole
control in connection with the preparation, filing, withdrawal, amendment
<PAGE>
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or supplementing of each registration statement, the selection of
underwriters, and the distribution of any preliminary prospectus included in
the registration statement.
(iv) Cooperation by Prospective Sellers, etc.
(A) Each prospective seller of Registrable
Securities shall furnish to Seragen US in writing such information as Seragen
US may reasonably require from such seller, and otherwise reasonably cooperate
with Seragen US in connection with any registration statement with respect to
such Registrable Securities. In the event that Seragen identifies any
deficiency in information provided by a Holder pursuant to this clause (A),
Seragen shall inform the Holder of such deficiency and afford the Holder a
reasonable opportunity to correct such deficiency.
(B) The failure of any prospective seller of
Registrable Securities to furnish any information or documents in accordance
with any provision contained in this SECTION 18(E) shall not affect the
obligations of Seragen US under this SECTION 18 to any remaining sellers who
furnish such information and documents unless in the reasonable opinion of
counsel to Seragen US or the underwriters, such failure impairs or may impair
the viability of the offering or the legality of the registration statement or
the underlying offering.
(C) The Holders of Registrable Securities
included in any registration statement shall not (until further notice) effect
sales thereof after receipt of telegraphic or written notice from Seragen US,
which notice shall be given only upon a good faith determination by the board
of directors of Seragen US that the registration statement requires amendment
or updating pursuant to applicable law, to suspend sales to permit Seragen US
to correct or update such registration statement or prospectus; provided,
however, that the obligations of Seragen US with respect to maintaining any
registration statement current and effective shall be extended by a period of
days equal to the period such suspension is in effect and Seragen US shall use
its best efforts to limit any such suspension to a period of not more than 120
days.
(D) At the end of any period during which Seragen
US is obligated to keep any registration statement current and effective
pursuant to this SECTION 18, the Holders of Registrable Securities included in
such registration statement shall discontinue sales of Registrable Securities
pursuant to such registration statement upon receipt of notice from Seragen US
of its intention to remove from registration the Registrable Securities
covered by such registration statement which remain unsold, and such Holders
shall notify Seragen US of the number of Registrable Securities registered
which remain unsold promptly after receipt of such notice from Seragen US.
(v) Indemnification.
(A) Indemnification by Seragen US. In connection
with each registration statement relating to disposition of Registrable
Securities, Seragen US shall indemnify and hold harmless each Holder and each
underwriter of Registrable Securities and each person, if any, who controls
such Holder or underwriter (within the meaning of Section 15 of the 1933 Act
or Section 20 of the 1934 Act) against any and
<PAGE>
- 27 -
all losses, claims, damages and liabilities, joint or several (including any
reasonable investigation, legal and other expenses incurred in connection
with, and any amount paid in settlement of, any action, suit or proceeding or
any claim asserted), to which they, or any of them, may become subject under
the 1933 Act, the 1934 Act or any other federal or state law or regulation, at
common law or otherwise, insofar as such losses, claims, damages or
liabilities arise out of or are based upon any untrue statement or alleged
untrue statement of a material fact contained in any registration statement,
prospectus or preliminary prospectus or any amendment thereof or supplement
thereto, or arise out of or are based upon any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading; provided, however, that such
indemnity shall not inure to the benefit of any Holder or underwriter (or any
person controlling such Holder or underwriter within the meaning of Section 15
of the 1933 Act or Section 20 of the 1934 Act) on account of any losses,
claims, damages or liabilities arising from the sale of the Registrable
Securities if such untrue statement or omission or alleged untrue statement or
omission was made in such registration statement, prospectus or preliminary
prospectus, or such amendment or supplement, in reliance upon and in
conformity with information furnished in writing to Seragen US by the Holder
or underwriter specifically for use therein. Seragen US shall also indemnify
selling brokers, dealer managers and similar securities industry professionals
participating in the distribution, their officers and directors and each
person who controls such persons (within the meaning of Section 15 of the 1933
Act or Section 20 of the 1934 Act) to the same extent as provided above with
respect to the indemnification of the Holders of Registrable Securities, if
requested. The indemnification obligation imposed on Seragen US under this
SECTION 18(E)(V)(A) shall be in addition to any liability which Seragen US may
otherwise have.
(B) Indemnification of Each Holder. In
connection with each registration statement, each Holder shall indemnify, to
the same extent as the indemnification provided by Seragen US in SECTION
18(E)(V)(A) hereof, Seragen US, its directors and each officer who signs the
registration statement and each person who controls Seragen US (within the
meaning of Section 15 of the 1933 Act and Section 20 of the 1934 Act) insofar
as such losses, claims and damages arise out of or are based upon any untrue
statement or omission or alleged untrue statement or omission contained in any
registration statement, prospectus or preliminary prospectus or any amendment
thereof or supplement thereto, in reliance upon and in conformity with
information furnished in writing by such Holder to Seragen US specifically for
use therein. In no event shall the liability of any selling Holder of
Registrable Securities hereunder be greater in amount than the dollar amount
of the net proceeds received by such Holder upon the sale of the Registrable
Securities giving rise to such indemnification obligation. Seragen US shall
be entitled to receive indemnities from underwriters, selling brokers, dealer
managers and similar securities industry professionals participating in the
distribution, to the same extent as provided above, with respect to
information so furnished in writing by such persons specifically for inclusion
in any prospectus, registration statement or preliminary prospectus or any
amendment thereof or supplement thereto.
(C) Conduct of Indemnification Procedure. Any
party that proposes to assert the right to be indemnified hereunder will,
promptly after receipt of notice of commencement of any action, suit or
proceeding against such party in respect of which a claim is to be made
<PAGE>
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against an indemnifying party or parties under this SECTION 18(E)(V), notify
each such indemnifying party of the commencement of such action, suit or
proceeding, enclosing a copy of all papers served. No indemnification
provided for in SECTION 18(E)(V)(A) and (B) hereof shall be available to any
party who shall fail to give notice as provided in this SECTION 18(E)(V)(C) if
the party to whom notice was not given was unaware of the proceeding to which
such notice would have related and was prejudiced by the failure to give such
notice, but the omission so to notify such indemnifying party of any such
action, suit or proceeding shall not relieve it from any liability that it may
have to any indemnified party for contribution or otherwise than under this
SECTION 18(E)(V). In case any such action, suit or proceeding shall be brought
against any indemnified party and it shall notify the indemnifying party of
the commencement thereof, the indemnifying party shall be entitled to
participate in, and, to the extent that it shall wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel reasonably satisfactory to such indemnified party, and after notice
from the indemnifying party to such indemnified party of its election so to
assume the defense thereof and the approval by the indemnified party to such
indemnifying party of indemnifying party's counsel, the indemnifying party
shall not be liable to such indemnified party for any legal or other expenses,
except as provided below and except for the reasonable costs of investigation
subsequently incurred by such indemnified party in connection with the defense
thereof. The indemnified party shall have the right to employ its own counsel
in any such action, but, after the assumption of the defense of such action by
an indemnifying party, the fees and expenses of such counsel shall be at the
expense of such indemnified party unless (I) the employment of counsel by such
indemnified party has been authorized in writing by the indemnifying parties,
(II) the indemnified party shall have reasonably concluded that there may be a
conflict of interest between the indemnifying parties and the indemnified
party in the conduct of the defense of such action (in which case the
indemnifying parties shall not have the right to direct the defense of such
action on behalf of the indemnified party) or (III) the indemnifying parties
shall not have employed counsel to assume the defense of such action within a
reasonable time after notice of the commencement thereof, in each of which
cases the fees and expenses of counsel shall be at the expense of the
indemnifying parties. An indemnifying party shall not be liable for any
settlement of any action, suit, proceeding or claim effected without its
written consent.
(D) Contribution. In connection with each
registration statement relating to the disposition of Registrable Securities,
if the indemnification provided for in SECTION 18(E)(V)(A) or (B) is
unavailable to an indemnified party thereunder in respect of any losses,
claims, damages or liabilities referred to therein, then the indemnifying
party shall, in lieu of indemnifying such indemnified party, contribute to the
amount paid or payable by such indemnified party as a result of such losses,
claims, damages or liabilities. The amount to be contributed by the
indemnifying party hereunder shall be (I) in such proportion as is appropriate
to reflect the relative benefits received by Seragen US, the selling Holders
and the underwriters from the offering of Registrable Securities or other
securities or, (II) if the allocation provided by clause (I) above is not
permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause (I) above but also the
relative fault of Seragen US, the selling Holders, and the underwriter in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities, as well as any other relevant equitable
considerations.
<PAGE>
- 29 -
(E) Specific Performance. Seragen US and the
Holder acknowledge that remedies at law for the enforcement of this SECTION
18(E)(V) may be inadequate and intend that this SECTION 18(E)(V) shall be
specifically enforceable.
(vi) Participation in Underwritten Registrations. No
Person may participate in any underwritten registration pursuant to this
SECTION 18 unless such Person (A) agrees to sell such Person's securities on
the basis provided in any underwriting arrangements approved by the persons
entitled, under the provisions contained in this SECTION 18(E), to approve
such arrangements, and (B) completes and executes all questionnaires, powers
of attorney, indemnities, underwriting agreements and other documents
reasonably required by the terms of such underwriting arrangements. Any
Holder of Registrable Securities to be included in any underwritten
registration shall be entitled at any time to withdraw such Registrable
Securities from such registration in the event that such Holder shall
disapprove of any of the terms of the related underwriting agreement.
19. Certain Actions.
(a) Continuation of Seragen Canada in British Columbia.
The parties hereto shall proceed forthwith following the execution and
delivery of this Agreement to take all actions necessary or desirable to
continue Seragen Canada as a business corporation under the laws of British
Columbia.
(b) Reorganization of Capital. Immediately following the
continuation of Seragen Canada as a business corporation under the laws of
British Columbia, the parties hereto shall proceed to take all actions
necessary or desirable, including the filing of articles of amendment, to
reorganize the capital of Seragen Canada as follows: The authorized capital
of Seragen Canada shall be amended to provide for two new classes of shares,
being Class C shares and Class D shares. The Class C shares and Class D
shares shall have those rights and terms set forth in SCHEDULE 19(B) hereto.
(c) Exchange Agreement. The parties acknowledge and agree
that subsequent to the actions contemplated by CLAUSES (A) and (B) of this
SECTION 19 and immediately prior to the Effective Closing, they will enter
into an Exchange Agreement in the form annexed hereto as SCHEDULE 19(C) and
consummate the transactions contemplated thereby. Seragen US shall in
connection with such transaction request and endeavor to obtain a certificate
under Section 116 of the Income Tax Act (Canada) from the Canadian federal tax
authorities.
(d) Redemption Transactions. Following the completion of
the actions contemplated by CLAUSES (A), (B) and (C) of this SECTION 19, each
Investor Shareholder and Seragen Canada shall enter into a Purchase and Sale
Agreement in the form annexed hereto as SCHEDULE 19(D) and consummate the
transactions contemplated thereby. At the closing of the transactions
contemplated by this CLAUSE (D), (i) Seragen US shall deliver to the Investor
Shareholders a certificate, executed by an executive officer of Seragen US, to
the effect that all of the conditions to the Investor Shareholders'
obligations set forth in SECTION 19A(A) have
<PAGE>
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been fulfilled and (ii) each Investor Shareholder shall deliver to Seragen US
a certificate, executed by an executive officer of the Investor Shareholder,
to the effect that all of the conditions to Seragen US' obligations set forth
in SECTION 19A(B), insofar as they relate to such Investor Shareholder, have
been fulfilled.
(e) Timing. The transactions contemplated in CLAUSES (C)
and (D) of this SECTION 19 shall be consummated on or before the tenth day
following the completion of the actions contemplated by CLAUSES (A) and (B) of
this Section. In addition, the transactions contemplated in CLAUSES (C) and
(D) of this Section shall occur successively on the same date, and all
documentation in connection therewith shall be held in escrow by a mutually
agreed upon third party until the consummation of the transactions
contemplated in CLAUSE (D), failing which the transactions contemplated in
CLAUSE (C) of this Section shall be deemed never to have occurred and all
documentation in connection therewith shall be destroyed.
(f) Expenses and Liabilities.
(i) Seragen Canada shall bear and pay, at or prior to the
Effective Closing, and provided it occurs, out of its cash on hand, all
reasonable out-of-pocket expenses incurred by Seragen US, in respect of
professional services rendered or other actions taken on or after May 1, 1997,
in connection with the preparation and negotiation of this Agreement and the
consummation of the transactions contemplated hereby, including, without
limitation, filing fees, fees and disbursements of legal counsel, and travel
costs, but excluding expenses relating to the issuance and registration of the
Common Stock pursuant to and as contemplated by SECTIONS 13 and 18 hereof.
Seragen US shall provide Seragen Canada and the Investor Shareholders with
appropriate documentation evidencing amounts claimed by Seragen US to be
reimbursed hereunder. Notwithstanding the foregoing, the maximum amount to be
reimbursed by Seragen Canada to Seragen US pursuant to this CLAUSE (I) shall
be U.S.$100,000.
(ii) Seragen Canada shall bear and pay, at or prior to the
Effective Closing, out of its cash on hand, all of its expenses and those of
the Investor Shareholders in connection with the preparation and negotiation
of this Agreement and the consummation of the transactions contemplated
hereby, including, without limitation, filing fees, fees and disbursements of
legal counsel and travel costs.
(g) Dissolution of Seragen Canada. Seragen US, in its
capacity as the sole shareholder of Seragen Canada following the consummation
of the transactions contemplated by CLAUSES (A) through (D) of this SECTION
19, shall do all acts which are necessary to maintain the corporate existence
of Seragen Canada and shall not take any action toward the dissolution,
liquidation or winding-up of Seragen Canada prior to the later of (i) January
1, 2000, and (ii) the issuance of the Offered Shares to the Investor
Shareholders.
19A. Certain Conditions.
(a) Conditions to the Investor Shareholders' Obligations.
The obligation of the Investor Shareholders to consummate the Redemption
Transactions is conditioned upon the satisfaction, at or
<PAGE>
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prior to the Effective Closing, of each of the following conditions, any of
which may be waived by the affected Investor Shareholder:
(i) All representations and warranties of Seragen US made
in SECTION 2 shall be true and correct as of the Effective Closing as though
made at such time (except for those representations and warranties made as of
a particular date), except for inaccuracies or changes which neither
individually nor in the aggregate would have an adverse effect on the ability
of Seragen US to consummate the transactions contemplated hereby;
(ii) Seragen US shall have performed all covenants and
agreements required by this Agreement to be performed by it prior to the
Effective Closing;
(iii) All consents and approvals of governmental
authorities necessary to consummate the transactions contemplated hereunder
shall have been obtained;
(iv) No litigation challenging the legality of the
transactions provided for in this Agreement shall have been instituted or
threatened and not settled or otherwise terminated;
(v) The Investor Shareholders shall have received an
opinion of Richards Buell Sutton, British Columbia counsel to the Investor
Shareholders, substantially in the form of SCHEDULE 19A(A)(V) hereto;
(vi) Seragen US shall have delivered the certificates and
other documents required to be delivered by it at or before the Effective
Closing;
(vii) Seragen US shall have reserved and have available a
sufficient number of shares of Common Stock for the purpose of enabling
Seragen US to satisfy its obligations to issue the Offered Shares pursuant
hereto;
(viii) Seragen Canada shall have delivered the Guaranty,
Security Agreement, and financing statement contemplated by SECTION 13(E)
hereof;
(ix) Seragen US shall have delivered to Seragen Canada a
release substantially in the form of SCHEDULE 19A(A)(IX), such release to be
dated the Effective Date; and
(x) Seragen US shall have delivered to the Investor
Shareholders a release substantially in the form of SCHEDULE 19A(A)(X), such
release to be dated the Effective Date.
(b) Conditions to Seragen US' Obligations. The obligation
of Seragen US to consummate the Redemption Transactions is conditioned upon
the satisfaction, at or prior to the Effective Closing, of each of the
following conditions, any of which may be waived by Seragen US:
<PAGE>
- 32 -
(i) All representations and warranties of the Investor
Shareholders made in SECTION 4 shall be true and correct as of the Effective
Closing as though made at such time (except for those representations and
warranties made as of a particular date), except for inaccuracies or changes
which neither individually nor in the aggregate would have an adverse effect
on the ability of the Investor Shareholders to consummate the transactions
contemplated hereby;
(ii) The Investor Shareholders shall have performed all
covenants and agreements required by this Agreement to be performed by them
prior to the Effective Closing;
(iii) All consents and approvals of governmental
authorities necessary for the Investor Shareholders to consummate the
transactions contemplated hereunder shall have been obtained;
(iv) No litigation challenging the legality of the
transactions provided for in this Agreement shall have been instituted or
threatened and not settled or otherwise terminated;
(v) Seragen US shall have received an opinion of Richards
Buell Sutton, British Columbia counsel to the Investor Shareholders,
substantially in the form of SCHEDULE 19A(A)(V) hereto;
(vi) Each of the Investor Shareholders shall have
delivered the certificates and other documents required to be delivered by it
at or before the Effective Closing;
(vii) The Investor Shareholders shall have secured and
delivered to Seragen US the resignation of all directors of Seragen Canada
designated by the Investor Shareholders pursuant to the Shareholders'
Agreement;
(viii) HCBVF shall have delivered to Seragen US a copy of
the order pursuant to which it was designated an "exempt purchaser" for
purposes of the Securities Act (Ontario);
(ix) each of the Investor Shareholders shall have
delivered to Seragen Canada a release substantially in the form of SCHEDULE
19A(B)(IX), such release to be dated the Effective Date; and
(x) each of the Investor Shareholders shall have delivered
to Seragen US a release substantially in the form of SCHEDULE 19A(B)(X), such
release to be dated the Effective Date.
(c) Seragen Canada. In the event that any condition to the
obligation of the Investor Shareholders or Seragen US to proceed with
<PAGE>
- 33 -
the Redemption Transactions has not been fulfilled or waived by the Effective
Closing, Seragen Canada shall not be obligated to, and shall not, proceed with
the Redemption Transactions.
20. Term.
(a) Term. This Agreement shall enter into effect as of the
date first set forth above and shall continue in full force and effect subject
to termination in accordance with the provisions of CLAUSE (B) of this SECTION
20.
(b) Termination. In the event that the Effective Closing
has not occurred by the close of business on June 15, 1998, (i) Seragen US
may deliver notice of its intent to terminate this Agreement to each of the
Investor Shareholders and Seragen Canada, and (ii) not less than a majority of
the Investor Shareholders may deliver notice of their intent to terminate this
Agreement, such notice to be delivered to Seragen US, Seragen Canada, and any
Investor Shareholders that are not parties to such notice. This Agreement
shall terminate on such date as may be specified in any notice given pursuant
to the first sentence of this clause (b); provided, however, that such
specified date may not be earlier than the thirty-first day following the date
of the notice; and, provided, further, that if the Effective Closing
occurs prior to the termination date specified in the notice, the notice shall
be without effect and this Agreement shall continue in full force and effect
notwithstanding the notice.
(c) Limitations on Termination. Notwithstanding the
provisions of CLAUSE (B) of this SECTION 20, neither Seragen US, on the one
hand, nor the Investor Shareholders, on the other hand, may terminate this
Agreement as a result of the failure of the Effective Closing to have timely
occurred if the failure of the Effective Closing to have occurred on or prior
to the date specified for termination of the Agreement is attributable to any
material extent to any action or failure to act of Seragen US, on the one
hand, or any Investor Shareholder, on the other hand, respectively.
(d) Effect of Termination. Nothing herein shall be
construed to release any party from any obligation which matured or any breach
of this Agreement which occurred prior to the effective date of any
termination of this Agreement. Upon the termination of this Agreement, the
provisions of the Related Documents, and each of them, shall continue in full
force and effect in accordance with their terms as though this Agreement had
never been entered into.
21. Best Efforts. Each of Seragen US, on the one hand, and the
Investor Shareholders, on the other hand, shall use its or their best efforts
to cause the conditions to the other's obligation to consummate the Redemption
Transactions, as set forth in SECTION 19A, to be satisfied and to effect the
actions contemplated in SECTION 19, in each case as promptly as possible
following the execution and delivery of this Agreement and in any event prior
to June 15, 1998. Notwithstanding the provisions of the foregoing sentence,
the parties acknowledge and agree that the decision on the part of Seragen US
to deliver the releases contemplated by SECTION 19A(A)(IX) and (X) and the
decision on the part of
<PAGE>
- 34 -
each Investor Shareholder to deliver the releases contemplated by SECTION
19A(B)(Ix) and (X) shall be at the sole and absolute discretion of the
delivering party, and no breach of any term of this Agreement shall be deemed
to arise or exist solely because of the failure or refusal of a delivering
party to deliver any such release.
22. No Admission. In the event that this Agreement becomes null
and void for any reason whatsoever, the parties agree that this Agreement and
anything contained in or derived from this Agreement or the provisions thereof
shall not be admissible or constitute any evidence, and shall not be of
probative value in any current or subsequent proceeding.
23. Arbitration. If any dispute or question (a "Dispute") shall
arise between the parties or any of them concerning the interpretation of this
Agreement or any part thereof, the parties shall attempt in good faith to
resolve such Dispute. If the parties have not agreed to a settlement of the
Dispute within 30 days from the date on which the Dispute first becomes known
to all of the parties, then the parties agree that the Dispute shall be
submitted to arbitration pursuant to Schedule A to the Shareholders'
Agreement. The decision of the arbitrators shall be conclusively deemed to
determine the rights and liabilities as between the parties to the arbitration
in respect of the matter in Dispute. Such Dispute shall not be made the
subject matter of an action in any court by any party hereto unless the
Dispute has been first submitted to arbitration and finally determined by the
arbitrator(s). Any such action commenced thereafter shall only be for the
purpose of enforcing the decision of the arbitrator(s) and the costs
incidental to the action.
24. Entire Agreement. This Agreement constitutes the entire
agreement between the parties with respect to the subject matter hereof and
supersedes and cancels any previous agreement, negotiations, commitments and
writings in respect thereto. Any modification of this Agreement must be in
writing and signed by the duly authorized representative of each party.
25. Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be an original and all of which, when
taken together, shall constitute one agreement. Delivery of an executed
counterpart of a signature page of this Agreement by facsimile transmission
shall be as effective as delivery of a manually executed counterpart of this
Agreement.
26. Binding Effect. This Agreement shall inure to the benefit
of, and be binding upon, the parties to it and their respective successors and
permitted assigns.
27. Headings. The headings and captions of the various
subdivisions of this Agreement are for convenience of reference only and shall
in no way modify, or affect the meaning or construction of, any of the terms
or provisions hereof.
<PAGE>
- 35 -
28. Assignment. The rights and obligations under this Agreement
may not be assigned by any party hereto without the prior written consent of
the other parties.
29. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the Province of Quebec and the laws
of Canada applicable therein.
30. Notices. Any notice or other communication required or
permitted to be given hereunder shall be in writing and shall be given by
prepaid first-class mail, by facsimile or other means of electronic
communication, or by delivery as hereafter provided. Any such notice or other
communication, if mailed by prepaid first-class mail at any time other than
during a general discontinuance of postal service due to strike, lockout or
otherwise, shall be deemed to have been received on the fourth Business Day
after the post-marked date thereof, or if sent by facsimile or other means of
electronic communication, shall be deemed to have been received on the
Business Day following the sending, or if delivered by hand shall be deemed to
have been received at the time it is delivered to the applicable address noted
below either to the individual designated below or to an individual at such
address having apparent authority to accept deliveries on behalf of the
addressee. Notice of change of address shall also be governed by this SECTION
30. In the event of a general discontinuance of postal service due to strike,
lockout or otherwise, notices or other communications shall be delivered by
hand or sent by facsimile or other means of electronic communication and shall
be deemed to have been received in accordance with this SECTION 30. Notices
and other communications shall be addressed as follows:
(a) if to Seragen US:
97 South Street
Hopkinton, Massachusetts 01748
Attention: Chief Executive Officer
Telecopier number: (508) 435-9805
with a copy to Seragen US's counsel at:
Covington & Burling
1201 Pennsylvania Avenue, N.W.
P.O. Box 7566
Washington D.C. 20044
Attention: Edward Britton
Telecopier number: (202) 662-6291
<PAGE>
- 36 -
(b) if to Sofinov:
1981 Avenue McGill College
Seventh Floor
Montreal, Quebec H3A 3C7
Attention: President
Telecopier number: (514) 847-2628
with a copy to:
Lapointe Rosenstein
1010 Sherbrooke Street West
Suite 1100
Montreal, Quebec H3A 2R7
Attention: Claude Bergeron
Telecopier number: (514) 288-7390
(c) if to Innovatech:
2020 University Street
Suite 1527
Montreal, Quebec H3A 2A5
Attention: President and Chief Executive
Officer
Telecopier number: (514) 864-4220
with a copy to:
Lapointe Rosenstein
1010 Sherbrooke Street West
Suite 1100
Montreal, Quebec H3A 2R7
Attention: Claude Bergeron
Telecopier number: (514) 288-7390
<PAGE>
- 37 -
(d) if to MDS:
100 International Blvd.
Etobicoke, Ontario M9W 6J6
Attention: Frank Gleeson
Telecopier number: (416) 213-4232
(e) if to CMDF:
100 International Blvd.
Etobicoke, Ontario M9W 6J6
Attention: Frank Gleeson
Telecopier number: (416) 213-4232
(f) if to RBCC:
Royal Bank Plaza
13th Floor, South Tower
Toronto, Ontario M5J 2J5
Attention: Z. Sam Ruttonsha
Telecopier number: (416) 974-8411
(g) if to HCBVF:
100 International Blvd.
Etobicoke, Ontario M9W 6J6
Attention: Michael J. Callaghan
Telecopier number: (416) 213-4232
(h) if to Seragen Canada:
1250 Rene-Levesque Blvd. West
Suite 2500
Montreal, Quebec H3B 4Y1
Attention: President, care of Bruce McNiven
Telecopier number: (514) 846-3427
<PAGE>
- 38 -
with a copy to the Corporation's counsel at:
Heenan Blaikie
P.O. Box 185, Suite 3350
South Tower, Royal Bank Plaza
Toronto, Ontario M5J 2J4
Attention: Robert A. Donaldson
Telecopier number: (416) 360-8425
Notwithstanding the foregoing, any notice or other communication required or
permitted to be given by any party pursuant to or in connection with any
arbitration procedures contemplated hereby may only be delivered by hand. For
purposes of this SECTION 30, "Business Day" means any day other than a
Saturday, Sunday or day on which banks are required or permitted to close in
any of the Province of Ontario, the Province of Quebec, or the Commonwealth of
Massachusetts.
31. Further Assurances. Each of the parties hereto hereby
covenants with each other party hereto to do any and all things and to execute
and deliver any and all acknowledgments, instruments, or other documents
whatsoever, at any time or from time to time after the date hereof upon the
request of any party hereto, that may be necessary or desirable in order more
fully and effectively to carry into effect and consummate the provisions of
this Agreement and the transactions contemplated hereby, including, without
limitation, the transactions contemplated by SECTION 19 hereof.
32. Language Clause. Les parties aux presente ont exige que la
presente convention ainsi que tous les documents et avis qui s'y rattachent
et/ou qui en decouleront soient rediges en langue anglaise. The parties
hereto have required that this Agreement and all documents and notices related
thereto and/or resulting therefrom be drawn up in English.
[The remainder of this page was left blank intentionally.]
<PAGE>
- 38 -
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the date first written above.
SERAGEN BIOPHARMACEUTICALS LTD.
SERAGEN BIOPHARMACEUTIQUE LTEE
By /s/ Lorne Meikle
-------------------------
Title: President and CEO
SERAGEN, INC.
By /s/ Reed R. Prior
-------------------------
Reed R. Prior
Chairman, Chief Executive
Officer and Treasurer
SOFINOV SOCIETE FINANCIERE D'INNOVATION INC.
By /s/ Denis Dionne
-------------------------
Denis Dionne
President
By /s/ Claude Miron
-------------------------
Claude Miron
Vice-President
<PAGE>
- 39 -
SOCIETE INNOVATECH DU GRAND MONTREAL
By /s/ Hubert Manseau
-------------------------
Title: President and CEO
MDS HEALTH VENTURES INC.
By /s/ Gregory Gubitz
-------------------------
Title:
By /s/ F. M. Gleeson
-------------------------
Title:
CANADIAN MEDICAL DISCOVERIES FUND INC.
By /s/ Gregory Gubitz
-------------------------
Title:
By /s/ F. M. Gleeson
-------------------------
Title:
ROYAL BANK CAPITAL CORPORATION
By /s/ Z. Sam Ruttonsha
-------------------------
Title:
HEALTH CARE AND BIOTECHNOLOGY VENTURE FUND
By /s/ Gregory Gubitz
-------------------------
Title:
By /s/ F. M. Gleeson
-------------------------
Title:
<PAGE>
LIST OF SCHEDULES
SCHEDULE 1 - Seragen Canada Balance Sheet
SCHEDULE 4(e) - Seragen Canada Shares Owned by Investor
Shareholders
SCHEDULE 13(a) - Dollar Amounts for Investor Shareholders
SCHEDULE 13(f)(i) - Form of Guaranty
SCHEDULE 13(f)(ii) - Form of Security Agreement
SCHEDULE 13(f)(iii) - Form of Financing Statement**
SCHEDULE 19(b) - Terms of Class C and Class D Shares
SCHEDULE 19(c) - Form of Exchange Agreement
SCHEDULE 19(d) - Form of Purchase and Sale Agreements
SCHEDULE 19A(a)(v) - Form of Opinion of British Columbia Counsel
SCHEDULE 19A(a)(ix) - Form of Seragen US release of Seragen Canada
SCHEDULE 19A(a)(x) - Form of Seragen US release of Investor
Shareholders
SCHEDULE 19A(b)(ix) - Form of Investor Shareholder release of Seragen
Canada
SCHEDULE 19A(b)(x) - Form of Investor Shareholder release of Seragen
US
<PAGE>
CONFIDENTIAL TREATMENT HAS BEEN
REQUESTED FOR PORTIONS OF THIS
EXHIBIT, WHICH PORTIONS HAVE BEEN
OMITTED FROM THE ATTACHED DOCUMENT
AND FILED SEPERATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
THE OMITTED PORTIONS HAVE BEEN
REPLACED BY AN ASTERISK ENCLOSED BY
BRACKETS ("[ * ]")
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
LIGAND PHARMACEUTICALS INCORPORATED,
KNIGHT ACQUISITION CORPORATION
AND
SERAGEN, INC.
DATED AS OF MAY 11, 1998
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I THE MERGER . . . . . . . . . . . . . . . . . . . . . . 2
1.1 The Merger . . . . . . . . . . . . . . . . . . . . . . 2
1.2 Effective Time . . . . . . . . . . . . . . . . . . . . 2
1.3 Effect of the Merger . . . . . . . . . . . . . . . . . 2
1.4 Certificate of Incorporation; Bylaws . . . . . . . . . 3
1.5 Directors and Officers . . . . . . . . . . . . . . . . 3
1.6 Consideration to Be Issued . . . . . . . . . . . . . . 3
1.7 Distribution of Merger Consideration . . . . . . . . . 6
1.8 Effect on Company Capital Stock. . . . . . . . . . . . 12
1.9 Dissenting Shares. . . . . . . . . . . . . . . . . . . 13
1.10 Surrender of Certificates. . . . . . . . . . . . . . . 13
1.11 No Further Ownership Rights in Company Capital Stock . 15
1.12 Lost, Stolen or Destroyed Certificates . . . . . . . . 15
1.13 Deliveries . . . . . . . . . . . . . . . . . . . . . . 15
1.14 Tax and Accounting Consequences. . . . . . . . . . . . 16
1.15 Taking of Necessary Action; Further Action . . . . . . 16
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY. . . . . 16
2.1 Organization of the Company. . . . . . . . . . . . . . 17
2.2 Company Capital Structure. . . . . . . . . . . . . . . 17
2.3 Subsidiaries and Joint Ventures. . . . . . . . . . . . 17
2.4 Authority. . . . . . . . . . . . . . . . . . . . . . . 18
2.5 Non-Contravention. . . . . . . . . . . . . . . . . . . 19
2.6 Consents and Approvals . . . . . . . . . . . . . . . . 19
2.7 Company Financial Statements; SEC Documents. . . . . . 19
2.8 Ownership of Parent Stock. . . . . . . . . . . . . . . 20
2.9 No Undisclosed Liabilities . . . . . . . . . . . . . . 20
2.10 No Changes . . . . . . . . . . . . . . . . . . . . . . 21
2.11 Tax and Other Returns and Reports. . . . . . . . . . . 23
2.12 Restrictions on Business Activities. . . . . . . . . . 25
2.13 Title to Properties; Absence of Liens and Encumbrances 26
2.14 Intellectual Property. . . . . . . . . . . . . . . . . 26
2.15 Agreements, Contracts and Commitments. . . . . . . . . 29
2.16 Interested Party Transactions. . . . . . . . . . . . . 31
2.17 Compliance with Laws . . . . . . . . . . . . . . . . . 31
2.18 Litigation . . . . . . . . . . . . . . . . . . . . . . 31
2.19 Insurance. . . . . . . . . . . . . . . . . . . . . . . 31
2.20 Minute Books . . . . . . . . . . . . . . . . . . . . . 32
2.21 Relationships With Suppliers and Licensors . . . . . . 32
2.22 Environmental Matters. . . . . . . . . . . . . . . . . 32
2.23 Brokers' and Finders' Fees; Third Party Expenses . . . 33
2.24 Permits and Licenses; No Debarment . . . . . . . . . . 33
2.25 Employee Matters and Benefit Plans . . . . . . . . . . 34
2.26 Employees. . . . . . . . . . . . . . . . . . . . . . . 37
i
<PAGE>
2.27 Distribution of Merger Consideration . . . . . . . . . 37
2.28 Disclosure Documents . . . . . . . . . . . . . . . . . 38
2.29 Opinion of Lehman Brothers . . . . . . . . . . . . . . 38
2.30 Representation Complete. . . . . . . . . . . . . . . . 38
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB 38
3.1 Organization, Standing and Power . . . . . . . . . . . 39
3.2 Authority. . . . . . . . . . . . . . . . . . . . . . . 39
3.3 Capital Structure. . . . . . . . . . . . . . . . . . . 40
3.4 SEC Documents; Parent Financial Statements . . . . . . 41
3.5 No Material Adverse Change . . . . . . . . . . . . . . 41
3.6 Litigation . . . . . . . . . . . . . . . . . . . . . . 42
3.7 Disclosure Documents . . . . . . . . . . . . . . . . . 42
3.8 Ownership of Company Stock . . . . . . . . . . . . . . 42
3.9 Subsidiaries and Joint Ventures. . . . . . . . . . . . 42
3.10 Compliance with Laws . . . . . . . . . . . . . . . . . 43
3.11 Minute Books . . . . . . . . . . . . . . . . . . . . . 43
3.12 No Undisclosed Liabilities . . . . . . . . . . . . . . 43
3.13 Restrictions on Business Activities. . . . . . . . . . 44
3.14 Representations Complete . . . . . . . . . . . . . . . 44
ARTICLE IV CONDUCT PRIOR TO THE EFFECTIVE TIME. . . . . . . . . . 44
4.1 Conduct of Business of the Company . . . . . . . . . . 44
4.2 Conduct of Business of Parent. . . . . . . . . . . . . 47
4.3 Other Offers . . . . . . . . . . . . . . . . . . . . . 47
4.4 Employee Releases. . . . . . . . . . . . . . . . . . . 48
4.5 Option and Asset Purchase Agreement. . . . . . . . . . 48
ARTICLE V ADDITIONAL AGREEMENTS. . . . . . . . . . . . . . . . . 48
5.1 Stockholders' Meeting; Proxy Material; Registration
Statement. . . . . . . . . . . . . . . . . . . . . . . 48
5.2 Access to Information. . . . . . . . . . . . . . . . . 50
5.3 Confidentiality. . . . . . . . . . . . . . . . . . . . 50
5.4 Intellectual Property. . . . . . . . . . . . . . . . . 51
5.5 Expenses . . . . . . . . . . . . . . . . . . . . . . . 51
5.6 Public Disclosure. . . . . . . . . . . . . . . . . . . 51
5.7 Consents . . . . . . . . . . . . . . . . . . . . . . . 51
5.8 FIRPTA Compliance. . . . . . . . . . . . . . . . . . . 51
5.9 Best Efforts . . . . . . . . . . . . . . . . . . . . . 51
5.10 Notification of Certain Matters. . . . . . . . . . . . 52
5.11 Additional Documents and Further Assurances. . . . . . 53
5.12 Company Auditors . . . . . . . . . . . . . . . . . . . 53
5.13 Preclosing Company Payables; Preclosing Company Revenues 53
5.14 Marathon Service Agreement . . . . . . . . . . . . . . 54
5.15 Obligations of Merger Sub. . . . . . . . . . . . . . . 54
5.16 Development Activities . . . . . . . . . . . . . . . . 54
ii
<PAGE>
5.17 FDA Contacts . . . . . . . . . . . . . . . . . . . . . 55
5.18 Payables . . . . . . . . . . . . . . . . . . . . . . . 56
5.19 Certain Escrow Amounts . . . . . . . . . . . . . . . . 56
ARTICLE VI CONDITIONS TO THE MERGER . . . . . . . . . . . . . . . 56
6.1 Conditions to Obligations of Each Party to Effect the
Merger . . . . . . . . . . . . . . . . . . . . . . . . 56
6.2 Additional Conditions to Obligations of the Company. . 57
6.3 Additional Conditions to the Obligations of Parent and
Merger Sub . . . . . . . . . . . . . . . . . . . . . . 58
ARTICLE VII TERMINATION, AMENDMENT AND WAIVER. . . . . . . . . . . 60
7.1 Termination. . . . . . . . . . . . . . . . . . . . . . 60
7.2 Effect of Termination. . . . . . . . . . . . . . . . . 62
7.3 Amendment. . . . . . . . . . . . . . . . . . . . . . . 62
7.4 Extension; Waiver. . . . . . . . . . . . . . . . . . . 62
ARTICLE VIII GENERAL PROVISIONS. . . . . . . . . . . . . . . . . 62
8.1 Survival of Representations, Warranties and Agreements;
Right of Set-off . . . . . . . . . . . . . . . . . . . 62
8.2 Notices. . . . . . . . . . . . . . . . . . . . . . . . 64
8.3 Interpretation . . . . . . . . . . . . . . . . . . . . 65
8.4 Counterparts . . . . . . . . . . . . . . . . . . . . . 65
8.5 Entire Agreement: Assignment . . . . . . . . . . . . . 65
8.6 Severability . . . . . . . . . . . . . . . . . . . . . 65
8.7 Other Remedies . . . . . . . . . . . . . . . . . . . . 66
8.8 Governing Law. . . . . . . . . . . . . . . . . . . . . 66
8.9 Consent to Jurisdiction and Forum Selection. . . . . . 66
8.10 Rules of Construction. . . . . . . . . . . . . . . . . 66
8.11 Specific Performance . . . . . . . . . . . . . . . . . 67
8.12 Corporate Transaction involving Parent . . . . . . . . 67
8.13 Insurance. . . . . . . . . . . . . . . . . . . . . . . 67
8.14 Third Party Beneficiaries. . . . . . . . . . . . . . . 67
8.15 Termination Fee. . . . . . . . . . . . . . . . . . . . 67
iii
<PAGE>
INDEX OF EXHIBITS AND SCHEDULES
EXHIBIT DESCRIPTION
Exhibit 6.2(d) Form of Legal Opinion of Counsel to Parent
Exhibit 6.3(d) Form of Legal Opinion of Counsel to the Company
SCHEDULE DESCRIPTION
Schedule 1.7(a)(i)(A) Escrow Agreement
Schedule 1.8(c) Company Warrants to be Assumed
Company Schedules
Parent Schedules
Schedule 4.1(n) Severance Payments
Schedule 6.2(c) Third Party Consents
Schedule 6.3(c) Third Party Consents
Schedule 6.3(k) Amended License Agreements
iv
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made and
entered into as of May 11, 1998 among Ligand Pharmaceuticals Incorporated, a
Delaware corporation ("Parent"), Knight Acquisition Corporation, a Delaware
corporation and a wholly-owned subsidiary of Parent ("Merger Sub"), and
Seragen, Inc., a Delaware corporation (the "Company").
RECITALS
A. The Boards of Directors of each of the Company, Parent and Merger
Sub believe it is in the best interests of each company and their respective
stockholders that Parent acquire the Company through the statutory merger of
Merger Sub with and into the Company (the "Merger") and, in furtherance
thereof, have approved the Merger.
B. Pursuant to the Merger, among other things, and subject to the
terms and conditions of this Agreement, all of the issued and outstanding
shares of capital stock of the Company ("Company Capital Stock") may be
converted into the right to receive shares of voting common stock, par value
$.001 per share, of Parent ("Parent Common Stock").
C. As part of the Merger Consideration (as defined in Section 1.6
below), the Company will receive Thirty Seven Million Dollars ($37,000,000)
contingent on receiving Final FDA Approval (as defined in Section 1.6(c)
below), which consideration may be paid in the form of cash, Parent Common
Stock or a combination of both, at the sole discretion of Parent.
D. The Company, Parent and Merger Sub desire to make certain
representations and warranties and other agreements in connection with the
Merger.
E. The Company, Parent and Merger Sub desire to enter into this
Agreement for the following reasons: (i) if the Company does not consummate a
financing or other transaction, then the Company's current cash position may
not be sufficient to meet its financial obligations at the current level
beyond June 1998; (ii) the Company has filed a biologics license application
for DAB389IL-2 with the United States Food and Drug Administration ("FDA") in
December 1997 and currently anticipates participating in a meeting with the
advisory panel to the FDA in June 1998, the results of which are uncertain;
(iii) the Company's ability to commercialize the DAB389IL-2 product on an
economically viable basis is uncertain as a result of the Company's
obligations to third parties; (iv) Ligand desires to obtain certain rights to
DAB389IL-2 and has an existing arrangement with Eli Lilly & Co. ("Lilly")
pursuant to which Ligand has been granted certain rights to DAB389IL-2; and
(v)
in connection with the execution and performance of this Merger Agreement and
as a result of the Merger, Ligand has represented that it will lose certain
rights under its agreements with Lilly.
<PAGE>
F. The Company, as of the date hereof, intends to enter into that
certain Accord and Satisfaction Agreement, of even date herewith (the "Accord
Agreement"), between the Company, Seragen Technology, Inc. ("STI"), Trustees
of Boston University ("BU"), Seragen LLC ("BU Holding"), Marathon
Biopharmaceuticals, LLC ("Marathon"), United States Surgical Corporation
("USSC"), Reed R. Prior ("Mr. Prior"), Jean C. Nichols, Ph.D. ("Dr. Nichols"),
Elizabeth C. Chen ("Ms. Chen"), Robert W. Crane ("Mr. Crane"), Leon C. Hirsch
("Mr. Hirsch"), Turi Josefsen ("Ms. Josefsen"), Gerald S.J. and Loretta P.
Cassidy (the "Cassidys"), Shoreline Pacific Institutional Finance
("Shoreline"), Lehman Brothers Inc. ("Lehman"), 520 Commonwealth Avenue Real
Estate Corp. and 660 Corporation, which is a material inducement to Ligand to
enter into this Merger Agreement.
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable
consideration, intending to be legally bound hereby the parties agree as
follows:
ARTICLE I
THE MERGER
1.1 The Merger. At the Effective Time (as defined in Section 1.2) and
subject to and upon the terms and conditions of this Agreement and the
applicable provisions of the Delaware General Corporation Law ("Delaware
Law"), Merger Sub shall be merged with and into the Company, the separate
corporate existence of Merger Sub shall cease, and the Company shall continue
as the surviving corporation and as a wholly-owned subsidiary of Parent. The
Company as the surviving corporation after the Merger is hereinafter sometimes
referred to as the "Surviving Corporation."
1.2 Effective Time. Unless this Agreement is earlier terminated
pursuant to Section 7.1, the closing of the Merger (the "Closing") will take
place as promptly as practicable, but no later than five (5) business days,
following satisfaction or waiver of the conditions set forth in Article VI, at
the offices of Brobeck, Phleger & Harrison LLP, 550 West "C" Street, Suite
1200, San Diego, California, unless another place or time is agreed to by
Parent and the Company. The date upon which the Closing actually occurs is
herein referred to as the "Closing Date." On the Closing Date, the parties
hereto shall cause the Merger to be consummated by filing an Agreement or
Certificate of Merger (or like instrument) with the Secretary of State of
Delaware (the "Merger Agreement"), in accordance with the relevant provisions
of applicable law (the time of confirmation by the Secretary of State of
Delaware of such filing, or such later time as may be set forth in this
Agreement, being referred to herein as the "Effective Time").
1.3 Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in the applicable provisions of Delaware Law.
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time, all the property, rights, privileges, powers and franchises of
the Company and Merger Sub shall vest in the Surviving Corporation, and all
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debts, liabilities and duties of the Company and Merger Sub shall become the
debts, liabilities and duties of the Surviving Corporation.
1.4 Certificate of Incorporation; Bylaws.
(a) Unless otherwise determined by Parent prior to the Effective
Time, at the Effective Time, the Certificate of Incorporation of Merger Sub,
as in effect immediately prior to the Effective Time, shall be the Certificate
of Incorporation of the Surviving Corporation until thereafter amended as
provided by law and such Certificate of Incorporation; provided, however, that
Article I of the Certificate of Incorporation of the Surviving Corporation
shall be amended to read as follows: "The name of the corporation is Seragen,
Inc."
(b) Unless otherwise determined by Parent, the Bylaws of Merger
Sub, as in effect immediately prior to the Effective Time, shall be the Bylaws
of the Surviving Corporation until thereafter amended.
1.5 Directors and Officers. The director(s) of Merger Sub immediately
prior to the Effective Time shall be the initial director(s) of the Surviving
Corporation, each to hold office in accordance with the Certificate of
Incorporation and Bylaws of the Surviving Corporation. The officers of Merger
Sub immediately prior to the Effective Time shall be the initial officers of
the Surviving Corporation, each to hold office in accordance with the Bylaws
of the Surviving Corporation.
1.6 Consideration to Be Issued. Subject to the terms and conditions
of this Agreement, Parent agrees to pay to, or on behalf of, as specified in
Section 1.7 hereof, holders of Company Capital Stock, or cause to be paid, an
aggregate amount of Sixty Seven Million Dollars ($67,000,000) (the "Merger
Consideration"), in the amounts and in the manner set forth in Sections 1.6(a)
and (b) herein.
(a) Closing Consideration. Parent shall pay as specified in
Section 1.7 hereof at the Closing an aggregate amount of Thirty Million
Dollars ($30,000,000) (the "Closing Consideration"), payable in the form of
cash in the amount of Four Million Dollars ($4,000,000), and shares of Parent
Common Stock in the amount of Twenty Six Million Dollars ($26,000,000), the
issuance of which has been registered under the Securities Act of 1933, as
amended (the "1933 Act"), as described herein; provided Parent may, in its
sole discretion, increase the amount of cash paid hereunder solely to cover
amounts due pursuant to Sections 1.7(a)(i)(A), (B), (C)(2) and (C)(3) of this
Agreement, in which case the Closing Consideration payable in shares of Parent
Common Stock shall be correspondingly reduced. The Closing Consideration
allocable to the holders of Company Common Stock and Company Series D
Preferred Stock (as defined herein) shall be delivered to the Exchange Agent
(as defined in Section 1.10(a) below) on or before the Closing Date for
distribution pursuant to Section 1.10 below. In addition, the Remaining
Closing Consideration shall be delivered at the Closing pursuant to Section
1.13 below.
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(b) Milestone Consideration. Parent shall also pay as specified
in Section 1.7 hereof an aggregate amount of Thirty Seven Million Dollars
($37,000,000) (the "Milestone Consideration") on the earlier of (i) the date
which is six (6) months after the date of receipt of Final FDA Approval and
(ii) the second anniversary of the Closing Date (the "Milestone Date");
provided, however, that in the event the Final FDA Approval has not been
received by the second anniversary of the Closing Date and, in addition, that
Parent has not breached its obligations under Section 5.16, Parent shall be
relieved of all obligations to pay the Milestone Consideration pursuant to
this Section 1.6(b). The Milestone Consideration, if any, may be paid in the
form of cash (which together with any cash consideration paid pursuant to
Section 1.6(a) above shall hereinafter be referred to as the "Cash
Consideration"), shares of Parent Common Stock, the issuance of which has been
registered under the 1933 Act, as described herein, or a combination of both
as determined by Parent in its sole discretion. The Milestone Consideration
allocable to the holders of Company Common Stock and Company Series D
Preferred Stock shall be delivered to the Exchange Agent on or before the
Milestone Date for distribution pursuant to Section 1.10 below. In addition,
the Milestone Consideration allocable to the recipients of the Stakeholder
Closing Consideration (as defined herein) (the "Variable Company
Stakeholders") shall be delivered on the Milestone Date pursuant to Section
1.13 below.
(c) Final FDA Approval. For purposes of this Agreement, "Final
FDA Approval" shall be deemed to have been received by the Company, Parent or
the Surviving Corporation, as the case may be, at such time as such party has
received such approval from the U.S. Food and Drug Administration ("FDA") as
is adequate to permit such party to begin the marketing, distribution in
interstate commerce and selling of DAB389IL-2 in the United States for
cutaneous T-Cell lymphoma ("CTCL") if such approval is supported to any
material extent by clinical and development efforts conducted by the Company
prior to the Closing Date. [ * ]
(i) [ * ]
(ii) [ * ]
In the event that Final FDA Approval is not obtained by the Closing
Date, and additional clinical tests and studies or other activities are
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necessary after the Closing Date to obtain Final FDA Approval, Parent shall,
or shall cause the Surviving Corporation to, perform such activities so as to
facilitate the earliest possible receipt of Final FDA Approval; provided,
however, neither Parent nor the Surviving Corporation shall be required to
perform such activities to the extent that the aggregate Study Costs (as
hereinafter defined) exceed [ * ] annually; and provided further that in
the event that Final FDA Approval on an accelerated basis is conditioned by
the FDA upon its receipt of a Phase IV commitment by Parent or the Surviving
Corporation, as the case may be, such party shall accept such Phase IV
commitment provided such commitment is based on (A) the Company's studies 04-
11 and/or 04-14, or (B) substitute studies, the Study Costs of which do not
exceed in the aggregate [ * ] annually, and Parent or the Surviving
Corporation, as the case may be, [ * ]. For purposes of this Section
1.6(c), "Study Costs" shall mean the internal, external and overhead costs for
clinical development and regulatory activities calculated in accordance with
Parent's current standard project cost accounting with respect to [ * ].
During the period from the Closing Date through the earlier of the
receipt of Final FDA Approval and the second anniversary of the Closing Date,
Parent shall not, and shall not cause the Surviving Corporation to, make any
change with respect to the manufacturing processes, standard operating
procedures, workforce or facilities and equipment of the Company or Marathon
that could reasonably be expected to adversely affect the prospects for, or
delay, the receipt by Parent or the Surviving Corporation, as the case may be,
of Final FDA Approval.
In the event that the BLA is transferred to any person other than the
Surviving Corporation, Parent shall cause such transferee to comply in full
with the provisions of this Section 1.6(c).
(d) Stock Consideration. For purposes of determining the value
of the shares of Parent Common Stock, if any, distributed pursuant to Section
1.6(a) and Section 1.6(b) (collectively, the "Stock Consideration"), Parent
Common Stock shall be valued as follows:
(i) The value of each share of Parent Common Stock issued
as part of the Closing Consideration shall be valued at the average of the
closing prices of a share of Parent Common Stock on the Nasdaq National Market
for the five (5) consecutive trading days immediately preceding the date of
execution of this Agreement.
(ii) The value of each share of Parent Common Stock issued
as part of the Milestone Consideration shall be valued at the average of the
closing prices of the a share of Parent Common Stock on the Nasdaq National
Market for the ten (10) consecutive trading days immediately preceding the
date of issuance of such Parent Common Stock.
All references to numbers of shares of Parent Common Stock in this
Agreement or provisions for the calculation of the number thereof shall be
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automatically adjusted to reflect any stock splits, dividends, stock
combinations, reverse splits or similar changes in Parent Common Stock between
the date of this Agreement and the dates shares of Parent Common Stock are
issued pursuant to the Merger.
1.7 Distribution of Merger Consideration.
(a) Distribution of Closing Consideration. The Closing
Consideration shall be distributed as set forth in this Section 1.7(a).
(i) Distribution of Closing Consideration to Persons Other
Than Holders of Company Common Stock. The balance of the Closing
Consideration remaining after distribution of the portion of the Closing
Consideration contemplated by Section 1.7(a)(ii) (the "Remaining Closing
Consideration") shall be distributed as set forth in this Section 1.7(a)(i).
(A) Escrow. A $200,000 portion of the Cash
Consideration included in the Closing Consideration shall be delivered to
State Street Bank & Trust Company of Boston, Massachusetts, as escrow agent,
to be held and distributed in accordance with the terms of an escrow agreement
substantially in the form of Schedule 1.7(a)(i)(A) (the "Escrow Agreement").
(B) Satisfaction of Preclosing Company Payables.
The Cash Consideration included in the Remaining Closing Consideration
remaining after compliance with the provisions of Section 1.7(a)(i)(A) shall
be applied to the extent necessary, after application of all cash held by the
Company as of the Closing, to pay and satisfy the Preclosing Company Payables
(as defined in Section 5.13 below) as follows: first to the obligees of the
Preclosing Company Payables other than the Executives (as defined in Section
1.7(a)(i)(D)), pro rata; and second, to each of the Executives, pro rata. In
the event the Cash Consideration remaining after compliance with the
provisions of Section 1.7(a)(i)(A) is not sufficient to satisfy the Preclosing
Company Payables of the Executives, such Preclosing Company Payables shall be
satisfied using Stock Consideration included within the Remaining Closing
Consideration.
(C) Distributions Pursuant to Accord Agreement. The
balance of the Remaining Closing Consideration remaining after compliance with
the provisions of Section 1.7(a)(i)(A) and (B) (the "Distributable Closing
Consideration") shall be distributed as set forth in this Section 1.7(a)(i)(C)
and Sections 1.7(a)(i)(D) and (E), all in accordance with the Accord
Agreement.
(1) A $5,000,000 portion of the Distributable
Closing Consideration shall be delivered to USSC.
(2) A $3,769,863 portion of the Distributable
Closing Consideration shall be delivered to BU.
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(3) A $2,132,329 portion of the Distributable
Closing Consideration shall be delivered to Marathon.
(4) A $500,000 portion of the Distributable
Closing Consideration shall be delivered to BU.
(5) 3.39113385 percent of the balance of the
Remaining Closing Consideration remaining after the payments contemplated by
Sections 1.7(a)(i)(C)(1), (2), (3) and (4) (the "Stakeholder Closing
Consideration") shall be delivered to Lehman.
(6) 1.69556693 percent of the Stakeholder
Closing Consideration shall be delivered to Shoreline.
(7) 13.91735164 percent of the Stakeholder
Closing Consideration shall be delivered to Mr. Prior; provided, however, that
the amount of Stakeholder Closing Consideration to which Mr. Prior would
otherwise be entitled pursuant to the provisions of this clause (7) shall be
reduced by the amount of the Option Stock Gain (as such term is defined in
that certain Employment Agreement, dated as of November 6, 1996, between the
Company and Mr. Prior, as amended through the date hereof) realized by Mr.
Prior in respect of the Prior ISOs (as defined in the Accord Agreement). Any
Option Stock Gain realized by Mr. Prior in respect of the Prior ISOs in excess
of the amount of Stakeholder Closing Consideration to which Mr. Prior is
entitled pursuant to the preceding sentence without regard to the provisos is
hereinafter referred to as the "Prior Excess Amount."
(8) 4.50267259 percent of the Stakeholder
Closing Consideration shall be delivered to Dr. Nichols; provided, however,
that the amount of Stakeholder Closing Consideration to which Dr. Nichols
would otherwise be entitled pursuant to the provisions of this clause (8)
shall be reduced by the amount of the Option Stock Gain (as such term is
defined in that certain Amended and Restated Employment Agreement, dated as of
September 22, 1997, between the Company and Dr. Nichols, as amended through
the date hereof) realized by Dr. Nichols in respect of the Nichols ISOs (as
defined in the Accord Agreement). Any Option Stock Gain realized by Dr.
Nichols in respect of the Nichols ISOs in excess of the amount of Stakeholder
Closing Consideration to which Dr. Nichols is entitled pursuant to the
preceding sentence without regard to the provisos is hereinafter referred to
as the "Nichols Excess Amount."
(9) 3.27467097 percent of the Stakeholder
Closing Consideration shall be delivered to Ms. Chen; provided, however, that
the amount of Stakeholder Closing Consideration to which Ms. Chen would
otherwise be entitled pursuant to the provisions of this clause (9) shall be
reduced by the amount of the Option Stock Gain (as such term is defined in
that certain Employment Agreement, dated as of January 15, 1997, between the
Company and Ms. Chen, as amended through the date hereof) realized by Ms. Chen
in respect of the Chen ISOs (as defined in the Accord Agreement). Any Option
Stock Gain realized by Ms. Chen in respect of the Chen ISOs in excess of the
amount of Stakeholder Closing Consideration to which Ms. Chen is entitled
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pursuant to the preceding sentence without regard to the provisos is
hereinafter referred to as the "Chen Excess Amount."
(10) 4.50267259 percent of the Stakeholder
Closing Consideration shall be delivered to Mr. Crane; provided, however,
that the amount of Stakeholder Closing Consideration to which Mr. Crane would
otherwise be entitled pursuant to the provisions of this clause (10) shall be
reduced by the amount of the Option Stock Gain (as such term is defined in
that certain Employment Agreement, dated as of April 30, 1998, between the
Company and Mr. Crane, as amended through the date hereof) realized by Mr.
Crane in respect of the Crane ISOs (as defined in the Accord Agreement). Any
Option Stock Gain realized by Mr. Crane in respect of the Crane ISOs in excess
of the amount of Stakeholder Closing Consideration to which Mr. Crane is
entitled pursuant to the preceding sentence without regard to the provisos is
hereinafter referred to as the "Crane Excess Amount."
(11) 34.06924332 percent of the Stakeholder
Closing Consideration shall be delivered to BU Holding.
(12) 20.21056806 percent of the Stakeholder
Closing Consideration shall be delivered to Mr. Hirsch.
(13) 8.66167203 percent of the Stakeholder
Closing Consideration shall be delivered to Ms. Josefsen.
(14) 5.77444803 percent of the Stakeholder
Closing Consideration shall be delivered to the Cassidys.
(D) Allocation of Cash Consideration and Stock
Consideration Among Persons Receiving Closing Consideration Pursuant to the
Accord Agreement. In the event that the Distributable Closing Consideration
consists of both Cash Consideration and Stock Consideration, the cash portion
of the Distributable Closing Consideration shall be delivered as follows: (1)
first, to Mr. Prior, Dr. Nichols, Ms. Chen and Mr. Crane (collectively, the
"Executives"), pro rata based on the portion of the Distributable Closing
Consideration to which each such person is entitled, up to an amount equal to
one-half of that portion of the Distributable Closing Consideration to which
each of the Executives is entitled, and, (2) second, to BU and Marathon, pro
rata based on the portion of the Distributable Closing Consideration to which
each such person is entitled, up to the amount of the Distributable Closing
Consideration to which each is entitled pursuant to, respectively, Sections
1.7(a)(i)(C)(2) and (3). In the event that any Cash Consideration remains as
part of the Distributable Closing Consideration after compliance with the
foregoing sentence, those persons designated to receive Distributable Closing
Consideration pursuant to Sections 1.7(a)(i)(C)(1), (4), (5), (6), (11), (12),
(13), and (14) shall receive such remaining Cash Consideration, pro rata based
on the portion of the Distributable Closing Consideration to which each such
person is entitled.
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(E) Valuation of Stock Consideration for Allocation
Purposes. For purposes of applying the provisions of this Section 1.7(a)(i),
the Stock Consideration shall be valued in accordance with the provisions of
Section 1.6(d)(i), subject to any adjustment for which provision is made in
the final paragraph of Section 1.6(d).
(ii) Distribution of Closing Consideration to Holders of
Company Common Stock. Shares of Parent Common Stock shall be distributed, in
accordance with the provisions of Section 1.10 hereof, among
(A) the holders of shares of the Company's common
stock, par value $.01 per share (the "Company Common Stock"), issued and
outstanding immediately prior to the Effective Time (including, without
limitation, shares of Company Common Stock issued by the Company pursuant to
(1) that certain Settlement Agreement, dated April 29, 1998 (the "Seragen
Canada Settlement Agreement"), between the Company, Seragen Biopharmaceuticals
Ltd./Seragen Biopharmaceutique Ltee ("Seragen Canada"), Sofinov Societe
Financiere d'Innovation Inc., Societe Innovatech du Grand Montreal, MDS Health
Ventures Inc., Canadian Medical Discoveries Fund Inc., Royal Bank Capital
Corporation, and Health Care and Biotechnology Venture Fund and (2) the Prior
ISOs, the Nichols ISOs, the Chen ISOs, and the Crane ISOs), and
(B) holders of shares of the Company's Series D
preferred stock, par value $.01 per share (the "Company Series D Preferred
Stock")
at the rate of _________ shares of Parent Common Stock per share of Company
Common Stock held by each holder. For purposes of this Section 1.7(a)(ii),
each holder of shares of the Company Series D Preferred Stock shall be deemed
to hold the number of shares of Company Common Stock that would have been
issued to the holder had the holder converted all of his or her Company Series
D Preferred Stock into Company Common Stock immediately prior to the Effective
Time.
(b) Distribution of Milestone Consideration. The Milestone
Consideration shall be distributed as set forth in this Section 1.7(b).
(i) Distribution of Milestone Consideration to Persons
Other Than Holders of Company Common Stock. The balance of the Milestone
Consideration remaining after distribution of that portion of the Milestone
Consideration contemplated in Section 1.7(b)(ii) (the "Remaining Milestone
Consideration") shall be distributed as set forth in this Section 1.7(b)(i),
all in accordance with the Accord Agreement.
(A) A $4,500,000 portion of the Remaining Milestone
Consideration shall be delivered to BU Holding.
(B) A $1,070,766 portion of the Remaining Milestone
Consideration shall be delivered to BU.
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(C) A portion of the Remaining Milestone
Consideration equal to the sum of
(x) $103,730 plus
(y) $11,780.82 multiplied by the number of
days elapsed between June 30, 1998 (exclusive of such date), and the Closing
Date (inclusive of such date)
shall be delivered to Marathon.
(D) 3.39113385 percent of the Remaining Milestone
Consideration after the payments contemplated by Section 1.7(b)(i)(A), (B) and
(C) (the "Stakeholder Milestone Consideration") shall be delivered to Lehman.
(E) 1.69556693 percent of the Stakeholder Milestone
Consideration shall be delivered to Shoreline.
(F) 13.91735164 percent of the Stakeholder Milestone
Consideration shall be delivered to Mr. Prior; provided, however, that the
amount of Milestone Consideration to which Mr. Prior would otherwise be
entitled pursuant to the provisions of this clause (F) shall be reduced by the
amount of the Prior Excess Amount, if any; provided further that an amount of
Stakeholder Milestone Consideration to which Mr. Prior is entitled pursuant to
the provisions of this clause (F) equal to the Prior Escrow Amount (as defined
below) shall be delivered to the Escrow Agent pursuant to Section 1.13(b)(i).
(G) 4.50267259 percent of the Stakeholder Milestone
Consideration shall be delivered to Dr. Nichols; provided, however, that the
amount of Milestone Consideration to which Dr. Nichols would otherwise be
entitled pursuant to the provisions of this clause (G) shall be reduced by the
amount of the Nichols Excess Amount, if any; provided further that an amount
of Stakeholder Milestone Consideration to which Dr. Nichols is entitled
pursuant to the provisions of this clause (G) equal to the Nichols Escrow
Amount (as defined below) shall be delivered to the Escrow Agent pursuant to
Section 1.13(b)(i).
(H) 3.27467097 percent of the Stakeholder Milestone
Consideration shall be delivered to Ms. Chen; provided, however, that the
amount of Milestone Consideration to which Ms. Chen would otherwise be
entitled pursuant to the provisions of this clause (H) shall be reduced by the
amount of the Chen Excess Amount, if any.
(I) 4.50267259 percent of the Stakeholder Milestone
Consideration shall be delivered to Mr. Crane; provided, however, that the
amount of Milestone Consideration to which Mr. Crane would otherwise be
entitled pursuant to the provisions of this clause (I) shall be reduced by the
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amount of the Crane Excess Amount, if any; provided further that an amount of
Stakeholder Milestone Consideration to which Mr. Crane is entitled pursuant to
the provisions of this clause (I) equal to the Crane Escrow Amount (as defined
below) shall be delivered to the Escrow Agent pursuant to Section 1.13(b)(i).
(J) 34.06924332 percent of the Stakeholder Milestone
Consideration shall be delivered to BU Holding.
(K) 20.21056806 percent of the Stakeholder Milestone
Consideration shall be delivered to Mr. Hirsch.
(L) 8.66167203 percent of the Stakeholder Milestone
Consideration shall be delivered to Ms. Josefsen.
(M) 5.77444803 percent of the Stakeholder Milestone
Consideration shall be delivered to the Cassidys.
(ii) Distribution of Milestone Consideration to Holders of
Company Common Stock. A portion of the Milestone Consideration shall be
distributed, in accordance with the provisions of Section 1.10 hereof, among
(A) the holders of shares of the Company Common Stock
issued and outstanding immediately prior to the Effective Time (including,
without limitation, shares of Company Common Stock issued by the Company
pursuant to (1) the Seragen Canada Settlement Agreement and (2) the Prior
ISOs, the Nichols ISOs, the Chen ISOs, and the Crane ISOs), and
(B) holders of shares of the Company Series D
Preferred Stock on the basis of the number of shares of Company Common Stock
held by each holder
at the rate of $0.23 per share of Company Common Stock held by each holder.
For purposes of this Section 1.7(b)(ii), each holder of shares of the Company
Series D Preferred Stock shall be deemed to hold the number of shares of
Company Common Stock that would have been issued to the holder had the holder
converted all of his or her Company Series D Preferred Stock into Company
Common Stock immediately prior to the Effective Time.
(iii) Allocation of Cash Consideration and Stock
Consideration. In the event that the Milestone Consideration consists of both
Cash Consideration and Stock Consideration, each person designated to receive
Milestone Consideration pursuant to this Section 1.7(b) shall receive that
percentage of the Cash Consideration that is included in the Milestone
Consideration that is equal to the percentage of the Milestone Consideration
to which such person is entitled and that percentage of the Stock
Consideration that is included in the Milestone Consideration that is equal to
the percentage of the Milestone Consideration to which such person is
entitled.
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(iv) Valuation of Stock Consideration for Allocation
Purposes. For purposes of applying the provisions of this Section 1.7(b), the
Stock Consideration shall be valued in accordance with the provisions of
Section 1.6(d)(ii).
1.8 Effect on Company Capital Stock.
(a) Conversion of Company Capital Stock. Each share of Company
Capital Stock issued and outstanding immediately prior to the Effective Time
(other than any shares of Company Capital Stock to be canceled pursuant to
Section 1.8(b) and any Dissenting Shares (as defined and to the extent
provided in Section 1.9(a)) shall be canceled and extinguished and be
converted automatically into the right to receive that portion of the Merger
Consideration set forth in Section 1.7, upon surrender of the certificate
representing such share of Company Capital Stock in the manner provided in
Section 1.10.
(b) Cancellation of Company-Owned Stock. Each share of Company
Capital Stock owned by the Company or any direct or indirect wholly-owned
subsidiary of the Company immediately prior to the Effective Time shall be
canceled and extinguished without any conversion thereof.
(c) Certain Stock Options and Warrants Not Assumed. Prior to
the Effective Time, the Company and its Board of Directors shall take all
actions necessary to (i) accelerate and effect the exercise and/or termination
of each option to purchase Company Capital Stock ("Company Options"), whether
issued under one of the Company's option plans or otherwise, and (ii) cause
each holder of a warrant to purchase Company Capital Stock (the "Company
Warrants") outstanding at any time prior to the Effective Time to exercise or
agree to the termination of the warrant in full prior to the Effective Time,
other than those holders listed on Schedule 1.8(c) whose Company Warrants are
not terminated pursuant to the Accord Agreement. Except as set forth on
Schedule 1.8(c) attached hereto, Parent will not assume any warrant not
exercised prior to the Effective Time. In the case of each warrant set forth
on Schedule 1.8(c) (the "Assumed Warrants") and to the extent such Assumed
Warrants are not terminated by their terms in connection with the Merger,
Parent shall, effective as of the Effective Time, assume the Assumed Warrants
(and if required by the terms of the Assumed Warrants or if otherwise
appropriate under the terms of the Assumed Warrants, execute a supplemental
agreement at the Closing in connection therewith) and shall reserve, make
available for issuance and, upon exercise of such Assumed Warrants in
accordance with their terms after the Effective Time, issue the number of
shares of Parent Common Stock issuable upon such exercise.
(d) Capital Stock of Merger Sub. Each share of common stock,
par value $.001 per share, of Merger Sub (the "Merger Sub Common Stock")
issued and outstanding immediately prior to the Effective Time shall be
converted into and exchanged for one validly issued, fully paid and
nonassessable share of common stock of the Surviving Corporation (the
"Surviving Corporation Common Stock"). Each stock certificate of Merger Sub
evidencing ownership of any such shares of Merger Sub Common Stock shall, as
of the Effective Time, evidence ownership of such shares of Surviving
Corporation Common Stock.
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(e) Fractional Shares. No fraction of a share of Parent Common
Stock will be issued, but in lieu thereof, each holder of shares of Company
Capital Stock who would otherwise be entitled to a fraction of a share of
Parent Common Stock (after aggregating all fractional shares of Parent Common
Stock to be received by such holder) shall be entitled to receive, without any
interest, from Parent an amount of cash (rounded to the nearest whole cent)
equal to the product of (i) such fraction, multiplied by (ii) the average of
the closing prices of a share of Parent Common Stock on the Nasdaq National
Market for the five (5) consecutive trading days ending five (5) trading days
prior to (A) the Closing Date with respect to the Closing Consideration and
(B) the Milestone Date with respect to the Milestone Consideration.
1.9 Dissenting Shares.
(a) Notwithstanding any provision of this Agreement to the
contrary, any shares of Company Capital Stock held by a holder who has
demanded and perfected appraisal or dissenters' rights for such shares in
accordance with Delaware Law and who, as of the Effective Time, has not
effectively withdrawn or lost such appraisal or dissenters' rights
("Dissenting Shares") shall not be converted into or represent a right to
receive the portion of the Merger Consideration otherwise issuable with
respect to such shares pursuant to Section 1.7, but the holder thereof shall
only be entitled to such rights as are granted by Delaware Law.
(b) Notwithstanding the provisions of Section 1.9(a), if any
holder of shares of Company Capital Stock who demands appraisal of such shares
under Delaware Law shall effectively withdraw or lose (through failure to
perfect or otherwise) the right to appraisal, then, as of the later of the
Effective Time and the occurrence of such event, such holder's shares shall
automatically be converted into and represent only the right to receive that
amount of Merger Consideration that would have been issuable with respect to
such shares pursuant to Section 1.7 had they not demanded appraisal, without
interest thereon, upon surrender of the certificate representing such shares.
(c) The Company shall give Parent (i) prompt notice of any
written demands for appraisal of any shares of Company Capital Stock,
withdrawals of such demands, and any other instruments served pursuant to
Delaware Law and received by the Company and (ii) the opportunity to
participate in all negotiations and proceedings with respect to demands for
appraisal under Delaware Law. The Company shall not, except with the prior
written consent of Parent, which consent shall not be unreasonably withheld,
voluntarily make any payment with respect to any demands for appraisal of
Company Capital Stock or offer to settle or settle any such demands.
1.10 Surrender of Certificates.
(a) Exchange Agent. Prior to the Effective Time, Parent shall
designate a bank or trust company with assets of not less than $500 million to
act as exchange agent (the "Exchange Agent").
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(b) Parent to Provide Merger Consideration. Parent shall make
available to the Exchange Agent (i) the Closing Consideration allocable to the
holders of Company Common Stock and Company Series D Preferred Stock under
Section 1.7 hereof on or before the Closing Date and (ii) the Milestone
Consideration, if any, allocable to the holders of Company Common Stock and
Company Series D Preferred Stock under Section 1.7 hereof on or before the
Milestone Date.
(c) Exchange Procedures. Promptly after the Effective Time, the
Surviving Corporation shall cause to be mailed to each holder of record of a
certificate or certificates (the "Certificates") which immediately prior to
the Effective Time represented outstanding shares of Company Common Stock and
Company Series D Preferred Stock and which shares were converted into the
right to receive the portion of the Merger Consideration issuable with respect
to such shares pursuant to Section 1.7, (i) a letter of transmittal (which
shall specify that delivery shall be effected, and risk of loss and title to
the Certificates shall pass, only upon delivery of the Certificates to the
Exchange Agent and shall be in such form and have such other provisions as
Parent may reasonably specify) and (ii) instructions for effecting the
surrender of the Certificates in exchange for the Merger Consideration. Upon
surrender of a Certificate for cancellation to the Exchange Agent or to such
other agent or agents as may be appointed by Parent, together with such letter
of transmittal, duly completed and validly executed in accordance with the
instructions thereto, the holder of such Certificate shall be entitled to
receive in exchange therefor the portion of the Merger Consideration issuable
pursuant to Section 1.7 as and when the Exchange Agent receives the Merger
Consideration with respect to the shares of Company Common Stock and Company
Series D Preferred Stock represented by such Certificate, and the Certificate
so surrendered shall forthwith be canceled. Until so surrendered, each
outstanding Certificate that, prior to the Effective Time, represented shares
of Company Common Stock and Company Series D Preferred Stock will be deemed
from and after the Effective Time, for all corporate purposes, subject to the
provisions of Section 1.10(d), to evidence the right to receive in accordance
with Section 1.8(a) the portion of the Merger Consideration issuable pursuant
to Section 1.7 as and when the Exchange Agent receives the Merger
Consideration with respect to the shares of Company Common Stock and Company
Series D Preferred Stock represented by such Certificate.
(d) Distributions with Respect to Unexchanged Shares. No
dividends or other distributions with respect to Parent Common Stock declared
or made after the date such shares are to be distributed to the holders of the
Company Capital Stock and with a record date after such date will be paid to
the holder of any unsurrendered Certificate with respect to the shares of
Parent Common Stock represented thereby until the holder of record of such
Certificate shall surrender such Certificate. Subject to applicable law,
following surrender of any such Certificate, there shall be paid to the record
holder of the certificates representing whole shares of Parent Common Stock
issued in exchange therefor, without interest, at the time of such surrender,
the amount of dividends or other distributions theretofore payable with
respect to whole shares of Parent Common Stock with a record date after the
date such shares of Parent Common Stock are to be delivered by Parent to the
Exchange Agent for distribution to the holders of the Company Capital Stock.
The provisions of the foregoing sentence are in addition to, and not by way of
limitation of, the provisions of the final paragraph of Section 1.6(d).
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(e) Transfers of Ownership. If any certificate for shares of
Parent Common Stock is to be issued in a name other than that in which the
Certificate surrendered in exchange therefor is registered, it will be a
condition of the issuance thereof that the Certificate so surrendered will be
properly endorsed and otherwise in proper form for transfer and that the
person requesting such exchange will have paid to Parent or any agent
designated by it any transfer or other taxes required by reason of the
issuance of a certificate for shares of Parent Common Stock in any name other
than that of the registered holder of the Certificate surrendered, or
established to the satisfaction of Parent or any agent designated by it that
such tax has been paid or is not payable.
(f) No Liability. Notwithstanding anything to the contrary in
this Section 1.10, none of the Exchange Agent, the Surviving Corporation or
any party hereto shall be liable to a holder of shares of Parent Common Stock
or Company Capital Stock for any amount properly paid to a public official
pursuant to any applicable abandoned property, escheat or similar law.
1.11 No Further Ownership Rights in Company Capital Stock. All shares
of Parent Common Stock issued or cash paid upon the surrender for exchange of
shares of Company Capital Stock in accordance with the terms hereof shall be
deemed to have been issued in full satisfaction of all rights pertaining to
such shares of Company Capital Stock, and there shall, after the Effective
Time, be no further registration of transfers on the records of the Surviving
Corporation of shares of Company Capital Stock which were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
Certificates are presented to the Surviving Corporation for any reason, they
shall be canceled and exchanged as provided in this Article 1.
1.12 Lost, Stolen or Destroyed Certificates. In the event any
Certificates evidencing shares of Company Capital Stock shall have been lost,
stolen or destroyed, the Exchange Agent shall issue in exchange for such lost,
stolen or destroyed Certificates, upon the making of an affidavit of that fact
by the holder thereof, cash and such shares of Parent Common Stock, if any, as
may be required to be delivered in exchange therefor pursuant to Section 1.7;
provided, however, that Parent may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost, stolen or
destroyed Certificates to deliver a bond in such sum as it may reasonably
direct as indemnity against any claim that may be made against Parent or the
Exchange Agent with respect to the Certificates alleged to have been lost,
stolen or destroyed.
1.13 Deliveries.
(a) At the Closing, Parent shall deliver or cause to be delivered
pursuant to Section 1.7(a):
(i) the Escrow Amount (as defined in the Escrow Agreement)
to the Escrow Agent;
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(ii) to each of the obligees of Preclosing Company
Payables, Cash Consideration in an amount necessary to pay and satisfy such
obligee's Preclosing Company Payables to the extent such payables have not
been satisfied by the Company at or prior to the Closing; and
(iii) to each of the Variable Company Stakeholders, the
portion of the Remaining Closing Consideration issuable to such Variable
Company Stakeholder pursuant to Section 1.7(a).
(b) At the Milestone Date, Parent shall deliver or cause to be
delivered pursuant to Section 1.7(b)(i)
(i) the Prior Escrow Amount, the Nichols Escrow Amount and
the Crane Escrow Amount to the Escrow Agent;
(ii) to each Variable Company Stakeholder, the portion of
the Milestone Consideration issuable to such Variable Company Stakeholder
pursuant to Section 1.7(b)(i).
1.14 Tax and Accounting Consequences. It is intended by the parties
hereto that the Merger shall be accounted for as a purchase, not a pooling of
interests. It is also intended by the Company that the Merger shall
constitute a reorganization within the meaning of Section 368 of the Internal
Revenue Code of 1986, as amended (the "Code"); provided, however, that the
parties hereto acknowledge that such a reorganization within the meaning of
Section 368 of the Code is contingent on the Merger Consideration consisting
of at least eighty percent (80%) Parent Common Stock.
1.15 Taking of Necessary Action; Further Action. If, at any time after
the Effective Time, any such further action is necessary or desirable to carry
out the purposes of this Agreement or to vest the Surviving Corporation with
full right, title and possession to all assets, property, rights, privileges,
powers and franchises of the Company and Merger Sub, the officers and
directors of the Company, Parent and Merger Sub are fully authorized in the
name of their respective corporations to take, and will take, all such lawful
and necessary action.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants, on behalf of itself and each
of its Subsidiaries (defined below), to Parent and Merger Sub, as of the date
of this Agreement and as of the Closing Date, except as otherwise expressly
provided herein, subject to such exceptions as are specifically disclosed in
the disclosure letter (referencing the appropriate schedule or section number)
supplied by the Company to Parent (the "Company Schedules") and dated as of
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the date hereof and updated as of the Closing Date by mutual agreement of the
Parent and Company, as follows:
2.1 Organization of the Company. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Delaware. The Company has the corporate power to own, operate and lease
its properties and to carry on its business as now being conducted. The
Company is duly qualified or licensed to conduct its business and is in good
standing as a foreign corporation in each jurisdiction in which the failure to
be so qualified would have, or would reasonably be expected to have, a
Material Adverse Effect on the Company. For purposes of this Agreement, a
"Material Adverse Effect", with respect to any person or entity, means a
material adverse effect on the business, assets (including intangible assets),
financial condition, results of operations, liabilities or prospects of such
person or entity and its Subsidiaries and Joint Ventures (each as defined in
Section 2.3(a) below) taken as a whole; and "Material Adverse Change" shall
mean a change which would have a Material Adverse Effect. The Company has
delivered a true and correct copy of its Certificate of Incorporation and
Bylaws, each as amended to date, to Parent.
2.2 Company Capital Structure. The authorized capital stock of the
Company consists of 70,000,000 shares of Common Stock, par value $0.01, and
5,000,000 shares of Preferred Stock, par value $0.01, of which 4,000 shares
are designated as Series A Preferred Stock, 23,800 shares are designated as
Series B Preferred Stock and 5,000 shares are designated as Series C Preferred
Stock, and 979 shares are designated as Series D Preferred Stock. As of
December 31, 1997, there were issued and outstanding:
(a) 20,905,710 shares of Company Common Stock; and
(b) No shares of Series A Preferred Stock, 23,800 shares of
Series B Preferred Stock, 5,000 shares of Series C Preferred Stock and 923
shares of Series D Preferred Stock.
All outstanding shares have been duly authorized and validly
issued and are fully paid and nonassessable. Except as set forth in this
Section, as set forth on Schedule 2.2, and as otherwise contemplated by this
Agreement, and except for changes since December 31, 1997 resulting from the
exercise of Company Options and Company Warrants, there are outstanding (i) no
shares of capital stock or other voting securities of Company, (ii) no
securities of the Company convertible into or exchangeable for shares of
capital stock or voting securities of Company and (iii) no options or other
rights to acquire from Company, and no obligation of Company to issue, any
capital stock, voting securities or securities convertible into or
exchangeable for capital stock or other voting securities of Company (the
items in clauses (i), (ii) and (iii) being referred to collectively as the
"Company Securities"). Except as disclosed above, there are no outstanding
obligations of Company or any of its Subsidiaries or Joint Ventures (as
defined in Section 2.3(a) below) to repurchase, redeem or otherwise acquire
any Company Securities.
2.3 Subsidiaries and Joint Ventures.
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(a) Schedule 2.3(a) sets forth the name and respective
jurisdiction of incorporation or organization of all of the Company's
Subsidiaries and Joint Ventures. Each of the Company's Subsidiaries is a
corporation or other entity duly incorporated or otherwise organized, validly
existing in good standing (or local law equivalent) under the laws of its
jurisdiction of organization. Each of the Company's Subsidiaries has the
corporate power and authority to own and lease the properties and assets it
now owns and leases and to carry on its business as and where such properties
and assets are now owned or leased and such business is now conducted. The
Company has heretofore delivered to Parent true, correct and complete copies
of the Articles of Incorporation, Bylaws, or equivalent governing instruments,
each as amended to the date hereof, for each such Subsidiary. Each of the
Company's Subsidiaries is duly licensed or qualified to do business as a
foreign corporation and is in good standing in all jurisdictions in which the
failure to be so licensed or qualified and in good standing would have a
Material Adverse Effect. For purposes of this Agreement, (i) "Subsidiary"
means, with respect to any entity, any corporation or organization of which
securities or other ownership interests having ordinary voting power to elect
a majority of the board of directors or other persons performing similar
functions are directly or indirectly owned by such entity, and (ii) "Joint
Venture" means, with respect to any entity, any corporation or organization
(other than such entity and any Subsidiary thereof) of which such entity or
any Subsidiary thereof is, directly or indirectly, the beneficial owner of 40%
or more of any class of equity securities or equivalent profit participation
interest.
(b) All of the outstanding capital stock of, or other ownership
interests in, each Subsidiary of the Company that is owned by the Company,
directly or indirectly, is free and clear of any material Lien (as defined in
Section 2.5 below) and free of any other material limitation or restriction on
the Company's rights as owner thereof (including any restriction on the right
to vote, sell or otherwise dispose of such capital stock or other ownership
interests), other than those imposed by applicable law. Except as set forth
on Schedule 2.3(b), there are no existing options, calls or commitments of any
character relating to the issued or unissued capital stock or other securities
or equity interests of any Subsidiary of the Company. The ownership interests
of the Company in any Joint Ventures are owned by the Company free and clear
of any Liens, limitations, restrictions, options, calls or commitments, other
than those that are immaterial.
2.4 Authority. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of the Company, subject only to
the approval of the Merger and this Agreement by the Company's stockholders.
The Board of Directors of the Company has unanimously (i) approved this
Agreement, the Plan of Merger and the transactions contemplated hereby and
thereby, (ii) determined that the Merger is in the best interests of the
stockholders of the Company and is on terms that are fair to such
stockholders, and (iii) recommended that the stockholders of the Company
approve this Agreement, the Plan of Merger and the Merger. This Agreement has
been duly executed and delivered by the Company and constitutes the valid and
binding obligation of the Company, enforceable in accordance with its terms
except (i) as limited by applicable bankruptcy, insolvency, reorganization,
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moratorium and other laws of general application affecting enforcement of
creditors' rights generally and (ii) as limited by laws relating to the
availability of specific performance, injunctive relief or other equitable
remedies.
2.5 Non-Contravention. The execution and delivery of this
Agreement by the Company does not, and, as of the Effective Time, the
consummation of the transactions contemplated hereby will not, (i) conflict
with, or result in any violation of, or default under (with or without notice
or lapse of time, or both), any provision of the Certificate of Incorporation
or Bylaws of the Company or any of its Subsidiaries; (ii) assuming compliance
with the matters referred to in Section 2.6 and assuming the requisite
approval of the Company's stockholders of the Merger, (a) contravene or
conflict with or constitute a violation of any provision of any law,
regulation, judgment, injunction, order or decree binding upon or applicable
to the Company or any of its Subsidiaries or Joint Ventures except for any
such contravention, conflict or violation that does not have a Material
Adverse Effect on the Company; or (b) constitute a default under or give rise
to a right of termination, cancellation, acceleration or loss of any material
benefit under any (A) material agreement, contract or other instrument binding
upon the Company or any of its Subsidiaries or Joint Ventures or (B) license,
franchise, permit or other similar authorization held by the Company or any
such Subsidiary or Joint Venture with respect to which a default, termination,
cancellation, acceleration or loss of any material benefit would result in a
material adverse effect on the Company's rights in or ability to use the
patents included in the Company Registered Intellectual Property or on the
prospects for Final FDA Approval; or (iii) result in the creation or
imposition of any material Lien on any material asset of the Company or any of
its Subsidiaries or Joint Ventures (any of (i), (ii) or (iii), a "Conflict").
For purposes of this Agreement, the term "Lien" means, with respect to any
asset, any mortgage, lien, pledge, charge, security interest or encumbrance of
any kind in respect of such asset.
2.6 Consents and Approvals. No consent, waiver, approval, order or
authorization of, or registration, declaration or filing with, any court,
administrative agency or commission or other federal, state, country, local or
foreign governmental authority, instrumentality, agency or commission
("Governmental Entity") or any third party (so as not to trigger any Conflict)
is required by or with respect to the Company or any of its Subsidiaries in
connection with the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby, except for (i) the
filing of the Merger Agreement with the Delaware Secretary of State; (ii)
compliance with any applicable requirements of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and the rules and regulations
promulgated thereunder; (iii) compliance with any applicable requirements of
the 1933 Act and the rules and regulations promulgated thereunder; (iv)
compliance with any applicable foreign or state securities or "blue sky" laws;
(v) compliance with any applicable requirements of the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"); (vi) such
other filings or registrations with, or authorizations, consents or approvals
of, governmental bodies, agencies, officials or authorities, the failure of
which to make or obtain would not materially and adversely affect the ability
of the Company, Parent or Merger Sub to consummate the Merger; or (vii) such
other consents, waivers, authorizations, filings, approvals and registrations
which are set forth on Schedule 2.6.
2.7 Company Financial Statements; SEC Documents.
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(a) The Company has delivered to Parent the unaudited condensed
balance sheet of the Company as of March 31, 1998, and the related unaudited
condensed statements of income, stockholders' equity and cash flows for the
quarter ended March 31, 1998 (the "1998 Financial Statements"). The 1998
Financial Statements and the audited financial statements and unaudited
interim condensed financial statements of the Company included in its annual
reports on Form 10-K, quarterly reports on Form 10-Q, and amendments thereto,
referred to in Section 2.7(b) (collectively, the "Company Financial
Statements") present fairly, in all material respects and in conformity with
generally accepted accounting principles applied on a consistent basis (except
as may be indicated in the notes thereto), the consolidated financial position
of the Company as of the dates thereof and its consolidated results of
operations and cash flows for the periods then ended (subject to normal year-
end adjustments in the case of any interim financial statements and except for
the absence of footnotes with respect to the 1998 Financial Statements). For
purposes of this Agreement, "Company Balance Sheet" means the condensed
balance sheet of the Company as of March 31, 1998, contained in the 1998
Financial Statements and "Company Balance Sheet Date" means March 31, 1998.
(b) The Company has furnished or made available to Parent true
and complete copies of all reports or registration statements filed by it with
the U.S. Securities and Exchange Commission (the "SEC") under the 1933 Act and
the Exchange Act for all periods since December 31, 1996, all in the form so
filed (all the foregoing being collectively referred to as the "SEC
Documents"). As of their respective filing dates, the SEC Documents of the
Company complied in all material respects with the requirements of the 1933
Act, or the Exchange Act, as the case may be, and none of such SEC Documents
contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances in which they were
made, not misleading, except to the extent corrected by a document
subsequently filed with the SEC.
2.8 Ownership of Parent Stock. As of the date hereof, and during the
three (3) year period immediately preceding the date hereof, neither the
Company nor, to the Company's knowledge, any affiliate or associate (as
defined in Section 203 of Delaware Law) thereof is an "interested stockholder"
of the Parent within the meaning of Section 203 of the Delaware Law.
2.9 No Undisclosed Liabilities. There are no liabilities of the
Company or any of its Subsidiaries or Joint Ventures of any kind whatsoever
that are, individually or in the aggregate, material to the Company and its
Subsidiaries and Joint Ventures taken as a whole, other than (i) liabilities
disclosed or provided for in the Company Balance Sheet or liabilities of a
nature not required to be disclosed in a balance sheet under generally
accepted accounting principles; (ii) liabilities incurred in the ordinary
course of business since the Company Balance Sheet Date; and (iii) liabilities
under this Agreement or incurred in connection with the transactions
contemplated hereby. The Surviving Corporation will not have any liability
for any Third Party Expenses (as defined in Section 5.5 below) of the Company
after the Closing.
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2.10 No Changes. Since the Company Balance Sheet Date, except as set
forth on Schedule 2.10 or as otherwise contemplated by this Agreement or the
Accord Agreement, there has not been, occurred or arisen:
(a) any transaction by the Company or any of its Subsidiaries
that creates an obligation that will continue to bind the Company or any of
its Subsidiaries after the Effective Time except for transactions in the
ordinary course of business as conducted on the Company Balance Sheet Date and
consistent with past practices;
(b) any amendments or changes to the Certificate of
Incorporation or Bylaws of the Company or any of its Subsidiaries;
(c) any capital expenditure by the Company or any of its
Subsidiaries, either individually exceeding $10,000 or in the aggregate
exceeding $25,000;
(d) any destruction of, damage to or loss of any assets,
business or customer of the Company or any of its Subsidiaries (whether or not
by covered by insurance) that would result in a Material Adverse Effect to the
Company;
(e) any material labor trouble or any claim of wrongful
discharge or other unlawful labor practice or action;
(f) any revaluation by the Company or any of its Subsidiaries of
any of its assets that results in a Material Adverse Effect to the Company;
(g) any declaration, setting aside or payment of a dividend or
other distribution with respect to the capital stock of the Company or any of
its Subsidiaries, or any direct or indirect redemption, purchase or other
acquisition by the Company or any of Subsidiaries of any Company Capital Stock
or the capital stock of any Subsidiary;
(h) any issuance of Company Securities (except upon exercise
after the date hereof of any options), any grant of any Company Options or
Company Warrants or any amendment of any material term of any outstanding
Company Securities or any of its Subsidiaries Securities;
(i) any sale, lease, license or other disposition of any of the
assets or properties of the Company or any of its Subsidiaries, except in the
ordinary course of business as conducted on the Company Balance Sheet Date and
consistent with past practices;
(j) any amendment or termination of any material contract,
agreement or license to which the Company or any of its Subsidiaries is a
party or by which it is bound;
(k) any loan by the Company or any of its Subsidiaries to any
natural person, corporation, general partnership, limited partnership, limited
liability company, proprietorship, other business organization, trust, union,
association or governmental or regulatory authority ("Person"), incurring by
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the Company or any Subsidiary of any indebtedness for borrowed money,
guaranteeing by the Company or any of its Subsidiaries of any indebtedness,
issuance or sale of any debt securities of the Company or any of its
Subsidiaries or guaranteeing of any debt securities of others, except for
advances to employees for travel and business expenses in the ordinary course
of business, consistent with past practices;
(l) any material waiver or release of any right or claim of the
Company or any of its Subsidiaries, including any write-off or other
compromise of any material account receivable of the Company or any of its
Subsidiaries;
(m) any commencement or notice or threat of commencement of any
lawsuit or proceeding against or investigation of the Company or any of its
Subsidiaries or their respective affairs that would have a Material Adverse
Effect on the Company;
(n) any notice of any claim of ownership by a third party of
Company Intellectual Property (as defined in Section 2.14 below), or of
revocation or change in material terms of any license to any item of any
Company Intellectual Property by a licensor, or of infringement by the Company
or any of its Subsidiaries of any third party's intellectual property rights;
(o) any material change in any method of accounting or
accounting practice by the Company or any of its Subsidiaries or Joint
Ventures, except for any such change required by reason of a concurrent change
in generally accepted accounting principles or disclosed in the 1998 Financial
Statements;
(p) other than in the ordinary course of business or as
contemplated by this Agreement, any (i) grant of any severance or termination
pay to any director, officer or employee of the Company or any of its
Subsidiaries who earns more than $50,000 per year, (ii) entering into of any
written employment, deferred compensation or other similar agreement (or any
amendment to any such existing agreement) with any director, officer or
employee of the Company or any such Subsidiary who earns more than $50,000 per
year, (iii) any material increase in benefits payable under any existing
severance or termination pay policies or employment agreements, or (iv) any
material increase in compensation, bonus or other benefits payable to any
director, officer or employee of the Company or any such Subsidiary who earns
more than $50,000 per year;
(q) any change in pricing or royalties set or charged by the
Company or any of its Subsidiaries to its customers or licensees or in pricing
or royalties set or charged by Persons who have licensed Company Intellectual
Property to the Company or any of its Subsidiaries other than any changes
effected pursuant to the terms of a written agreement existing prior to the
date hereof;
(r) any event or condition of any character that has had or
could be reasonably expected to have a Material Adverse Effect on the Company;
or
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(s) negotiation or agreement by the Company or any of its
Subsidiaries or any officer or employee thereof to do any of the things
described in the preceding clauses (a) through (r) (other than negotiations
with Parent and its representatives regarding the transactions contemplated by
this Agreement).
2.11 Tax and Other Returns and Reports.
(a) Definition of Taxes. For the purposes of this Agreement,
"Tax" (and, with correlative meaning, "Taxes" and "Taxable") means any and all
federal, state, local and foreign taxes, assessments and other governmental
charges, duties, impositions and liabilities, including taxes based upon or
measured by gross receipts, income, profits, sales, use and occupation, and
value added, ad valorem, transfer, franchise, withholding, payroll, recapture,
employment, excise and property taxes, together with all interest, penalties
and additions imposed with respect to such amounts and any obligations under
any agreements or arrangements with any other Person with respect to such
amounts and including any liability for taxes of a predecessor entity.
(b) Tax Returns and Audits. Except as set forth in Schedule
2.11 as of the Effective Time:
(i) The Company and each Subsidiary will have timely
prepared and filed all required material federal, state, local and foreign
returns, estimates, statements and reports ("Returns") relating to any and all
Taxes of, concerning or attributable to the Company and its operations and
each Subsidiary and its operations with respect to any Taxable period ending
on or before the Effective Time. To the knowledge of the Company, such
Returns are true, correct and complete in all material respects. No material
Taxes, whether or not shown on the Returns, will be owing after the Closing
for any period covered by any of the Returns. Neither the Company nor any of
its Subsidiaries has applied for or received an extension of time within which
to file any Return. No tax authority has asserted in writing to the Company
that the Company or any of its Subsidiaries is required to file a Return in
any jurisdiction in which the Company has not previously filed Returns. For
purposes of this Agreement, the "Company's knowledge," "knowledge of the
Company" or "known to the Company" means the knowledge of the Chairman and
Chief Executive Officer, the President and Chief Technology Officer, the Chief
Financial Officer, any Vice President or any director of the Company, in each
case after due inquiry and reasonable investigation.
(ii) The Company and each of its Subsidiaries as of the
Effective Time: (A) will have paid or accrued all material Taxes shown as due
and payable on the Returns and (B) will have withheld and deposited, or will
have made arrangements for withholding with respect to amounts which have not
yet been paid but are due on or before the Closing Date in connection with
this Agreement or otherwise, all material federal, state, local or foreign
income taxes, FICA, FUTA and other Taxes required to be withheld.
(iii) Neither the Company nor any of its Subsidiaries has
been a member of an affiliated group other than one of which the Company was
the common parent, or filed or been included in a combined, consolidated or
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unitary Return other than one filed by the Company (or a return for a group
consisting solely of its Subsidiaries or predecessors), or participated in any
other similar arrangement whereby any income, revenues, receipts, gains,
losses, deductions, credits or other Tax items of the Company or any such
Subsidiary was determined or taken into account for Tax purposes with
reference to or in conjunction with any such items of another Person other
than the Company or any such Subsidiary or predecessor;
(iv) Neither the Company nor any of its Subsidiaries has
any unaccrued material liability for the payment of any material Tax. Except
as disclosed on Schedule 2.10(b)(iv), there is no Tax deficiency outstanding,
proposed or assessed against the Company or any of its Subsidiaries. Neither
the Company nor any of its Subsidiaries executed any waiver of any statute of
limitations on or extending the period for the assessment or collection of any
Tax.
(v) No audit or other examination of any Return of the
Company or any of its Subsidiaries is currently in progress, nor has the
Company, any of its Subsidiaries or the officers, directors or other Tax
advisors been notified in writing of any request for such an audit or other
examination.
(vi) Neither the Company nor any of its Subsidiaries has
any material liabilities for unpaid federal, state, local and foreign Taxes
which have not been accrued or reserved against in accordance with GAAP on the
balance sheet, whether asserted or unasserted, contingent or otherwise, and,
to the knowledge of the Company, there is no basis of the assertion of any
such unaccrued and unreserved liabilities attributable to the Company, its
assets or operations or any Subsidiary, its assets or operations. No material
liability for Tax shall be incurred prior to the Effective Time other than in
the Company's ordinary course of business consistent with its past practices.
(vii) The Company has provided to Parent copies of all
federal, state, local and foreign Tax Returns for the last five (5) fiscal
years of the Company and each of its Subsidiaries.
(viii) To the knowledge of Company, there are (and as
of immediately following the Effective Time there will be) no Liens on the
assets of the Company or any of its Subsidiaries relating to or attributable
to Taxes except Liens for current Taxes not yet due.
(ix) Immediately prior to the Merger, there will be no
material limitations on the Company's right to utilize its net operating loss
carryforwards for federal income tax purposes.
(x) To the Company's knowledge, neither it nor any of its
Subsidiaries will be required to include any adjustment in Taxable income for
any Tax period (or portion thereof) ending after the Effective Time pursuant
to Section 481(c) of the Code (or any similar provision of the Tax laws of any
jurisdiction) as a result of a change in method of accounting for any Tax
period (or portion thereof) ending on or before the Effective Time or pursuant
to the provisions of any agreement entered into with any governmental
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authority (a "Taxing Authority") responsible for the imposition of any such
tax with regard to the Tax liability of the Company or any such Subsidiary for
any Tax period (or portion thereof) ending on or before the Effective Time.
(xi) There are no requests for rulings in respect of any
Tax pending between the Company or any of its Subsidiaries and any Taxing
Authority;
(xii) None of the Company's nor any of its Subsidiaries'
assets are treated as "tax-exempt use property" within the meaning of Section
168(h) of the Code.
(xiii) Neither the Company nor any of its Subsidiaries
has filed any consent agreement under Section 341(f) of the Code.
(xiv) The Company does not have any liability for the Taxes
of any Person other than the Company, any of its Subsidiaries or Joint
Ventures (A) under Treasury Regulations section 1.1502-6 (or any similar
provision of state, local, or foreign law), (B) as a transferee or successor,
(C) by contract, or (D) otherwise.
(xv) Except as disclosed on Schedule 2.10(b)(xv), neither
the Company nor any of its Subsidiaries is a party to a tax sharing or
allocation agreement nor does the Company or any of its Subsidiaries owe any
amount under any such agreement.
(xvi) Neither the Company nor any of its Subsidiaries is,
nor has been at any time, a "United States real property holding corporation"
within the meaning of Section 897(c)(2) of the Code.
(xvii) The Company's and each of its Subsidiaries' tax
basis in its assets for purposes of determining its future amortization,
depreciation and other federal income tax deductions is accurately reflected
on the Company's tax books and records.
(c) Notwithstanding any of the foregoing, no representation or
warranty is made by the Company with respect to the Tax consequences that may
result from the transactions contemplated by this Agreement.
2.12 Restrictions on Business Activities. Except as set forth on
Schedule 2.12, there is no agreement (non-compete or otherwise), commitment,
judgment, injunction, order or decree to which the Company, any of its
Subsidiaries or any Joint Venture is a party or otherwise binding upon the
Company, any of its Subsidiaries or any Joint Venture which has or reasonably
could be expected to have the effect of prohibiting or materially impairing
the ability of the Company, any of its Subsidiaries or any Joint Venture to
conduct the Company's business, such Subsidiary's business or such Joint
Venture's business, as such business is currently conducted, or any
acquisition of property (tangible or intangible) by the Company, any of its
Subsidiaries or any Joint Venture. Without limiting the foregoing, except as
set forth in Schedule 2.14(i), none of the Company or any of its Subsidiaries
or Joint Ventures has entered into any agreement under which the Company, any
Subsidiary or any Joint Venture is restricted from selling, licensing or
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otherwise distributing any of its products or drug candidates to any class of
customers, in any geographic area, during any period of time or in any segment
of the market.
2.13 Title to Properties; Absence of Liens and Encumbrances.
(a) Neither the Company nor any of its Subsidiaries owns any
real property, nor have they ever owned any real property. Schedule 2.13(a)
sets forth a list of all real property currently, or at any time in the past,
leased by the Company or any of its Subsidiaries, and, with respect to all
real property currently leased by the Company or any of its Subsidiaries, the
name of the lessor, the date of the lease and each amendment thereto and the
aggregate annual rental and/or other fees payable under any such lease. All
such current leases are, to the knowledge of the Company, in full force and
effect, are valid and effective in accordance with their respective terms, and
there is not, under any of such leases, any existing material default or event
of default by the Company or any of its Subsidiaries (or event which with
notice or lapse of time, or both, would constitute such a material default).
(b) To the knowledge of the Company, the Company and each of its
Subsidiaries, if any, has good and valid title to, or, in the case of leased
properties and assets, valid leasehold interests in, all of its tangible
properties and assets, real, personal and mixed, used or held for use in its
business, free and clear of any Liens, except as reflected in the Company
Financial Statements or in Schedule 2.13(b) and except for Liens for taxes not
yet due and payable and such imperfections of title and encumbrances, if any,
which are not material in character, amount or extent, and which do not
materially detract from the value, or materially interfere with the present
use, of the property subject thereto or affected thereby.
2.14 Intellectual Property.
(a) For the purposes of this Agreement, the following terms have
the following definitions:
(i) "Intellectual Property" shall mean any or all of the
following and all rights in, arising out of, or associated therewith: (a) all
United States, international and foreign patents and applications therefor and
all reissues, divisions, renewals, extensions, provisionals, continuations and
continuations-in-part thereof; (b) all inventions (whether patentable or not),
invention disclosures, improvements, drug candidates, trade secrets,
proprietary information, know how, technology, technical data and customer
lists, and all documentation relating to any of the foregoing; (c) all
copyrights, copyrights registrations and applications therefor, and all other
rights corresponding thereto throughout the world; (d) all industrial designs
and any registrations and applications therefor throughout the world; (e) all
trade names, logos, common law trademarks and service marks, trademark and
service mark registrations and applications therefor throughout the world; (f)
all databases and data collections and all rights therein throughout the
world; and (g) any similar or equivalent rights to any of the foregoing
anywhere in the world.
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(ii) "Company Intellectual Property" shall mean that
Intellectual Property owned by, or exclusively licensed to, the Company or any
of its Subsidiaries that is set forth on Schedule 2.14(a).
(iii)"Company Registered Intellectual Property" means those
United States, international and foreign: (a) patents and patent applications
(including provisional applications); (b) registered trademarks, applications
to register trademarks, intent-to-use applications, or other registrations or
applications related to trademarks; and (c) registered copyrights and
applications for copyright registration that are listed on Schedule 2.14(b).
(c) Schedule 2.14(c) lists all non-routine proceedings or
actions known to the Company before any court, tribunal (including the United
States Patent and Trademark Office ("PTO") or equivalent authority anywhere in
the world) related to any Company Intellectual Property. To the knowledge of
the Company, no Company Intellectual Property is the subject of any non-
routine proceeding or outstanding decree, order, judgment, agreement, or
stipulation restricting in any manner the use, transfer, or licensing thereof
by the Company or any of its Subsidiaries, or which may affect the validity,
use or enforceability of such Company Intellectual Property.
(d) With respect to (i) each item of Company Registered
Intellectual Property, necessary registration, maintenance and renewal fees in
connection with such Company Registered Intellectual Property have been made
and all necessary documents and certificates in connection with such Company
Registered Intellectual Property have been filed with the relevant patent
authorities in the United States for the purposes of maintaining such Company
Registered Intellectual Property and (ii) those patents set forth on Schedule
2.14(d)(ii) ("Company Core Intellectual Property"), no information material to
patentability under applicable law has been withheld from the examining office
that would constitute fraud or inequitable conduct. Claims [ * ] in
United States Patent No.[ * ], claims [ * ] and, as each claim depends
from claim [ * ] in United States Patent No. [ * ] claims [ * ]
and, as each claim depends from claim [ * ] in United States Patent No.[
* ] and claims [ * ] in United States Patent No.[ * ] (I) are valid
over the prior art made of record in and/or considered by the examining office
in connection therewith and (II) the supporting specifications comply in all
material respects with applicable law, in each case to the extent that such
claims read upon making, using or selling [ * ].
(e) The Company and each of its Subsidiaries owns and has good
and exclusive title free and clear of any Lien to all Company Registered
Intellectual Property listed on Schedule 2.14(b), that is owned by the Company
(for purposes of this Section 2.14(e), joint ownership with third parties of
such Company Registered Intellectual Property constitutes "good and exclusive
title").
(f) [reserved]
(g) To the extent that any work, invention, or material has been
developed or created by a third party for the Company or any of its
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Subsidiaries, the Company and each of its Subsidiaries has a written agreement
with such third party with respect thereto and the Company and each of its
Subsidiaries thereby has obtained ownership of, and is the exclusive owner of,
or has a valid license to use, all Company Intellectual Property in such work,
material or invention by operation of law or by valid assignment or by
agreement, as the case may be.
(h) Except as set forth on Schedule 2.14(i), neither the Company
nor any of its Subsidiaries has transferred ownership of, or granted any
exclusive license with respect to, any Company Intellectual Property, to any
third party.
(i) Schedule 2.14(i) lists all contracts, licenses and
agreements to which the Company or any of its Subsidiaries is a party that are
currently in effect (i) with respect to Company Intellectual Property licensed
or offered to any third party; or (ii) pursuant to which a third party has
licensed or transferred any Company Intellectual Property to the Company or
any of its Subsidiaries.
(j) To the knowledge of the Company, the contracts, licenses and
agreements listed on Schedule 2.14(i) are in full force and effect. The
consummation of the transactions contemplated by this Agreement will neither
violate nor result in the breach, modification, cancellation, termination, or
suspension of such contracts, licenses and agreements listed on Schedule
2.14(i). The Company and each of its Subsidiaries is in material compliance
with, and has not materially breached any term any of such contracts, licenses
and agreements listed on Schedule 2.14(i) and, to the knowledge of the
Company, all other parties to such contracts, licenses and agreements listed
on Schedule 2.14(i) are in compliance with, and have not breached any term of,
such contracts, licenses and agreements. To the knowledge of the Company,
following the Closing Date the Surviving Corporation will be permitted to
exercise all of the Company's and each of its Subsidiaries', if any, rights
under the contracts, licenses and agreements listed on Schedule 2.14(i) to the
same extent the Company and such Subsidiary would have been able to had the
transactions contemplated by this Agreement not occurred and without the
payment of any additional funds other than ongoing fees, royalties or payments
which the Company or such Subsidiary would otherwise be required to pay.
(k) To the knowledge of the Company, Schedule 2.14(k) lists all
contracts, licenses and agreements between the Company or any of its
Subsidiaries and any third party wherein or whereby the Company or any of its
Subsidiaries has agreed to, or assumed, any obligation or duty to warrant,
indemnify, hold harmless or otherwise assume or incur any obligation or
liability with respect to the infringement or misappropriation by the Company
or any of its Subsidiaries or such third party of the Intellectual Property of
any third party.
(l) The operation of the business of the Company with respect to
DAB389IL-2, as such business currently is conducted, including the Company's
design, development, manufacture, marketing and sale of DAB389IL-2, does not
infringe or misappropriate the Intellectual Property of any third party. To
the knowledge of the Company, the operation of the remainder of the business
of the Company and each of its Subsidiaries, if any, as such businesses
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currently are conducted, including the Company's and such Subsidiary's design,
development, manufacture, marketing and sale of the products, drug candidates
or services (including products and drug candidates currently under
development) other than DAB389IL-2, does not infringe or misappropriate the
Intellectual Property of any third party or constitute unfair competition or
trade practices under the laws of any jurisdiction.
(m) The Company and each of its Subsidiaries, if any, (including
each of their executive officers, directors and, to the knowledge of the
Company, employees) has not received notice from any third party that the
operation of its business or any act, product, drug candidate or service of
the Company or any of its Subsidiaries, infringes or misappropriates the
Intellectual Property of any third party or constitutes unfair competition or
trade practices under the laws of any jurisdiction.
(n) To the knowledge of the Company, (i) no Person has or is
infringing or misappropriating any Company Core Intellectual Property and (ii)
there have been, and are, no claims asserted against the Company or any of its
Subsidiaries or against any customer of the Company or any of its
Subsidiaries, related to DAB389IL-2.
(o) The Company and each of its Subsidiaries, if any, has taken
measures they each deem reasonable to protect their respective rights in their
respective confidential information and trade secrets or any trade secrets or
confidential information of third parties provided to the Company or any of
its Subsidiaries. To the knowledge of the Company, neither the Company or any
of its Subsidiaries, nor any employees or consultants of the Company or any of
its Subsidiaries, have permitted any such confidential information or trade
secrets to be used, divulged or appropriated for the benefit of Persons to the
material detriment of the Company or any of its Subsidiaries.
2.15 Agreements, Contracts and Commitments. Except as set forth on
Schedule 2.15(a), neither the Company nor any of its Subsidiaries has, or is a
party to or is bound by:
(i) any collective bargaining agreements;
(ii) any agreements or arrangements that contain any
severance pay or post-employment liabilities or obligations;
(iii) any bonus, deferred compensation, pension, profit
sharing or retirement plans, or any other employee benefit plans or
arrangements;
(iv) any employment or consulting agreement, contract or
commitment with an employee or individual consultant or salesperson or any
consulting or sales agreement, contract or commitment under which any firm or
other organization provides services to the Company or any of its
Subsidiaries;
(v) any agreement or plan, including, without limitation,
any stock option plan, stock appreciation rights plan or stock purchase plan,
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any of the benefits of which will be increased, or the vesting of benefits of
which will be accelerated, by the occurrence of any of the transactions
contemplated by this Agreement or the value of any of the benefits of which
will be calculated on the basis of any of the transactions contemplated by
this Agreement;
(vi) any fidelity or surety bond or completion bond;
(vii) any agreement of indemnification or guaranty;
(viii) any agreement, contract, commitment, transaction
or series of transactions for any purpose other than in the ordinary course of
the Company's or any of its Subsidiaries' business relating to capital
expenditures or commitments or long-term obligations in excess of $10,000;
(ix) any material agreement, contract or commitment
relating to the disposition or acquisition of assets or any interest in any
business enterprise outside the ordinary course of the Company's or any of its
Subsidiaries' business;
(x) any material mortgages, indentures, loans or credit
agreements, security agreements or other arrangements or instruments relating
to the borrowing of money or extension of credit, including guaranties
referred to in clause (vii) hereof;
(xi) any purchase order or contract for the purchase of raw
materials involving $10,000 or more;
(xii) any distribution, joint marketing or development
agreement, that has a Material Adverse Effect on the Company or any of its
Subsidiaries;
(xiii) any assignment, license or other agreement with
respect to any form of intangible property that would have a Material Adverse
Effect on the Company; or,
(xiv) any other agreement, contract or commitment that
involves $10,000 or more or is not cancelable without penalty in excess of
$10,000 within thirty (30) days (collectively, any of (i) through (xiv) above
shall be known as "Contracts").
Except for such alleged material breaches, violations and defaults, and events
that would constitute a material breach, violation or default with the lapse
of time, giving of notice, or both, all of which are noted in Schedule
2.15(b), neither the Company nor any of its Subsidiaries has materially
breached, violated or defaulted under, or received notice that it has
materially breached, violated or defaulted under, any of the terms or
conditions of any agreement, contract or commitment required to be set forth
on Schedule 2.15(a) or Schedule 2.14(i) (any such agreement, contract or
commitment, a "Contract"). The Company is in material compliance with each
such Contract and, to the Company's knowledge, each such contract is in full
force and effect and, except as otherwise disclosed in Schedule 2.15(b), is
not subject to any default thereunder of which the Company or any of its
Subsidiaries has knowledge by any party obligated to the Company or any of its
Subsidiaries pursuant thereto.
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2.16 Interested Party Transactions. Except as set forth on Schedule
2.16, no officer, director or, to the knowledge of the Company, stockholder of
the Company or any of its Subsidiary (nor, to the Company's knowledge, any
ancestor, sibling, descendant or spouse of any of such persons, or any trust,
partnership or corporation in which any of such persons has an interest), has
directly or indirectly, (i) a material economic interest in any entity which
furnishes or sells, services, drug candidates or products that the Company or
any of its Subsidiaries furnishes or sells or proposes to furnish or sell,
(ii) a material economic interest in any entity that purchases from or sells
or furnishes to, the Company or any of its Subsidiaries, any goods or
services, or (iii) a beneficial interest in any contract or agreement set
forth in Schedule 2.14(i) or filed as an exhibit to a SEC Document; provided,
that ownership of no more than five percent (5%) of the outstanding voting
stock of a publicly traded corporation shall not be deemed an "economic
interest in any entity" for purposes of this Section 2.16.
2.17 Compliance with Laws. The Company and each of its Subsidiaries
has complied in all respects with, is not in violation of, and has not
received any notices of violation with respect to, any foreign, federal, state
or local statute, law or regulation, the failure to comply with which would
have a Material Adverse Effect.
2.18 Litigation. Except as set forth in Schedule 2.18, there is no
action, suit or proceeding of any nature pending or, to the knowledge of the
Company, threatened against the Company or any of its Subsidiaries or Joint
Ventures, their respective properties or any of their respective officers or
directors, in their respective capacities as such. There is no investigation
pending or, to the knowledge of the Company, threatened against the Company or
any of its Subsidiaries or Joint Ventures, their respective properties or any
of their respective officers or directors by or before any governmental
entity. To the knowledge of the Company, no governmental entity has at any
time challenged or questioned the legal right of the Company or any of its
Subsidiaries or Joint Ventures to conduct the Company's, such Subsidiary's or
such Joint Venture's respective businesses in the present manner or style
thereof. No order of any governmental entity exists that would restrict the
ability of the Company, any of its Subsidiaries or Joint Ventures to conduct
the Company's, such Subsidiary's or such Joint Venture's respective research,
development and manufacturing activities in the present manner or style
thereof. For purposes of this Section 2.18, "investigation" shall not include
ordinary and routine compliance inspections or audits or inspections in
connection with receipt of regulatory approval.
2.19 Insurance. The Company has provided Parent with true and correct
copies of the insurance policies covering the assets, business, equipment,
properties, operations, employees, officers and directors of the Company and
any of its Subsidiaries, if any (collectively, the "Company Insurance
Policies"). As of the date of this Agreement, there is no material claim by
the Company or any of its Subsidiaries pending under any of the material
Company Insurance Policies as to which coverage has been questioned, denied or
disputed by the underwriters of such policies or bonds. All premiums payable
under all such material Company Insurance Policies have been paid and, to the
knowledge of the Company, the Company and its Subsidiaries, if any, are
otherwise in material compliance with the terms of such policies (or other
policies and providing substantially similar insurance coverage). As of the
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date of this Agreement, the Company does not know of any threatened
termination of, or material premium increase with respect to, any of its
material Company Insurance Policies.
2.20 Minute Books. The minute books of the Company and each of its
Subsidiaries, if any, made available to counsel for Parent are the only minute
books of the Company and such Subsidiary and contain a reasonably accurate
summary of all meetings of directors (or committees thereof) and stockholders
or actions by written consent since the time of incorporation of the Company
and such Subsidiary.
2.21 Relationships With Suppliers and Licensors. No current supplier
to the Company or any of its Subsidiaries has notified the Company or such
Subsidiary of an intention to terminate or substantially alter its existing
business relationship with the Company or such Subsidiary, nor has any
licensor under a license agreement with the Company or any of its Subsidiaries
notified the Company or such Subsidiary of an intention to terminate or
substantially alter the Company's or such Subsidiary's rights under such
license, which termination or alteration would have a Material Adverse Effect
on the Company.
2.22 Environmental Matters.
(a) Except as set forth on Schedule 2.22(a), neither the Company
nor any of its Subsidiaries is to the knowledge of the Company in violation of
any Federal, state or local Environmental Law (as defined below), which
violation could reasonably be expected to result in a Material Adverse Effect
on the Company. Except as set forth on Schedule 2.22(a), neither the Company,
any of its Subsidiaries nor any third party has, to the knowledge of the
Company, used, released, discharged, generated, manufactured, produced,
stored, or disposed of in, on, under or about its owned or leased property or
other assets, or transported thereto or therefrom, any Hazardous Materials (as
defined below) in a manner that could reasonably be expected to subject the
Company or any Subsidiary to a material liability under any Environmental Law;
to the knowledge of the Company, there are no, nor has there ever been,
underground tanks, whether operative or temporarily or permanently closed,
located on its owned or leased property or other assets; to the knowledge of
the Company, there are no, nor has there ever been, polychlorinated biphenyls
("PCBs") or items containing PCBs used, stored or present at, on or, to the
knowledge of the Company, near its owned or leased property or assets; and, to
the knowledge of the Company, there is or has been no condition, circumstance,
action, activity or event that could reasonably be expected to form the basis
of any violation of, or material liability to the Company or any of its
Subsidiaries under, any local, state or Federal Environmental Law.
(b) The Company has not within five (5) years preceding the date
hereof received any written notice, demand, citation, summons, complaint or
order and, to the Company's knowledge, no proceeding, investigation or review
is pending or overtly threatened by any local, state or Federal governmental
entity or non-governmental third-party with respect to the presence or release
of any Hazardous Material in, on, from or to the Company or any Subsidiary's
owned or leased property.
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(c) For purposes of this Agreement, (i) "Environmental Law"
means the Comprehensive Environmental Response, Compensation, and Liability
Act of 1980, as amended (42 U.S.C. Sections 9601, et seq.) ("CERCLA"); the
Federal Clean Water Act (33 U.S.C. Section 1251, et seq.); the Federal Clean
Air Act (42 U.S.C. Section 7401); Federal Insecticide, Fungicide, and
Rodenticide Act (7 U.S.C. section 136 et seq.); Toxic Substances Control Act
(15 U.S.C. section 2601 et seq.); Resource Conservation and Recovery Act (42
U.S.C. section 6901 et seq.) ("RCRA"); and Emergency Planning and Community
Right to Know Act (42 U.S.C. section 11001 et seq.), together with applicable
state and local laws of similar substance, and (ii) "Hazardous Materials"
shall mean substances defined as "hazardous substances," "hazardous
materials," or "toxic substances" in CERCLA, the Hazardous Materials
Transportation Act (49 U.S.C. Section 1801, et seq.) and RCRA; those
substances defined as "hazardous waste," "hazardous materials" or "regulated
substances" by RCRA; those substances designated as a "hazardous substance"
pursuant to Section 311 of the Federal Water Pollution Control Act (33 U.S.C.
section 1317); those substances regulated as a hazardous chemical substance or
mixture or as an imminently hazardous chemical substance or mixture pursuant
to Section 6 or 7 of the Toxic Substances Control Act (15 U.S.C. sections
2605, 2606); those substances defined as a pesticide pursuant to Section
136(u) of the Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C.
section 136(u)); those substances defined as hazardous waste constituents in
40 CFR 260.10, specifically including Appendix VII and VIII of Subpart D of 40
CFR 261; and those substances defined by the Atomic Energy Act of 1954, as
amended (42 U.S.C. sections 3011, et seq., as amended) as a source, special
nuclear or by-product material; and in the regulations adopted and
publications promulgated pursuant to said laws.
2.23 Brokers' and Finders' Fees; Third Party Expenses. Except pursuant
to the engagement of Lehman Brothers Incorporated and Shoreline Pacific (the
"Company Financial Advisors") pursuant to engagement letters dated April 30,
1998, and October 1, 1997, respectively, neither the Company nor any of its
Subsidiaries has incurred, nor will it incur, directly or indirectly, any
liability for brokerage or finders' fees or agents' commissions or any similar
charges in connection with this Agreement or any transaction contemplated
hereby. Schedule 2.23 sets forth the Company's current reasonable estimate of
all Third Party Expenses expected to be incurred by the Company and any
Subsidiary in connection with the negotiation and effectuation of the terms
and conditions of this Agreement and the transactions contemplated hereby.
2.24 Permits and Licenses; No Debarment.
(a) Schedule 2.24 contains a complete and correct copy of (i)
each pending application or registration for governmental approval and each
governmental approval held by the Company or any of its Subsidiaries to
develop, manufacture, test (including, without limitation, preclinical tests
and clinical trials), import, export, store, market and sell the Company's or
any Subsidiary's products or drug candidates, and (ii) the most recent report
by or on behalf of the FDA or any other governmental body involving or
relating to any facility inspection of the Company's or any Subsidiary's
facilities. Except as set forth in Schedule 2.24, (i) the Company and each of
its Subsidiaries possesses such governmental approvals from all governmental
bodies including, without limitation, all FDA approvals, necessary to permit
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the operation of its business in the manner as the same is currently
conducted, and to operate, own or occupy its properties, (ii) there have been
no product recalls, field corrective activity, medical device reports, warning
letters or administrative actions by the FDA or any other governmental body,
and (iii) to the knowledge of the Company, (aa) there is no administrative
action pending or threatened for the revocation of any such governmental
approval and (bb) assuming the obtaining of the authorizations, consents,
approvals and other actions listed in Schedule 2.24, no governmental approval
by any governmental body having jurisdiction over the operation of the
Company's or any Subsidiary's business, whether in whole or in part, will be
revoked, or become ineffective or subject to revocation, as a consequence of
the transactions contemplated by this Agreement.
(b) Neither the Company nor any of its Subsidiaries (i) has been
debarred or received notice of action or threat of action with respect to its
debarment under the provisions of the Generic Drug Enforcement Act of 1992, 21
U.S.C. section 335(a) and (b), or (ii) to the Company's knowledge, has used in
any capacity the services of any individual, corporation, partnership or
association which has been debarred under the provisions of the Generic Drug
Enforcement Act of 1992, 21 U.S.C. section 335(a) and (b).
2.25 Employee Matters and Benefit Plans.
(a) Definitions. With the exception of the definition of
"Affiliate" set forth in Section 2.25(a)(i) below (which definition shall
apply only to this Section 2.25), for purposes of this Agreement, the
following terms shall have the meanings set forth below:
(i) "Affiliate" shall mean any other Person under common
control with or otherwise required to be aggregated with the Company or any
Subsidiary as set forth in Section 414(b), (c), (m) or (o) of the Code and the
regulations thereunder;
(ii) "Company Employee Plan" shall refer to any plan,
program, policy, practice, contract, agreement or other arrangement providing
for compensation, severance, termination pay, performance awards, stock or
stock-related awards, fringe benefits or other employee benefits or
remuneration of any kind, whether formal or informal, funded or unfunded and
whether or not legally binding, including without limitation, each "employee
benefit plan" within the meaning of Section 3(3) of ERISA, which is or has
been maintained, contributed to, or required to be contributed to, by the
Company or any of its Subsidiaries or any Affiliate for the benefit of any
"Employee" (as defined below), and pursuant to which the Company or any
Subsidiary or any Affiliate has or may have any material liability contingent
or otherwise;
(iii) "Employee" shall mean any current, former or retired
employee, officer, or director of the Company or any Subsidiary or any
Affiliate;
(iv) "Employee Agreement" shall refer to any material
management, employment, severance, consulting, relocation, repatriation,
expiration, visas, work permit or similar agreement or contract between the
Company or any Subsidiary or any Affiliate and any Employee or consultant that
is not a Company Employee Plan;
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(v) "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended;
(vi) "IRS" shall mean the Internal Revenue Service;
(vii) "Multiemployer Plan" shall mean any "Pension Plan"
(as
defined below) which is a "multiemployer plan," as defined in Sections 3(37)
and 4001(a)(3) of ERISA; and
(viii) "Pension Plan" shall refer to each Company and
Subsidiary Employee Plan which is an "employee pension benefit plan," within
the meaning of Section 3(2) of ERISA.
(b) Schedule. Schedule 2.25(b) contains an accurate and
complete list of each Company Employee Plan and each Employee Agreement.
Except as set forth on Schedule 2.25(b), neither the Company nor any of its
Subsidiaries has any announced plan or commitment, whether legally binding or
not, to establish any new Company Employee Plan or Employee Agreement, to
modify any Company Employee Plan or Employee Agreement (except to the extent
required by law or to conform any such Company Employee Plan or Employee
Agreement to the requirements of any applicable law, in each case as
previously disclosed to Parent in writing, or as required by this Agreement),
or to enter into any Company Employee Plan or Employee Agreement, nor does it
have any intention or commitment to do any of the foregoing.
(c) Documents. The Company has provided to Parent correct and
complete copies of all material documents embodying or relating to each
Company Employee Plan and each Employee Agreement including: (i) all
amendments thereto and written interpretations thereof; (ii) the most recent
annual actuarial valuations, if any, prepared for each Company Employee Plan;
(iii) the three most recent annual reports (Series 5500 and all schedules
thereto), if any, required under ERISA or the Code in connection with each
Company Employee Plan or related trust; (iv) if the Company Employee Plan is
funded, the most recent annual and periodic accounting of Company Employee
Plan assets; (v) the most recent summary plan description together with the
most recent summary of material modifications, if any, required under ERISA
with respect to each Company Employee Plan; (vi) all IRS determination letters
and rulings relating to Company Employee Plans and copies of all applications
and correspondence to or from the IRS or the Department of Labor ("DOL") with
respect to any Company Employee Plan; (vii) all communications material to any
Employee or Employees relating to any Company Employee Plan and any proposed
Company Employee Plans, in each case, relating to any amendments,
terminations, establishments, increases or decreases in benefits, acceleration
of payments or vesting schedules or other events which would result in any
material liability to the Company or any Subsidiary; and (viii) all
registration statements and prospectuses prepared in connection with each
Company Employee Plan.
(d) Employee Plan Compliance. (i) The Company and each of its
Subsidiaries, if any, has performed in all material respects all obligations
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required to be performed by it under each Company Employee Plan, and each
Company Employee Plan has been established and maintained in all material
respects in accordance with its terms and in compliance with all applicable
laws, statutes, orders, rules and regulations, including but not limited to
ERISA and the Code; (ii) to the knowledge of the Company, no "prohibited
transaction," within the meaning of Section 4975 of the Code or Section 406 of
ERISA, has occurred with respect to any Company Employee Plan; (iii) to the
knowledge of the Company, there are no material actions, suits or claims
pending, or threatened or anticipated (other than routine claims for benefits)
against any Company Employee Plan or against the assets of any Company
Employee Plan; (iv) each Company Employee Plan can be amended, terminated or
otherwise discontinued after the Effective Time in accordance with its terms,
without material liability to the Company or any of its Subsidiaries, Parent
or any of its Affiliates (other than ordinary administration expenses
typically incurred in a termination event); (v) to the knowledge of the
Company, there are no inquiries or proceedings pending or threatened by the
IRS or DOL with respect to any Company Employee Plan; (vi) to the knowledge of
the Company, neither the Company nor any of its Subsidiaries is subject to any
penalty or tax with respect to any Company Employee Plan under Section 402(i)
of ERISA or Section 4975 through 4980 of the Code; and (vii) all
contributions, including any top heavy contributions, required to be made by
the Company or any ERISA affiliate to any Company Employee Plan have been made
or shall be made on or before the Closing Date.
(e) Pension Plans. Neither the Company nor any of its
Subsidiaries currently maintains, sponsors, participates in or contributes to,
nor has it ever maintained, established, sponsored, participated in, or
contributed to, any Pension Plan which is subject to Part 3 of Subtitle B of
Title I of ERISA, Title IV of ERISA or Section 412 of the Code.
(f) Multiemployer Plans. At no time has the Company or any of
its Subsidiaries contributed to or been requested to contribute to any
Multiemployer Plan.
(g) No Post-Employment Obligations. Except as set forth on
Schedule 2.25(g) or as required by local, state or federal law, no Company
Employee Plan provides, or has any liability to provide, life insurance,
medical or other employee benefits to any Employee upon his or her retirement
or termination of employment for any reason, including continuation health
care coverage under Section 4980B of the Code, and the Company and each of its
Subsidiaries, if any, has never represented, promised or contracted (whether
in oral or written form) to any Employee (either individually or to Employees
as a group) that such Employee(s) would be provided with life insurance,
medical or other employee welfare benefits upon their retirement or
termination of employment.
(h) Effect of Transaction. The execution of this Agreement and
the consummation of the transactions contemplated hereby will not (either
alone or upon the occurrence of any additional or subsequent events)
constitute an event under any Company Employee Plan, Employee Agreement, trust
or loan that will or may result in any payment (whether of severance pay or
otherwise), acceleration, forgiveness of indebtedness, vesting, distribution,
increase in benefits or obligation to fund benefits with respect to any
Employee.
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(i) Employment Matters. The Company and each of its
Subsidiaries, if any, (i) is in compliance in all material respects with all
applicable foreign, federal, state and local laws, rules and regulations
respecting employment, employment practices, terms and conditions of
employment and wages and hours, in each case, with respect to Employees; (ii)
has withheld all amounts required by law or by agreement to be withheld from
the wages, salaries, and other payments to Employees; (iii) is not liable for
any arrears of wages or any taxes or any penalty for failure to comply with
any of the foregoing; and (iv) is not liable for any payment to any trust or
other fund or to any governmental or administrative authority, with respect to
unemployment compensation benefits, social security or other benefits or
obligations for Employees (other than routine payments to be made in the
normal course of business and consistent with past practice).
(j) Labor. No work stoppage or labor strike against the Company
or any Subsidiary is pending or, to the knowledge of the Company, threatened.
Neither the Company nor any of its Subsidiaries is involved in or, to the
knowledge of the Company, threatened with, any labor dispute, grievance,
administrative proceeding or litigation relating to labor, safety, employment
practices or discrimination matters involving any Employee, including, without
limitation, charges of unfair labor practices or discrimination complaints,
which, if adversely determined, would, individually or in the aggregate, have
a Material Adverse Effect on the Company. Neither the Company nor any of its
Subsidiaries has engaged in any unfair labor practices within the meaning of
the National Labor Relations Act which would, individually or in the
aggregate, directly or indirectly have a Material Adverse Effect on the
Company. Neither the Company nor any of its Subsidiaries is presently, nor
has it been in the past, a party to, or bound by, any collective bargaining
agreement or union contract with respect to Employees and no collective
bargaining agreement is being negotiated by the Company or any Subsidiary.
2.26 Employees. To the knowledge of the Company, (i) no employees of
the Company or any Subsidiary are in material violation of any term of any
employment contract, patent disclosure agreement, non-competition agreement,
or any restrictive covenant to a former employer relating to the right of any
such employee to be employed by the Company because of the nature of the
business conducted or presently proposed to be conducted by the Company or
such Subsidiary or to the use of trade secrets or proprietary information of
others, (ii) as of the date hereof, no employees have given notice to the
Company or any Subsidiary, nor is the Company or any Subsidiary otherwise
aware, that any such employee intends to terminate his or her employment with
the Company or any Subsidiary and (iii) as of the Closing Date, there have
been no terminations of employment with the Company or any of its Subsidiaries
that would have a Material Adverse Effect.
2.27 Distribution of Merger Consideration. The Merger Consideration,
when distributed in accordance with Sections 1.7 and 1.8, will have been
distributed to the holders of Company Capital Stock in accordance with the
provisions of the Company's Certificate of Incorporation in effect immediately
prior to the Effective Time and any other document or agreement among the
Company and such holders related to the distribution of the Merger
Consideration. No holder of Company Capital Stock shall have any claims
against Parent in connection with the distribution of the Merger Consideration
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by the Exchange Agent to the extent that the Exchange Agent receives and
distributes the Merger Consideration in accordance with the terms hereof,
except as provided herein.
2.28 Disclosure Documents. None of the information supplied or to be
supplied by the Company for inclusion in (i) the proxy statement relating to
the meeting of the Company's stockholders to be held in connection with the
Merger (the "Proxy Statement"), and (ii) any registration statement on Form S-
4 or other appropriate registration form to be filed with the SEC by Parent in
connection with the offer and issuance of the Parent Common Stock in or as a
result of the Merger (each, a "Registration Statement"), including the Proxy
Statement included therein, will, in the case of the Proxy Statement, at the
time of mailing of the Proxy Statement to stockholders of the Company, contain
any untrue statement of a material fact or will omit to state any material
fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made,
not misleading or will, in the case of each Registration Statement, at the
time each such Registration Statement becomes effective under the 1933 Act,
contain any untrue statement of a material fact or omit to state any 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. The Proxy Statement will comply as to form in all material
respects with the provisions of the Exchange Act and the rules and regulations
thereunder applicable to the Company, except that no representation is made by
the Company with respect to information supplied by Parent or Merger Sub for
inclusion therein and no representation is made by the Company with respect to
any forward-looking information, budgets or projections which may have been
supplied by the Company.
2.29 Opinion of Lehman Brothers. The Company has received the opinion
of Lehman Brothers to the effect that, as of May 1, 1998, the Merger
Consideration is fair, from a financial point of view, to the common
shareholders of the Company.
2.30 Representation Complete. None of the representations or
warranties made by the Company (as modified by the Company Schedules), nor any
statement made in any schedule or certificate furnished by the Company
pursuant to this Agreement contains or will contain at the Effective Time, any
untrue statement of a material fact, or omits or will omit at the Effective
Time to state any material fact necessary in order to make the statements
contained herein or therein, in the light of the circumstances under which
made, not misleading. The Company has disclosed to Parent all facts that are
known to the Company to be material (individually or in the aggregate) to the
business, assets, liabilities, financial condition, prospects or operations of
the Company and each Subsidiary taken together.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub hereby represent and warrant to the Company, as of
the date of this Agreement and as of the Closing Date, except as otherwise
expressly provided herein, subject to such exceptions as are specifically
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disclosed in the disclosure letter (referencing the appropriate schedule or
section number) supplied by Parent to Company (the "Parent Schedules") and
dated as of the date hereof and updated as of the Closing Date by mutual
agreement of the Parent and Company, as follows:
3.1 Organization, Standing and Power. Parent is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Delaware. Merger Sub is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware. Each of Parent and
Merger Sub has the corporate power to own, operate and lease its properties
and to carry on its business as now being conducted and is duly qualified or
licensed to conduct its business and is in good standing as a foreign
corporation in each jurisdiction in which the failure to be so qualified would
have, or would reasonably be expected to have, a Material Adverse Effect on
Parent or Merger Sub. Parent has delivered a true and correct copy of its
Certificate of Incorporation and Bylaws, each as amended to date, to the
Company. Merger Sub has delivered a true and correct copy of its Certificate
of Incorporation and Bylaws, each as amended to date, to the Company.
3.2 Authority. Parent and Merger Sub have all requisite corporate
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of Parent
and Merger Sub. This Agreement has been duly executed and delivered by Parent
and Merger Sub and constitutes the valid and binding obligations of Parent and
Merger Sub, enforceable in accordance with its terms except (i) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium and other laws
of general application affecting enforcement of creditors' rights generally
and (ii) as limited by laws relating to the availability of specific
performance, injunctive relief or other equitable remedies. The execution and
delivery of this Agreement by the Parent and Merger Sub does not, and, as of
the Effective Time, the consummation of the transactions contemplated hereby
will not, (i) conflict with, or result in any violation of, or default under
(with or without notice or lapse of time, or both) any provision of the
Certificate of Incorporation or Bylaws of Parent or Merger Sub or (ii)
assuming compliance with the matters referred to in the next succeeding
sentence, (a) contravene or conflict with or constitute a violation of any
provision of any law, regulation, judgment, injunction, order or decree
binding upon or applicable to Parent or Merger Sub or any of their respective
Subsidiaries or Joint Ventures except for any such contravention, conflict or
violation that does not have a Material Adverse Effect on Parent or Merger
Sub, as applicable; or (b) constitute a default under or give rise to a
termination, cancellation, acceleration or loss of any material benefit under
any material agreement, contract or other instrument binding upon Parent,
Merger Sub or any of their respective Subsidiaries or Joint Ventures or any
material license, franchise, permit or other similar authorization held by
Parent, Merger Sub or any of their respective Subsidiaries or Joint Ventures;
or (iii) result in the creation or imposition of any material Lien on any
material asset of Parent or Merger Sub or any of their respective Subsidiaries
or Joint Ventures. No consent, waiver, approval, order or authorization of,
or registration, declaration or filing with, any court, administrative agency
or commission or other federal, state, country, local or foreign governmental
authority, instrumentality, agency or commission or any shareholder of Parent
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or Merger Sub or any third party (so as not to trigger any Conflict) is
required by or with respect to the Parent in connection with the execution and
delivery of this Agreement or the consummation of the transactions
contemplated hereby, except for (i) the filing of the Merger Agreement with
the Delaware Secretary of State, (ii) compliance with any applicable
requirements of the Exchange Act, and the rules and regulations promulgated
thereunder; (iii) compliance with any applicable requirements of the 1933 Act,
and the rules and regulations promulgated thereunder, (iv) compliance with any
applicable foreign or state securities or "blue sky" laws; (v) compliance with
any applicable requirements of the HSR Act; (vi) such other filings or
registrations with, or authorizations, consents or approvals of, governmental
bodies, agencies, officials or authorities, the failure of which to make or
obtain would not materially and adversely affect the ability of the Company,
Parent or Merger Sub to consummate the Merger; or (vii) such other consents,
waivers, authorizations, filings, approvals and registrations which are set
forth on Schedule 3.2.
3.3 Capital Structure.
(a) The authorized stock of Parent consists of 80,000,000 shares
of Common Stock and 5,000,000 shares of Preferred Stock. As of December 31,
1997 there were issued and outstanding:
(i) 38,504,459 shares of Parent Common Stock;
(ii) No shares of Preferred Stock;
(iii) Options to purchase an aggregate of 4,068,506 shares
of Parent Common Stock (of which such options to purchase an aggregate of
2,442,187 shares of Parent Common Stock were exercisable);
(iv) Warrants to purchase an aggregate of 6,606,094 shares
of Parent Common Stock (of which all such Warrants were exercisable) and an
aggregate principal amount of $6,250,000 of convertible promissory notes
convertible into 558,991 shares of Parent Common Stock; and
(v) an aggregate principal amount of $50 million of 7-1/2%
Convertible Subordinated Debentures of Glycomed, Inc., a wholly owned
subsidiary of Parent, convertible into 1,885,370 shares of Parent Common
Stock.
All such shares have been duly authorized, and all such issued and
outstanding shares have been validly issued, are fully paid and nonassessable
and are free of any liens or encumbrances other than any liens or encumbrances
created by or imposed upon the holders thereof. Except as set forth in this
Section 3.3 and except for changes since December 31, 1997 resulting from the
issuance or exercise of stock options and stock purchase rights to or by
employees, directors and consultants in the ordinary course of business
consistent with past practice, as of the date hereof there are outstanding (i)
no shares of capital stock or other voting securities of Parent, (ii) no
securities of Parent convertible into or exchangeable for shares of capital
stock or voting securities of Parent and (iii) no options or other rights to
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acquire from Parent, and no obligation of Parent to issue, any capital stock,
voting securities or securities convertible into or exchangeable for capital
stock or other voting securities of Parent (the items in clauses (i), (ii) and
(iii) being referred to collectively as the "Parent Securities"). Except as
disclosed above and in SEC Documents filed by Parent, as of the date hereof
there are no outstanding obligations of Parent or any of its Subsidiaries or
Joint Ventures to issue or to repurchase, redeem or otherwise acquire any
Parent Securities.
(b) The shares of Parent Common Stock to be issued pursuant to
the Merger, when issued, will be duly authorized, validly issued, fully paid
and nonassessable. Parent has reserved and will keep reserved sufficient
shares of Parent Common Stock for issuance in connecting with payment of the
Closing Consideration and Milestone Consideration.
(c) The authorized capital stock of Merger Sub consists of 100
shares of Common Stock, all of which are issued and outstanding and are held
by Parent.
3.4 SEC Documents; Parent Financial Statements. As of the date
hereof, Parent has furnished or made available to the Company true and
complete copies of all SEC Documents previously filed by it with the SEC under
the 1933 Act and the Exchange Act. As of their respective filing dates, all
such SEC Documents of Parent complied in all material respects with the
requirements of the 1933 Act or the Exchange Act, as the case may be, and none
of such SEC Documents contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements made therein, in light of the circumstances in which they
were made, not misleading, except to the extent corrected by a document
subsequently filed with the SEC. The financial statements of Parent,
including the notes thereto, included in the aforesaid SEC Documents (the
"Parent Financial Statements") comply as to form in all material respects with
applicable accounting requirements and with the published rules and
regulations of the SEC with respect thereto, have been prepared in accordance
with GAAP consistently applied (except as may be indicated in the notes
thereto or, in the case of unaudited statements, as permitted by Form 10-Q of
the SEC) and present fairly the consolidated financial position of Parent at
the dates thereof and the consolidated results of its operations and cash
flows for the periods then ended (subject, in the case of unaudited
statements, to normal audit adjustments). As of the date hereof, there has
been no change in Parent accounting policies except as described in the notes
to the Parent Financial Statements.
3.5 No Material Adverse Change. Since the date of the balance sheet
included in the Parent's most recently filed report on Form 10-K (the "Parent
Balance Sheet") and continuing through the date hereof, Parent has conducted
its business in the ordinary course and there has not occurred: (a) any
material adverse change in the financial condition, liabilities, assets
(including intellectual property assets) or business of Parent or any of its
Subsidiaries or Joint Ventures; (b) any amendment or change in the Certificate
of Incorporation or Bylaws of Parent or any of its Subsidiaries or Joint
Ventures, or Merger Sub (with respect to Merger Sub, since the date of its
incorporation); or (c) any damage to, destruction or loss of any assets of
Parent or any of its Subsidiaries or Joint Ventures (whether or not covered
by insurance) that materially and adversely affects the financial condition or
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business of Parent or any of its Subsidiaries or Joint Ventures. Since
December 31, 1997 and continuing through the Effective Time, there has not
occurred delisting or suspension of the trading of Parent's Common Stock on
the Nasdaq National Market.
3.6 Litigation. As of the date hereof, there is no material action,
suit or proceeding of any nature pending or to the knowledge of Parent
threatened against Parent or Merger Sub, any of their respective Subsidiaries
or Joint Ventures, their respective properties or any of their respective
officers or directors, in their respective capacities as such. As of the date
hereof, there is no material investigation pending or to the knowledge of
Parent threatened against Parent or Merger Sub, any of their respective
Subsidiaries or any Joint Ventures, any of their respective properties or any
of their respective officers or directors by or before any Governmental
Entity. To the knowledge of Parent, as of the date hereof no Governmental
Entity has at any time challenged or questioned the legal right of Parent or
Merger Sub, or any of their respective Subsidiaries or Joint Ventures to
conduct research, development and manufacturing activities in the present
manner or style thereof.
3.7 Disclosure Documents. None of the information supplied or to be
supplied by Parent for inclusion in (i) the Proxy Statement, and (ii) any
Registration Statement, including the Proxy Statement included therein, will,
in the case of the Proxy Statement, at the time of the mailing of the Proxy
Statement to stockholders of the Company, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading or will, in the case
of each Registration Statement, at the time each such becomes effective under
the 1933 Act, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. Each Registration Statement will comply as to form in all
material respects with the provisions of the 1933 Act and the rules and
regulations thereunder, except that no representation is made by Parent with
respect to information supplied by the Company for inclusion therein and no
representation is made by Parent with respect to any forward-looking
information, budgets or projections which may have been supplied by Parent.
3.8 Ownership of Company Stock. As of the date hereof, and during the
three (3) year period immediately preceding the date hereof, neither Parent or
Merger Sub nor, to the Company's knowledge, any affiliate or associate (as
defined in Section 203 of Delaware Law) thereof is an "interested stockholder"
of the Company within the meaning of Section 203 of the Delaware Law.
3.9 Subsidiaries and Joint Ventures.
(a) Schedule 3.9 sets forth, as of the date hereof, the
name and respective jurisdiction of incorporation or organization of all
Subsidiaries and Joint Ventures of Parent. Each of the Subsidiaries of Parent
as of the date hereof is a corporation or other entity duly incorporated or
otherwise organized, validly existing in good standing (or local law
equivalent) under the laws of its jurisdiction of organization. Each of the
Subsidiaries of Parent as of the date hereof has the corporate power and
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authority to own and lease the properties and assets it now owns and leases
and to carry on its business as and where such properties and assets are now
owned or leased and such business is now conducted. Parent has heretofore
delivered to the Company true, correct and complete copies of the Articles of
Incorporation, Bylaws, or equivalent governing instruments, each as amended to
the date hereof, for each such Subsidiary. Each of the Subsidiaries of Parent
as of the date hereof is duly licensed or qualified to do business as a
foreign corporation and is in good standing in all jurisdictions in which the
failure to be so licensed or qualified and in good standing would have a
Material Adverse Effect.
(b) All of the outstanding capital stock of, or other
ownership interests in, each Subsidiary of Parent that is owned by Parent,
directly or indirectly, is as of the date hereof free and clear of any
material Lien and free of any other material limitation or restriction on
Parent's rights as owner thereof (including any restriction on the right to
vote, sell or otherwise dispose of such capital stock or other ownership
interests), other than those imposed by applicable law. As of the date
hereof, there are no existing options, calls or commitments of any character
relating to the issued or unissued capital stock or other securities or equity
interests of any Subsidiary of Parent. As of the date hereof, the ownership
interests of Parent in any Joint Ventures are owned by Parent free and clear
of any Liens, limitations, restrictions, options, calls or commitments, other
than those that are immaterial.
3.10 Compliance with Laws. As of the date hereof, Parent, Merger Sub
and each of their respective Subsidiaries has complied in all respects with,
is not in violation of, and has not received any notices of violation with
respect to, any foreign, federal, state or local statute, law or regulation,
the failure to comply with which would have a Material Adverse Effect.
3.11 Minute Books. The minute books of Parent and each of its
Subsidiaries (other than Ligand Pharmaceuticals (Canada) Inc. ("Ligand
Canada")) made available to counsel for the Company prior to the date hereof
are, as of the date hereof, the only minute books of Parent and such
Subsidiaries and contain, as of the date hereof, a reasonably accurate summary
of all meetings of directors (or committees thereof) and stockholders or
actions by written consent since the time of incorporation of Parent and such
Subsidiaries. Parent represents and warrants that the Board of Directors and
shareholders of Ligand Canada have authorized and approved any action of
Ligand Canada that would require such authorization or approval, and that
there is nothing set forth in such minutes, or that should have been recorded
in such minutes, that would have a Material Adverse Effect on Ligand Canada or
would adversely affect the consummation of the Merger or other transactions
contemplated hereby.
3.12 No Undisclosed Liabilities. Except as disclosed in the Parent
Balance Sheet, as of the date hereof, there are no liabilities of Parent or
any of its Subsidiaries or Joint Ventures of any kind whatsoever that are,
individually or in the aggregate, material to Parent and its Subsidiaries and
Joint Ventures taken as a whole, other than (a) liabilities disclosed or
provided for in the Parent Balance Sheet or liabilities of a nature not
required to be disclosed in a balance sheet under generally accepted
accounting principles; (b) liabilities incurred in the ordinary course of
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business since the date of the Company Balance Sheet; and (c) liabilities
under this Agreement, the Marathon Agreement and as previously described by
Parent to the Company arising in connection with the agreement between Ligand
and Lilly dated the date hereof or incurred in connection with the
transactions contemplated hereby or thereby.
3.13 Restrictions on Business Activities. Except as disclosed in the
Parent's Annual Report on Form 10-K for the year ended December 31, 1997 or as
set forth on Schedule 3.13, as of the date hereof, there is no agreement
(non-compete or otherwise), commitment, judgment, injunction, order or decree
to which Parent or Merger Sub, or any of their respective Subsidiaries or
Joint Ventures is a party or otherwise binding upon Parent or Merger Sub, or
any of their respective Subsidiaries or Joint Ventures which has or reasonably
could be expected to have the effect of prohibiting or materially impairing
the ability of Parent, any of its Subsidiaries or Joint Ventures to conduct
its business as currently conducted or any acquisition of property (tangible
or intangible) by Parent or any of its Subsidiaries or Joint Ventures.
3.14 Representations Complete. None of the representations and
warranties made by Parent or Merger Sub (as modified by the Parent Schedules),
nor any statement made in any schedule or certificate furnished by Parent or
Merger Sub pursuant to this Agreement, or included in any Registration
Statement, contains, or will contain at the Effective Time, any untrue
statement of a material fact, or omits or will omit at the Effective Time to
state any material fact necessary in order to make the statements contained
herein or therein, in light of the circumstances under which made, not
misleading. Parent has, as of the date hereof, disclosed to the Company all
facts that are known to Parent to be material (individually or in the
aggregate) to the business, assets, liabilities, financial condition,
prospects or operations of Parent, Merger Sub and each of their respective
Subsidiaries taken together.
ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 Conduct of Business of the Company. During the period from the
date of this Agreement and continuing until the earlier of the termination of
this Agreement and the Effective Time, the Company agrees (except to the
extent that Parent shall otherwise consent in writing) to carry on its
business in the usual, regular and ordinary course in substantially the same
manner as heretofore conducted and, to the extent consistent with such
business, to use all reasonable efforts consistent with past practice and
policies to preserve intact its present business organization, keep available
the services of its present officers and key employees and preserve its
relationships with customers, suppliers, distributors, licensors, and others
having business dealings with it, all with the goal of preserving unimpaired
its goodwill and ongoing businesses at the Effective Time. The Company shall
promptly notify Parent of any event or occurrence or emergency not in the
ordinary course of its business, and any material event involving or adversely
affecting the Company or its business. Except as expressly contemplated by
this Agreement or the Accord and Satisfaction Agreement, the Company shall
not, without the prior written consent of Parent:
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(a) Enter into any commitment, activity or transaction that
creates an obligation that will continue to bind the Company or any of its
Subsidiaries after the Closing Date, which commitment, activity or transaction
is not in the ordinary course of business as conducted on the Company Balance
Sheet Date and consistent with the Company's past practices;
(b) Transfer to any Person or entity any rights to any Company
Intellectual Property;
(c) Enter into, amend, willfully violate the terms of, fail to
perform under or terminate any material agreement, including, without
limitation, any agreement pursuant to which (i) any other party is granted
manufacturing, marketing, distribution or similar rights of any type or scope
with respect to any products or drug candidates of the Company or (ii) the
Company is granted exclusive rights in a geographical area or field of use;
(d) Amend or otherwise modify (or agree to do so), except in the
ordinary course of business consistent with the Company's past practices, or
willfully violate the terms of, any of the material agreements set forth or
described in the Company Schedules;
(e) Amend or otherwise modify (or agree to do so), or willfully
violate the terms of, any of the agreements set forth or described in Schedule
2.13(i);
(f) Settle or compromise, or agree to settle or compromise, any
suit or other litigation matter or matter in an arbitration proceeding for any
material amount (after taking into account any insurance proceeds to which the
Company is entitled) or otherwise on terms which would have a Material Adverse
Effect on the Company;
(g) Except as contemplated by the Accord Agreement, declare, set
aside or pay any dividends on or make any other distributions (whether in
cash, stock or property) in respect of any Company Capital Stock, or split,
combine or reclassify any Company Capital Stock or issue or authorize the
issuance of any other securities in respect of, in lieu of or in substitution
for shares of Company Capital Stock, or repurchase, redeem or otherwise
acquire, directly or indirectly, any shares of Company Capital Stock (or
options, warrants or other rights exercisable therefor);
(h) Grant, deliver or sell or authorize or propose the issuance,
grant, delivery or sale of, or purchase or propose the purchase of, any shares
of Company Securities, or subscriptions, rights, warrants or options to
acquire, or other agreements or commitments of any character obligating it to
issue any such shares or other convertible securities; except for (i) the
issuance of shares of Company Capital Stock upon exercise or conversion of
Company Options or Company Warrants outstanding at the date of execution of
this Agreement, (ii) options required to be issued by the Company pursuant to
employment or consultant agreements with certain key executive officers and
consultants in effect as of the date hereof, or (iii) additional options
exercisable into not more than 200,000 shares of Company Common Stock, in the
aggregate;
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(i) Cause or permit any amendments to its Certificate of
Incorporation or Bylaws;
(j) Acquire or agree to acquire by merging or consolidating
with, or by purchasing any assets or equity securities of, or by any other
manner, any business or any corporation, partnership, association or other
business organization or division thereof, or otherwise acquire or agree to
acquire any assets which are material, individually or in the aggregate, to
the business of the Company;
(k) Knowingly fail in any material respect to comply with any
laws, ordinances, regulations or other governmental restrictions applicable to
the Company;
(l) Sell, lease, license or otherwise dispose of any of its
properties or assets except in the ordinary course of business and consistent
with past practice;
(m) Make loans or advances or incur any indebtedness for
borrowed money or guarantee or otherwise become responsible for any such
indebtedness or guarantee such indebtedness or issue or sell any of its debt
securities or guarantee, endorse or otherwise become responsible for the
obligations of others;
(n) Grant any severance or termination pay to any director,
officer, employee or consultant, except (i) payments made pursuant to written
agreements outstanding on the date hereof (which agreements are disclosed on
Schedule 4.1(n)) or (ii) other payments disclosed on Schedule 4.1(n))
("Severance Payments");
(o) Adopt or amend any employee benefit plan, program, policy or
arrangement, or enter into any employment contract, extend any employment
offer, pay or agree to pay any special bonus or special remuneration to any
director, employee or consultant in excess of an aggregate of $75,000, or
increase the salaries or wage rates of its employees, except pursuant to
payments under the Accord and Satisfaction Agreement;
(p) Revalue any of its assets, including without limitation
writing down the value of inventory or writing off notes or accounts
receivable other than in the ordinary course of business and consistent with
past practice, so as to result in a Material Adverse Effect to the Company;
(q) Pay, discharge or satisfy, in an amount in excess of $10,000
in any one case, or $25,000 in the aggregate, any claim, liability or
obligation (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction in the ordinary
course of business of liabilities reflected or reserved against in the Company
Financial Statements, other than Third Party Expenses which shall be paid
pursuant to Section 5.5 of this Agreement;
(r) Fail to pay Taxes when due, make or change any material
election in respect of Taxes, adopt or change any accounting method in respect
of Taxes, enter into any closing agreement, settle any claim or assessment in
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respect of Taxes, or consent to any extension or waiver of the limitation
period applicable to any claim or assessment in respect of Taxes to the extent
that any of the foregoing would have a Material Adverse Effect on the Company;
provided, however, that the consent of Parent shall not be unreasonably
withheld;
(s) Enter into any strategic alliance, joint development or
joint marketing arrangement or agreement;
(t) Fail to pay or otherwise satisfy its monetary obligations as
they become due, except such as are being contested in good faith and except
such obligations as are due under the Service Agreement;
(u) Waive or commit to waive any rights with a value in excess
of $10,000 in any one case, or $25,000 in the aggregate;
(v) Cancel, modify, reduce or renew at rates not substantially
similar to those rates in recent prior years any of its existing liability
insurance, including without limitation existing directors' and officers'
liability insurance, except an extension of the existing directors' and
officers' liability insurance for two years following the Closing Date at a
cost to the Company not to exceed $350,000, which extension the Company shall
be free to obtain without the consent of Parent or Merger Sub;
(w) Alter, or enter into any commitment to alter, its interest
in any corporation, association, joint venture, partnership or business entity
in which the Company directly or indirectly holds an interest on the date
hereof;
(x) Take, or agree in writing or otherwise to take, any of the
actions described in Sections 4.1(a) through (w) above, or any other action
that would prevent the Company from performing or cause the Company not to
perform its covenants hereunder.
4.2 Conduct of Business of Parent. Except as expressly contemplated by
this Agreement, the Parent shall not, without the prior written consent of the
Company:
(a) Adopt any changes in its Amended and Restated Certificate of
Incorporation or Bylaws that in any respect adversely affects the rights of
the holders of Parent Common Stock or adversely affects the ability of Parent
to consummate the transactions contemplated hereby; or
(b) Take any action that would result in a failure to maintain
the trading of Parent Common Stock on the Nasdaq National Market without
causing such stock to be listed for trading on a national securities exchange
at or prior to the termination of its trading on the Nasdaq National Market.
4.3 Other Offers. From the date hereof until the termination of this
Agreement, the Company and the officers, directors, employees or other agents
of the Company will not, directly or indirectly, take any action to solicit,
initiate or encourage the making of any Acquisition Proposal (as hereinafter
defined); provided, however, that the Board of Directors of the Company may
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engage in negotiations with, or disclose any nonpublic information relating to
the Company or afford access to the properties, books or records of the
Company to, any person or entity that informs the Board of Directors that it
is considering making, or has made, an Acquisition Proposal. Until this
Agreement shall be terminated, the Company will not enter into any agreement
to merge or consolidate with, or sell a substantial portion of its assets to,
any person or entity. The Company will promptly notify Parent after receipt
of any Acquisition Proposal or any request for nonpublic information relating
to the Company in connection with an Acquisition Proposal or for access to the
properties, books or records of the Company by any person or entity that
informs the Board of Directors that it is considering making, or has made, an
Acquisition Proposal. The term "Acquisition Proposal" as used herein means
any offer or proposal for, or any indication of interest in, a merger or other
business combination involving the Company or the acquisition of a majority by
voting power of the outstanding shares of Company Capital Stock or a majority
of the assets of the Company, other than the transactions contemplated by this
Agreement.
4.4 Employee Releases. Prior to the Effective Time, the Company shall
not grant severance rights or make Excess Severance Payments to any person
employed by the Company without such person executing a general release and
waiver, effective upon receipt of such payment, in a form reasonably
acceptable to Parent of all claims arising out of the relationship of
employment, the termination of employment or any matter arising out of the
employee's relationship with the Company or the transactions contemplated by
this Agreement, other than any rights the employee may have to receive a
portion of the Merger Consideration as a holder of any Company Capital Stock.
For purposes of this Agreement, "Excess Severance Payments" shall mean
severance payments to a person in excess of amounts typically paid by the
Company to an employee of similar rank and seniority as such person.
4.5 Option and Asset Purchase Agreement. Parent shall not exercise
its Option (as defined under the Purchase Agreement (as defined herein)) or
otherwise acquire any right, title or interest in or to Marathon or its assets
or businesses prior to the Closing Date.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Stockholders' Meeting; Proxy Material; Registration Statement.
(a) If the Merger Consideration is to consist of Parent Common
Stock, Parent shall reserve sufficient shares of Parent Common Stock for
issuance in or as a result of the Merger and, prior to the Closing Date,
Parent (i) shall prepare and file with the SEC all Registration Statements
necessary to provide that all Parent Common Stock issued as part of the Merger
Consideration is freely tradable, except as contemplated by Section 5.1(c) of
this Agreement or Rule 145 under the 1933 Act, and subject to the prospectus
delivery requirements of the 1933 Act, and shall use its best efforts to cause
such Registration Statements to be declared effective, (ii) shall take such
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actions as are necessary to qualify such shares of Parent Common Stock for
sale under applicable foreign or state securities or "blue sky" laws, and, in
the case of both clause (i) and (ii), to maintain in effect such registrations
and qualifications until the later of (A) six (6) months following the date of
payment of the Milestone Consideration pursuant to Section 1.6, and (B) the
second anniversary of the Closing Date, and (iii) shall take such actions as
are necessary to authorize such shares for listing on the Nasdaq National
Market upon official notice of issuance.
(b) The Company shall cause a meeting of its stockholders to be
duly called and held as soon as practicable following the effectiveness of all
the Registration Statements for the purpose of voting on the approval and
adoption of this Agreement and the Merger. The Board of Directors of the
Company shall, subject to its fiduciary duties, recommend approval and
adoption of such matters by the Company's stockholders. In connection with
such meeting, Parent and the Company:
(i) will together promptly prepare and file with the SEC
the Proxy Statement and will use their best efforts to have cleared by the SEC
the Proxy Statement; and
(ii) will otherwise comply with all legal requirements
applicable to such meeting.
In connection with such meeting, the Company (i) will mail to its
stockholders as promptly as practicable the Proxy Statement and all other
proxy materials for such meeting; and (ii) will use its best efforts, subject
to Section 4.3, to obtain the necessary approvals by its stockholders of this
Agreement and the transactions contemplated hereby.
(c) Lock-Up of Parent Common Stock.
(i) If any Stock Consideration is paid pursuant to Section
1.6 above, shares of Parent Common Stock issued in the Merger to the holders
of Company Capital Stock described in Section 5.1(c)(ii) below shall be
subject to lock-up for periods specified in Section 5.1(c)(ii) below, and such
holder of any Company Capital Stock that receives any shares of Parent Common
Stock in the Merger shall not, to the extent requested by Parent, directly or
indirectly, sell, transfer or otherwise dispose of, or offer or contract to
sell, transfer or otherwise dispose of, any Parent Common Stock received by
such holder in the Merger at any time during such period ("Lock-Up"). In
order to enforce the foregoing restriction on transfer, the Company may impose
stop-transfer instructions with respect to the Parent Common Stock issued to
such stockholders issued in the Merger until the end of such period.
(ii) That portion of the shares of Parent Common Stock
issued in the Merger to Boston University as Stakeholder Closing
Consideration, if any, shall be subject to Lock-Up until the later of (A) the
second anniversary of the Closing Date and (B) the first anniversary of the
date of issuance of such Parent Common Stock. All shares of Parent Common
Stock issued in the Merger to Eli Lilly and Company ("Lilly") shall be subject
to the restrictions on transfer set forth in Section 4.1 of that certain Stock
Purchase Agreement dated November 25, 1997 between Parent and Lilly as if such
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shares of Parent Common Stock were shares pursuant to such agreement.
Finally, all shares of Parent Common Stock issued in the Merger to Company
Financial Advisors and fifty percent (50%) of the shares of Parent Common
Stock issued in the Merger to management of the Company, including, without
limitation, any shares of Parent Common Stock delivered to the Escrow Agent
pursuant to Section 1.13(b)(i), shall be subject to Lock-Up for a period of
ninety (90) days from the date of issuance of such shares.
(d) Additional Assurances. Each party, at the request of the
other, shall use its reasonable efforts to cause the its stockholders to
execute and deliver such instruments and do and perform such acts and things
as may be necessary or desirable for complying with all applicable securities
laws and state corporate law.
5.2 Access to Information. Each party shall afford the others and
their accountants, counsel and other representatives, reasonable access during
normal business hours during the period prior to the Effective Time to (a) all
of its properties, books, contracts, commitments and records, and (b) all
other information concerning its business, properties and personnel (subject
to restrictions imposed by applicable law) as the others may reasonably
request; provided however, neither party shall be required to permit any
inspection, or to disclose any information, which in the reasonable judgment
of such party would result in the disclosure of any trade secrets of third
parties or violate any obligation of such party with respect to
confidentiality, or constitute a waiver of attorney-client or other privilege
of such party. Consistent with such obligations, such party must provide a
summary description of items subject to non-disclosure. No information or
knowledge obtained in any investigation pursuant to this Section 5.2 shall
affect or be deemed to modify any representation or warranty contained herein
or the conditions of the parties to consummate the Merger.
5.3 Confidentiality. (a) Except as and to the extent required by law,
the parties hereto will not disclose or use, and will direct their respective
representatives not to disclose or use to the detriment of the other parties,
any Confidential Information (as defined below) with respect to such other
party furnished, or to be furnished, by such other party or its
representatives to the disclosing party or its representatives at any time or
in any manner other than in connection with the transaction contemplated in
this Agreement. For purposes of this Agreement, "Confidential Information"
means any information about Parent, Merger Sub, the Company or any Subsidiary
or Joint Venture stamped "confidential" or identified in writing as such
promptly following its disclosure, unless (a) such information is already
known to the party receiving such information or its representatives or to
others not bound by a duty of confidentiality as demonstrated by its written
records or such information becomes publicly available through no fault of the
party receiving such information or its representatives, (b) the use of such
information is necessary or appropriate in making any filing or obtaining any
consent or approval required for the consummation of the transactions
contemplated herein, or (c) the furnishing or use of such information is
required by or necessary or appropriate in connection with legal proceedings;
provided that in cases described above in (b) or (c), the non-disclosing party
shall be informed of such required disclosure prior to its disclosure and
shall have the opportunity to comment on any required disclosure so as to
minimize the disclosure of Confidential Information.
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(b) Upon termination of this Agreement, the party receiving any
such Confidential Information shall (a) return to the party disclosing the
same, or shall destroy in a manner satisfactory to such disclosing party, all
tangible forms of such Confidential Information, including any and all copies
thereof, and those portions of any documents, memoranda, notes, studies and
analyses prepared by or on behalf of the receiving party or any of its
directors, officers, employees, advisors or representatives that incorporate
or are derived from such Confidential Information, and (b) immediately cease,
and shall cause its directors, officers, employees, advisors and
representatives to cease, use of such Confidential Information as well as any
information or materials that incorporate or are derived from such
Confidential Information.
5.4 Intellectual Property. Parent and Company each agree that prior
to the Merger, any and all Intellectual Property, including trade secrets,
created or developed by either party shall remain the exclusive property of
the party who created or developed such property, notwithstanding the sharing
of information prior to the Merger.
5.5 Expenses. Whether or not the Merger is consummated, all fees and
expenses incurred in connection with the Merger including, without limitation,
all legal, accounting, financial advisory, consulting, investment banking,
broker and finder fees and expenses and all other fees and expenses of third
parties (collectively, "Third Party Expenses") incurred by a party in
connection with the negotiation and effectuation of the terms and conditions
of this Agreement and the transactions contemplated hereby shall be the
obligation of the respective party incurring such fees and expenses.
5.6 Public Disclosure. Each of Parent and the Company shall use all
reasonable efforts to consult with the other before issuing any press release
or making any public statement with respect to this Agreement and the
transactions contemplated hereby and, except as may be required by applicable
law upon the advice of counsel, the rules of any market or stock exchange on
which the securities of the Company or Parent, as the case may be, are listed
or, if applicable, the rules of the Nasdaq National Market, shall use all
reasonable efforts not to issue any such press release or make any such public
statement prior to such consultation.
5.7 Consents. The Company shall use its best efforts to obtain the
consents, waivers and approvals under any of the Contracts as may be required
in connection with the Merger (all of such consents, waivers and approvals are
set forth in Company Schedules), including without limitation, the release of
security interests effected in connection with the Seragen Canada Settlement
Agreement, so as to preserve all rights of and benefits to the Company
thereunder.
5.8 FIRPTA Compliance. On or prior to the Closing Date, the Company
shall deliver to Parent a properly executed statement in a form reasonably
acceptable to Parent for purposes of satisfying Parent's obligations under
Treasury Regulation Section 1.1445-2(c)(3).
5.9 Best Efforts. Subject to the terms and conditions provided in
this Agreement, each of the parties hereto shall use its best efforts to
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ensure that its representations and warranties remain true and correct in all
material respects at and prior to the Effective Time, except as set forth in
such representation or warranty, and to take promptly, or cause to be taken,
all actions, and to do promptly, or cause to be done, all things necessary,
proper or advisable under applicable laws and regulations to consummate and
make effective the transactions contemplated hereby, to obtain all necessary
waivers, consents and approvals, to effect all necessary registrations and
filings, and to remove any injunctions or other impediments or delays, legal
or otherwise, in order to consummate and make effective the transactions
contemplated by this Agreement for the purpose of securing to the parties
hereto the benefits contemplated by this Agreement; provided, however, that
Parent shall not be required to agree to any divestiture by Parent or the
Company or any of Parent's subsidiaries or affiliates of shares of capital
stock or any business, assets or property of Parent or its subsidiaries or
affiliates or the Company or its affiliates, or the imposition of any material
limitation on the ability of any of them to conduct their businesses or to own
or exercise control of such assets, properties and stock.
5.10 Notification of Certain Matters. (a) Each of Parent and the
Company shall, upon obtaining knowledge of any of the following, promptly
notify the other of:
(i) any notice or other communication from any Person alleging
that the consent of such Person is or may be required in connection with the
Merger;
(ii) any notice or other communication from any governmental or
regulatory agency or authority in connection with the Merger;
(iii) any actions, suits, claims, investigations or other
judicial
proceedings known to its executive officers commenced or threatened against
the such party or any of its Subsidiaries which, if pending on the date of
this Agreement, would have been required to have been disclosed pursuant to
Section 2.18 or 3.6 as applicable or which relate to the consummation of the
Merger;
(v) occurrence or non-occurrence of any other event known to its
executive officers which is likely to cause any representation or warranty of
the such party contained in this Agreement to be materially untrue or
inaccurate at or prior to the Effective Time; and
(vi) any failure of such party known to its executive officers
to comply with or satisfy any covenant, condition or agreement to be complied
with or satisfied by it hereunder.
(b) In addition to its obligations set forth in Section 5.10(a), the
Company shall promptly notify Parent of any adverse determination or
recommendation in connection with any governmental proceeding to license any
of the Company's products, and any report filed with the FDA regarding an
unexpected fatal or life-threatening experience with respect to any such
product.
(c) The delivery of any notice pursuant to this Section 5.10 shall not
limit or otherwise affect any remedies available to a party.
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5.11 Additional Documents and Further Assurances. Each party hereto,
at the request of the other party hereto, shall execute and deliver such other
instruments and do and perform such other acts and things as may be necessary
or desirable for effecting completely the consummation of this Agreement and
the transactions and contemplated hereby.
5.12 Company Auditors. The Company will use its commercially
reasonable efforts to cause its management and its independent auditors to
facilitate on a timely basis (i) the preparation of financial statements of
the Company (including pro forma financial statements if required) as required
by Parent to comply with applicable SEC regulations and (ii) the review of the
Company's audit work papers for up to the past three years, including the
examination of selected interim financial statements and data.
5.13 Preclosing Company Payables; Preclosing Company Revenues.
(a) For purposes of this Section 5.13: (i) "Preclosing Company
Revenues" shall mean all revenues of the Company, including without
limitation, (A) returns of prepaid deposits, insurance premiums, the remaining
balance in any bank accounts or other amounts and (B) any payments received
from Lilly on or after the Closing Date whether in respect of amounts
reimbursed to the Company by Lilly in the normal course of business or one-
time milestone payments, of any kind or nature that would be required or
permitted by generally accepted accounting principles applied in a consistent
manner with the past practice of the Company to be reflected as assets on a
consolidated balance sheet for the Company and its Subsidiaries as of the
Closing Date; provided revenues of the Company derived from the Company's
contracts with Lilly will only be included in Preclosing Company Revenues to
the extent they relate to amounts actually paid by the Company prior to the
Effective Time or the extent the [ * ] milestone due upon regulatory
approval of DAB389IL-2 in the United States becomes due on or before the
Closing Date and is not paid on or before the Closing Date; and (ii)
"Preclosing Company Payables" shall mean all payables of the Company from the
date of this Agreement through the time of the Closing, including, without
limitation, (A) the Company's severance obligations to its employees
terminated at or prior to the Closing (subject to Section 4.4), including,
without limitation, its executive officers; (B) premiums payable in connection
with an extension of the existing directors' and officers' liability insurance
of the Company for two years following the Closing Date at a cost to the
Company not to exceed $350,000; (C) fees payable to legal counsel and
accountants, but only upon delivery of a bill marked final from each such
counsel and accountant; and (D) other expenses incurred in connection with the
Merger, other than fees (but not the expenses of Shoreline and Lehman);
provided Preclosing Company Payables shall not include distributions to be
made to BU and Marathon pursuant to Section 1.7 (which are made in full and
complete satisfaction of BU and Marathon payables under the Service Agreement
pursuant to the Accord Agreement).
(b) Parent shall deposit all Preclosing Company Revenues with
the Escrow Agent to become part of the Escrowed Amount (as defined in the
Escrow Agreement) and to be held in escrow pursuant to the Escrow Agreement.
The Escrowed Amount (as defined in the Escrow Agreement) shall be applied to
satisfy any Preclosing Company Payables that become payable following the
Closing Date.
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(c) On the 120th day following the Closing Date, any portion of
the Escrowed Amount that has not been applied to the payment of Preclosing
Company Payables shall be distributed as additional Distributable Closing
Consideration pursuant to the provisions of Sections 1.7(a)(i)(C)(5) through
(14) without regard to the provisos set forth in Sections 1.7(a)(i)(C)(7)
through (10). The distribution of the Escrowed Amount in accordance with this
provision of this Section 5.13(c) shall be without prejudice to any other
rights or remedies Parent may have pursuant to the terms of this Agreement.
(d) In the event of any dispute regarding the provisions of this
Section 5.13, such dispute may be submitted by the Surviving Corporation or
any person entitled to receive Distributable Closing Consideration to the
Boston, Massachusetts office of a nationally recognized accounting firm other
than Ernst & Young LLP or Arthur Andersen LLP for resolution in accordance
with the provisions of this Section 5.13 by notice given to, in the case of a
dispute resolution proceeding initiated by the Surviving Corporation, all
persons entitled to receive Distributable Closing Consideration or, in the
case of a dispute resolution proceeding initiated by a person entitled to
receive Distributable Closing Consideration, to the Surviving Corporation and
all other persons entitled to receive Distributable Closing Consideration.
Such accounting firm shall specify such procedures for the resolution of such
dispute as may think appropriate for the fair and prompt resolution of the
dispute.
5.14 Marathon Service Agreement.
(a) The Company shall maintain its Service Agreement with
Marathon through January 31, 1999. The parties acknowledge and agree that the
obligations of the Company pursuant to this Section 5.14 do not require the
Company to pay its monetary obligations under the Service Agreement on a
timely basis. The Company further agrees that if Marathon considers the
Company in default or in breach other than for the failure to pay its monetary
obligations under the Service Agreement and gives notice to such effect, the
Company shall use its best efforts to cure any such breach or default.
(b) The Company shall not exercise its option to purchase the
assets of Marathon, as provided under the Service Agreement. The Company
hereby acknowledges (i) the grant to Parent of the Option under the Purchase
Agreement and (ii) the grant to Parent and the Company of the Option under the
Extension Option Agreement among Marathon, the members of Marathon, the
Company and Parent.
5.15 Obligations of Merger Sub. Parent shall take all action necessary
to cause Merger Sub to perform its obligations under this Agreement and to
consummate the Merger on the terms and conditions set forth in this Agreement.
Merger Sub shall not issue any shares of its capital stock, any securities
convertible into or exchangeable for its capital stock, or any option, warrant
or other right to acquire its capital stock to any person or entity other than
Parent or a wholly owned subsidiary of Parent. Merger Sub shall not incur any
indebtedness or liabilities of any kind except pursuant to this Agreement.
5.16 Development Activities.
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(a) After the Effective Time through the second anniversary of
the Closing Date, Parent shall undertake such tests, studies and other
activities as may be required pursuant to Section 1.6(c) hereof and shall make
commercially reasonable efforts (i) to perform, or cause to be performed, all
such other tests, studies and other activities and (ii) to take, or cause to
be taken, all such other actions, that are necessary or appropriate to obtain
Final FDA Approval by the second anniversary of the Closing Date (the
"Development Activities"). Parent shall perform all Development Activities in
good scientific manner, and in compliance in all material respects with all
requirements of applicable laws, rules and regulations, and shall proceed
diligently to obtain Final FDA Approval by allocating sufficient time, effort,
equipment, and skilled personnel to complete such activities successfully and
promptly. Parent shall be responsible for all costs and expenses incurred in
connection with the Development Activities without any reduction in the Merger
Consideration. For purposes of this Section 5.16, "commercially reasonable
efforts" shall mean that level of commitment, financial and otherwise, that
Parent currently dedicates to the development of and obtaining regulatory
approval for its own products of comparable commercial potential and risk
profile.
(b) Parent shall maintain, or cause to be maintained, records of
all of the Development Activities in sufficient detail and in good scientific
manner appropriate for patent and regulatory purposes, which shall be complete
and accurate and shall fully and properly reflect all work done and results
achieved in the performance of the Development Activities, and which shall be
retained by Parent until the fifth anniversary of the Closing Date.
(c) In the event the Milestone Consideration is not paid, Parent
will deliver a report to all persons entitled to receive such Milestone
Consideration, certified by Parent's Chief Financial Officer, providing in
reasonable detail sufficient information to establish that the obligations set
forth in this Section and Section 1.6(c) have been fulfilled.
5.17 FDA Contacts. Prior to the Effective Time, neither Parent nor
Merger Sub shall, directly or indirectly, engage in any independent contact
with the FDA regarding the Company's pending BLA. Parent shall, however, be
entitled to designate, by notice given to the Company, one person to represent
the Parent in connection with communications, meetings and correspondence
between the Company and the FDA. Such designated representative shall be
entitled to participate in all of the Company's scheduled internal planning
meetings and post-FDA meeting reviews that cover substantive issues relating
to the BLA and shall be entitled to participate as a passive listener on all
regularly scheduled telephone conferences between the Company and the FDA that
cover substantive issues relating to the BLA. The Company shall provide such
designated representative with a copy of all correspondence between the
Company and the FDA relating to the BLA and all substantive internal reports
and memoranda generated by the Company to the extent the same relate to the
BLA. Following mailing by the Company of the Proxy Statement, the aforesaid
designated representative of the Parent shall be entitled to attend all
meetings between Company representatives and the FDA in person and to actively
participate in all regularly scheduled telephone conferences between Company
representatives and the FDA.
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5.18 Payables. From the date hereof through the Closing Date, the
Company shall provide to Parent, within ten (10) days of the end of a calendar
month, a summary of the outstanding Preclosing Company Payables as of the end
of such calendar month, including a summary of any potential or actual
disputes regarding such payables. Parent shall have the right to pay any
Preclosing Company Payable, in its sole discretion; provided any such payment
by Parent shall be deducted from the aggregate value of Stock Consideration
included in the Distributable Closing Consideration.
5.19 Certain Escrow Amounts. Promptly following the execution of this
Agreement, Mr. Prior, on behalf of himself and Dr. Nichols and Mr. Crane, and
Parent shall establish separate escrow accounts pursuant to which the Prior
Escrow Amount, the Nichols Escrow Amount and the Crane Escrow Amount,
respectively, will be deposited pursuant to Section 1.13 of this Agreement and
held in escrow. For purposes of this Agreement, the "Prior Escrow Amount"
shall mean $319,600, the "Nichols Escrow Amount" shall mean $66,900 and the
"Crane Escrow Amount" shall mean $20,000.
ARTICLE VI
CONDITIONS TO THE MERGER
6.1 Conditions to Obligations of Each Party to Effect the Merger. The
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction at or prior to the Closing of the
following conditions:
(a) Stockholder Approval. This Agreement and the Merger shall
have been approved and adopted by the stockholders of the Company by the
requisite vote under applicable law and the Company's Certificate of
Incorporation.
(b) Government Approvals. There shall have been obtained any
and all material governmental licenses, authorizations, consents and approvals
of all Government Entities, and permits, approvals and consents of securities
or "blue sky" commissions of any jurisdiction and of any other governmental
body or agency, that may reasonably be deemed necessary so that the
consummation of the Merger will be in compliance with applicable laws, the
failure to comply with which would be reasonably likely to have a Material
Adverse Effect on Parent, the Company or the Surviving Corporation or would be
reasonably likely to subject any of Parent, Merger Sub, the Company or any of
their respective directors or officers to substantial penalties or criminal
liability.
(c) Registration Statement. Any shares of Parent Common Stock
to be issued in the Merger shall have been registered as required herein on a
Registration Statement that has been declared effective under the 1933 Act by
the SEC and the Registration Statement shall not be the subject of any stop
order or proceedings seeking a stop order, and the Proxy Statement shall at
the Effective Time not be subject to any proceedings commenced or threatened
by the SEC.
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(d) No Injunctions or Restraints; Illegality. No statute, rule,
regulation executive order, decree, temporary restraining order, preliminary
or permanent injunction or other order shall have been enacted, promulgated or
enforced (and not repealed, superseded or otherwise made inapplicable) by any
court or governmental authority, which prohibits the consummation of the
merger (each party agreeing to use its best efforts to have such order decree
or injunction lifted).
(e) Nasdaq Listing. The shares of Parent Common Stock issuable
to stockholders of the Company pursuant to this Agreement, if any, and such
other shares required to be reserved for issuance in connection with the
Merger shall have been authorized for listing on the Nasdaq National Market,
subject to official notice of issuance.
(f) HSR Act. The waiting period (and any extension thereof)
applicable to the consummation of the Merger under the HSR Act shall have
expired or been terminated.
(g) Approval of Office of the Attorney General of the
Commonwealth of Massachusetts, Public Charities Division. The approval of the
Office of the Attorney General of the Commonwealth of Massachusetts, Public
Charities Division, which approval is acceptable in form and substance to
Parent, shall be in full force and effect as of the Effective Time.
6.2 Additional Conditions to Obligations of the Company. The
obligations of the Company to consummate the Merger and the transactions
contemplated by this Agreement shall be subject to the satisfaction at or
prior to the Closing of each of the following conditions, any of which may be
waived, in writing, exclusively by the Company.
(a) Representations and Warranties. The representations and
warranties of Parent and Merger Sub contained in this Agreement shall be true
and correct in all material respects on and as of the Closing Date, except for
changes contemplated by this Agreement and except for those representations
and warranties which address matters only as of a particular date (which shall
remain true and correct as of such date), with the same force and effect as if
made on and as of the Closing Date, except, in all such cases, for such
breaches, inaccuracies or omissions of such representations and warranties
which have neither had nor reasonably would be expected to have a Material
Adverse Effect on Parent; and the Company shall have received a certificate to
such effect signed on behalf of Parent by a duly authorized officer of Parent.
(b) Agreements and Covenants. Parent and Merger Sub shall have
performed or compiled in all material respects with all agreements and
covenants required by this Agreement to be performed or complied with by them
on or prior to the Effective Time, and the Company shall have received a
certificate to such effect signed by a duly authorized officer of Parent.
(c) Third Party Consents. The Company shall have been furnished
with evidence satisfactory to it that Parent has obtained the consents,
approvals and waivers set forth in Schedule 6.2(c), other than those consents,
approvals and waivers the failure of which to obtain would not have a Material
Adverse Effect on Parent.
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(d) Legal Opinion. The Company shall have received a legal
opinion from Brobeck, Phleger & Harrison, LLP, counsel to Parent, in
substantially the form attached hereto as Exhibit 6.2(d).
6.3 Additional Conditions to the Obligations of Parent and Merger Sub.
The obligations of Parent and Merger Sub to consummate the Merger and the
transactions contemplated by this Agreement shall be subject to the
satisfaction at or prior to the Closing of each of the following conditions,
any of which may be waived, in writing, exclusively by Parent:
(a) Representations and Warranties. The representations and
warranties of the Company contained in this Agreement shall be true and
correct in all material respects on and as of the Closing Date, except for
changes contemplated by this Agreement and except for those representations
and warranties which address matters only as of a particular date (which shall
remain true and correct as of such date), with the same force and effect as if
made on and as of the Closing Date, except, in all such cases, for such
breaches, inaccuracies or omissions of such representations and warranties
which have neither had nor reasonably would be expected to have a Material
Adverse Effect on the Company or Parent; and Parent and Merger Sub shall have
received a certificate to such effect signed on behalf of the Company by the
chief executive officer and chief financial officer of the Company.
(b) Agreements and Covenants. The Company shall have performed
or complied in all material respects with all agreements and covenants
required by this Agreement to be preformed or complied with by it on or prior
to the Effective Time, and Parent and Merger Sub shall have received a
certificate to such effect signed by the chief executive officer of the
Company.
(c) Third Party Consents. Parent shall have been furnished with
evidence satisfactory to it that the Company has obtained the consents,
approvals and waivers set forth in Schedule 6.3(c), other than those consents,
approvals and waivers the failure of which to obtain would not have a Material
Adverse Effect on the Company.
(d) Legal Opinion. Parent shall have received a legal opinion
from Covington & Burling, counsel to the Company, in substantially the form
attached hereto as Exhibit 6.3(d).
(e) Satisfaction of Preclosing Company Payables. The Company
shall have received bills marked as final from each of its legal counsel and
accountants.
(f) General Adverse Development. There shall not have occurred
any material adverse change in the business, assets (including intangible
assets), liabilities, financial condition or results of operations of the
Company since the date of the Company Balance Sheet which could reasonably be
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expected to result in a diminution of the value of the Company by Five Million
Dollars ($5,000,000) or more; provided, however, that any developments, or the
absence of any developments, with respect to the FDA's review of the Company's
BLA for DAB389IL-2 for CTCL shall not be a condition to the obligations of
Parent and Merger Sub under this Agreement whether pursuant to this clause
(f), Section 6.3(a) or otherwise, and shall not be included in the
determination of any adverse change with respect to the Company.
(g) Marathon Purchase Agreement. The representations and
warranties of Marathon contained in that certain Option and Asset Purchase
Agreement of even date herewith (the "Purchase Agreement") by and between
Marathon, its members and Parent shall be true and correct in all material
respects on and as of the Closing Date, except for changes contemplated by the
Purchase Agreement and except for those representations and warranties which
address matters only as of a particular date (which shall remain true and
correct as of such date), with the same force and effect as if made on and as
of the Closing Date, except, in all such cases, for such breaches,
inaccuracies or omissions of such representations and warranties which have
neither had nor reasonably would be expected to have a Material Adverse Effect
on Marathon. In addition, Marathon shall have performed or complied in all
material respects with all agreements and covenants required by the Purchase
Agreement to be performed or complied with by it on or prior to the Effective
Time. Parent and Merger Sub shall have received a certificate to such effect
signed by the chief executive officer of Marathon.
(h) Company Options and Company Warrants. Except as provided in
Section 1.8(c), all of the Company Options and Company Warrants shall have
been exercised or terminated immediately prior to the Closing.
(i) Resignation of Directors and Officers. The directors and
officers of the Company in office immediately prior to the Effective Time
shall have resigned as directors and officers of the Surviving Corporation
effective immediately following the Effective Time.
(j) Dissenters' Rights. Holders of not more than ten percent
(10%) of the outstanding shares of the Company Capital Stock shall have
exercised, and no other shareholder or the Company shall have any continued
right to exercise, appraisal, dissenters' or similar rights under applicable
law with respect to their shares of the Company Capital Stock by virtue of the
Merger.
(k) License Agreements. All license agreements, royalty
agreements, service agreements, marketing and other agreements and assignments
set forth on Schedule 6.3(k) shall have been amended or terminated, as
applicable, in a manner satisfactory to Parent to ensure that (i) the
consummation of the transactions contemplated in this Agreement will not
constitute a breach by the Company of such agreements or assignment as of the
Effective Time and (ii) the existence of such agreements or assignments as of
the Effective Time will not constitute a breach by the Company of any of its
representations, warranties, covenants or obligations under this Agreement.
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ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1 Termination. Except as provided in Section 7.2 below, this
Agreement may be terminated and the Merger abandoned at any time prior to the
Effective Time:
(a) by mutual written consent of the Boards of Directors of the
Company, Parent and Merger Sub;
(b) by Parent or the Company if: (i) the Effective Time has not
occurred before 5:00 p.m. (Eastern Daylight Savings Time) on January 31, 1999
(provided that the right to terminate this Agreement under this clause
7.1(b)(i) shall not be available to any party whose willful failure to fulfill
any obligation hereunder has been the cause of, or resulted in, the failure of
the Effective Time to occur on or before such date); provided in the event
that Parent or the Company has exercised the Option under the Extension Option
Agreement such date shall be extended upon each exercise of such Option to the
then-effective termination of such Option; (ii) there shall be a final
nonappealable order of a federal or state court in effect preventing
consummation of the Merger; or (iii) there shall be any statute, rule,
regulation or order enacted, promulgated or issued or deemed applicable to the
Merger by any governmental entity that would make consummation of the Merger
illegal;
(c) by Parent if there shall be any action taken, or any
statute, rule, regulation or order enacted, promulgated or issued or deemed
applicable to the Merger, by any governmental entity, which would: (i)
prohibit Parent's or the Surviving Corporation's ownership or operation of all
or any portion of the business of the Company or (ii) compel Parent or the
Surviving Corporation to dispose of or hold separate all or a portion of the
business or assets of the Company or Parent as a result of the Merger;
(d) by Parent if it is not in material breach of its obligations
under this Agreement and there has been a material breach of representation,
warranty, covenant or agreement contained in this Agreement on the part of the
Company and (i) such breach has not been cured within five (5) business days
after written notice to the Company (provided that, no cure period shall be
required for a breach which by its nature cannot be cured), and (ii) as a
result of such breach the conditions set forth in Section 6.3(a) or 6.3(b), as
the case may be, would not then be satisfied;
(e) by the Company if it is not in material breach of its
obligations under this Agreement and there has been a material breach of any
representation, warranty, covenant or agreement contained in this Agreement on
the part of the Parent or Merger Sub and (i) such breach has not been cured
within five (5) business days after written notice to Parent (provided that,
no cure period shall be required for a breach which by its nature cannot be
cured), and (ii) as a result of such breach the conditions set forth in
Section 6.2(a) or 6.2(b), as the case may be, would not then be satisfied;
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(f) by Parent, if the Company suffers a Material Adverse Effect
which could reasonably be expected to result in a diminution of the value of
the Company by Five Million Dollars ($5,000,000) or more, provided, however,
any Material Adverse Effect shall not include effects arising from the FDA's
review of DAB389IL-2 for CTCL;
(g) by Parent or the Company, if, at the meeting of Company
stockholders (including any adjournment or postponement thereof) called
pursuant to Section 5 hereof, the requisite vote of the stockholders of the
Company shall not have been obtained (following a recommendation by the
Company's Board of Directors to vote in favor of the Merger);
(h) by Parent or the Company, if, at the meeting of Company
stockholders (including any adjournment or postponement thereof) called
pursuant to Section 5.1 hereof, the Company's stockholders approve an
acquisition proposal (other than an acquisition proposal with Parent or an
affiliate of Parent);
(i) (Reserved)
(j) by Parent, if it is not in material breach of its
obligations under this Agreement and if any Person other than Parent or any of
Parent's affiliates shall purchase a majority of the outstanding shares of
Company Common Stock;
(k) by either party, if the other becomes insolvent or seeks
protection under any bankruptcy, receivership, trust deed, creditors
arrangement, composition or comparable proceeding, or if any such proceeding
is instituted against such other party (and not dismissed within sixty (60)
days); provided, however, that the Company shall not be deemed to be insolvent
as a result of its failure to pay Marathon under the Service Agreement for so
long as Marathon and BU forebear from the receipt of such payments or for any
period that Marathon and BU are contractually obligated to so forebear.
(l) by Parent, if it is not in material breach of its
obligations under this Agreement and if the Board of Directors of Company
shall have:
(i) withdrawn its recommendation of the Merger, or
(ii) adversely changed its recommendation of the Merger, or
(iii) recommended or approved any acceptance by Company's
stockholders of any acquisition proposal (other than an
acquisition proposal made by Parent or an affiliate of
Parent); or
(m) by the Company, if the Company shall have received an
Acquisition Proposal (other than with respect to Parent or an affiliate of
Parent), which the Board of Directors of the Company determines, after
consultation with counsel, to recommend to the security holders of the Company
in order to comply with the fiduciary duty of the Board of Directors of the
Company.
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When action is taken to terminate this Agreement pursuant to this
Section 7.1, it shall be sufficient for such action to be authorized by the
Board of Directors (as applicable) of the party taking such action. Either
party shall provide notice to the other party no less than five (5) days prior
to any termination under this Section 7.1. Each party acknowledges that
failure to provide such notice in a timely manner will have material, adverse
consequences on the other.
7.2 Effect of Termination. In the event of termination of this
Agreement as provided in Section 7.1, this Agreement shall forthwith become
void and there shall be no liability or obligation on the part of Parent,
Merger Sub or the Company, or their respective officers, directors or
stockholders, provided that each party shall remain liable for any breaches of
this Agreement prior to its termination; and provided further, that the
provisions of Sections 5.3 and 5.4 of this Agreement shall remain in full
force and effect and survive any termination of this Agreement.
7.3 Amendment. Except as is otherwise required by applicable law
after the stockholders of the Company approve this Agreement, this Agreement
may be amended by the parties hereto at any time by execution of an instrument
in writing signed on behalf of each of the parties hereto.
7.4 Extension; Waiver. At any time prior to the Effective Time,
Parent and Merger Sub, on the one hand, and the Company, on the other, may, to
the extent legally allowed, (i) extend the time for the performance of any of
the obligations of the other party hereto, (ii) waive any inaccuracies in the
representations and warranties made to such party contained herein or in any
document delivered pursuant hereto, and (iii) waive compliance with any of the
agreements or conditions for the benefit of such party contained herein. Any
agreement on the part of a party hereto to any such extension or waiver shall
be valid only if set forth in an instrument in writing signed on behalf of
such party.
ARTICLE VIII
GENERAL PROVISIONS
8.1 Survival of Representations, Warranties and Agreements; Right of
Set-off.
(a) All representations, warranties, covenants and agreements in
this Agreement or in any instrument delivered pursuant to this Agreement shall
survive the consummation of the Merger and shall (except to the extent that
survival is necessary to effectuate the intent of such provisions) terminate
on the third (3rd) anniversary of the Closing Date; provided, however, that
(i) the representations and warranties in Sections 2.1-2.2, 2.4 and 3.1-3.3
shall continue to survive indefinitely after the Closing Date and (ii) the
representations and warranties in Section 2.11 shall continue to survive after
the Closing Date until the expiration of all applicable Tax statutes of
limitations, plus one year. Notwithstanding the foregoing, in no event shall
the Company or any holder of Company Capital Stock other than the Identified
Company Stakeholders be liable for any Parent Damages (as defined below) under
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this Section 8.1 or otherwise. In no event shall the Identified Company
Stakeholders be liable for any Parent Damages unless the aggregate amount of
such Parent Damages exceeds Two Hundred Fifty Thousand Dollars ($250,000), in
which case each Identified Company Stakeholder shall be liable for its Pro
Rata Portion of all Parent Damages over an aggregate amount for all Identified
Company Stakeholders of Two Hundred Fifty Thousand Dollars ($250,000) (the
"Deductible Amount") up to, but not exceeding, an aggregate amount for all
Identified Company Stakeholders of Eight Million Seven Hundred Thousand
Dollars ($8,700,000) above the Deductible Amount. No claim may be made by
Parent, Merger Sub or the Surviving Corporation with respect to any Parent
Damages in accordance with this Section 8.1(a) or otherwise unless notice
thereof is delivered to each of the Identified Company Stakeholders on or
prior to the termination of the representation, warranty, covenant or
agreement under which such claim is made.
(b) In furtherance of the rights set forth in Section 8.1(a)
above, Parent shall have the right to reduce each Identified Company
Stakeholder's Milestone Consideration due under this Agreement by such
Identified Company Stakeholder's Pro Rata Portion of any amounts constituting
Parent Damages up to an aggregate amount for all Identified Company
Stakeholders of Two Million Nine Hundred Thousand Dollars ($2,900,000) above
the Deductible Amount. Nothing in this Section 8.1(b) shall be construed to
limit the amount of Parent Damages for which the Identified Company
Stakeholders are liable under this Section 8.1 to less than $8,950,000 (which
includes the Deductible Amount). Except as provided in this Section 8.1(b),
neither Parent nor Merger Sub shall have any right of reduce or otherwise set
off with respect to the Merger Consideration.
(c) Parent shall notify each Identified Company Stakeholder as
promptly as practicable upon its discovery of facts giving rise to a claim for
Parent Damages hereunder, including receipt by Parent, Merger Sub or the
Surviving Corporation of notice of any demand, assertion, claim, action or
proceeding, judicial or otherwise, with respect to any Parent Damages,
together with a summary statement of such information respecting any of the
foregoing as such party shall have, and Parent shall provide the Identified
Company Stakeholders with copies of all papers and official documents with
respect thereto. With respect to any Parent Damages arising in connection
with or as a result of the claims of third parties, the Identified Company
Stakeholders shall have the sole right to control the defense of such matter,
provided that the Identified Company Stakeholders shall obtain the written
consent of the Parent, which shall not be unreasonably withheld, prior to
ceasing to defend, settling or otherwise disposing of any Parent Damages if as
a result thereof Parent party would become subject to injunctive or other
equitable relief or any remedy other than the payment of money by the
Identified Company Stakeholders.
(d) For purposes of this Section 8.1, "Parent Damages" shall
mean any and all losses, damages, liabilities, obligations, claims, demands,
judgments, settlements, governmental investigations, Taxes, costs and expenses
of any nature whatsoever, including the reasonable fees and expenses of
attorneys, accountants and consultants resulting from, arising out of or
attributable to a breach of the Company's representations, warranties,
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covenants and agreements under this Agreement. For purposes of this Section
8.1, (i) "Pro Rata Portion" for an Identified Company Stakeholder shall be
calculated by taking such Identified Company Stakeholder's percentage of
Stakeholder Closing Consideration and dividing it by the sum of all Identified
Company Stakeholders' percentages of Stakeholder Closing Consideration; the
amount resulting from that calculation shall be multiplied by the amount of
Parent Damages hereunder to determine the Pro Rata Portion; and (ii)
"Identified Company Stakeholder(s)" shall mean the Variable Company
Stakeholders identified in Sections 1.7(a)(i)(C)(7) through (14).
8.2 Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally or by commercial
delivery service, or mailed by registered or certified mail (return receipt
requested) or sent via facsimile (with acknowledgment of complete
transmission) to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
(a) if to Parent or Merger Sub, to:
Ligand Pharmaceuticals Incorporated
10275 Science Center Drive
San Diego, CA 92121
Attention: William L. Respess, Esq.
General Counsel
Telephone No: (619) 550-7500
Facsimile No: (619) 550-7506
with a copy to:
Brobeck, Phleger & Harrison LLP
550 West C Street, Suite 1300
San Diego, California 92101
Attention: Faye H. Russell, Esq.
Telephone: (619) 234-1966
Facsimile: (619) 234-3848
(b) if to the Company, to:
Seragen, Inc.
97 South Street
Hopkinton, MA 01748
Attention: Reed R. Prior
Chairman, Chief Executive Officer
and Treasurer
Telephone No: (508) 435-2331
Facsimile No: (508) 435-9024
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with a copy to:
Covington and Burling
P.O. Box 7566
1201 Pennsylvania Avenue, N.W.
Washington, DC 20044-7566
Attention: Edward Britton, Esq.
Telephone No: (202) 662-5248
Facsimile No: (202) 778-5248
(c) if to a Variable Company Stakeholder, to the address set
forth in the Accord Agreement.
8.3 Interpretation. Unless the context of this Agreement otherwise
requires: (a) words of any gender include each other gender; (b) words using
the singular or plural number also include the plural or singular number,
respectively; (c) the terms "hereof," "herein," "hereby" and derivative or
similar words refer to this entire Agreement; (d) the terms "Article" or
"Section" refer to the specified Article or Section of this Agreement; (e) the
term "or" has, except where indicated, the inclusive meaning represented by
the phrase "and/or"; and (f) the term "including" means "including without
limitation." Whenever this Agreement refers to a number of days, such number
shall refer to calendar days unless business days are specified. All
accounting terms used herein and not expressly defined herein shall have the
meanings given to them under GAAP.
8.4 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each
of the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart. Executed counterparts delivered
by facsimile transmission shall have the same force and effect as originally
executed counterparts delivered personally.
8.5 Entire Agreement: Assignment. This Agreement, the Schedules and
Exhibits hereto, that certain Confidentiality Agreement between Parent and the
Company dated March 17, 1998 and the documents and instruments and other
agreements among the parties hereto referenced herein: (a) constitute the
entire agreement among the parties with respect to the subject matter hereof
and supersede all prior agreements and understandings, both written and oral,
among the parties with respect to the subject matter hereof; (b) are not
intended to confer upon any other person any rights or remedies hereunder; and
(c) shall not be assigned by operation of law or otherwise except as otherwise
specifically provided, except that Parent and Merger Sub may assign their
respective rights and delegate their respective obligations hereunder to their
respective affiliates.
8.6 Severability. In the event that any provision of this Agreement
or the application thereof, becomes or is declared by a court of competent
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jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other Persons or circumstances will be interpreted so as
reasonable to effect the intent of the parties hereto. The parties further
agree to replace such void or unenforceable provision of this Agreement with a
valid and enforceable provision that will achieve, to the extent possible, the
economic, business and other purposes of such void or unenforceable provision.
8.7 Other Remedies. Except as otherwise provided herein, any and all
remedies herein expressly conferred upon a party will be deemed cumulative
with and not exclusive of any other remedy conferred hereby, or by law or
equity upon such party, and the exercise by any party of any one remedy will
not preclude the exercise of any other remedy.
8.8 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware regardless of the laws
that might otherwise govern under applicable principles of conflicts of laws
thereof. Each of the parties hereto agrees that process may be served upon
them in any manner authorized by the laws of the State of Delaware for such
Persons and waives and covenants not to assert or plead any objection which
they might otherwise have to such jurisdiction and such process.
8.9 Consent to Jurisdiction and Forum Selection. The parties hereto
agree that all actions or proceedings arising in connection with this
Agreement shall be initiated and tried exclusively in the State and Federal
courts located in the State of Delaware. The aforementioned choice of venue
is intended by the parties to be mandatory and not permissive in nature,
thereby precluding the possibility of litigation between the parties with
respect to or arising out of this Agreement in any jurisdiction other than
that specified in this Section 8.9. Each party hereby waives any right it may
have to assert the doctrine of forum non conveniens or similar doctrine or to
object to venue with respect to any proceeding brought in accordance with this
paragraph, and stipulates that the State and Federal courts located in the
State of Delaware shall have in personam jurisdiction and venue over each of
them for the purposes of litigating any dispute, controversy or proceeding
arising out of or related to this Agreement. Each party hereby authorizes and
accepts service of process sufficient for personal jurisdiction in any action
against it as contemplated by this Section 8.9 by registered or certified
mail, return receipt requested, postage prepaid, to its address for the giving
of notices as set forth in this Agreement, or in the manner set forth in
Section 8.2 of this Agreement for the giving of notice. Any final judgment
rendered against a party in any action or proceeding shall be conclusive as to
the subject of such final judgment and may be enforced in other jurisdictions
in any manner provided by law.
8.10 Rules of Construction. The parties hereto agree that they have
been represented by counsel during the negotiation and execution of this
Agreement and, therefore waive the application of any law, regulation, holding
or rule of construction providing that ambiguities in an agreement or other
document will be construed against the party drafting such agreement or
document.
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8.11 Specific Performance. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any court of the United States
or any state having jurisdiction, this being in addition to any other remedy
to which they are entitled at law or in equity.
8.12 Corporate Transaction involving Parent. If after the Effective
Time Parent is acquired by merger (including by reverse triangular merger), or
is a party to a consolidation, or liquidates, all references to "Parent Common
Stock" in this Agreement shall thereafter mean, on a per-share basis, the
amount of cash, securities and/or other property received by Parent
stockholders for their (pre-transaction) Parent Common Stock in such
transaction.
8.13 Insurance.
(a) Parent shall cause to be maintained in effect for the
remainder of its term the current policy of directors' and officers' liability
insurance maintained by the Company. After the expiration of such policy and
for a period of one year thereafter, Parent shall use its Reasonable Efforts
to either extend the current policy or cause the directors and officers of the
Company as of the date hereof to be covered by directors' and officers'
liability insurance comparable to that maintained from time to time for the
benefit of the directors of Parent.
(b) Parent shall cause the Surviving Corporation to maintain
without any reduction in scope or coverage the indemnification provisions for
present and former officers and directors contained in the Company's Restated
Bylaws in effect on the date hereof.
(c) The provisions of this Section 8.13 shall survive the
Effective Time and are intended to be for the benefit of, and shall be
enforceable by, each present or former director or officer of the Company and
his or her heirs and representatives.
8.14 Third Party Beneficiaries. Each of the Third Parties (as such
term is defined in the Accord Agreement), their successors and assigns are
intended beneficiaries of the terms and provisions of this Agreement, and each
Third Party shall have the right independently to enforce its rights in
respect thereof without the need to join the Company, the Surviving
Corporation or any other person in any action, whether at law or in equity,
for such purpose.
8.15 Termination Fee. If the Merger is not consummated because (A)
Parent elects to terminate this Agreement pursuant to Section 7.1(k) or (B)
the Company has terminated this Agreement in accordance with Section 7.1(m),
then the Company shall pay Parent (X) a termination fee of $5,000,000 (the
"Termination Fee") and (Y) an additional fee (the "Enhanced Value Fee") equal
to five percent (5%) of the Enhanced Value Realized (as defined below) by
persons entitled to receive Merger Consideration hereunder with respect to any
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<PAGE>
Acquisition Proposal which results in an aggregate amount paid to such persons
of greater than Sixty Seven Million Dollars ($67,000,000) (the "Enhanced
Acquisition Proposal") and (Z) in the event that Parent has exercised its
option to extend the Agreement Term (as defined in the Extension Option
Agreement) or any Extension Term (as defined in the Extension Option
Agreement) and has remitted amounts pursuant to the exercise of such option,
the additional amounts remitted thereunder (the "Option Fee"). If this
Agreement shall be terminated in the circumstances specified in this Section
8.15, the Termination Fee, the Enhanced Value Fee, if any, and the Option Fee,
if any, shall be liquidated damages to Parent for loss of its bargain
hereunder. The Termination Fee and the Option Fee shall each be due and
payable to Parent within thirty (30) days of termination of this Agreement;
the Enhanced Value Fee shall be due and payable to Parent on the closing of a
transaction in connection with the Enhanced Acquisition Proposal. For
purposes of this Section 8.15, "Enhanced Value Realized" shall mean the
aggregate value realized by the persons entitled to receive Merger
Consideration hereunder as a result of an Enhanced Acquisition Proposal
(determined as set forth below) minus Sixty Seven Million Dollars
($67,000,000). A determination of the aggregate value realized by the persons
entitled to receive Merger Consideration hereunder in connection with an
Enhanced Acquisition Proposal shall be the aggregate amount of cash plus, if
applicable, the product of (i) the average closing sales price of any
securities received in the Enhanced Acquisition Proposal for the five (5)
trading days immediately preceding the date of the closing of the Enhanced
Acquisition Proposal, or if there is no such average price, the value of such
securities shall be determined in good faith by the Company's Board of
Directors in consultation with the Company's financial advisors for the
Enhanced Acquisition Proposal, subject to the reasonable approval of Parent's
Board of Directors, and (ii) the total number of shares of such securities
issued, or to be issued, in connection with the Acquisition Proposal.
Notwithstanding the foregoing, nothing contained herein (including Section
7.2) shall relieve any party from liability for any breach of this Agreement.
[Remainder of This Page Intentionally Left Blank]
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IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused this
Agreement to be signed by their duly authorized respective officers, all as of
the date first written above.
LIGAND PHARMACEUTICALS SERAGEN, INC.:
INCORPORATED:
By: /s/ David Robinson By: /s/ Reed R. Prior
------------------- -----------------
Name: David Robinson Name: Reed R. Prior
Title: President and CEO Title: Chairman and CEO
KNIGHT ACQUISITION CORPORATION:
By: /s/ David Robinson
------------------
Name: David Robinson
Title: President and CEO
ACCORD AND SATISFACTION AGREEMENT
by and among
Seragen, Inc.
Seragen Technology, Inc.
and
Trustees of Boston University
Seragen LLC
Marathon Biopharmaceuticals, LLC
United States Surgical Corporation
Leon C. Hirsch
Turi Josefsen
Gerald S. J. and Loretta P. Cassidy
Reed R. Prior
Jean C. Nichols, Ph.D.
Elizabeth C. Chen
Robert W. Crane
Shoreline Pacific Institutional Finance
Lehman Brothers Inc.
520 Commonwealth Avenue Real Estate Corp.
660 Corporation
Dated as of May 11, 1998
<PAGE>
TABLE OF CONTENTS
RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
PARTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
THE MERGER AGREEMENT . . . . . . . . . . . . . . . . . . . . . 3
CLAIMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Series B Shares . . . . . . . . . . . . . . . . . . . . . 4
Series C Shares . . . . . . . . . . . . . . . . . . . . . 5
Warrants . . . . . . . . . . . . . . . . . . . . . . . . . 6
Service Agreement . . . . . . . . . . . . . . . . . . . . 7
USSC Evaluation License . . . . . . . . . . . . . . . . . 8
Executive Compensation . . . . . . . . . . . . . . . . . . 8
Shoreline . . . . . . . . . . . . . . . . . . . . . . . .10
Lehman . . . . . . . . . . . . . . . . . . . . . . . . . .11
SECTION 1 -- SATISFACTION OF CLAIMS . . . . . . . . . . . . . . . .11
1.1 Satisfaction of Claims Related to Series B Stock . . . . .11
1.2 Satisfaction of Claims Related to Series C Stock . . . . .11
1.3 Satisfaction of Warrant Claims . . . . . . . . . . . . . .12
1.4 Satisfaction of Technology Agreement Claims . . . . . . .12
1.5 Satisfaction of Service Agreement Claims . . . . . . . . .12
1.6 Satisfaction of USSC Evaluation License Claims . . . . . .13
1.7 Satisfaction of Executive Compensation Claims . . . . . .13
1.8 Satisfaction of Shoreline Claims . . . . . . . . . . . . .13
1.9 Satisfaction of Lehman Claims . . . . . . . . . . . . . .14
SECTION 2 -- RELEASE . . . . . . . . . . . . . . . . . . . . . . . .14
2.1 Release of Seragen and STI . . . . . . . . . . . . . . . .14
2.2 Effectiveness of Release . . . . . . . . . . . . . . . . .15
2.3 Survival of Release . . . . . . . . . . . . . . . . . . .15
SECTION 3 -- TERM . . . . . . . . . . . . . . . . . . . . . . . . .15
3.1 Term . . . . . . . . . . . . . . . . . . . . . . . . . . .15
3.2 Termination . . . . . . . . . . . . . . . . . . . . . . .15
3.3 Effect of Termination . . . . . . . . . . . . . . . . . .15
SECTION 4 -- FORBEARANCE . . . . . . . . . . . . . . . . . . . . . .16
<PAGE>
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SECTION 5 -- REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . .16
5.1 Mutual Representations and Warranties . . . . . . . . . .16
5.2 Representations and Warranties of Seragen and STI . . . .17
5.3 Representations and Warranties of Boston University,
BU Holding, Marathon, USSC, Shoreline and Lehman . . . . .18
5.4 Representations and Warranties of Hirsch,
Josefsen, the Cassidys, Prior, Nichols, Chen and Crane . .19
SECTION 6 -- CERTAIN COVENANTS . . . . . . . . . . . . . . . . . . .20
6.1 Non-Interference . . . . . . . . . . . . . . . . . . . . .20
6.2 Amendments to Merger Agreement . . . . . . . . . . . . . .20
6.3 Assignments of Claims . . . . . . . . . . . . . . . . . .20
SECTION 7 -- NO ADMISSION . . . . . . . . . . . . . . . . . . . . .21
SECTION 8 -- COMPLIANCE WITH AGREEMENTS. . . . . . . . . . . . . . .21
8.1 Representations and Warranties in Marathon Agreement . . .21
8.2 Compliance with Marathon Agreement . . . . . . . . . . . .21
SECTION 9 -- INDEMNIFICATION OF MARATHON, 520 COMMONWEALTH
AND 660 CORP . . . . . . . . . . . . . . . . . . . . . .21
SECTION 10 -- ARBITRATION . . . . . . . . . . . . . . . . . . . . .22
10.1 Arbitration . . . . . . . . . . . . . . . . . . . . . . .22
10.2 Injunctive Relief . . . . . . . . . . . . . . . . . . . .22
SECTION 11 -- FURTHER ASSURANCES . . . . . . . . . . . . . . . . . .22
SECTION 12 -- MISCELLANEOUS . . . . . . . . . . . . . . . . . . . .23
12.1 Entire Agreement . . . . . . . . . . . . . . . . . . . . .23
12.2 Modification . . . . . . . . . . . . . . . . . . . . . . .23
12.3 Governing Law . . . . . . . . . . . . . . . . . . . . . .23
12.4 Delay of No Effect . . . . . . . . . . . . . . . . . . . .23
12.5 Attorneys Fees and Other Costs . . . . . . . . . . . . . .23
12.6 No Third-Party Beneficiary . . . . . . . . . . . . . . . .23
12.7 Binding Effect . . . . . . . . . . . . . . . . . . . . . .23
12.8 Assignment . . . . . . . . . . . . . . . . . . . . . . . .24
<PAGE>
- iii -
12.9 Counterparts . . . . . . . . . . . . . . . . . . . . . . .24
12.10 Signatures . . . . . . . . . . . . . . . . . . . . .24
12.11 Headings . . . . . . . . . . . . . . . . . . . . . .24
12.12 Inconsistent Provisions . . . . . . . . . . . . . . .24
12.13 No Party Deemed Drafter . . . . . . . . . . . . . . .24
12.14 Notices . . . . . . . . . . . . . . . . . . . . . . .24
12.15 Incorporation of Recitals . . . . . . . . . . . . . . . .29
<PAGE>
ACCORD AND SATISFACTION AGREEMENT
This Accord and Satisfaction Agreement (the "Agreement") is made and
entered into as of May 11, 1998 by and among
SERAGEN, INC. ("Seragen") and SERAGEN TECHNOLOGY, INC., ("STI"), as parties of
the first part,
TRUSTEES OF BOSTON UNIVERSITY ("Boston University"); SERAGEN LLC ("BU
Holding"); MARATHON BIOPHARMACEUTICALS, LLC ("Marathon"); UNITED STATES
SURGICAL CORPORATION ("USSC"); LEON C. HIRSCH ("Hirsch"); TURI JOSEFSEN
("Josefsen"); GERALD S.J. AND LORETTA P. CASSIDY (the "Cassidys"); REED R.
PRIOR ("Prior"); JEAN C. NICHOLS, PH.D. ("Nichols"); ELIZABETH C. CHEN
("Chen"); ROBERT W. CRANE ("Crane"); SHORELINE PACIFIC INSTITUTIONAL FINANCE
("Shoreline"); and LEHMAN BROTHERS INC. ("Lehman"; Boston University, BU
Holding, Marathon, USSC, Hirsch, Josefsen, the Cassidys, Prior, Nichols, Chen,
Crane, Shoreline and Lehman, collectively, the "Third Parties"), as parties of
the second part, and
520 COMMONWEALTH AVENUE REAL ESTATE CORP. ("520 Commonwealth") and 660
CORPORATION ("660 Corp"), as parties of the third part.
The Seragen, STI, the Third Parties, 520 Commonwealth, and 660 Corp are
hereinafter referred to collectively as the "parties."
RECITALS
PARTIES
A. Seragen is a Delaware corporation with a principal place of
business at 97 South Street, Hopkinton, Massachusetts 01748. STI is a
Delaware corporation with a principal place of business at 97 South Street,
Hopkinton, Massachusetts 10748, and is a subsidiary of Seragen.
B. Boston University is a Massachusetts not-for-profit
corporation having a principal place of business at 881 Commonwealth Avenue,
Boston, Massachusetts 02215.
C. BU Holding is a Massachusetts limited liability company
having a principal place of business at 147 Bay State Road, Boston,
Massachusetts 02115. BU Holding is an indirect wholly-owned subsidiary of
Boston University.
<PAGE>
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D. Marathon is a Massachusetts limited liability company having
a principal place of business at 97 South Street, Hopkinton, Massachusetts
01748. Marathon is an indirect wholly-owned subsidiary of Boston University.
E. USSC is a Delaware corporation having a principal place of
business at 150 Glover Avenue, Norwalk, Connecticut 06856.
F. Hirsch is an individual having an address at c/o United
States Surgical Corporation, 150 Glover Avenue, Norwalk, Connecticut 06856.
G. Josefsen is an individual having an address at c/o United
States Surgical Corporation, 150 Glover Avenue, Norwalk, Connecticut 06856.
H. The Cassidys are individuals having an address at 700 13th
Street, N.W., Washington, D.C. 20005.
I. Prior is an individual having an address at c/o Seragen,
Inc., 97 South Street, Hopkinton, MA 01748.
J. Nichols is an individual having an address at c/o Seragen,
Inc., 97 South Street, Hopkinton, MA 01748.
K. Chen is an individual having an address at c/o Seragen, Inc.,
97 South Street, Hopkinton, MA 01748.
L. Crane is an individual having an address at c/o Seragen,
Inc., 97 South Street, Hopkinton, MA 01748.
M. Shoreline is a California sole proprietorship having a
principal place of business at 3 Harbor Drive, Suite 311, Sausalito,
California 94065.
N. Lehman is a Delaware corporation having a principal place of
business at 3 World Financial Center, New York, New York 10285-1700.
O. 520 Commonwealth is a Massachusetts corporation having a
principal place of business at 881 Commonwealth Avenue, Boston, Massachusetts
02215.
P. 660 Corp is a Massachusetts corporation having a principal
place of business at 881 Commonwealth Avenue, Boston, Massachusetts 02215.
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THE MERGER AGREEMENT
Q. Seragen and LIGAND PHARMACEUTICALS INCORPORATED, a Delaware
corporation with a principal place of business at 10275 Science Center Drive,
San Diego, California 92121 ("Ligand") have negotiated an agreement, of even
date herewith (the "Merger Agreement"), providing for the merger of Seragen
with and into KNIGHT ACQUISITION CORPORATION, a Delaware corporation having a
principal place of business at 10275 Science Center Drive, San Diego,
California 92121 ("Merger Sub"), on the terms and for the consideration and
under the conditions set forth in the Merger Agreement (the "Merger
Transaction"). The Merger Agreement provides for the payment of certain
"Closing Consideration" (as defined in the Merger Agreement) and "Milestone
Consideration" (as defined in the Merger Agreement; the Closing Consideration
and the Milestone Consideration, together, the "Merger Consideration"). The
Merger Agreement is attached to this Agreement as Exhibit A.
R. Marathon, 520 Commonwealth, and 660 Corp (collectively, the
"BU Parties") and Ligand have negotiated an agreement, of even date herewith
(the "Marathon Agreement"), providing for the purchase by Ligand of
substantially all of the assets of Marathon. Each of the BU Parties is
wholly-owned, directly or indirectly, by Boston University.
S. The obligation of Ligand to consummate the transactions
contemplated by the Merger Agreement is conditioned on those representations
and warranties made by the BU Parties pursuant to the Marathon Agreement being
true and correct as of the Closing Date (as defined in the Merger Agreement)
with the same effect as thought such representations and warranties had been
made on and as of such date and on the BU Parties having performed, as of the
Closing Date, all of those covenants set forth in the Marathon Agreement
required to be performed by the BU Parties on or prior to the Closing Date.
Seragen is unwilling to enter into the Merger Agreement without assurance that
the aforesaid conditions to Ligand's obligations to consummate the
transactions contemplated by the Merger Agreement will be fulfilled at the
Closing Date. In order to induce Seragen to enter into the Merger Agreement,
the BU Parties are willing to provide such assurance.
T. The BU Parties are unwilling to enter into the Marathon
Agreement without certain indemnities from the Third Parties with respect to
the representations and warranties to be given by the BU Parties pursuant to
the Merger Agreement.
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CLAIMS
Series B Shares
U. BU Holding owns 11,800 shares of Series B preferred stock,
par value $.01 per share, of Seragen (the "Series B Stock"), with a
liquidation preference of $1,000 per share plus accrued and unpaid dividends
from the date of issuance and which are convertible by their terms into common
stock, par value $.01 per share, of Seragen (the "Common Stock"). As of
December 31, 1997, accrued and unpaid dividends on the Series B Stock owned by
BU Holding were $1,459,201. The Series B Stock is entitled to receive a
cumulative cash dividend payable quarterly in arrears on the last day of
March, June, September, and December of each year at an annual rate equal to
the prime rate plus 1 1/2% through June 1999 and at an increasing percentage
rate thereafter up to a maximum rate of the prime rate plus 5% in July 2003.
V. Hirsch owns 7,000 shares of Series B Stock. As of December
31, 1997, accrued and unpaid dividends on the Series B Stock owned by Hirsch
were $865,628. The Series B Stock is entitled to receive a cumulative cash
dividend payable quarterly in arrears on the last day of March, June,
September, and December of each year at an annual rate equal to the prime rate
plus 1 1/2% through June 1999 and at an increasing percentage rate thereafter
up to a maximum rate of the prime rate plus 5% in July 2003.
W. Josefsen owns 3,000 shares of Series B Stock. As of December
31, 1997, accrued and unpaid dividends on the Series B Stock owned by Josefsen
were $370,983. The Series B Stock is entitled to receive a cumulative cash
dividend payable quarterly in arrears on the last day of March, June,
September, and December of each year at an annual rate equal to the prime rate
plus 1 1/2% through June 1999 and at an increasing percentage rate thereafter
up to a maximum rate of the prime rate plus 5% in July 2003.
X. The Cassidys own 2,000 shares of Series B Stock. As of
December 31, 1997, accrued and unpaid dividends on the Series B Stock owned by
Cassidys were $247,322. The Series B Stock is entitled to receive a
cumulative cash dividend payable quarterly in arrears on the last day of
March, June, September, and December of each year at an annual rate equal to
the prime rate plus 1 1/2% through June 1999 and at an increasing percentage
rate thereafter up to a maximum rate of the prime rate plus 5% in July 2003.
Y. BU Holding owns 11,800 shares of the Class B common stock,
par value $.01 per share, of STI (the "STI Class B Common Stock").
<PAGE>
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Z. Hirsch owns 7,000 shares of STI Class B Common Stock.
AA. Josefsen owns 3,000 shares of STI Class B Common Stock.
BB. The Cassidys own 2,000 shares of STI Class B Common Stock.
CC. On June 28, 1996, Seragen transferred all of its existing and
future United States patents and patent applications (the "Patents") to STI in
exchange for shares of the Class A common stock, par value $.01 per share, of
STI.
DD. Shares of the STI Class B Common Stock are entitled to
cumulative dividends equal to any royalty payable to STI under the Irrevocable
License Agreement between Seragen and STI, dated June 28, 1996 (the
"Irrevocable License Agreement"). The STI Class B Common Stock is required to
be redeemed upon the redemption or conversion of shares of Series B Stock in a
number equal to the number of shares of Series B Stock redeemed or converted.
EE. Under the terms of the Irrevocable License Agreement, Seragen
is obligated to pay quarterly dividends to STI in an amount equal to the
amount of any dividends that the holders of shares of the Series B Stock are
entitled to receive but have not received by the royalty due date (which is
one day after each quarterly dividend payment date for the Series B Stock).
FF. On July 1, 1996, STI executed a collateral assignment of the
Patents (the "Collateral Assignment of Patents") in favor of the holders of
the STI Class B Common Stock. Mintz, Levin, Cohn, Ferris, Glovsky and Popeo,
P.C. (the "Escrow Agent") holds the Collateral Assignment of Patents under an
escrow agreement dated July 1, 1996 (the "Escrow Agreement"). The Escrow
Agent is required to deliver the Collateral Assignment of Patents to the
holders of the STI Class B Common Stock if dividends on the STI Class B Common
Stock are in arrears and STI fails, for 60 days, after the receipt of notice
from the holders of the STI Class B Common Stock, to pay the dividends due.
GG. The holders of the STI Class B Common Stock executed a
reassignment of the Patents (the "Reassignment of Patents") to STI, which also
is being held by the Escrow Agent. The Escrow Agent is obligated to deliver
the Reassignment of Patents to STI upon the redemption by STI of all of the
STI Class B Common Stock.
Series C Shares
HH. BU Holding owned 5,000 shares of Series C preferred stock, par
value $.01 per share, of Seragen (the "Series C Stock"), which
<PAGE>
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converted automatically by their terms into 3,360,625 shares of Common Stock
(the "Conversion Shares"), the maximum number of shares of Common Stock into
which the Series C Stock could convert by its terms, on March 30, 1998. BU
Holding is as of the date hereof the record owner of the Conversion Shares.
Under the terms of the Certificate of Designation for the Series C Stock,
Seragen was obligated to pay BU Holding $1,150 per share for each share of
Series C Stock that Boston University was unable to convert as a result of
this limitation. As of the date hereof, Seragen has not paid this amount and
is therefore obligated to pay to BU Holding $4,530,461 (the "Series C Debt
Amount").
Warrants
II. On May 31, 1995, Seragen issued to BU Holding warrants to
purchase 1,376,666 shares of Common Stock at a purchase price of $4.75 per
share. On June 28, 1996, Seragen issued to Boston University warrants to
purchase 2,950,000 shares of Common Stock at a purchase price of $4.00 per
share, subject to anti-dilution provisions. As of December 31, 1997, BU
Holding had received warrants to purchase an additional 4,354,008 shares of
Common Stock related to the anti-dilution provisions. All warrants held by BU
Holding for the purchase of capital stock of Seragen, whether outstanding as
of the date hereof or issued after the date hereof, are referred to as the
"Boston University Warrants."
JJ. On May 31, 1995, Seragen issued to Hirsch warrants to
purchase 816,666 shares of Common Stock at a purchase price of $4.75 per
share. On June 28, 1996, Seragen issued to Hirsch warrants to purchase
1,750,000 shares of Common Stock at a purchase price of $4.00 per share,
subject to anti-dilution provisions. As of December 31, 1997, Hirsch had
received warrants to purchase an additional 2,582,886 shares of Common Stock
related to the anti-dilution provisions. All warrants held by Hirsch for the
purchase of capital stock of Seragen, whether outstanding as of the date
hereof or issued after the date hereof, are referred to as the "Hirsch
Warrants."
KK. On May 31, 1995, Seragen issued to Josefsen warrants to
purchase 350,000 shares of Common Stock at a purchase price of $4.75 per
share. On June 28, 1996, Seragen issued to Josefsen warrants to purchase
750,000 shares of Common Stock at a purchase price of $4.00 per share, subject
to anti-dilution provisions. As of December 31, 1997, Josefsen had received
warrants to purchase an additional 1,106,951 shares of Common Stock related to
the anti-dilution provisions. All warrants held by Josefsen for the purchase
of capital stock of Seragen, whether outstanding as of the date hereof or
issued after the date hereof, are referred to as the "Josefsen Warrants."
LL. On May 31, 1995, Seragen issued to the Cassidys warrants to
purchase 233,332 shares of Common Stock at a purchase price of $4.75
<PAGE>
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per share. On June 28, 1996, Seragen issued to the Cassidys warrants to
purchase 500,000 shares of Common Stock at a purchase price of $4.00 per
share, subject to anti-dilution provisions. As of December 31, 1997, the
Cassidys had received warrants to purchase an additional 737,967 shares of
Common Stock related to the anti-dilution provisions. All warrants held by
the Cassidys for the purchase of capital stock of Seragen, whether outstanding
as of the date hereof or issued after the date hereof, are referred to as the
"Cassidy Warrants."
MM. On July 31, 1997, Seragen issued to USSC warrants to
purchase 500,000 shares of Common Stock at a purchase price of $0.5625 per
share. All warrants held by USSC for the purchase of capital stock of
Seragen, whether outstanding as of the date hereof or issued after the date
hereof, are referred to as the "USSC Warrants."
Technology Purchase and Royalty Agreement
NN. Boston University and Seragen are parties to a Technology
Purchase and Royalty Agreement, dated January 28, 1998 (the "Technology
Agreement"), pursuant to which Seragen has agreed to pay Boston University
certain royalties and granted Boston University a security interest in the
Technology (as defined in the Technology Agreement) transferred by Boston
University to Seragen pursuant to the Technology Agreement.
Service Agreement
OO. Boston University and Seragen are parties to a Service
Agreement, dated as of February 14, 1997 (the "Service Agreement"). Effective
December 31, 1997, Boston University, as permitted by the terms of the Service
Agreement, assigned the Service Agreement to Marathon, and Marathon assumed
Boston University's obligations under the Service Agreement as of such date.
Under the terms of the Service Agreement, Boston University or its assignee is
required to provide certain specified research, development, clinical trial,
and manufacturing services to Seragen in exchange for "Technology Service
Fees" of $5,521,342 during the first twelve months of the Service Agreement
and $6,605,651 during the second twelve months of the Service Agreement,
subject to proration for partial years of services. As of the date hereof,
Seragen is obligated to pay to Boston University $4,840,629 for accrued but
unpaid Technology Service Fees relating to the period February 14, 1997,
through December 31, 1997, and to Marathon $1,561,137 for accrued but unpaid
Technology Service Fees for the period January 1, 1998, through March 31,
1998, and additional Technology Service Fees for the period April 1, 1998,
through the date hereof.
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USSC Evaluation License
PP. Seragen and USSC are parties to an Evaluation License and
Option Agreement, dated as of July 31, 1997 (the "Evaluation License").
Pursuant to the Evaluation License, Seragen granted to USSC an option to
obtain exclusive worldwide rights to Seragen's DAB389EGF molecule (the "USSC
Technology"), together with the USSC Warrants, in exchange for a payment by
USSC to Seragen of $5,000,000. In the event USSC chooses not to acquire the
license, Seragen will be obligated to issue to USSC $5,000,000 worth of Common
Stock (the "USSC Shares").
Executive Compensation
QQ. Seragen and Prior are parties to an employment agreement
dated as of November 6, 1997, as amended December 18, 1996, January 6, 1997,
January 31, 1997, March 28, 1997, April 30, 1997, September 30, 1997 (two
amendments of this date), and February 5, 1998 (the "Prior Employment
Agreement").
RR. As of December 31, 1997, Seragen had granted to Prior
options to purchase 11,996,208 shares of Common Stock. Pursuant to the
anti-dilution provisions of the Prior Employment Agreement, Prior may be
entitled to receive additional options. Certain options (the "Prior ISOs")
granted by Seragen to Prior qualify or will qualify as incentive stock options
for purposes of the Internal Revenue Code. All options held by Prior for the
purchase of capital stock of Seragen, whether outstanding as of the date
hereof or issued after the date hereof, are referred to as the "Prior
Options."
SS. The Prior Employment Agreement provides for payment to Prior
of an asset value realization bonus in the event of a change in ownership of
Seragen, as defined, in an amount equal to 8.5% of the net proceeds from the
change in ownership transaction. Under the Prior Employment Agreement, the
Prior Asset Value Realization Bonus is to be reduced by the amount of gain, if
any, recognized by Prior as a result of exercise of the Prior Options. That
portion of the asset value realization bonus payable by Seragen to Prior
pursuant to the Prior Employment Agreement that is in excess of the amount of
gain recognized by Prior as a result of the exercise of the Prior ISOs is
referred to herein as the "Prior Asset Value Realization Bonus."
TT. Seragen and Nichols are parties to an amended and restated
employment agreement dated as of September 22, 1997, as amended February 23,
1998 (the "Nichols Employment Agreement").
UU. As of December 31, 1997, Seragen had granted to Nichols
options to purchase 2,850,098 shares of Common Stock. Pursuant to the
anti-dilution provisions of the Nichols Employment Agreement, Nichols may
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be entitled to receive additional options. Certain options (the "Nichols
ISOs") granted by Seragen to Nichols qualify or will qualify as incentive
stock options for purposes of the Internal Revenue Code. All options held by
Nichols for the purchase of capital stock of Seragen, whether outstanding as
of the date hereof or issued after the date hereof, are referred to as the
"Nichols Options."
VV. The Nichols Employment Agreement provides for payment to
Nichols of an asset value realization bonus in the event of a change in
ownership of Seragen, as defined, in an amount equal to 2.75% of the net
proceeds from the change in ownership transaction. In the event of a change in
ownership after which the purchaser makes Nichols a bona fide employment
offer, as defined in the Nichols Employment Agreement, the asset value
realization bonus will be payable to her as follows: 25% on the closing of
the change in ownership, 25% two months after closing, 25% four months after
closing, and 25% six months after closing, the obligation of Seragen to make
each such payment in respect of the asset value realization bonus being
subject to Nichols' continued employment with the purchaser at the time the
payment falls due. If the purchaser terminates Nichols' employment without
just cause, as defined in the Nichols Employment Agreement, or if Nichols
terminates her employment with the purchaser for good reason, as defined in
the Nichols Employment Agreement, Nichols is entitled to receive the entire
unpaid balance of the asset value realization bonus as a lump sum payment.
Under the Nichols Employment Agreement, the asset value realization bonus is
to be reduced by the amount of gain, if any, recognized by Nichols as a result
of exercise of the Nichols Options. That portion of the asset value
realization bonus payable by Seragen to Nichols pursuant to the Nichols
Employment Agreement that is in excess of the amount of gain recognized by
Nichols as a result of the exercise of the Nichols ISOs is referred to herein
as the "Nichols Asset Value Realization Bonus."
WW. Seragen and Chen are parties to an employment agreement (the
"Chen Employment Agreement") dated as of January 15, 1997, as amended March
28, 1997, September 3, 1997, September 30, 1997, and February 17, 1998.
XX. As of December 31, 1997, Seragen had granted to Chen options
to purchase 2,894,174 shares of Common Stock. Pursuant to the anti-dilution
provisions of the Chen Employment Agreement, Chen may be entitled to receive
additional options. Certain options (the "Chen ISOs") granted by Seragen to
Chen qualify or will qualify as incentive stock options for purposes of the
Internal Revenue Code. All options held by Chen for the purchase of capital
stock of Seragen, whether outstanding as of the date hereof or issued after
the date hereof, are referred to as the "Chen Options."
YY. The Chen Employment Agreement provides for payment to Chen
of an asset value realization bonus in the event of a change in ownership of
Seragen, as defined, in an amount equal to 2.0% of the net
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proceeds from the change in ownership transaction. Under the Chen Employment
Agreement, the Chen Asset Value Realization Bonus is to be reduced by the
amount of gain, if any, recognized by Chen as a result of exercise of the Chen
Options. That portion of the asset value realization bonus payable by Seragen
to Chen pursuant to the Chen Employment Agreement that is in excess of the
amount of gain recognized by Chen as a result of the exercise of the Chen ISOs
is referred to herein as the "Chen Asset Value Realization Bonus."
ZZ. Seragen and Crane are parties to an employment agreement (the
"Crane Employment Agreement") dated as of April 30, 1998.
AAA. As of the date hereof, Seragen has granted to Crane options
to purchase 3,690,962 shares of Common Stock (the "Crane Options"). Pursuant
to the anti-dilution provisions of the Crane Employment Agreement, Crane may
be entitled to receive additional options. Certain options (the "Crane ISOs")
granted by Seragen to Crane qualify or will qualify as incentive stock options
for purposes of the Internal Revenue Code. All options held by Crane for the
purchase of capital stock of Seragen, whether outstanding as of the date
hereof or issued after the date hereof, are referred to as the "Crane
Options."
BBB. The Crane Employment Agreement provides for payment to
Crane of an asset value realization bonus in the event of a change in
ownership of Seragen, as defined, in an amount equal to 2.75% of the net
proceeds from the change in ownership transaction. Under the Crane Employment
Agreement, the Crane Asset Value Realization Bonus is to be reduced by the
amount of gain, if any, recognized by Crane as a result of exercise of
options. That portion of the asset value realization bonus payable by Seragen
to Crane pursuant to the Crane Employment Agreement that is in excess of the
amount of gain recognized by Crane as a result of the exercise of the Crane
ISOs is referred to herein as the "Crane Asset Value Realization Bonus."
Shoreline
CCC. Seragen and Shoreline entered into an engagement letter,
dated as of October 1, 1997 (the "Shoreline Engagement Letter"), relating to a
proposed financing transaction. Pursuant to the Shoreline Engagement Letter,
Seragen is obligated to pay to Shoreline a fee of 1% of the aggregate purchase
price paid in any establishment of a strategic investment transaction, as
defined in the Shoreline Engagement Letter. The Shoreline Engagement Letter
also provides that Seragen pay Shoreline a fee of $100,000 on October 1, 1998,
in the event that no other fees are due to Shoreline under the terms of the
Shoreline Engagement Letter.
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Lehman
DDD. Seragen and Lehman entered into a letter agreement, dated as
of April 30, 1998 (the "Lehman Letter Agreement"), engaging Lehman to provide
certain financial advisory services to Seragen. Pursuant to the Lehman Letter
Agreement, Seragen is obligated to pay to Lehman a fee of 2% of the
consideration involved in a sale of Seragen, as defined in the Lehman Letter
Agreement.
NOW, THEREFORE, for and in consideration of the foregoing premises
and the mutual covenants and promises of the parties to this Agreement, and
for other good and valuable consideration, the sufficiency and receipt of
which are hereby acknowledged, the parties to this Agreement agree as follows:
SECTION 1 -- SATISFACTION OF CLAIMS
1.1 Satisfaction of Claims Related to Series B Stock. BU
Holding, Hirsch, Josefsen and the Cassidys hereby agree to accept the right to
receive the Merger Consideration allocated to them in the Merger Agreement as
full and complete satisfaction for any and all Claims that they may have as of
the Closing Date (as defined in the Merger Agreement) against Seragen and STI
with respect to or arising under the Series B Stock, the STI Class B Common
Stock and the Collateral Assignment of Patents. BU Holding, Hirsch, Josefsen,
and the Cassidys agree that, at the Effective Time, all shares of Series B
Stock and STI Class B Common Stock held by them shall be extinguished,
terminated, and of no further force and effect, without any further action on
the part of any person. Each of BU Holding, Hirsch, Josefsen, and the
Cassidys agrees to deliver and relinquish to Seragen at the Closing (as
defined in the Merger Agreement) certificates evidencing all shares of Series
B Stock and STI Class B Common Stock then held by them. Each such certificate
shall be duly endorsed in blank for transfer or accompanied by a duly executed
stock power in blank, with signatures guaranteed by a national banking
association or a member of the New York Stock Exchange. BU Holding, Hirsch,
Josefsen, and the Cassidys hereby agree that, at the Effective Time, they
shall be deemed for all purposes to have released any and all rights held by
them in or pursuant to the Collateral Assignment of Patents. BU Holding,
Hirsch, Josefsen and the Cassidys shall, and hereby do, instruct the Escrow
Agent to deliver the Reassignment of Patents to STI at the Effective Time.
1.2 Satisfaction of Claims Related to Series C Stock. BU
Holding hereby agrees to accept the right to receive the Merger Consideration
allocated to it in the Merger Agreement as full and complete satisfaction of
Seragen's obligation to pay to BU Holding the Series C Debt Amount. In
addition, BU Holding agrees to surrender to Seragen for
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cancellation, immediately prior to the Effective Time and without any
additional consideration, that number of shares of Common Stock that is equal
to the number of Conversion Shares delivered by Seragen to BU Holding in
connection with the conversion of the Series C Stock.
1.3 Satisfaction of Warrant Claims. BU Holding, Hirsch,
Josefsen, the Cassidys, and USSC hereby agree to accept the right to receive
the Merger Consideration allocated to them in the Merger Agreement as full and
complete satisfaction for any and all Claims that they may have as of the
Closing Date against Seragen and STI with respect to or arising under,
respectively, the Boston University Warrants, the Hirsch Warrants, the
Josefsen Warrants, the Cassidy Warrants, and the USSC Warrants. BU Holding,
Hirsch, Josefsen, the Cassidys, and USSC agree that, at the Effective Time,
all Boston University Warrants, Hirsch Warrants, Josefsen Warrants, Cassidy
Warrants, and USSC Warrants shall be extinguished, terminated and of no
further force or effect, without any further action on the part of any person.
Each of BU Holding, Hirsch, Josefsen, the Cassidys, and USSC shall at the
Closing relinquish and surrender unexercised to Seragen all, respectively,
Boston University Warrants, Hirsch Warrants, Josefsen Warrants, Cassidy
Warrants and USSC Warrants.
1.4 Satisfaction of Technology Agreement Claims. Boston
University hereby agrees to accept the right to receive the Merger
Consideration allocated to it in the Merger Agreement as full and complete
satisfaction for any Claims it may have against Seragen with respect to or
arising under the Technology Agreement, including, without limitation,
Seragen's obligation to pay to it royalties pursuant to the Technology
Agreement, and agrees that, as of the Effective Time, the Technology
Agreement, including, without limitation, Seragen's obligations to pay
royalties pursuant thereto, whether arising on or prior to such time, and the
security interest granted by Seragen pursuant thereto, shall be terminated.
1.5 Satisfaction of Service Agreement Claims.
1.5.1 Boston University hereby agrees to accept the right
to receive the Closing Consideration allocated to it in the Merger Agreement
as full and complete satisfaction of Seragen's obligation to pay to it any and
all Technology Service Fees, Additional Service Fees, royalties, or any other
amounts whatsoever that are payable under the terms of the Service Agreement
for the period from February 14, 1997, through December 31, 1997.
1.5.2 Marathon hereby agrees to accept the right to receive
the Closing Consideration allocated to it in the Merger Agreement as full and
complete satisfaction of Seragen's obligation to pay to it any and all
Technology Service Fees, Additional Service Fees, royalties, or
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any other amounts whatsoever that are payable under the terms of the Service
Agreement for the period from January 1, 1998, through the Closing Date.
1.6 Satisfaction of USSC Evaluation License Claims. USSC hereby
agrees to accept the right to receive the Closing Consideration allocated to
it in the Merger Agreement as full and complete satisfaction for any and all
Claims that it may have against Seragen with respect to or arising under the
Evaluation License and agrees that, as of the Effective Time, the Evaluation
License, including, without limitation, any right that USSC may have to
receive shares of Common Stock, shall be terminated.
1.7 Satisfaction of Executive Compensation Claims.
1.7.1 Prior, Nichols, Chen, and Crane hereby agree to
accept the right to receive the Merger Consideration allocated to them in the
Merger Agreement as full and complete satisfaction of Seragen's obligations to
them in connection with, respectively, the Prior Asset Value Realization
Bonus, the Nichols Asset Value Realization Bonus, the Chen Asset Value
Realization Bonus, and the Crane Asset Value Realization Bonus (collectively,
the "Asset Value Realization Bonuses") and, respectively, the Prior Options
other than the Prior ISOs, Nichols Options other than the Nichols ISOs, Chen
Options other than the Chen ISOs, and Crane Options other than the Crane ISOs
(collectively, the "Executive Options").
1.7.2 Any reduction pursuant to the terms hereof from the
amounts that Prior, Nichols, Chen and Crane would have been entitled to
receive under their respective employment agreement in respect of the Asset
Value Realization Bonuses and the Executive Options shall be deemed to be a
reduction first in amounts to which each such person was entitled in respect
of his Asset Value Realization Bonus and thereafter, to the extent of any
further reduction, a reduction in amounts to which such person was entitled in
respect of his Executive Options.
1.7.3 Prior, Nichols, Chen and Crane hereby agree that at
the Effective Time each of the, respectively, Prior ISOs, Nichols ISOs, Chen
ISOs, and Crane ISOs shall, to the extent not exercised at or prior to such
time, be deemed for all purposes to have been relinquished and surrendered
unexercised to Seragen and shall thereafter be deemed terminated,
extinguished, and of no further force or effect.
1.7.4 Nothing in this Section 1.6 shall be construed to
limit the right of Seragen to pay any Merger Consideration allocated to
Nichols in the Merger Agreement in accordance with and subject to the
provisions of Section 3.7 of the Nichols Employment Agreement.
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1.8 Satisfaction of Shoreline Claims. Shoreline hereby agrees
to accept the right to receive the Merger Consideration allocated to it in the
Merger Agreement as full and complete satisfaction of Seragen's obligations
pursuant to the Shoreline Engagement Letter to pay fees to Shoreline and to
reimburse Shoreline for its out-of-pocket expenses.
1.9 Satisfaction of Lehman Claims. Lehman hereby agrees to
accept the right to receive the Merger Consideration allocated to it in the
Merger Agreement as full and complete satisfaction of Seragen's obligations
pursuant to the Lehman Letter Agreement to pay fees to Lehman; provided,
however, that on or prior to Closing Date Seragen shall reimburse Lehman in
cash for its reasonable out-of-pocket expenses incurred by Lehman in
connection with the engagement contemplated by the Lehman Letter Agreement.
SECTION 2 -- RELEASE
2.1 Release of Seragen and STI.
2.1.1 Release. Each of the Third Parties hereby releases
Seragen and STI and their current and past directors, officers, employees,
agents, representatives, successors and assigns from any and all Claims
relating to any act, omission or circumstance whatsoever from the beginning of
time to the date of this Agreement to the extent the same relates in any
manner whatsoever, directly or indirectly, to the operations of Seragen and
STI or the conduct of their business, including, without limitation, financing
and other transactions entered into by Seragen and STI or to which Seragen or
STI was a party, sales of assets by Seragen and STI, licensing by Seragen and
STI of their patents, trademarks, trade secrets and other intellectual
property, transactions between Seragen and STI and directors, officers or
shareholders, and affiliates thereof, of Seragen or STI, and any and all
issuances by Seragen and STI of securities. Without limiting the foregoing,
each of the Third Parties hereby releases Seragen and STI and their current
and past directors, officers, employees, agents, representatives, successors
and assigns from any and all Claims that any such Third Party may have in
respect of or relating to such Third Party's subscription for or purchase of
securities issued by Seragen or STI, including, without limitation, Claims
relating to any alleged fraud or misrepresentation to which any such party may
have been a party in connection with the issuance or sale of securities by
Seragen or STI.
2.1.2 Limitations on Release. The provisions of Section
2.1.1 shall not apply, or effect any release of, any Claim by any Third Party
(a) to enforce the terms of this Agreement or the Merger Agreement, (b) for
indemnification from Seragen or STI to which such Third Party may be entitled
as a consequence of such Third Party having served
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as an director, officer, employee or agent of Seragen or STI, whether such
right to indemnification arises pursuant to any provision of the charter or
bylaws of Seragen or STI, any provision of any employment agreement or other
contract to which such Third Party may be a party with Seragen or STI, any
provision of law, or otherwise, or (c) any Claim by any Third Party in respect
of unpaid salary, unpaid reimbursable commuting or living expenses, unpaid
severance, accrued vacation rights, or other employee benefits, and unpaid
reimbursable business expenses. The provisions of Section 2.1.1 are not
intended to, and shall not, effect the termination of any agreement or
contract between any Third Party and Seragen or STI, including, without
limitation, the Service Agreement, as the terms of the same apply following
the Effective Time. The provisions of this Section 2.1.2 are without
prejudice to the provisions of Section 1 hereof.
2.1.3 Definition. For purposes of this Agreement, "Claims"
means all actions, causes of action, suits, debts, liens, sums of money,
guarantees, warranties, demands, expenses, costs, attorneys' fees, judgments,
or other rights of any nature whatsoever, liquidated or unliquidated, fixed or
contingent, and whether or not matured.
2.2 Effectiveness of Release. The release for which provisions
is made in this Section 2 shall become effective on, and only on, the
occurrence of the Effective Time, failing which each such release shall be
deemed never to have occurred.
2.3 Survival of Release. Each of the parties expressly
acknowledges that it may hereafter discover Claims presently unknown or
unsuspected or facts different from or in addition to those which it now knows
or believes to be true with respect to the Claims released in this Agreement,
and each of the parties to this Agreement agrees that, notwithstanding the
discovery of such different or additional facts and/or Claims, the releases
set forth in this Section 2 shall survive the Effective Time and shall
continue in full force and effect.
SECTION 3 -- TERM
3.1 Term. This Agreement shall enter into effect as of the date
first set forth above and shall continue in full force and effect subject to
termination in accordance with the provisions of Section 3.2.
3.2 Termination. In the event that the Merger Agreement is
terminated by any party thereto in accordance with its terms, this Agreement
shall terminate. If this Agreement is terminated in accordance with this
Section 3.2, the effective date of termination shall be the "Termination
Date."
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3.3 Effect of Termination. Nothing in this Agreement shall be
construed to release any party from any obligation that matured under this
Agreement prior to the Termination Date or any breach of this Agreement that
occurred prior to the Termination Date.
SECTION 4 -- FORBEARANCE
All parties to this Agreement agree, until the earlier of the
Closing Date or the Termination Date, (a) to forbear from exercising any right
or remedy that they may now or in the future have with respect to any right or
claim that is the subject of the provisions of Section 1 hereof or is to be
released at the Effective Time pursuant to Section 2.1 hereof and (b) to
forbear from exercising any warrant or stock option or exercising any right or
remedy that they may now or in the future have under or pursuant to any
warrant agreement or stock option agreement.
SECTION 5 -- REPRESENTATIONS AND WARRANTIES
5.1 Mutual Representations and Warranties. As part of the
consideration for this Agreement and the undertakings of the parties to this
Agreement, each of the parties expressly represents and warrants to each other
party as follows:
5.1.1 Consideration. The consideration received and to be
received by it as set forth in this Agreement is full, sufficient, adequate,
and fair in all respects.
5.1.2 Title to Claims. It has not heretofore assigned,
sold, transferred, pledged or encumbered, or purported to assign, sell,
transfer, pledge or encumber, either in writing or otherwise, any right,
title, or interest it has or may have in any Claims it is settling, resolving,
or releasing pursuant to this Agreement. It has not heretofore created any
lien, encumbrance, or other right by which any other party may claim all or
any part of the claim(s) it is releasing under this Agreement. Without
limiting the foregoing, as of the date hereof, it is the sole owner,
beneficially and of record, of those securities, options and warrants of which
it is stated to be the owner in the recitals to this Agreement and it has not
assigned, transferred or encumbered any right under, pursuant to, or in
connection with any agreement identified in the recitals hereto to which it is
a party. Notwithstanding anything to the contrary contained in any other
section of this Agreement, it shall indemnify, defend, and hold harmless each
of the other parties to this Agreement from and against any Claims based on or
arising in connection with any such prior assignment, sale, transfer, lien,
encumbrance, or right, or any such purported assignment, sale, transfer, lien,
encumbrance, or right.
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5.1.3 Full Information. Before executing this Agreement,
it has been fully informed and has satisfied itself of the terms, contents,
conditions, and effects of this Agreement and any documents to be executed in
connection with this Agreement, and, before entering into this Agreement, it
has had and has taken full and complete advantage of the benefit and advice of
counsel of its own choosing; in connection therewith, it has relied solely and
completely on its own judgment and the judgment and advice of its own counsel
in entering into this Agreement.
5.1.4 No Additional Payments. No party to this Agreement
or anyone acting on behalf of any party to his Agreement has made any promise
or representation of any kind, nature, or character in connection with the
matters relating to this Agreement, on which any other party is relying in
entering into this Agreement, except as expressly stated or otherwise
contemplated in this Agreement. This Section 5.1.4 shall not negate the
effect of any representations, denominated as such, set forth in this
Agreement, including any such representation contained in the Recitals.
5.2 Representations and Warranties of Seragen and STI. Seragen
and STI each hereby represents and warrants to the Third Parties as follows:
5.2.1 Organization and Standing. It is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has the corporate power and authority to
enter into, deliver and perform its obligations and undertakings under this
Agreement.
5.2.2 Validity. The execution, delivery and performance by
it of this Agreement have been duly authorized and approved by all necessary
corporate action. This Agreement has been duly executed and delivered by it.
This Agreement constitutes its valid and binding obligation, enforceable
against it in accordance with its terms, subject to laws of general
application affecting creditors' rights and the exercise of judicial
discretion in accordance with general equitable principles.
5.2.3 No Conflicts. The execution, delivery and
performance of this Agreement, and the consummation of the transactions
contemplated hereby, by it do not and will not
(a) conflict with, or result in a breach of any of the
terms of, or constitute a default under, its certificate of incorporation,
statute of organization, or by-laws;
(b) conflict with or result in a breach of any of the
terms of, or constitute a default under, any agreement, instrument, covenant
or other restriction to which it is a party or by which any of its properties
or assets are bound, or
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(c) conflict with any law, rule, regulation, order or
decree applicable to it or by which it is bound;
except, in each instance, for such conflicts, breaches or defaults as would
not, individually or in the aggregate, adversely affect its ability to
consummate the transactions contemplated hereby or thereby or materially and
adversely affect its financial condition, business or assets.
5.2.4 Governmental Consents. Except for filings, consents,
permits, approvals, registrations, qualifications and authorizations which
have been made or obtained by it, no filing, consent, approval, registration,
qualification or authorization with or of any governmental authority is
required under existing laws, rules and regulations in connection with its
execution and delivery of this Agreement. Except as set forth or contemplated
in the Merger Agreement, no filing, consent, approval, registration,
qualification or authorization with or of any governmental authority is
required to be made by it under existing laws, rules or regulations in
connection with its consummation of the transactions contemplated hereby to be
consummated at or prior to the Effective Time.
5.3 Representations and Warranties of Boston University, BU
Holding, Marathon, USSC, Shoreline, Lehman, 520 Commonwealth and 660 Corp.
Each of Boston University, BU Holding, Marathon, USSC, Shoreline, Lehman, 520
Commonwealth and 660 Corp represents and warrants to the other parties as
follows:
5.3.1 Organization and Standing. It is a corporation or
other legal entity duly organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation or other organization and
has the corporate or other power and authority to enter into, deliver and
perform its obligations and undertakings under this Agreement.
5.3.2 Validity. The execution, delivery and performance by
it of this Agreement have been duly authorized and approved by all necessary
corporate or other entity action. This Agreement has been duly executed and
delivered by it. This Agreement constitutes its valid and binding obligation,
enforceable against it in accordance with its terms, subject to laws of
general application affecting creditors' rights and the exercise of judicial
discretion in accordance with general equitable principles.
5.3.3 No Conflicts. The execution, delivery and
performance of this Agreement, and the consummation of the transactions
contemplated hereby, by it do not and will not
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(a) conflict with, or result in a breach of any of the
terms of, or constitute a default under, its certificate of incorporation,
statute of organization, or by-laws;
(b) conflict with or result in a breach of any of the
terms of, or constitute a default under, any agreement, instrument, covenant
or other restriction to which it is a party or by which any of its properties
or assets are bound, or
(c) conflict with any law, rule, regulation, order or
decree applicable to it or by which it is bound;
except, in each instance, for such conflicts, breaches or defaults as would
not, individually or in the aggregate, adversely affect its ability to
consummate the transactions contemplated hereby or thereby or materially and
adversely affect its financial condition, business or assets.
5.3.4 Governmental Consents. Except for filings, consents,
permits, approvals, registrations, qualifications and authorizations which
have been made or obtained by it, no filing, consent, approval, registration,
qualification or authorization with or of any governmental authority is
required under existing laws, rules and regulations in connection with its
execution and delivery of this Agreement. Except as set forth or contemplated
in the Merger Agreement, no filing, consent, approval, registration,
qualification or authorization with or of any governmental authority is
required to be made by it under existing laws, rules or regulations in
connection with its consummation of the transactions contemplated hereby to be
consummated at or prior to the Effective Time.
5.4 Representations and Warranties of Hirsch, Josefsen, the
Cassidys, Prior, Nichols, Chen and Crane. Each of Hirsch, Josefsen, the
Cassidys, Prior, Nichols, Chen and Crane represents and warrants to the other
parties as follows:
5.4.1 Validity. He has duly executed and delivered this
Agreement. This Agreement constitutes his valid and binding obligation,
enforceable against him in accordance with its terms, subject to laws of
general application affecting creditors' rights and the exercise of judicial
discretion in accordance with general equitable principles.
5.4.2 No Conflicts. The execution, delivery and
performance of this Agreement, and the consummation of the transactions
contemplated hereby, by him do not and will not
<PAGE>
- 20 -
(a) conflict with or result in a breach of any of the
terms of, or constitute a default under, any agreement, instrument, covenant
or other restriction to which he is a party or by which any of his properties
or assets are bound, or
(c) conflict with any law, rule, regulation, order or
decree applicable to him or by which he is bound;
except, in each instance, for such conflicts, breaches or defaults as would
not, individually or in the aggregate, adversely affect his ability to
consummate the transactions contemplated hereby or thereby or materially and
adversely affect his financial condition, business or assets.
5.4.3 Governmental Consents. Except for filings, consents,
permits, approvals, registrations, qualifications and authorizations which
have been made or obtained by it, no filing, consent, approval, registration,
qualification or authorization with or of any governmental authority is
required under existing laws, rules and regulations in connection with his
execution and delivery of this Agreement. Except as set forth or contemplated
in the Merger Agreement, no filing, consent, approval, registration,
qualification or authorization with or of any governmental authority is
required to be made by him under existing laws, rules or regulations in
connection with his consummation of the transactions contemplated hereby to be
consummated at or prior to the Effective Time.
SECTION 6 -- CERTAIN COVENANTS
6.1 Non-Interference. No party shall take any action that would
interfere with the performance of this Agreement by any other party or that
would adversely affect any of the rights provided for in this Agreement.
6.2 Amendments to Merger Agreement. Seragen shall not, without
the written consent of all Third Parties, enter into any amendment to the
Merger Agreement that would alter the amount, kind or timing of Merger
Consideration payable to any Third Party. Without limiting the provisions of
the foregoing sentence, Seragen shall not, without the written consent of the
affected Third Party, enter into any amendment to the Merger Agreement that
would or could reasonably be expected to adversely affect the rights of any
Third Party.
6.3 Assignments of Claims. Except as contemplated hereby or in
the Merger Agreement, no Third Party shall assign, sell, transfer, pledge or
encumber, either in writing or otherwise, any right, title, or interest it has
or may have in any Claims it is settling, resolving, or releasing pursuant to
this Agreement, any of its right, title or interest
<PAGE>
- 21 -
in or to shares of Series B Stock, shares of STI Class B Common Stock,
Conversion Shares, or options or warrants issued by Seragen, or any right
under, pursuant to, or in connection with any agreement to which it and
Seragen or STI are parties. Notwithstanding anything to the contrary
contained in any other section of this Agreement, each Third Party shall
indemnify, defend, and hold harmless each of the other parties to this
Agreement from and against any Claims based on or arising in connection with
any such assignment, sale, transfer, lien, encumbrance, or right, or any such
purported assignment, sale, transfer, lien, encumbrance, or right, in
violation of the provisions of this Section 6.3.
SECTION 7 -- NO ADMISSION
In the event that this Agreement does not become fully effective in
accordance with its terms or becomes null and void for any reason whatsoever,
the parties agree that nothing contained in this Agreement and in any
settlement discussions, communications, and writings among the parties shall
be admissible or otherwise used in any subsequent litigation (including any
arbitration proceeding) among the parties, except in respect of any claim for
breach, or seeking enforcement, of the terms of this Agreement. No party, by
entering into this Agreement, admits or acknowledges the existence of any
liability or wrongdoing, all such liability and wrongdoing being expressly
denied by the parties.
SECTION 8 -- COMPLIANCE WITH AGREEMENTS
8.1 Representations and Warranties in Marathon Agreement. The
BU Parties represent and warrant to Seragen that each of the representations
and warranties of the BU Parties or any of them set forth in the Marathon
Agreement is true and correct in all respects. The provisions of this Section
8.1 are subject to the provisions of Section 9 hereof and shall not effect the
nature or extent of the indemnification provided by the Indemnifying Parties
(as hereinafter defined) pursuant thereto.
8.2 Compliance with Marathon Agreement. Marathon, 520
Commonwealth, and 660 Corp agree to comply fully and faithfully, until the
earlier of the Closing Date and the termination of the Marathon Agreement in
accordance with its terms, with each and every one of their obligations set
forth in the Marathon Agreement.
<PAGE>
- 22 -
SECTION 9 -- INDEMNIFICATION OF MARATHON, 520 COMMONWEALTH
AND 660 CORP
Each of the Third Parties other than Lehman and Shoreline (the
"Indemnifying Parties") hereby agrees, severally and not jointly, to indemnify
Marathon, 520 Commonwealth and 660 Corp and hold them harmless from and
against that fraction of any Claims that may arise under or in respect of the
representations and warranties made by Marathon, 520 Commonwealth and 660 Corp
pursuant to Section 4.1 of the Marathon Agreement, but only to the extent that
such Claims arise as a result of or relate to matters not known to Kenneth G.
Condon or other officers of Boston University and its direct and indirect
wholly-owned subsidiaries other than Marathon, that is equal to the portion of
the Remaining Milestone Consideration allocable to such Indemnifying Party
divided by the aggregate amount of the Remaining Milestone Consideration
allocated to all Indemnifying Parties; provided, however, that in no event
shall the liability of any Indemnifying Party pursuant to the provisions of
this Section 9 exceed a fraction of $1,000,000 that is equal to the portion of
the Remaining Milestone Consideration allocable to such Indemnifying Party
divided by the aggregate amount of the Remaining Milestone Consideration
allocated to all Indemnifying Parties.
SECTION 10 -- ARBITRATION
10.1 Arbitration. Any controversy or claim arising out of or
relating to this contract, or the breach thereof, shall be settled by
arbitration in New York, New York in accordance with the commercial
arbitration rules of the American Arbitration Association, and judgment upon
the award rendered by the arbitrators(s) may be entered in any court having
jurisdiction thereof.
10.2 Injunctive Relief. Any party hereto may seek specific
performance of the obligations of any other party hereunder, and the parties
hereby agree that the failure of any party hereto fully and faithfully to
perform its obligations hereunder would result in irreparable injury to the
other parties hereto for which damages would be an inadequate remedy.
Arbitrators acting pursuant to Section 8.1 shall have the right to grant
injunctive relief to any party hereto.
10.3 Fees and Costs. In any arbitration brought pursuant to
Section 8.1 hereof, the arbitrators shall allocate all reasonable fees and
costs incurred by the parties to such arbitration (including, without
limitation, the reasonable fees and disbursements to counsel to the parties)
in accordance with the degree, as determined by the arbitrators, to which the
initial position of each party to the arbitration has been sustained by the
decision of the arbitrators.
<PAGE>
-23 -
SECTION 11 -- FURTHER ASSURANCES
Each of the parties to this Agreement covenants with each other
party to this Agreement to do any and all things and to execute and deliver
any and all acknowledgments, instruments, or other documents whatsoever, at
any time or from time to time after the date of this Agreement on the request
of any party to this Agreement, that may be necessary or desirable in order
more fully and effectively to carry into effect and consummate the provisions
of this Agreement and the transactions contemplated by this Agreement.
SECTION 12 -- MISCELLANEOUS
12.1 Entire Agreement. This Agreement constitutes the entire
agreement between the parties with respect to the subject matter of this
Agreement and supersedes and cancels any previous agreement, negotiations,
commitments and writings in respect to the subject matter of this Agreement.
12.2 Modification. Any modification of this Agreement must be
in writing and signed by the duly authorized representative of each party.
12.3 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware.
12.4 Delay of No Effect. No failure or delay on the part of any
party in exercising any power, right or remedy under this Agreement shall
operate as a waiver thereof, and no single or partial exercise of any power,
right or remedy shall preclude any other exercise thereof or the exercise of
any other power, right or remedy.
12.5 Attorneys Fees and Other Costs. Each party to this
Agreement shall bear its own attorney fees and other costs incurred in
connection with the negotiation, drafting and consideration of this Agreement.
12.6 Third-Party Beneficiaries.
12.6.1 Limits on Third Party Beneficiaries. Other than as
set forth in Section 12.6.1, nothing contained in this Agreement shall be
construed to confer upon any other party, other than the parties to this
Agreement, the rights of a third-party beneficiary.
12.6.2 Third Party Beneficiary. Ligand, its successors and
assigns are an intended beneficiary of the terms and provisions of
<PAGE>
- 24 -
this Agreement. Ligand shall have the right independently to enforce its
rights in respect thereof without the need to join any party hereto or any
other person in any arbitration or action for the enforcement of the same.
12.7 Binding Effect. This Agreement shall inure to the benefit
of, and be binding upon, the parties and to their respective successors and
permitted assigns. This Agreement shall be binding to the fullest extent
allowed by law on the parties to this Agreement and their respective heirs,
successors in interest, and assigns, whether by operation of law or otherwise.
12.8 Assignment. The rights and obligations under this
Agreement may not be assigned by any party to this Agreement without the prior
written consent of the other parties. For the avoidance of doubt, however,
the parties acknowledge and agree that Seragen may consummate the Merger
Transaction as contemplated by the Merger Agreement and in connection
therewith convey by way of the Merger Transaction all of its rights and
obligations hereunder to the Surviving Corporation (as defined in the Merger
Agreement).
12.9 Counterparts. This Agreement may be executed in any number
of counterparts (including by facsimile transmission), each of which shall be
an original and all of which, when taken together, shall constitute one
agreement.
12.10 Signatures. Delivery of an executed counterpart of a
signature page of this Agreement by facsimile transmission shall be as
effective as delivery of a manually executed counterpart of this Agreement.
12.11 Headings. The headings and captions of the various
subdivisions of this Agreement are for convenience of reference only and shall
in no way modify, or affect the meaning or construction of, any of the terms
or provisions of this Agreement.
12.12 Inconsistent Provisions. Unless otherwise agreed by the
parties to this Agreement, if any of the provisions of any documents or
agreements executed in connection with this Agreement are inconsistent with
the provisions of this Agreement, the provisions of this Agreement shall
control, and any such inconsistent provisions of such other documents or
agreements shall be disregarded and overridden.
12.13 No Party Deemed Drafter. No party shall be deemed the
drafter of this Agreement, and this Agreement should not be construed against
any party as the drafter.
12.14 Notices. Any notice or other communication required or
permitted to be given under this Agreement shall be in writing and
<PAGE>
- 25 -
shall be given by prepaid first-class mail, by facsimile or other means of
electronic communication, or by delivery as provided below.
12.14.1 Any such notice or other communication, if mailed
by prepaid first-class mail at any time other than during a general
discontinuance of postal service due to strike, lockout or otherwise, shall be
deemed to have been received on the third Business Day after the post-marked
date of the notice or communication, or if sent by facsimile or other means of
electronic communication or by nationally recognized overnight courier
service, shall be deemed to have been received on the Business Day following
the sending, or if delivered by hand shall be deemed to have been received at
the time it is delivered to the applicable address noted below either to the
individual designated below or to an individual at such address having
apparent authority to accept deliveries on behalf of the addressee.
12.14.2 In the event of a general discontinuance of postal
service due to strike, lockout or otherwise, notices or other communications
shall be delivered by hand or sent by facsimile or other means of electronic
communication and shall be deemed to have been received in accordance with the
guidelines set forth above.
12.14.3 Notice of change of address shall also be governed
by this Section 12.14.
12.14.4 Notwithstanding the foregoing, any notice or other
communication required or permitted to be given by any party pursuant to or in
connection with any arbitration procedures contemplated by this Agreement may
only be delivered by hand.
12.14.5 For purposes of this Section 10.14, "Business Day"
means any day other than a Saturday, Sunday or day on which banks are required
or permitted to close in the Commonwealth of Massachusetts.
<PAGE>
- 26 -
12.14.6 Notices and other communications shall be addressed
as follows:
If to Seragen:
Seragen, Inc.
97 South Street
Hopkinton, MA 01748
Attention: Robert W. Crane
Telecopier number: (508) 435-9805
with a copy to Seragen's counsel at:
Covington & Burling
1201 Pennsylvania Avenue, N.W.
P.O. Box 7566
Washington D.C. 20044
Attention: Edward C. Britton
Telecopier number: (202) 662-6291
If to STI:
Seragen Technology, Inc.
c/o Seragen, Inc.
97 South Street
Hopkinton, MA 01748
Attention: Robert W. Crane
Telecopier number: (508) 435-9805
with a copy to Seragen's counsel at:
Covington & Burling
1201 Pennsylvania Avenue, N.W.
P.O. Box 7566
Washington D.C. 20044
Attention: Edward C. Britton
Telecopier number: (202) 662-6291
<PAGE>
- 27 -
If to Boston University:
Boston University
881 Commonwealth Avenue
Boston, MA 02215
Attention: Kenneth G. Condon
Telecopier number: (617) 353-5492
If to BU Holding:
Seragen LLC
147 Bay State Road
Boston, MA 02115
Attention: Kenneth G. Condon
Telecopier number: (617) 353-5492
If to Marathon:
Marathon Biopharmaceuticals, LLC
97 South Street
Hopkinton, MA 01748
Attention: Elizabeth C. Chen
Telecopier number: (508) 497-0777
If to USSC:
United States Surgical Corporation
150 Glover Avenue
Norwalk, CT 06856
Attention: Thomas R. Bremer
Telecopier number: (203) 845-1736
<PAGE>
- 28 -
If to Hirsch:
Leon C. Hirsch
c/o United States Surgical Corporation
150 Glover Avenue
Norwalk, CT 06856
Telecopier number: (203) 845-1736
If to Josefsen:
Turi Josefsen
c/o United States Surgical Corporation
150 Glover Avenue
Norwalk, CT 06856
Telecopier number: (203) 845-1736
If to the Cassidys:
Gerald S.J. and Loretta P. Cassidy
c/o Cassidy and Associates, Inc.
700 13th Street, N.W.
Suite 400
Washington, D.C. 20005
Telecopier number: (202) 347-2708
If to Prior:
Reed R. Prior
c/o Seragen Inc.
97 South Street
Hopkinton, MA 01748
Telecopier number: (508) 435-9805
<PAGE>
- 29 -
If to Nichols:
Jean C. Nichols, Ph. D.
c/o Seragen Inc.
97 South Street
Hopkinton, MA 01748
Telecopier number: (508) 435-9805
If to Chen:
Elizabeth C. Chen
c/o Seragen Inc.
97 South Street
Hopkinton, MA 01748
Telecopier number: (508) 435-9805
If to Crane:
Robert W. Crane
c/o Seragen Inc.
97 South Street
Hopkinton, MA 01748
Telecopier number: (508) 435-9805
If to Shoreline:
Shoreline Pacific
3 Harbor Drive
Suite 211
Sausalito, CA 94965
Attention: Vida B. Harband
Telecopier number: (415) 332-7808
<PAGE>
<PAGE>
- 30 -
If to Lehman:
Lehman Brothers, Inc.
3 World Financial Center
New York, NY 10285-0001
Attention: Rodney Young
Telecopier number: (212) 526-9731
12.15 Incorporation of Recitals. The recitals hereto form an
integral part of this Agreement and are hereby incorporated by reference as
fully as if they were herein fully set forth.
[The balance of this page was intentionally left blank.]
<PAGE>
- 31 -
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the date first written above.
SERAGEN, INC.
By: /s/ Reed R. Prior
-----------------------
Name: Reed R. Prior
Title: Chairman and CEO
SERAGEN TECHNOLOGY, INC.
By: /s/ Reed R. Prior
-----------------------
Name: Reed R. Prior
Title: Chairman and CEO
TRUSTEES OF BOSTON UNIVERSITY
By: /s/ Kenneth G. Condon
-----------------------
Name: Kenneth G. Condon
Title: Treasurer
SERAGEN LLC
By: /s/ Kenneth G. Condon
-----------------------
Name: Kenneth G. Condon
Title: President and Treasurer
MARATHON BIOPHARMACEUTICALS, LLC
By: /s/ Kenneth G. Condon
-----------------------
Name: Kenneth G. Condon
Title: Manager
<PAGE>
- 32 -
UNITED STATES SURGICAL CORPORATION
By: /s/ Thomas R. Bremer
-------------------
Name: Thomas R. Bremer
Title: Senior Vice President
and General Counsel
/s/ Leon C. Hirsch
------------------------
Leon C. Hirsch
/s/ Turi Josefsen
------------------------
Turi Josefsen
/s/ Leon C. Hirsch
------------------------
Gerald S. J. Cassidy
/s/ Loretta P. Cassidy
------------------------
Loretta P. Cassidy
/s/ Reed R. Prior
------------------------
Reed R. Prior
/s/ Jean C. Nichols, Ph.D.
------------------------
Jean C. Nichols, Ph.D.
/s/ Elizabeth C. Chen
------------------------
Elizabeth C. Chen
<PAGE>
- 33-
/s/ Robert W. Crane
------------------------
Robert W. Crane
SHORELINE PACIFIC INSTITUTIONAL
FINANCE
By: /s/ Harlan P. Kleiman
------------------------
Harlan P. Kleiman
President
LEHMAN BROTHERS INC.
By: /s/ Fred Frank
------------------------
Name: Fred Frank
Title: Vice Chairman
520 COMMONWEALTH AVENUE REAL ESTATE
CORP.
By: /s/ Kenneth G. Condon
-----------------------
Name: Kenneth G. Condon
Title: President
660 CORPORATION
By: /s/ Kenneth G. Condon
-----------------------
Name: Kenneth G. Condon
Title: Treasurer
<PAGE>
- 34 -
LIST OF EXHIBITS
EXHIBIT A Merger Agreement, dated May 11, 1998, by and between Seragen,
Inc., Ligand Pharmaceuticals Incorporated, and Knight Acquisition Corporation.
<PAGE>
EXTENSION OPTION AGREEMENT
This Extension Option Agreement (this "Agreement") is made and entered into as
of May 11, 1998, by and among SERAGEN, INC., a Delaware Corporation
("Seragen"), LIGAND PHARMACEUTICALS INCORPORATED, a Delaware corporation
("Ligand"),
MARATHON BIOPHARMACEUTICALS, LLC, a Massachusetts limited liability company
(the "Company"),
520 COMMONWEALTH AVENUE REAL ESTATE CORP., a Massachusetts corporation ("520
Commonwealth"), and
660 CORPORATION, a Massachusetts corporation ("660 Corporation," and together
with 520 Commonwealth and the Company, "Sellers").
RECITALS
WHEREAS, concurrently with the execution of this Agreement,
Sellers and Ligand have entered into that certain Option and Asset Purchase
Agreement (the "Asset Agreement"), which agreement expires on January 31,
1999, whereby, among other things, Ligand will purchase substantially all of
the assets of the Company (the "Asset Purchase");
WHEREAS, the Company is a party to that certain Service Agreement,
dated as of February 14, 1997 (the "Service Agreement"), by and between
Seragen and Boston University, of which the Company is an assignee, which
agreement expires on January 31, 1999;
WHEREAS, concurrently with the execution of this Agreement,
Ligand, Seragen and Knight Acquisition Corporation, a Delaware corporation,
are entering into an Agreement and Plan of Reorganization (the "Merger
Agreement") and other transactions contemplated therein, whereby, among other
things, Seragen will become a wholly owned subsidiary of Ligand (the
"Merger");
WHEREAS, the Merger may not close before January 31, 1999;
WHEREAS, the closing of the Merger is a condition to the closing
of the Asset Purchase;
WHEREAS, as a condition to Ligand's execution of the Asset
Agreement and the Merger Agreement and consummation of the transactions
contemplated therein, Sellers have agreed to grant to Ligand an irrevocable
option pursuant to the terms and conditions of this Agreement; and
WHEREAS, as a condition to Seragen's execution of the Merger
Agreement and consummation of the transactions contemplated therein, Sellers
have agreed to grant to Seragen an irrevocable option pursuant to the terms
and conditions of this Agreement.
<PAGE>
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and promises contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which hereby are acknowledged,
the parties agree as follows:
Section 1. Option Grant. The Sellers hereby grant each of Ligand and
Seragen an irrevocable option (the "Option") to extend the terms of both the
Asset Agreement and the Service Agreement (collectively, the "Agreement Term")
for one or more additional sixty-day periods (each, an "Extension Term") upon
the terms and conditions set forth in this Agreement.
Section 2. Option Exercise. Ligand shall have the right upon written
notice to the Company and Seragen to exercise the Option on or before the
thirtieth day prior to the expiration of the Agreement Term or the then-
effective Extension Term, as the case may be (each, a "Ligand Expiration
Date"); provided, however, that in the event Ligand fails at any time to
exercise the Option prior to a Ligand Expiration Date, the Option shall
immediately terminate with respect to Ligand. If, and only if, Ligand fails
to exercise the Option prior to a Ligand Expiration Date, Seragen shall have
the right upon written notice to the Company and Ligand to exercise the Option
(a) with respect to the Agreement Term, during the period from the Ligand
Expiration Date for such term to the end of the Agreement Term, and (b) with
respect to each Extension Term, (i) if Ligand has exercised the Option for
such Extension Term, during the period from the Ligand Expiration Date for
such Extension Term to the end of such Extension Term, or (ii) if Seragen has
exercised the Option for such Extension Term, at any time on or before the
tenth day prior to the expiration of such Extension Term. Seragen may not
exercise the Option without the prior written consent of the Sellers, which
consent may be granted or withheld in the sole discretion of the Sellers. If
neither Ligand nor Seragen has exercised the Option prior to the end of the
Agreement Term or any Extension Term, the Option shall immediately terminate
at the end of such term.
Section 3. Covenants of the Company, Ligand and Seragen.
(a) With respect to any exercise of the Option by Ligand for an
Extension Term, Ligand shall be responsible for any and all
Operating Losses incurred by the Company, and shall benefit from
any Cash Revenue generated by the Company, during such Extension
Term.
(b) With respect to any exercise of the Option by Seragen for an
Extension Term, Seragen shall be responsible for any and all
Operating Losses incurred by the Company, and shall benefit from
any Cash Revenue generated by the Company, during such Extension
Term.
(c) For purposes of Sections 3(a) and (b), Operating Losses shall
mean, with respect to each Extension Term, the difference between
(i) all cash actually expended by the Company during such period
(whether the same would be capitalized or expensed in accordance
with U.S. GAAP), in such period ("Cash Expended"), less (ii) all
2.
<PAGE>
cash revenues actually received by the Company during such period
("Cash Revenue"); provided, however, that Cash Expended shall
include only such expenditures (including capital expenditures) as
are reasonably necessary to conduct the business of the Company
and are consistent with past practice; and provided further that
the Company shall not make any capital expenditures in an
Extension Term, in excess of $30,000 in the aggregate, without the
prior written consent of the party responsible for such
expenditures in such Extension Term; and provided further that
Cash Revenue in each Extension Term (i) shall include any cash
revenue that would have been received in such Extension Term
consistent with past practice, but was not received in such
Extension Term, and (ii) shall exclude any cash revenue that was
received in such Extension Term, but would not have been received
in such Extension Term consistent with past practice.
(d) The obligations of Seragen and Ligand in Sections 3(a) through
3(c) accrued through the termination or earlier expiration of this
Agreement shall survive such termination or expiration.
(e) The Company and Seragen each shall perform their respective
obligations under the Service Agreement, consistent with past
practice, during any Extension Term.
Section 4. Representations and Warranties of Sellers. Each of the
Sellers represents and warrants to each of Seragen and Ligand, as of the date
hereof, as follows:
(a) The Company is a limited liability company duly organized, validly
existing and in good standing under the laws of the Commonwealth
of Massachusetts. The Company currently conducts its business
exclusively within the Commonwealth of Massachusetts. The Company
has the corporate power and authority to own and hold its assets
and properties and to carry on its business as currently
conducted. Kenneth G. Condon is the Manager of the Company. The
Company has the following named officers, each duly elected and
qualified by the Manager of the Company as of the date hereof:
Elizabeth Chen, President, and Kenneth G. Condon, Treasurer. The
Company has delivered to each of Seragen and Ligand correct and
complete copies of the Company's Certificate of Organization and
Operating Agreement, each as amended to date. The Members of the
Company are 520 Commonwealth Avenue Real Estate Corp., a
Massachusetts corporation, and 660 Corporation, a Massachusetts
corporation (collectively, the "Members").
(b) The Company has the limited liability company power and authority
to execute, deliver and perform this Agreement. The execution,
delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby have been duly authorized and
approved by the Company's Manager and the Company's Members. This
Agreement has been duly executed and delivered by, and constitutes
the legal, valid and binding obligation of each of the Sellers,
enforceable against each of the Sellers in accordance with its
terms, subject to the effect of bankruptcy, insolvency,
reorganization, arrangement, moratorium and other similar laws now
or hereafter in effect, as well as limitations imposed by general
principles of equity upon the specific enforceability of any of
3.
<PAGE>
the remedies, covenants or other provisions and the availability
of injunctive relief or other equitable remedies.
(c) The execution and delivery of this Agreement, the consummation of
the transactions contemplated hereby and the performance of this
Agreement will not, except as set forth in the Disclosure Schedule
to the Asset Agreement, (i) conflict with or result in any breach
of any trust agreement, certificate of organization or operating
agreement of the Company, (ii) except for approval of the
transactions contemplated hereby by the Office of the Attorney
General of the Commonwealth of Massachusetts, Public Charities
Division, require any consent, approval, authorization or permit
of, or filing with or notification to, any governmental or
regulatory authority or any third party, or (iii) result in a
breach of or default (or give rise to any right of termination,
cancellation or acceleration) under any law, rule or regulation or
any judgment, decree, order, governmental permit (other than
permits set forth in the Disclosure Schedule to the Asset
Agreement which are not transferable), license or order or any of
the terms, conditions or provisions of any mortgage, indenture or
note or any material license, agreement or other instrument or
obligation to which the Company is a party or by which the Company
or its assets and properties are bound.
(d) Each Member has all necessary corporate power and authority and
has taken all action necessary to enter into this Agreement, to
consummate the transactions contemplated hereby and to perform its
obligations hereunder and no other proceedings on the part of such
Member is necessary to authorize this Agreement or to consummate
the transactions contemplated hereby. Each Member is a
corporation duly authorized to conduct business and is in good
standing under the laws of the Commonwealth of Massachusetts.
Section 5. Representations and Warranties of Ligand. Ligand
represents and warrants to Sellers, as of the date hereof, as follows:
(a) Ligand is a corporation duly organized, validly existing, and in
good standing under the laws of the State of Delaware. Ligand is
duly authorized to conduct business and is in good standing under
the laws of each jurisdiction where such qualification is required
except for any jurisdiction where failure to so qualify would not
have a material adverse effect upon Ligand. Ligand has full power
and authority, and holds all permits and authorizations necessary,
to carry on the business in which it is engaged and to own and use
the properties owned and used by it except where the failure to
have such power and authority or to hold such license, permit or
authorization would not have a material adverse effect on Ligand.
(b) Ligand has all necessary corporate power and authority and has
taken all action necessary to enter into this Agreement, to
consummate the transactions contemplated hereby and to perform its
obligations hereunder and no other proceedings on the part of
4.
<PAGE>
Ligand are necessary to authorize this Agreement or to consummate
the transactions contemplated hereby. This Agreement has been
duly executed and delivered by Ligand and constitutes the legal,
valid and binding obligation of Ligand enforceable against Ligand
in accordance with its terms, subject to the effect of bankruptcy,
insolvency, reorganization, arrangement, moratorium and other
similar laws now or hereafter in effect, as well as limitations
imposed by general principles of equity upon the specific
enforceability of any of the remedies, covenants or other
provisions and the availability of injunctive relief or other
equitable remedies.
Section 6. Representations and Warranties of Seragen. Seragen
represents and warrants to Sellers, as of the date hereof, as follows:
<PAGE>
(a) Seragen is a corporation duly organized, validly existing, and in
good standing under the laws of the State of Delaware. Seragen is
duly authorized to conduct business and is in good standing under
the laws of each jurisdiction where such qualification is required
except for any jurisdiction where failure to so qualify would not
have a material adverse effect on Seragen. Seragen has full power
and authority, and holds all permits and authorizations necessary,
to carry on the business in which it is engaged and to own and use
the properties owned and used by it except where the failure to
have such power and authority or to hold such license, permit or
authorization would not have a material adverse effect on Seragen.
(b) Seragen has all necessary corporate power and authority and has
taken all action necessary to enter into this Agreement, to
consummate the transactions contemplated hereby and to perform its
obligations hereunder and no other proceedings on the part of
Seragen are necessary to authorize this Agreement or to consummate
the transactions contemplated hereby. This Agreement has been
duly executed and delivered by Seragen and constitutes the legal,
valid and binding obligation of Seragen enforceable against
Seragen in accordance with its terms, subject to the effect of
bankruptcy, insolvency, reorganization, arrangement, moratorium
and other similar laws now or hereafter in effect, as well as
limitations imposed by general principles of equity upon the
specific enforceability of any of the remedies, covenants or other
provisions and the availability of injunctive relief or other
equitable remedies.
Section 7. Termination. This Agreement shall remain in effect until
the termination of the Option with respect to both Ligand and Seragen pursuant
to Section 2 hereof, unless (a) the Merger Agreement or the Asset Agreement is
earlier terminated or (b) this Agreement is earlier terminated by written
consent of each of the parties hereto.
Section 8. Construction of Certain Terms and Phrases. Unless the
context of this Agreement otherwise requires, (a) words of any gender include
each other gender; (b) words using the singular or plural number also include
the plural or singular number, respectively; (c) the terms "hereof," "herein,"
"hereby" and derivative or similar words refer to this entire Agreement; (d)
the terms "Article" or "Section" refer to the specified Article or Section of
5.
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this Agreement; (e) the term "or" has, except where otherwise indicated, the
inclusive meaning represented by the phrase "and/or"; and (f) the term
"including" means "including without limitation." Whenever this Agreement
refers to a number of days, such number shall refer to calendar days unless
Business Days are specified. All accounting terms used herein and not
expressly defined herein shall have the meanings given to them under GAAP.
Section 9. Notices. All notices, requests and other communications
hereunder must be in writing and will be deemed to have been duly given only
if delivered personally against written receipt or by facsimile transmission
with answer back confirmation or mailed (postage prepaid by certified or
registered mail, return receipt requested) or by overnight courier to the
parties at the following addresses or facsimile numbers:
IF TO THE COMPANY, TO:
<PAGE>
Marathon Biopharmaceuticals, LLC
97 South Street
Hopkinton, MA 01748
Facsimile No.: (508) 497-0777
Attention: President
WITH COPIES TO:
Mintz Levin Cohn Ferris Glovsky
and Popeo PC
One Financial Center
Boston, MA 02111
Facsimile No.: (617) 542-2241
Attention: Thomas J. Kelly, Esq.
Dionne & Gass
73 Tremont Street
Boston, MA 02108
Facsimile No.: (617) 723-4151
Attention: Richard Dionne, Esq.
520 Commonwealth Avenue Real Estate Corp.
(See below)
IF TO THE MEMBERS, TO:
520 Commonwealth Avenue Real Estate Corp.
881 Commonwealth Avenue
Boston, MA 02215
Facsimile No.: (617) 353-5492
Attention: Kenneth G. Condon, President
6.
<PAGE>
IF TO LIGAND, TO:
Ligand Pharmaceuticals Incorporated
10275 Science Center Drive
San Diego, CA 92121
Facsimile No.: (619) 550-7506
Attention: William L. Respess, Esq.
WITH COPIES TO:
Brobeck, Phleger & Harrison LLP
550 West "C" Street, Suite 1300
San Diego, CA 92101
Facsimile No.: (619) 234-1966
Attn: Faye H. Russell, Esq.
<PAGE>
IF TO SERAGEN, TO:
Seragen, Inc.
97 South Street
Hopkinton, MA 01748
Facsimile No.: (508) 435-2331
Attention: Reed R. Prior.
WITH COPIES TO:
Covington & Burling
1201 Pennsylvania Avenue, N.W.
Washington, D.C. 20004
Facsimile No.: (202) 662-6291
Attn: Edward Britton, Esq.
All such notices, requests and other communications will (i) if delivered
personally to the address as provided in this Section, be deemed given upon
delivery, (ii) if delivered by facsimile transmission to the facsimile number
as provided in this Section, be deemed given upon receipt, and (iii) if
delivered by mail in the manner described above to the address as provided in
this Section, be deemed given upon receipt (in each case regardless of
whether such notice, request or other communication is received by any other
Person to whom a copy of such notice, request or other communication is to be
delivered pursuant to this Section). Any party from time to time may change
its address, facsimile number or other information for the purpose of notices
to that party by giving notice specifying such change to the other parties
hereto.
Section 10. Waiver. Any term or condition of this Agreement may be
waived at any time by the party that is entitled to the benefit thereof, but
no such waiver shall be effective unless set forth in a written instrument
duly executed by or on behalf of the party waiving such term or condition. No
waiver by any party hereto of any term or condition of this Agreement, in any
7.
<PAGE>
one or more instances, shall be deemed to be or construed as a waiver of the
same or any other term or condition of this Agreement on any future occasion.
All remedies, either under this Agreement or by law or otherwise afforded,
will be cumulative and not alternative.
Section 11. Amendment. This Agreement may be amended, supplemented or
modified only by a written instrument duly executed by or on behalf of each
party hereto.
Section 12. No Third Party Beneficiary. The terms and provisions of
this Agreement are intended solely for the benefit of each party hereto and
their respective successors or permitted assigns, and it is not the intention
of the parties to confer third-party beneficiary rights upon any other person
or entity.
Section 13. Assignment. Neither this Agreement nor any right, interest
or obligation hereunder may be assigned by any party hereto without the prior
written consent of the other parties hereto and any attempt to do so will be
void.
Section 14. Headings. The headings used in this Agreement have been
inserted for convenience of reference only and do not define or limit the
provisions hereof.
Section 15. Severability. If any provision of this Agreement is held
to be illegal, invalid or unenforceable under any present or future law, and
if the rights or obligations of any party hereto under this Agreement will not
be materially and adversely affected thereby, (a) such provision will be fully
severable, (b) this Agreement will be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part hereof,
(c) the remaining provisions of this Agreement will remain in full force and
effect and will not be affected by the illegal, invalid or unenforceable
provision or by its severance herefrom and (d) in lieu of such illegal,
invalid or unenforceable provision, there will be added automatically as a
part of this Agreement a legal, valid and enforceable provision as similar in
terms to such illegal, invalid or unenforceable provision as may be possible
and mutually acceptable to the parties herein.
Section 16. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of Massachusetts
applicable to contracts executed and performed in such State, without giving
effect to conflicts of laws principles.
Section 17. Consent to Jurisdiction and Forum Selection. The parties
hereto agree that all actions or proceedings arising in connection with this
Agreement shall be initiated and tried exclusively in the State and Federal
courts located in the Commonwealth of Massachusetts. The aforementioned
choice of venue is intended by the parties to be mandatory and not permissive
in nature, thereby precluding the possibility of litigation between the
parties with respect to or arising out of this Agreement in any jurisdiction
other than that specified in this Section. Each party hereby waives any right
it may have to assert the doctrine of forum non conveniens or similar doctrine
or to object to venue with respect to any proceeding brought in accordance
with this paragraph, and stipulates that the State and Federal courts located
in the Commonwealth of Massachusetts shall have in personam jurisdiction and
venue over each of them for the purposes of litigating any dispute,
controversy or proceeding arising out of or related to this Agreement. Each
party hereby authorizes and accepts service of process sufficient for personal
jurisdiction in any action against it as contemplated by this Section by
registered or certified mail, return receipt requested, postage prepaid, to
8.
<PAGE>
its address for the giving of notices as set forth in this Agreement, or in
the manner set forth in Section of this Agreement for the giving of notice.
Any final judgment rendered against a party in any action or proceeding shall
be conclusive as to the subject of such final judgment and may be enforced in
other jurisdictions in any manner provided by law.
Section 18. Counterparts. This Agreement may be executed in any number
of counterparts and by facsimile, each of which will be deemed an original,
but all of which together will constitute one and the same instrument.
[SIGNATURE PAGES TO FOLLOW]
9.
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the
parties hereto as of the date first above written.
SERAGEN, INC.,
a Delaware corporation
By: /s/ Reed R. Prior
---------------------
Name: Reed R. Prior
Title: Chief Executive Officer
LIGAND PHARMACEUTICALS INCORPORATED,
a Delaware corporation
By: /s/ David E. Robinson
---------------------
Name: David E. Robinson
Title: President and CEO
MARATHON BIOPHARMACEUTICALS, LLC,
a Massachusetts limited liability company
By: /s/ Kenneth G. Condon
---------------------
Name: Kenneth G. Condon
520 COMMONWEALTH AVENUE REAL ESTATE CORP., a Massachusetts corporation
By: /s/ Kenneth G. Condon
---------------------
Name: Kenneth G. Condon
[SIGNATURE PAGE 1 OF 2 TO EXTENSION OPTION AGREEMENT]
10.
<PAGE>
660 CORPORATION, a Massachusetts corporation
By: /s/ Kenneth G. Condon
---------------------
Name: Kenneth G. Condon
[SIGNATURE PAGE 2 OF 2 TO EXTENSION OPTION AGREEMENT]
11.
<PAGE>
May 11, 1998
Ligand Pharmaceuticals Incorporated
10275 Science Center Drive
San Diego, California 92121
Eli Lilly and Company
Lilly Corporate Center
Indianapolis, IN 46285
To Whom It May Concern:
This letter agreement will confirm the following matters in connection
with the execution as of the date hereof (i) by Ligand Pharmaceuticals
Incorporated, a Delaware corporation ("Ligand"), Seragen, Inc., a Delaware
corporation ("Seragen"), and Knight Acquisition Corp., a Delaware corporation
and wholly owned subsidiary of Ligand ("Knight Acquisition"), of that certain
Agreement and Plan of Reorganization (the "Reorganization Agreement"), (ii) by
Ligand, Marathon Biopharmaceuticals, LLC, a Massachusetts limited liability
company ("Marathon"), and each of the members of Marathon (the "Members") of
that certain Option and Asset Purchase Agreement, (iii) by Ligand, Marathon,
the Members and Seragen of that certain Extension Option Agreement, and (iv)
by Ligand and Eli Lilly and Company (and, as of the effective time of the
proposed merger of Knight Acquisition and Seragen ("Merger"), Seragen) of that
certain Agreement (the "Lilly Agreement"). Seragen acknowledges that the
execution of this letter agreement is a material inducement to Ligand and
Lilly to enter into the Lilly Agreement and a material inducement to Ligand to
enter into the Reorganization Agreement.
1. (a) (i) Lilly and Seragen are parties to the Sales and
Distribution Agreement (as amended through the date hereof, the "Sales
Agreement") dated as of August 3, 1994, as previously amended by an Amendment
to Sales and Distribution Agreement dated May 28, 1996, and to the Development
Agreement dated as of August 3, 1994 (as amended through the date hereof, the
"Development Agreement"), each of the Sales Agreement and the Development
Agreement having been amended by an Amendment dated December 16, 1994, an
Amendment re: Steering Committee effective June 30, 1995, an Amendment to
Sales and Distribution Agreement and Development Agreement dated April 7,
1997, a certain letter agreement dated June 5, 1997, and this letter
agreement, in each case between Lilly and Seragen (collectively, the Sales
Agreement and the Development Agreement shall be known as the "Seragen
Agreements").
(ii) Lilly and Ligand are parties to that certain
Option and Wholesale Purchase Agreement dated November 25, 1997 (the
"Wholesale Purchase Agreement").
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<PAGE>
(b) Seragen hereby consents, pursuant to Section 14.7 of the
Sales Agreement and Section 10.7 of the Development Agreement, to the
assignment of the Seragen Agreements by Lilly to Ligand, in the following
circumstances:
(i) in the event the closing ("Closing") of the proposed
merger of Seragen with and into Knight Acquisition under the Reorganization
Agreement occurs prior to receipt of all authorizations by the appropriate
governmental entity or entities necessary for commercial sale of the Product
(including exports) in a jurisdiction, including, without limitation, approval
of labeling, price, reimbursement and manufacturing ("Regulatory Approval");
or
(ii) in the event (A) Regulatory Approval is received
prior to the Closing and (B) Ligand is in compliance with Section 5.9 of the
Reorganization Agreement through the date of Regulatory Approval.
In the event of assignment under Section 1(b)(ii) above, Seragen shall,
within two (2) business days of receipt of Regulatory Approval, notify Ligand
and Lilly in the event that Ligand is not in compliance with Section 5.9 of
the Reorganization Agreement. Ligand shall be deemed to be in compliance with
Section 5.9 of the Reorganization Agreement if Seragen fails to so notify
Ligand and Lilly.
Seragen hereby agrees that the Seragen Agreements are amended as they
relate to the milestone payment upon U.S. regulatory approval as provided in
Section 5 of the Lilly Agreements, which amendment shall be effective as to
Lilly and Seragen as of the date of this letter agreement. Ligand and Lilly
represent and warrant to Seragen that the definitions of the terms "Closing"
and "Sales Agreement" in the Lilly Agreement conform to the definitions of
such terms herein and that "Product" is defined in the Lilly Agreement to mean
the finished, salable pharmaceutical form of DAB389IL-2.
3. In the event of assignment under Section 1(b)(ii) above, effective
upon such assignment,
(a) Seragen, on behalf of itself and its affiliates, hereby
releases Lilly and its affiliates and their respective directors, officers,
employees and agents from any and all liabilities and obligations of any
nature whatsoever under or pursuant to the Seragen Agreements to the extent
such liabilities and obligations arise from and after the effective date of
such assignment (inclusive of such date), including, without limitation,
product liability claims arising from the sale or use of the Product after the
effective date of assignment, regardless of the theory under which such claims
are brought.
(b) Ligand, agrees to assume and fully and faithfully perform each
and every obligation of Lilly under the Seragen Agreements from and after the
effective date of such assignment (inclusive of such date), including, without
limitation, product liability claims arising from the sale or use of the
Product after the effective date of assignment, regardless of the theory under
which such claims are brought.
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<PAGE>
(c) Seragen, on behalf of itself and its affiliates, hereby
releases Lilly and Ligand, their respective affiliates and directors,
officers, employees and agents from any and all liabilities and obligations of
any nature whatsoever to the extent such liabilities and obligations arise
from the execution and delivery by Lilly and/or Ligand of the Wholesale
Purchase Agreement, which Wholesale Purchase Agreement terminates upon the
assignment under Section 1(b)(ii) above .
4. In the event of assignment under Section 1(b)(i) above, effective
upon such assignment, Seragen, on behalf of itself and its affiliates, hereby
releases Lilly and Ligand, their respective affiliates and officers,
directors, employees and agents from any and all liabilities and/or
obligations of any nature whatsoever Lilly has or may have under the Seragen
Agreements other than obligations to Ligand (and Seragen in the event the
Closing occurs) set forth in the Lilly Agreement; and from any other claims,
demands, causes of action, damages or liabilities or costs, known or unknown,
suspected or unsuspected, in law or equity, that Seragen or any of its
affiliates, predecessors or successors and assigns ever had, now has or
hereafter can, shall or may have relating in any way to any conduct prior to
the date hereof, including, without limitation, claims related in any way to
the Seragen Agreements.
5. This letter agreement may be executed in one or more counterparts,
each of which shall be an original and all of which shall constitute together
the same document. Each party agrees to execute, acknowledge, and deliver
such further instruments, and to do all such other acts, as may be necessary
or appropriate to carry out
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
the purposes and intent of this letter agreement. The parties hereto have
duly executed this letter agreement as of the date first written above.
ELI LILLY AND COMPANY
By: /s/ Sydney Taurel
--------------------
Title: President and Chief Operating Officer
LIGAND PHARMACEUTICALS INCORPORATED
By: /s/ David E. Robinson
---------------------
David E. Robinson
President and Chief Executive Officer
SERAGEN, INC.
By: /s/ Reed R. Prior
---------------------
Reed R. Prior
Chairman of the Board and Chief Executive
Officer
[SIGNATURE PAGE TO LETTER AGREEMENT]
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