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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
Targeted Genetics Corporation
-------------------------------------------
(Name of Issuer)
Common Stock
-------------------------------------------
(Title of Class of Securities)
87612M 10 8
-------------------------------------------
(CUSIP Number of Class of Securities)
H. Stewart Parker
1100 Olive Way, Suite 100
Seattle, WA 98101
(206) 623-7612
-------------------------------------------
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
June 19, 1996
-------------------------------------------
(Date of Event Which Requires Filing
of This Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box. / /
Check the following box if a fee is being paid with this statement. /X/
(A fee is not required only if the reporting person: (1) has a previous
statement on file reporting beneficial ownership of more than five percent of
the class of securities described in Item 1; and (2) has filed no amendment
subsequent thereto reporting beneficial ownership of less than five percent of
such class. See Rule 13d-7.)
Exhibit Index appears on page 7
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SCHEDULE 13D
PAGE 2 OF 7 PAGES
CUSIP NO. 87612M 10 8
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Martin P. Sutter ###-##-####
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / /
(b) /X/
3 SEC USE ONLY
4 SOURCE OF FUNDS*
OO
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(E) / /
6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States
SOLE VOTING POWER
7
1,132,728 Shares
NUMBER OF
SHARES SHARED VOTING POWER
BENEFICIALLY 8
OWNED BY 440,520 Shares
EACH
REPORTING SOLE DISPOSITIVE POWER
PERSON 9
WITH 1,132,728 Shares
SHARED DISPOSITIVE POWER
10
440,520 Shares
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
1,573,248 Shares**
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES* / /
12
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
8.1%**
TYPE OF REPORTING PERSON*
14
IN
*SEE INSTRUCTIONS BEFORE FILLING OUT!
**See Item 5
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ITEM 1. SECURITY AND ISSUER.
This Schedule 13D relates to the Common Stock of Targeted Genetics
Corporation, a Washington corporation ("Targeted Genetics"). The principal
executive offices are located at 1100 Olive Way, Suite 100, Seattle, Washington
98101.
ITEM 2. IDENTITY AND BACKGROUND.
This Schedule 13D relates to the following person:
Name: Martin P. Sutter
Business Address: The Woodlands/Essex Venture Partners
2170 Buckthorne Place, Suite 170
The Woodlands, Texas 77380
Principal Occupation: General Partner, The Woodlands/Essex Management
Partners, L.P.; Managing General Partner, The
Woodlands Venture Partners, L.P. (same addresses as
above)
Citizenship: United States
During the last five years, Martin P. Sutter has not been convicted in
a criminal proceeding and has not been a party to any civil proceeding relating
to federal or state securities laws which resulted in any judgment, decree or
order enjoining violation of, or prohibiting or mandating activities subject to,
federal and state securities laws, or finding any violation with respect to such
laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
See Item 4.
ITEM 4. PURPOSE OF TRANSACTION.
The shares of Common Stock of Targeted Genetics attributable to Martin
P. Sutter will be issued pursuant to the terms of the Agreement and Plan of
Merger, dated April 16, 1996 (the "Merger Agreement"), among Targeted Genetics,
TGC Acquisition Corporation (the "Subsidiary") and RGene Therapeutics, Inc.
("RGene"). The Merger Agreement provides for the merger of the Subsidiary with
and into RGene (the "Merger") and for the conversion of all shares of capital
stock of RGene into the right to receive shares of Common Stock of Targeted
Genetics. The Merger was consummated on June 19, 1996.
Pursuant to the terms of the Merger Agreement, Martin P. Sutter and
Austin M. Long, III will be appointed to the Targeted Genetics Board of
Directors at the next regularly scheduled Board meeting. Martin P. Sutter has no
other current plans or
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proposals that relate to or would result in any of the actions or occurrences
described in Item 4 of Schedule 13D.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
Martin P. Sutter may be deemed to be the beneficial owner of an
aggregate of 1,573,248 shares of Common Stock of Targeted Genetics (the
"Shares"), representing approximately 8.1% of the outstanding shares of Common
Stock of Targeted Genetics. All of such 1,573,248 shares are issuable pursuant
to the terms of the Merger Agreement. The aggregate number represents 440,520
Shares issuable to Aronex Pharmaceuticals, Inc. ("Aronex"), 367,452 Shares
issuable to The Woodlands Venture Fund, L.P. and 765,276 Shares issuable to The
Woodlands/Essex Venture Partners III, L.P. Mr. Sutter is Chairman of the Board
of Aronex. In addition, he is (i) a General Partner of The Woodlands/Essex
Management Partners, L.P., which is the General Partner of The Woodlands/Essex
Venture Partners III, L.P., and (ii) the Managing General Partner of The
Woodlands Venture Partners, L.P., which is the General Partner of The Woodlands
Venture Fund, L.P. Although for purposes of the Securities Exchange Act
of 1934, as amended, Mr. Sutter is deemed to be the beneficial owner of
the Shares, Mr. Sutter expressly disclaims that he is, in fact, the beneficial
owner of the Shares.
Each of the entities which directly holds the Shares is entitled to
receive any dividends with respect to, and any proceeds from the sale of, the
Shares held by such entity.
With respect to the 440,520 Shares issuable to Aronex, Mr. Sutter
does not have sole voting control, or sole power to dispose of such Shares.
However, as Chairman of the Board of Directors he may be deemed to share voting
control, and the power to dispose of such Shares, with Aronex. Aronex is a
Delaware corporation which develops proprietary pharmaceuticals for the
treatment of cancer and life-threatening infections. Its principal business
address is 3400 Research Forest Drive, The Woodlands, Texas 77381. During the
last five years, Aronex has not been convicted in a criminal proceeding, and
has not been a party to any civil proceeding relating to federal or state
securities laws which resulted in any judgment, decree or order enjoining
violation of, or prohibiting or mandating activities subject to, federal and
state securities laws, or finding any violation with respect to such laws.
With respect to the 367,452 Shares issuable to The Woodlands Venture
Fund, L.P., and the 765,276 Shares issuable to The Woodlands/Essex Venture
Partners III, L.P., Mr. Sutter possesses sole voting control and sole power
to dispose of such Shares.
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ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO SECURITIES OF THE ISSUER.
None
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ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
The following exhibit is filed herewith:
2.1 Agreement and Plan of Merger, dated April 16, 1996, among
Targeted Genetics Corporation, TGC Acquisition Corporation and
RGene Therapeutics, Inc. (incorporated herein by reference
to Appendix A of Targeted Genetics' Definitive Proxy Statement
mailed to the Shareholders of Targeted Genetics in connection
with the Special Meeting of Shareholders held on June 19,
1996, and filed with the Securities and Exchange Commission
on May 29, 1992)
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SIGNATURE
After reasonable inquiry and to the best knowledge and belief of the
undersigned, the undersigned certifies that the information set forth in this
statement is true, complete and correct.
Dated: July 1, 1996
/s/ Martin P. Sutter
-------------------------
Martin P. Sutter
-7-
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EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
- -------- -----------
2.1 Agreement and Plan of Merger, dated as of April 16, 1996,
among Targeted Genetics Corporation, TGC Acquisition
Corporation and RGene Therapeutics, Inc. (incorporated herein
by reference to Appendix A of Targeted Genetics' Definitive
Proxy Statement mailed to the Shareholders of Targeted
Genetics in connection with the Special Meeting of
Shareholders held on June 19, 1996, and filed with the
Securities and Exchange Commission on May 29, 1992)
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EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
AMONG
TARGETED GENETICS CORPORATION,
TGC ACQUISITION CORPORATION
AND
RGENE THERAPEUTICS, INC.
DATED AS OF APRIL 16, 1996
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CONTENTS
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ARTICLE I -- THE MERGER............................................................... A-1
1.1 The Merger................................................................ A-1
1.2 The Closing............................................................... A-1
1.3 Effective Date and Time................................................... A-1
1.4 Certificate of Incorporation of the Surviving Corporation................. A-2
1.5 Bylaws of the Surviving Corporation....................................... A-2
1.6 Directors and Officers of the Surviving Corporation....................... A-2
1.7 Conversion of Shares...................................................... A-2
1.8 Dissenting Shares......................................................... A-2
1.9 Exchange of Certificates.................................................. A-3
1.10 No Fractional Shares...................................................... A-3
1.11 No Further Transfers...................................................... A-3
1.12 Merger Consideration...................................................... A-3
ARTICLE II -- REPRESENTATIONS AND WARRANTIES OF THE COMPANY........................... A-5
2.1 Organization.............................................................. A-5
2.2 Enforceability............................................................ A-5
2.3 Capitalization............................................................ A-5
2.4 Subsidiaries and Affiliates............................................... A-6
2.5 No Approvals; No Conflicts................................................ A-6
2.6 Financial Statements...................................................... A-6
2.7 Absence of Certain Changes or Events...................................... A-7
2.8 Taxes..................................................................... A-9
2.9 Property.................................................................. A-9
2.10 Contracts................................................................. A-10
2.11 Claims and Legal Proceedings.............................................. A-10
2.12 Labor and Employment Matters.............................................. A-10
2.13 Employee Benefit Plans.................................................... A-11
2.14 Patents, Trademarks, etc.................................................. A-12
2.15 Corporate Books and Records............................................... A-14
2.16 Licenses, Permits, Authorizations, etc.................................... A-14
2.17 Compliance With Laws...................................................... A-14
2.18 Insurance................................................................. A-14
2.19 Brokers or Finders........................................................ A-15
2.20 Absence of Questionable Payments.......................................... A-15
2.21 Bank Accounts............................................................. A-15
2.22 Insider Interests......................................................... A-15
2.23 Full Disclosure........................................................... A-15
2.24 Exemption from HSR Act.................................................... A-16
ARTICLE III -- REPRESENTATIONS AND WARRANTIES OF TARGETED
AND ACQUISITION...................................................... A-16
3.1 Organization.............................................................. A-16
3.2 Enforceability............................................................ A-16
3.3 Targeted Common Stock..................................................... A-16
3.4 No Approvals; No Conflicts................................................ A-16
3.5 Capitalization............................................................ A-17
3.6 SEC Documents............................................................. A-17
3.7 Exemption from HSR Act.................................................... A-17
3.8 Subsidiaries and Affiliates............................................... A-18
3.9 Absence of Certain Changes or Events...................................... A-18
</TABLE>
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<TABLE>
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3.10 Taxes..................................................................... A-19
3.11 Property.................................................................. A-20
3.12 Contracts................................................................. A-20
3.13 Claims and Legal Proceedings.............................................. A-21
3.14 Labor and Employment Matters.............................................. A-21
3.15 Employee Benefit Plans.................................................... A-21
3.16 Patents, Trademarks, etc.................................................. A-22
3.17 Licenses, Permits, Authorizations, etc.................................... A-24
3.18 Compliance With Laws...................................................... A-24
3.19 Insurance................................................................. A-24
3.20 Brokers or Finders........................................................ A-24
3.21 Absence of Questionable Payments.......................................... A-24
3.22 Full Disclosure........................................................... A-25
ARTICLE IV -- COVENANTS............................................................... A-25
4.1 Conduct of Business by the Company Pending the Merger..................... A-25
4.2 Conduct of Business by Targeted Pending the Merger........................ A-26
4.3 Access to Information; Confidentiality.................................... A-26
4.4 No Alternative Transactions............................................... A-27
4.5 Notification of Certain Matters........................................... A-27
4.6 Further Action; Reasonable Best Efforts................................... A-27
4.7 Publicity................................................................. A-27
4.8 Registration Statement.................................................... A-28
4.9 Board of Directors........................................................ A-28
Consulting Agreements; Scientific Advisory Board; Clinical Advisory
4.10 Board..................................................................... A-28
4.11 Severance Agreements...................................................... A-28
4.12 Conversion of Outstanding Bridge Loan..................................... A-29
4.13 Development of Technology................................................. A-29
4.14 Survival of Indemnification............................................... A-29
4.15 Company Stockholders' Meeting; Targeted Shareholders' Meeting............. A-29
4.16 Private Placement Memorandum.............................................. A-30
4.17 Lock Up Agreements........................................................ A-30
4.18 Investor Questionnaire.................................................... A-30
ARTICLE V -- CONDITIONS PRECEDENT TO OBLIGATIONS OF ACQUISITION
AND TARGETED.......................................................... A-30
5.1 Accuracy of Representations and Warranties................................ A-30
5.2 Performance of Agreements................................................. A-30
5.3 Opinions of Counsel for the Company....................................... A-30
5.4 Company Stockholder Approval.............................................. A-31
5.5 Targeted Shareholder Approval............................................. A-31
5.6 Resignations.............................................................. A-31
5.7 Termination of Agreements................................................. A-31
5.8 Compliance Certificate.................................................... A-31
5.9 Approvals and Consents.................................................... A-31
5.10 Proceedings and Documents; Secretary's Certificate........................ A-31
5.11 Compliance With Laws...................................................... A-31
5.12 Legal Proceedings......................................................... A-32
5.13 Tax-Free Reorganization................................................... A-32
5.14 Delivery of Audited Financial Statements.................................. A-32
5.15 Exercise or Cancellation of Options and Warrants.......................... A-32
5.16 Consulting Agreements; Advisory Boards.................................... A-32
</TABLE>
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<TABLE>
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5.17 Bridge Loans.............................................................. A-32
5.18 University of Tennessee License Agreement................................. A-32
ARTICLE VI -- CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY...................... A-32
6.1 Accuracy of Representations and Warranties................................ A-33
6.2 Performance of Agreements................................................. A-33
6.3 Opinion of Counsel........................................................ A-33
6.4 Compliance Certificate.................................................... A-33
6.5 Legal Proceedings......................................................... A-33
6.6 Approvals and Consents.................................................... A-33
6.7 Compliance With Laws...................................................... A-33
6.8 Tax-Free Reorganization................................................... A-33
6.9 Targeted Shareholder Approval............................................. A-33
6.10 Proceedings and Documents; Secretary's Certificate........................ A-34
ARTICLE VII -- TERMINATION, AMENDMENT AND WAIVER...................................... A-34
7.1 Termination............................................................... A-34
7.2 Effect of Termination..................................................... A-34
7.3 Amendment................................................................. A-34
7.4 Waiver.................................................................... A-35
ARTICLE VIII -- SURVIVAL AND INDEMNIFICATION.......................................... A-35
8.1 Survival.................................................................. A-35
8.2 Indemnification........................................................... A-35
8.3 Threshold and Limitations................................................. A-35
8.4 Procedure for Indemnification............................................. A-36
8.5 Escrow.................................................................... A-37
8.5.1 Escrowed Shares.................................................... A-37
8.5.2 Pledge............................................................. A-37
8.5.3 Release of Escrowed Shares......................................... A-37
8.5.4 Claims Procedure................................................... A-38
8.5.5 Voting............................................................. A-38
8.5.6 Merger or Recapitalization......................................... A-38
8.5.7 Taxation of Dividends.............................................. A-39
8.5.8 Disposition of Escrowed Shares..................................... A-39
8.6 Remedies.................................................................. A-39
ARTICLE IX -- GENERAL................................................................. A-39
9.1 Expenses.................................................................. A-39
9.2 Notices................................................................... A-39
9.3 Severability.............................................................. A-40
9.4 Entire Agreement.......................................................... A-40
9.5 Assignment................................................................ A-40
9.6 Parties in Interest....................................................... A-41
9.7 Headings.................................................................. A-41
9.8 Counterparts.............................................................. A-41
9.9 Governing Law............................................................. A-41
9.10 Knowledge................................................................. A-41
</TABLE>
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<TABLE>
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EXHIBITS
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1.4 -- Certificate of Incorporation of the Surviving Corporation
4.10 -- Form of Consulting and Scientific Advisory Board Agreement
4.18 -- Investor Questionnaire
5.3 -- Form of Opinion of Counsel for the Company
5.7 -- Agreements to Be Terminated
6.3 -- Form of Opinion of Counsel for Targeted and Acquisition
</TABLE>
iv
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of April 16, 1996, by and among
TARGETED GENETICS CORPORATION, a Washington corporation ("Targeted"), TGC
ACQUISITION CORPORATION, a Delaware corporation and wholly owned subsidiary of
Targeted ("Acquisition"), and RGENE THERAPEUTICS, INC., a Delaware corporation
(the "Company").
RECITALS
A. The Company, Targeted and Acquisition believe it advisable and in the
best interests of their respective shareholders and stockholders to effect a
merger of the Company and Acquisition pursuant to this Agreement (the "Merger").
B. The Board of Directors of the Company has approved the Merger as
required by applicable law.
C. The Board of Directors of Targeted and the Board of Directors and the
sole shareholder of Acquisition have approved the Merger as required by
applicable law.
D. For federal income tax purposes, the parties hereto intend to treat the
Merger as a reorganization under Section 368(a) of the Internal Revenue Code of
1986, as amended (the "Code").
AGREEMENT
In consideration of the terms hereof, the parties hereto agree as follows:
ARTICLE I -- THE MERGER
1.1 THE MERGER
Upon the terms and subject to the conditions hereof, (a) at the Effective
Time (as defined in Section 1.3 hereof) the separate existence of Acquisition
shall cease and Acquisition shall be merged with and into the Company (the
Company is sometimes referred to herein as the "Surviving Corporation") and (b)
from and after the Effective Time, the Merger shall have all the effects of a
merger under the laws of the state of Delaware and other applicable law.
1.2 THE CLOSING
The closing of the Merger pursuant to this Agreement (the "Closing") shall
take place on the earliest practicable business day after the conditions to the
Closing of the Merger set forth in Articles V and VI hereof are satisfied or
waived (the "Closing Date") at 10:00 a.m. local time at the offices of Perkins
Coie, 1201 Third Avenue, 46th Floor, Seattle, Washington, or such other time or
location as Targeted and the Company shall agree. At the Closing, each of the
parties hereto shall deliver all such documents, instruments, certificates and
other items as may be required under this Agreement or otherwise.
1.3 EFFECTIVE DATE AND TIME
On the Closing Date and subject to the terms and conditions hereof, a
certificate of merger (the "Certificate of Merger") complying with the
applicable provisions of the Delaware General Corporation Law ("Delaware Law"),
in such form and executed in such manner as required by Delaware Law, shall be
delivered for filing to the Secretary of State of the State of Delaware (the
"Delaware Secretary of State"). The Merger shall become effective on the date
(the "Effective Date") and at the time (the "Effective Time") of filing of the
Certificate of Merger or at such other time as may be specified in the
Certificate of Merger as filed. If the Delaware Secretary of State requires any
changes in the Certificate of Merger as a condition to its filing or to issuing
its certificate to the effect that the Merger is effective, Targeted,
Acquisition and the Company shall execute any necessary revisions incorporating
such changes; provided, however, that such changes are not inconsistent with and
do not result in any substantial change in the terms of this Agreement.
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1.4 CERTIFICATE OF INCORPORATION OF THE SURVIVING CORPORATION
At the Effective Time, the Certificate of Incorporation of Acquisition
shall be in the form attached hereto as Exhibit 1.4 and shall be the Certificate
of Incorporation of the Surviving Corporation. Thereafter, the Certificate of
Incorporation of the Surviving Corporation may be amended in accordance its
terms and as provided by law.
1.5 BYLAWS OF THE SURVIVING CORPORATION
At the Effective Time, the Bylaws of Acquisition shall be the Bylaws of the
Surviving Corporation. Thereafter, the Bylaws may be amended or repealed in
accordance with their terms, the Certificate of Incorporation of the Surviving
Corporation and as provided by law.
1.6 DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION
At the Effective Time, the directors and officers of Acquisition shall
become the directors and officers, with equivalent titles, of the Surviving
Corporation.
1.7 CONVERSION OF SHARES
As of the Effective Time, by virtue of the Merger and without any action on
the part of the holders thereof:
(a) All shares of any class of capital stock of the Company held by
the Company as treasury shares shall be canceled.
(b) Each share of Common Stock of the Company, $.001 par value per
share ("Company Common Stock"), and each share of Preferred Stock of the
Company, $.001 par value per share, convertible into Company Common Stock
(the "Preferred Stock," and together with the Company Common Stock, the
"Company Capital Stock") that is issued and outstanding as of the Effective
Time other than the Dissenting Shares (as defined in Section 1.8 hereof),
shall be converted into the right to receive from Targeted the Merger
Consideration (as defined in Section 1.12 hereof) in accordance with the
terms of Section 1.12 hereof. All shares of Company Common Stock and
Preferred Stock, when so converted, shall no longer be outstanding and
shall automatically be canceled and retired and shall cease to exist, and
each holder of a certificate representing any such shares shall cease to
have any rights with respect thereto, except the right to receive the
Merger Consideration payable in respect of such shares upon the surrender
of such certificate. The holders of such shares of Company Common Stock and
Preferred Stock are collectively referred to herein as the "Stockholders"
and individually as a "Stockholder."
(c) Each issued and outstanding share of capital stock of Acquisition
shall be converted into one share of common stock of the Surviving
Corporation.
(d) Each issued and outstanding Option (as defined in Section 2.3(c)
hereof), Warrant (as defined in Section 2.3(c) hereof), performance share
agreement or other right to purchase or subscribe for any capital stock or
other securities of the Company, including, but not limited to any shares
of Company Common Stock, not exercised in writing on or before the second
business day before the Effective Date shall be canceled to the extent the
Company has the power or ability to cancel such Option, Warrant or other
right. To the extent that the Company does not have such power or ability,
the Company shall use its commercially reasonable best efforts to have such
instruments so canceled.
1.8 DISSENTING SHARES
Shares of Company Common Stock or Preferred Stock held by any Stockholder
entitled to and seeking relief as a dissenting shareholder under Delaware Law
("Dissenting Shares") shall not be converted into the right to receive the
Merger Consideration but shall be converted in such consideration as may be due
with respect to such shares pursuant to applicable provisions of Delaware Law,
unless and until the right of such holder to receive the fair cash value for
such Dissenting Shares terminates in accordance with Delaware Law. If such right
is terminated otherwise than by the purchase of such shares by the Company, then
such shares shall cease to be Dissenting Shares and shall be converted into and
represent the right to receive the Merger Consideration.
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1.9 EXCHANGE OF CERTIFICATES
As soon as practicable after the Effective Date, Targeted shall make
available, and each Stockholder will be entitled to receive, upon surrender to
Targeted of one or more certificates representing Company Common Stock or
Preferred Stock for cancellation, and delivery to Targeted of (i) an executed
Lock Up Agreement (as defined in Section 4.17 hereof) and (ii) a properly
completed and executed investor questionnaire in the form of Exhibit 4.18
hereto, certificates representing the number of shares of Targeted Common Stock
that such Stockholder is entitled to receive at the Closing pursuant to Section
1.9 hereof. The shares of Targeted Common Stock that each Stockholder shall be
entitled to receive pursuant to the Merger shall be deemed to have been issued
at the Effective Time, the date the First Milestone (as defined in Section 1.12
hereof) is achieved, or the date the Second Milestone (as defined in Section
1.12 hereof) is achieved, as the case may be. No interest shall accrue on the
Merger Consideration. If the Merger Consideration (or any portion thereof) is to
be delivered to any person other than the person in whose name the certificate
or certificates representing shares of Company Common Stock or Preferred Stock
surrendered in exchange therefor is registered, it shall be a condition to such
exchange that the person requesting such exchange shall pay to Targeted any
transfer or other taxes required by reason of the payment of the Merger
Consideration to a person other than the registered holder of the certificate or
certificates so surrendered, or shall establish to the satisfaction of Targeted
that such tax has been paid or is not applicable. Notwithstanding the foregoing,
neither Targeted nor any other party hereto shall be liable to a holder of
shares of Company Common Stock or Preferred Stock for any Merger Consideration
delivered to a public official pursuant to, and in accordance with the mandatory
terms of, applicable abandoned property, escheat and similar laws.
1.10 NO FRACTIONAL SHARES
No certificates or scrip representing fractional shares of Targeted Common
Stock shall be issued pursuant to the Merger, and no dividend, stock split or
other distribution with respect to Targeted Common Stock shall relate to any
such fractional interest, and any such fractional interest shall not entitle the
owner thereof to vote or to any rights of a security holder. In lieu of each
such fractional share, Targeted shall pay to the holder thereof, as soon as
practicable after the Effective Date or the date Additional Consideration (as
defined in Section 1.12 hereof) shall become issuable, an amount in cash equal
to such fraction multiplied by the closing price of Targeted Common Stock on the
Nasdaq National Market on the trading day immediately preceding the Effective
Date or the date Additional Consideration (as defined in Section 1.12 hereof)
shall become issuable.
1.11 NO FURTHER TRANSFERS
After the Effective Time, there shall be no transfers of any shares of
Company Common Stock on the stock transfer books of the Surviving Corporation.
If, after the Effective Time, certificates formerly representing shares of
Company Common Stock or Preferred Stock are presented to the Surviving
Corporation, they shall be canceled and exchanged in accordance with this
Article I.
1.12 MERGER CONSIDERATION
The merger consideration (the "Merger Consideration") shall consist of and
be payable as follows:
(a) With respect to each share of Preferred Stock (other than
Dissenting Shares), a preference (the "Preference") equal to that number of
shares of Common Stock of Targeted, $.01 par value per share ("Targeted
Common Stock") determined by dividing (i) Seven Hundred Twenty-Seven
Thousand Two Hundred Seventy-Three (727,273) by (ii) the number of shares
of Preferred Stock outstanding as of the Effective Time, shall be payable
with respect to each such share. The Preference shall be issuable at the
Closing.
(b) With respect to each share of Company Common Stock and Preferred
Stock (other than Dissenting Shares), that number of shares of Targeted
Common Stock (the "Common Equivalent Closing Consideration") determined by
dividing (i) Two Million Nine Hundred Nine Thousand Ninety-One (2,909,091),
by (ii) the number of shares of Company Capital Stock outstanding as of the
Effective Time shall be payable with respect to each such share; provided,
however, that an aggregate of Three Hundred Sixty-Three
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Thousand Six Hundred Thirty-Six (363,636) shares of the Common Equivalent
Closing Consideration shall be held by, and pledged by the Stockholders on
a pro rata basis to, Targeted pursuant to Section 8.5 hereof. The Common
Equivalent Closing Consideration shall be issuable at the Closing.
(c) With respect to each share of Company Common Stock and Preferred
Stock (other than Dissenting Shares), additional consideration (the
"Additional Consideration") shall be issued in accordance with this Section
1.12(c):
(i) Additional Consideration shall be issued upon the achievement
of the First Milestone as set forth below. The "First Milestone" shall
mean, as it pertains to the United States, the enrollment of at least
one patient in a Phase II clinical trial for the Company's E1A product
and, as it pertains to Europe, the enrollment of at least one patient in
a clinical trial for such product meeting substantially the same
standards as are established for Phase II clinical trials in the United
States. "Europe" shall mean any member country of the European Economic
Union. Additional Consideration in the amount of up to Three Million
Dollars ($3,000,000) of Targeted Common Stock shall be issuable as
follows if the First Milestone is achieved in the following areas on or
before the following dates:
<TABLE>
<CAPTION>
AREA DATE TARGETED COMMON STOCK
------------------------------------------------------------------------------------
<S> <C> <C>
------------------------------------------------------------------------------------
United States only December 31, 1997 $2,000,000
------------------------------------------------------------------------------------
Europe only December 31, 1997 $ 0
------------------------------------------------------------------------------------
United States and Europe December 31, 1997 $3,000,000
------------------------------------------------------------------------------------
United States only December 31, 1998 $1,000,000
------------------------------------------------------------------------------------
Europe only December 31, 1998 $1,000,000(1)
------------------------------------------------------------------------------------
United States and Europe December 31, 1998 $2,000,000(2)
------------------------------------------------------------------------------------
</TABLE>
(1) To be issued only if the First Milestone is achieved in the United
States after December 31, 1997. If the First Milestone is achieved
in the United States prior to January 1, 1998, or if it is not
achieved at all in the United States, then no Targeted Common Stock
will be issued for achieving the First Milestone in Europe during
1998.
(2) The maximum amount of Targeted Common Stock issuable in the event
that the First Milestone is not achieved in the United States prior
to January 1, 1998 is $2,000,000.
As promptly as practicable, but in no event later than twenty (20)
days, after achievement of the First Milestone, each Stockholder shall
be issued for each share of Company Capital Stock held as of the
Effective Time that number of shares of Targeted Common Stock determined
by dividing (A) the quotient of the dollar amount set forth above by the
First Milestone Average Trading Price by (B) the number of shares of
Company Capital Stock outstanding as of the Effective Time. The "First
Milestone Average Trading Price" shall equal the average of the closing
sale prices for Targeted Common Stock as reported on the Nasdaq National
Market for the thirty (30) trading days ending on the last trading day
immediately preceding the date the First Milestone shall have been
achieved.
(ii) As promptly as practicable, but in no event later than twenty
(20) days, after achievement of the Second Milestone, provided that such
milestone is achieved on or before December 31, 1997, each Stockholder
shall be issued for each share of Company Capital Stock held as of the
Effective Time that number of shares of Targeted Common Stock determined
by dividing (A) the quotient of Two Million Dollars ($2,000,000) divided
by the Second Milestone Average Trading Price by (B) the number of
shares of Company Capital Stock outstanding as of the Effective Time.
The "Second Milestone Average Trading Price" shall equal the average of
the closing sale prices for Targeted Common Stock as reported on the
Nasdaq National Market for the thirty (30) trading days ending on the
last trading day immediately preceding the date the Second Milestone
shall have been achieved. The "Second Milestone" shall mean the
execution of a definitive collaboration agreement with a third party,
which
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agreement shall provide for (x) the development of genetic vaccines
using the Company's technology and (y) minimum revenue to Targeted of at
least Two Million Dollars ($2,000,000) during the first year following
execution of the agreement, of which a minimum of One Million Five
Hundred Thousand Dollars ($1,500,000) shall not be subject to any prior
commitment under any license or research agreement.
ARTICLE II -- REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
To induce Targeted and Acquisition to enter into and perform this Agreement
and except as is otherwise set forth in the Disclosure Memorandum of the
Company, delivered to Targeted on the date hereof (the "Company Disclosure
Memorandum"), which shall specifically identify or cross-reference the paragraph
or paragraphs of this Article II to which the exceptions therein relate, and
which shall constitute in its entirety a representation and warranty under this
Article II, the Company represents and warrants to Targeted and Acquisition as
of the date of this Agreement and as of the Closing as follows in this Article
II.
2.1 ORGANIZATION
The Company is a corporation duly organized, validly existing and in good
standing under the laws of the state of Delaware. The Company has all requisite
corporate power and authority to own, operate and lease its properties and
assets, to carry on its business as now conducted and as proposed to be
conducted, to enter into and perform its obligations under this Agreement, and
to consummate the transactions contemplated hereby. The Company is duly
qualified and licensed as a foreign corporation to do business and is in good
standing in each jurisdiction listed on Schedule 2.1 to the Company Disclosure
Memorandum, which jurisdictions constitute all jurisdictions where the character
of the Company's properties occupied, owned or held under lease or the nature of
the business conducted by the Company makes such qualification necessary, except
(a) as set forth on Schedule 2.1 to the Company Disclosure Memorandum or (b)
where such failure to qualify or be licensed would not result in a Material
Adverse Effect (as defined in Section 2.7 hereof).
2.2 ENFORCEABILITY
All corporate action on the part of the Company and its officers, directors
and Stockholders necessary for the authorization, execution, delivery and
performance of this Agreement, the consummation of the Merger and the
performance of all of the Company's obligations under this Agreement has been
taken or will be taken as of or prior to the Effective Time. This Agreement has
been duly executed and delivered by the Company, and this Agreement is a legal,
valid and binding obligation of the Company, enforceable against the Company in
accordance with its terms.
2.3 CAPITALIZATION
(a) The authorized capital stock of the Company consists of 15,000,000
shares of Company Common Stock, par value $.001 per share, and 10,000,000 shares
of Preferred Stock, par value $.001 per share.
(b) The issued and outstanding capital stock of the Company consists solely
of 3,394,176 shares of Company Common Stock and 3,571,430 shares of Preferred
Stock (the "Outstanding Shares"), which are and as of the Closing will be held
of record by the Stockholders as set forth on Schedule 2.3(b) to the Company
Disclosure Memorandum. The Outstanding Shares are, and immediately prior to the
Closing will be, duly authorized and validly issued, fully paid and
nonassessable, and issued in compliance with all applicable federal, state and
foreign securities laws. True and correct copies of the stock records of the
Company, showing all issuances and transfers of shares of capital stock of the
Company since inception, have been provided to Targeted.
(c) Except for the (i) issued and outstanding options to purchase up to
608,000 shares of Company Common Stock listed on Schedule 2.3(c) to the Company
Disclosure Memorandum, all of which options were duly and validly granted, and
the rights of the University of Texas M.D. Anderson Cancer Center to acquire
shares of
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Company Common Stock, as listed on Schedule 2.3(c) to the Company Disclosure
Memorandum (collectively, the "Options"), (ii) issued and outstanding warrants
to purchase up to 1,207,143 shares of Company Common Stock listed on Schedule
2.3(c)(ii) to the Company Disclosure Memorandum, all of which warrants were duly
and validly granted (the "Warrants"), and (iii) the bridge loans listed on
Schedule 2.3(c)(ii) to the Company Disclosure Memorandum, which are to be
converted into shares of Company Common Stock as described in Section 5.18
hereof, there are no outstanding rights of first refusal, preemptive rights,
options, warrants, conversion rights or other agreements, either directly or
indirectly, for the purchase or acquisition from the Company of any shares of
the Company's capital stock. Such Schedule 2.3(c) sets forth the name of each
holder of an Option or a Warrant and the exercise prices, vesting schedules and
termination dates thereof. The Company will take all necessary action, to the
extent the Company has the power or ability to do so, to ensure that all Options
and Warrants that have not been exercised to acquire Company Common Stock on or
before the second business day before the Closing shall have been canceled prior
to the Closing without liability to the Company.
(d) Except as set forth in Schedule 2.3 to the Company Disclosure
Memorandum, (i) no Stockholder or any affiliate thereof is indebted to the
Company, (ii) the Company is not indebted to any Stockholder or any affiliate
thereof, and (iii) the Company is not under any contractual or other obligation
to register any of its presently outstanding securities or any of its securities
which may hereafter be issued.
2.4 SUBSIDIARIES AND AFFILIATES
Except as set forth on Schedule 2.4 to the Company Disclosure Memorandum,
the Company does not own, directly or indirectly, any ownership, equity, profits
or voting interest in, or otherwise control, any corporation, partnership, joint
venture or other entity, and has no agreement or commitment to purchase any such
interest.
2.5 NO APPROVALS; NO CONFLICTS
Except as set forth on Schedule 2.5 to the Company Disclosure Memorandum,
the execution, delivery and performance of its obligations pursuant to this
Agreement by the Company and the consummation of the transactions contemplated
hereby will not (a) constitute a violation (with or without the giving of notice
or lapse of time, or both) of (i) any judgment, decree, or order of any court or
other governmental authority or (ii) in any material respect, any law, rule or
regulation applicable to the Company, (b) require any consent, approval or
authorization of, or declaration, filing or registration with, any person,
corporation, partnership, joint venture, association, organization, other entity
or governmental or regulatory authority (a "Person"), except compliance with
applicable securities laws, the approval of the Stockholders and the filing of
all documents necessary to consummate the Merger with the Delaware Secretary of
State (the consent of all such Persons to be duly obtained by the Company at or
prior to the Closing), (c) result in a default (with or without the giving of
notice or lapse of time, or both) under, acceleration or termination of, or the
creation in any party of the right to accelerate, terminate, modify or cancel,
any material agreement, lease, note or other restriction, encumbrance,
obligation or liability to which the Company is a party or by which it is bound
or to which any assets of the Company are subject, (d) result in the creation of
any lien or encumbrance upon the assets of the Company or upon any Outstanding
Shares or other securities of the Company, (e) conflict with or result in a
breach of or constitute a default under any provision of the Certificate of
Incorporation or Bylaws of the Company, or (f) invalidate or adversely affect
any material permit, license, authorization or status used in the conduct of the
business of the Company.
2.6 FINANCIAL STATEMENTS
The Company has delivered to Targeted (a) balance sheets, statements of
income and expenses, statements of cash flow, and statements of stockholders'
equity of the Company as of or for the fiscal year ended December 31, 1994, as
audited by and together with the report thereon of Arthur Andersen & Co.,
independent certified public accountants, (b) an unaudited balance sheet and
statement of income and expenses of the Company as of or for the fiscal year
ended December 31, 1995, and (c) a balance sheet and statement of income and
expenses of the Company as of and for the two (2) month period ended February
29, 1996. All of the foregoing financial statements, including any notes
thereto, are herein referred to as the "Financial Statements." The unaudited
balance sheet of the Company as of February 29, 1996 is herein referred to as
the "Company
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Balance Sheet." The Financial Statements have been prepared in conformity with
generally accepted accounting principles in the United States ("GAAP"),
consistently applied throughout the periods covered thereby, and fairly present
the financial position, results of operations and changes in financial position
of the Company as of the dates and for the periods indicated, subject, in the
case of unaudited statements, to normal recurring period-end audit adjustments
which will not exceed Twenty-Five Thousand Dollars ($25,000) in the aggregate.
Except as set forth in Schedule 2.6 of the Company Disclosure Memorandum, the
Company has no liabilities or obligations of any type required to be set forth
on a balance sheet, or required to be disclosed in the footnotes to financial
statements, in accordance with GAAP, which are not fully reflected or reserved
against in the Company Balance Sheet or disclosed in the Financial Statements,
except liabilities or obligations incurred since the date of the Company Balance
Sheet in the ordinary course of business and consistent with the Company's
operating budget for 1996. The Company maintains standard systems of accounting
which are adequate for its business. Except as set forth on Schedule 2.6 to the
Company Disclosure Memorandum, the Company has not agreed to be a guarantor,
indemnitor, surety or other obligor of any indebtedness of any other Person.
2.7 ABSENCE OF CERTAIN CHANGES OR EVENTS
Except as specifically set forth on Schedule 2.7 to the Company Disclosure
Memorandum and except for transactions specifically contemplated in this
Agreement, since December 31, 1995, neither the Company nor any of its officers
or directors in their representative capacities on behalf of the Company has:
(a) taken any action or entered into or agreed to enter into any
material transaction, agreement or commitment other than in the ordinary
course of business;
(b) forgiven or canceled any indebtedness or waived any claims or
rights of material value (including, without limitation, any indebtedness
owing by any Stockholder or any officer, director, employee or affiliate of
the Company);
(c) granted, other than in the ordinary course of business and
consistent with past practice, any increase in the compensation of
directors, officers, employees or consultants (including any such increase
pursuant to any employment agreement or bonus, pension, profit-sharing,
lease payment or other plan or commitment) or any increase in the
compensation payable or to become payable to any director, officer,
employee or consultant;
(d) suffered any Material Adverse Effect. "Material Adverse Effect"
means any change or effect that, when taken together with all other adverse
changes and effects (including, without limitation, such changes and
effects that are within the scope of the representations and warranties
made by a party in this Agreement but which are not individually or in the
aggregate deemed to constitute a Material Adverse Effect), is or is
reasonably likely to be materially adverse to the business, operations,
properties, condition (financial or otherwise), assets or liabilities
(including, without limitation, contingent liabilities) of a party taken as
a whole; provided, however, that the term Material Adverse Effect shall not
include (i) the results of any matter affecting the party's industry in
general, or general economic conditions or (ii) net cash expenditures
consistent with the party's annual operating budget or a monthly cash flow
forecast that has been disclosed to the other party hereto. Notwithstanding
the foregoing, a Material Adverse Effect shall include any termination of
the strategic relationship currently under negotiation with respect to the
development of the E1A product in Europe, or any announcement by the
Company's proposed licensee of revised terms of its proposed license that
are materially adverse to the Company with regard to the proposed license
agreement;
(e) borrowed or agreed to borrow any money, incurred or become subject
to, whether directly or by way of assumption or guarantee or otherwise, any
obligations or liabilities (absolute, accrued, contingent or otherwise) in
excess of Twenty-Five Thousand Dollars ($25,000), except liabilities and
obligations incurred in the ordinary course of business and consistent with
past practice, or increased, or experienced any change in any assumptions
underlying or methods of calculating, any bad debt, contingency or other
reserves;
(f) paid, discharged or satisfied any claims, liabilities or
obligations (absolute, accrued, contingent or otherwise) other than the
payment, discharge or satisfaction in the ordinary course of business and
consistent with past practice of claims, liabilities and obligations
reflected or reserved against in the Company's
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balance sheet as of December 31, 1995 or incurred or which became payable
in the ordinary course of business and consistent with past practice since
December 31, 1995, or prepaid any obligation having a fixed maturity of
more than ninety (90) days from the date such obligation was issued or
incurred;
(g) permitted or allowed any of its material properties or assets
(real, personal or mixed, tangible or intangible) to be subjected to any
mortgage, pledge, lien, security interest, encumbrance, restriction or
charge, except (i) assessments for current taxes not yet due and payable,
(ii) landlord's liens for rental payments not yet due and payable, and
(iii) mechanics', materialmen's, carriers' and other similar statutory
liens securing indebtedness that was incurred in the ordinary course of
business and is not yet due and payable;
(h) sold, transferred or otherwise disposed of any of its material
properties or assets (real, personal or mixed, tangible or intangible);
(i) disposed of or permitted to lapse any rights to the use of any
trademark, trade name, patent or copyright, or disposed of or disclosed to
any Person, other than representatives of Targeted or other persons subject
to confidentiality agreements set forth on Schedule 2.14 to the Company
Disclosure Memorandum, any trade secret, formula, process or know-how not
theretofore a matter of public knowledge;
(j) made any single capital expenditure or commitment in excess of
Twenty-Five Thousand Dollars ($25,000) for additions to property, plant,
equipment or intangible capital assets or made aggregate capital
expenditures in excess of Twenty-Five Thousand Dollars ($25,000) for
additions to property, plant, equipment or intangible capital assets;
(k) made any material change in any method of accounting or accounting
practice or internal control procedure;
(l) issued any capital stock or other securities, or declared, paid or
set aside for payment any dividend or other distribution in respect of its
capital stock, or redeemed, purchased or otherwise acquired, directly or
indirectly, any shares of capital stock or other securities of the Company,
or otherwise permitted the withdrawal by any of the holders of capital
stock of the Company of any cash or other assets (real, personal or mixed,
tangible or intangible), in compensation, indebtedness or otherwise, other
than payments of compensation in the ordinary course of business and
consistent with past practice;
(m) paid, loaned or advanced any material amount to, or sold,
transferred or leased any properties or assets (real, personal or mixed,
tangible or intangible) to, or entered into any agreement or arrangement
with, any Stockholder or any of the Company's officers, directors or
employees or any affiliate of any Stockholder or any of the Company's
officers, directors or employees, except compensation paid to officers and
employees at rates not exceeding the rates of compensation paid during the
fiscal year last ended, and except for compensation increased in the
ordinary course of business and consistent with past practice;
(n) received notice of, or otherwise obtained knowledge of: (i) any
claim, action, suit, arbitration, proceeding or investigation involving,
pending against or threatened against the Company or any employee of the
Company before or by any court or governmental or nongovernmental
department, commission, board, bureau, agency or instrumentality, or any
other Person; (ii) any outstanding or unsatisfied judgments, orders,
decrees or stipulations to which the Company or any employee of the Company
is a party and where such items in subparagraphs (i) and (ii) above relate
directly to the transactions contemplated herein;
(o) entered into or agreed to any sale, assignment, transfer or
license of any patents, trademarks, copyrights, trade secrets or other
intangible assets of the Company or any amendment or change to any existing
license or other agreement relating to intellectual property, other than in
the ordinary course of business; or
(p) agreed, whether in writing or otherwise, to take any action
described in this Section 2.7.
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2.8 TAXES
Except as described on Schedule 2.8 to the Company Disclosure Memorandum,
(a) the Company has duly and timely filed, including valid extensions, with the
appropriate governmental agencies (domestic and foreign) all tax returns,
information returns and reports ("Returns") for all Taxes (as defined below)
required to have been filed with respect to the Company and its business, (b)
the deductions giving rise to net operating loss carryovers showing on the
Returns will be upheld by the applicable taxing authority in the amount so
reported, and (c) except as set forth on Schedule 2.9 to the Company Disclosure
Memorandum, the Company has paid in full or provided for all Taxes that are due
or claimed to be due by any governmental agency (whether or not shown as due on
the Returns). "Taxes" shall mean all taxes, charges, fees, levies or other
assessments, including, but not limited to, income, excise, gross receipts,
property, sales, use, ad valorem, transfer, franchise, profits, license,
withholding, payroll, employment, severance, stamp, occupation, windfall
profits, social security and unemployment or other taxes imposed by the United
States or any agency or instrumentality thereof, any state, county, local or
foreign government, or any agency or instrumentality thereof, and any interest
or fines, and any and all penalties or additions relating to such taxes,
charges, fees, levies or other assessments. Except as described on Schedule 2.8
to the Company Disclosure Memorandum, (i) the reserves and provisions for Taxes
reflected in the Financial Statements are adequate, in all material respects,
for the payment of Taxes not yet due and payable or not yet assessed for the
period covered by such Financial Statements; (ii) no unresolved claim for
assessment or collection of Taxes has been asserted or threatened against the
Company, and no audit or investigation by any governmental authority is under
way with respect to Taxes, interest or other governmental charges; (iii) the
Company has not filed or entered into any election, consent or extension
agreement or any waiver that extends any applicable statute of limitations; and
(iv) the Company has not filed any consent to the application of Section
341(f)(2) of the Code to any assets held, acquired or to be acquired by it. The
Company has furnished Targeted with complete and correct copies of all Returns.
There are no tax liens on any property or assets of the Company other than liens
for current taxes not yet payable. To the Company's knowledge, no claim has been
made by an authority in any jurisdiction where the Company does not file Returns
that the Company is or may be subject to taxation by that jurisdiction. The
Company has not made any payments, is not obligated to make any payments, and is
not a party to any agreement that could obligate it to make any payments that
will not be deductible under Section 280G of the Code.
2.9 PROPERTY
(a) The Company owns no real property and leases no real property other
than as set forth in Schedule 2.9(a) to the Company Disclosure Memorandum, which
contains a complete and accurate list, in all material respects, of all real
property of the Company which is leased, rented or used by the Company (the
"Company Real Property"). The Company has delivered to Targeted true and
complete copies of all written leases, subleases, rental agreements, contracts
of sale, tenancies or licenses relating to the Company Real Property and written
summaries of the terms of any oral leases, subleases, rental agreements,
contracts of sale, tenancies or licenses relating to the Company Real Property.
(b) The Company's leasehold interest in each parcel of the Company Real
Property is free and clear of all material liens, mortgages, pledges, deeds of
trust, security interests, charges, encumbrances and other adverse claims or
interests of any kind. Each material lease of the Company Real Property, or any
part thereof, is valid, binding and enforceable in accordance with its terms
against the parties thereto and any other Person with an interest in such
Company Real Property, the Company has performed in all material respects all
obligations imposed upon it thereunder, and neither the Company nor any other
party thereto is in default thereunder nor is there any event which with notice
or lapse of time, or both, would constitute a default thereunder. Except as set
forth on Schedule 2.5 to the Company Disclosure Memorandum, no consent is
required from any Person under any lease or other agreement or instrument
relating to the Company Real Property in connection with the consummation of the
transactions contemplated by this Agreement and the Company has not received
notice that any party to any such lease or other agreement or instrument intends
to cancel, terminate or refuse to renew the same or to exercise or decline to
exercise any option or other right thereunder. The Company has not granted any
lease, sublease, tenancy or license of, or entered into any rental agreement or
contract of sale with respect to, any portion of the Company Real Property.
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(c) Except as described on Schedule 2.9(c) to the Company Disclosure
Memorandum, the offices, laboratories and laboratory equipment owned by, or used
under the control and supervision of, the Company are of quality consistent with
industry standards, are in good operating condition and repair, normal wear and
tear excepted, are adequate for the uses to which they are being put, and comply
in all material respects with applicable safety, health, environmental, Food and
Drug Administration ("FDA"), and other laws, regulations, and guidelines.
(d) Except as set forth on Schedule 2.9(d) to the Company Disclosure
Memorandum, and except for (i) assessments for current taxes not yet due and
payable, (ii) lessor's liens for rental payments incurred in the ordinary course
of business and not yet due and payable, and (iii) mechanics', materialmen's,
carriers' and other similar statutory liens securing indebtedness that was
incurred in the ordinary course of business and is not yet due and payable, the
Company's personal property is free and clear of all material liens.
(e) Except as set forth on Schedule 2.9(e) to the Company Disclosure
Memorandum, the Company has not granted any lease, sublease, tenancy or license
of any portion of its personal property.
(f) Neither the whole nor any portion of the leaseholds or any other assets
or property of the Company is subject to any currently outstanding governmental
decree or order to be sold or is being condemned, expropriated or otherwise
taken by any public authority with or without payment of compensation therefor,
nor, to the Company's Knowledge (as defined in Section 9.10 hereof), has any
such condemnation, expropriation or taking been proposed.
2.10 CONTRACTS
Schedule 2.10 to the Company Disclosure Memorandum contains a complete and
accurate list (other than the Company Intellectual Property Licenses (as defined
in Section 2.14 hereof)) of all material contracts, agreements and
understandings, oral or written, to which the Company is currently a party or by
which the Company is currently bound, including, without limitation, security
agreements, license agreements, joint venture agreements, credit agreements,
instruments relating to the borrowing of money, research contracts and
scientific collaboration or cooperation agreements. Except as set forth on
Schedule 2.10 to the Company Disclosure Memorandum, all contracts set forth in
such Schedule are valid, binding and enforceable in accordance with their terms
against each party thereto, are in full force and effect, the Company has
performed in all material respects all obligations imposed upon it thereunder,
and neither the Company nor, to the best of the Company's Knowledge, any other
party thereto is in default thereunder, nor has any event occurred which with
notice or lapse of time, or both, would constitute a default by the Company or,
to the best of the Company's Knowledge, any other party thereunder. To the
extent requested by Targeted, true and complete copies of each such written
contract (or written summaries of the terms of any such oral contract) have been
heretofore delivered to Targeted. The Company has not received notice, nor does
the Company otherwise have Knowledge, that any party to any such contract
intends to cancel, terminate or refuse to renew such contract or to exercise or
decline to exercise any option or right thereunder.
2.11 CLAIMS AND LEGAL PROCEEDINGS
Except as set forth on Schedules 2.11 and 2.14 to the Company Disclosure
Memorandum, there are no claims, actions, suits, arbitrations, investigations or
proceedings pending against or involving or, to the Company's best knowledge,
threatened against the Company before or by any court or governmental or
nongovernmental department, commission, board, bureau, agency or
instrumentality, or any other Person. There are no outstanding or unsatisfied
judgments, orders, decrees or stipulations to which the Company is a party which
involve the transactions contemplated herein. Schedule 2.11 to the Company
Disclosure Memorandum sets forth a description of any material disputes which
have been settled or resolved by litigation or arbitration since inception.
2.12 LABOR AND EMPLOYMENT MATTERS
(a) Except as set forth on Schedule 2.12 to the Company Disclosure
Memorandum, the Company is in compliance, in all material respects, with all
Federal, state or other applicable laws, domestic or foreign,
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respecting employment and employment practices, terms and conditions of
employment and wages and hours, and has not, and is not, engaged in any unfair
labor practice;
(b) No unfair labor practice complaint against the Company is pending
before the National Labor Relations Board;
(c) There is no labor strike, dispute, slowdown or stoppage actually
pending or threatened against or involving the Company; and
(d) Except as provided on Schedule 2.12 of the Company Disclosure
Memorandum, no claim in respect of the Company's obligations arising in
connection with the employment of any employee is pending or, to the knowledge
of the Company, threatened, against the Company.
2.13 EMPLOYEE BENEFIT PLANS
(a) Employee Benefit Plans. Schedule 2.13(a) to the Company Disclosure
Memorandum sets forth an accurate and complete list of each employee benefit
plan, policy, program, contract or material arrangement, whether formal or
informal, written or unwritten and whether legally binding or not, covering or
benefiting any officer, employee, former employee, director or former director
of the Company or any dependents or beneficiaries of any such person, or with
respect to which the Company has (or could have) any obligation or liability,
including, but not limited to, each "employee benefit plan," within the meaning
of Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), and specifically including, but not limited to, all
retirement, pension, profit sharing, stock bonus, savings, bonus, cafeteria,
medical, dental, vision, life insurance, disability, accident insurance, medical
expense reimbursement, dependent care expense reimbursement, or tuition
reimbursement plan, policy or program, each sick pay, holiday and vacation
policy or program, each executive or deferred compensation plan or contract,
each stock purchase, stock option or stock appreciation rights plan or
arrangement, each severance agreement or plan and each employment, consulting or
personal services contract with any officer, director or employee (or any person
who prior to entering into such contract was an officer, director or employee)
(such items are hereinafter referred to collectively as "Employee Benefit Plans"
and each individually as an "Employee Benefit Plan") of the Company.
(b) Documents Provided. The Company has delivered to Targeted true,
correct and complete copies of all of its Employee Benefit Plans (including all
amendments thereto), along with, to the extent applicable to the particular
Employee Benefit Plan, the following information: (i) copies of the annual
reports (Form 5500 series) filed with respect to the Employee Benefit Plan for
the last three (3) years; (ii) copies of the most recent summary plan
descriptions, summary annual reports, summaries of material modifications and
all material employee manuals or communications filed or distributed with
respect to the Employee Benefit Plan; (iii) copies of any insurance contracts or
trust agreements through which the Employee Benefit Plan is funded; (iv) copies
of all contracts relating to the Employee Benefit Plan, including, but not
limited to, service provider agreements, insurance contracts, investment
management agreements, subscription and prescription agreements and record
keeping agreements; (v) a copy of the most recent Internal Revenue Service
("IRS") determination letter issued with respect to the Employee Benefit Plan;
and (vi) notice of any material adverse change occurring with respect to the
Employee Benefit Plan since the date of the most recently completed and filed
annual report.
(c) Compliance With Laws. Except as provided in Schedule 2.13 to the
Company Disclosure Memorandum, with respect to each Employee Benefit Plan of the
Company:
(i) the Company is, and at all times has been, in compliance in all
material respects with, and such Employee Benefit Plan is, and at all times
has been, maintained and operated in all material respects in compliance
with, the terms of such Employee Benefit Plan and all applicable laws,
rules and regulations, including, but not limited to, ERISA and the Code;
(ii) neither the Company nor any other fiduciary of such Employee Benefit
Plan has engaged in any transaction or acted or failed to act in a manner
that violates the fiduciary requirements of Section 404 of ERISA with
respect to such Employee Benefit Plan; and (iii) no event has occurred or,
to the best knowledge of the Company, is threatened or about to occur which
would constitute a prohibited transaction under Section 406 of ERISA or
under Section 4975 of the Code.
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(d) Pension Plans. Neither the Company nor any ERISA Affiliate (as defined
below) has ever maintained or contributed to, or had an obligation to contribute
to, (i) any multiemployer plan within the meaning of Section 3(37) or Section
4001(a)(3) of ERISA or (ii) any employee benefit plan, fund program, contract or
arrangement that is subject to Section 412 of the Code, Section 302 of ERISA or
Title IV of ERISA or (iii) any plan that is intended to be qualified under
Section 401(a) of the Code. "ERISA Affiliate," as used in Article II hereof,
means any entity, whether or not incorporated, that is part of a group that
includes the Company and that is treated as a single employer under Section
414(b), (c), (m), or (o) of the Code with the Company.
(e) Welfare Plans. Each Employee Benefit Plan of the Company that
constitutes a "group health plan," within the meaning of Section 4980B(g)(2) of
the Code or Section 607(1) of ERISA, has been operated at all times in all
material respects in compliance with the requirements of Section 4980B of the
Code and Part 6 of Title I of ERISA. No Employee Benefit Plan of the Company
that is an "employee welfare benefit plan," within the meaning of Section 3(1)
of ERISA, provides or has any obligation to provide benefits with respect to
current or former employees of the Company or any other entity beyond their
retirement or other termination of service, including, without limitation,
post-retirement (or post-termination) medical, dental, life insurance, severance
or any other similar benefit, whether provided on an insured or self-insured
basis, other than benefits mandated by applicable law, including, but not
limited to, continuation coverage required to be provided under Section 4980B of
the Code or Part 6 of Subtitle B of Title I of ERISA.
(f) Contributions. All contributions and other payments required to have
been made by the Company (including any pre-tax or post-tax contributions or
payments by employees or their dependents) to any Employee Benefit Plan of the
Company (or to any person pursuant to the terms thereof) have been so made or,
if not yet due, the amount of any such payment or contribution obligation has
been properly reflected in the Financial Statements (except for obligations
accrued in the ordinary course of business after the date of such Financial
Statements).
(g) Other Claims and Investigations. There are no actions, suits or claims
(other than routine claims for benefits) pending or, to the best knowledge of
the Company, threatened with respect to any Employee Benefit Plan of the Company
or against the assets of any such Employee Benefit Plan. None of the Employee
Benefit Plans of the Company is currently under investigation, audit or review,
directly or indirectly, by the IRS or the Department of Labor (the "DOL"), and,
to the best knowledge of the Company, no such action is contemplated or under
consideration by the IRS or DOL.
(h) Other Binding Commitments. The Company has no agreement, arrangement,
commitment or obligation, whether formal or informal, whether written or
unwritten, and whether legally binding or not, to create any plan, policy,
program, contract or arrangement not identified in Schedule 2.13 to the Company
Disclosure Memorandum or to modify or amend any of its existing Employee Benefit
Plans.
(i) ERISA Affiliates. The Company has no liability or potential liability
to participants, beneficiaries or any other person or entity under any employee
benefit plan, policy, program, practice, contract or arrangement currently (or
previously) maintained or contributed to by any ERISA Affiliate.
(j) Payments Resulting From Transactions. Except as set forth in Schedule
2.13 to the Company Disclosure Memorandum, the consummation of any transaction
contemplated by this Agreement will not result in any (i) payment (whether of
severance pay or otherwise) becoming due from the Company to any officer,
employee, former employee or director thereof or to the trustee under any "rabbi
trust" or similar arrangement; (ii) benefit under any Employee Benefit Plan of
the Company being established or becoming accelerated, vested or payable; or
(iii) payment or series of payments by the Company, directly or indirectly, to
any person that would constitute a "parachute payment" within the meaning of
Section 280G of the Code.
2.14 PATENTS, TRADEMARKS, ETC.
Set forth on Schedule 2.14 to the Company Disclosure Memorandum is a true
and complete list of all patents, trademarks, service marks, trade names, brand
names, and registered copyrights, and any applications for any of the foregoing
(collectively, the "Company Intellectual Property") of any kind used now or
within the two (2) year period immediately preceding the date of this Agreement
in the business of the Company. Such
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Schedule 2.14 contains a complete and accurate list of all licenses or
agreements that in any way affect the rights of the Company to any of the
Company Intellectual Property or any trade secret material to the Company (the
"Company Intellectual Property Licenses"). No claim with respect to the Company
Intellectual Property, any trade secret material to the Company, or any Company
Intellectual Property License is currently pending or, to the best knowledge of
the Company, overtly threatened by any Person, nor does the Company know of any
valid grounds for any bona fide claim, except as set forth on such Schedule
2.14, (a) to the effect that any Company operation, Company Intellectual
Property, trade secret material to the Company, or Company Intellectual Property
License infringes or misappropriates any copyright, patent, trademark, service
mark or trade secret; (b) to the effect that any other Person infringes on the
Company Intellectual Property or misappropriates any trade secret material to
the Company; (c) challenging the ownership, validity or effectiveness of any of
the Company Intellectual Property or trade secret material to the Company; or
(d) challenging the Company's license under, or other legally enforceable right
under, any Company Intellectual Property License. The consummation of the
transactions contemplated hereby will not alter or impair the Company's rights
to any of the Company Intellectual Property, any trade secret material to the
Company or under any Company Intellectual Property License. With respect to any
Company Intellectual Property or trade secret material to the Company, the
Company owns or has the right to use such Company Intellectual Property or trade
secret in its business. Except as set forth on such Schedule 2.14 in respect of
the Company Intellectual Property Licenses or otherwise, and except where the
failure to so own or be licensed would not have a Material Adverse Effect upon
the Company, the Company is the sole and exclusive owner or the exclusive
licensee pursuant to the Company Intellectual Property Licenses of the Company
Intellectual Property.
Except as set forth on such Schedule 2.14, each of the Company Intellectual
Property Licenses is valid, binding and enforceable in accordance with its terms
against the parties thereto; the Company has performed all obligations imposed
upon it under each of the Company Intellectual Property Licenses; and neither
the Company nor any other party thereto is in default thereunder, nor, to the
Company's best knowledge, is there any event that with notice or lapse of time,
or both, would constitute a default thereunder. Except as set forth on such
Schedule 2.14, the Company has not received notice that any party to any of the
Company Intellectual Property Licenses intends to cancel, terminate or refuse to
renew the same or to exercise or decline to exercise any option or other right
thereunder. Except as set forth on such Schedule 2.14, no licenses, sublicenses,
covenants or agreements have been granted or entered into by the Company in
respect of any of the Company Intellectual Property or any trade secret material
to the Company except the Company Intellectual Property Licenses. No director,
officer, Stockholder or employee of the Company owns, directly or indirectly, in
whole or in part, any of the Company Intellectual Property or any trade secret
material to the Company. To the Company's best knowledge, none of the Company's
officers, employees, consultants, distributors, agents, representatives or
advisors have entered into any agreement relating to the Company's business
regarding know-how, trade secrets, assignment of rights in inventions, or
prohibition or restriction of competition or solicitation of customers, or any
other similar restrictive agreement or covenant, whether written or oral, with
any Person other than the Company.
Except as set forth on such Schedule 2.14, to the Company's best knowledge,
no Person has asserted any claim of infringement or other interference with
third-party rights with respect to the Company Intellectual Property or any
trade secret material to the Company. Except as set forth on such Schedule 2.14,
(a) during the two (2) year period immediately preceding the date of this
Agreement, the Company has not disclosed other than in the ordinary course
consistent with past practice any proprietary information relating to the
Company Intellectual Property, any trade secret material to the Company or the
Company Intellectual Property Licenses to any person other than to Targeted or
Acquisition; (b) the Company has at all times maintained reasonable procedures
to protect and have enforced all trade secrets of the Company; (c) the Company
has disclosed trade secrets to other Persons solely as required for the conduct
of the Company's business and solely under nondisclosure agreements that are
enforceable by the Company and, upon the Closing, will be enforceable by
Acquisition or Targeted in accordance with their terms; and (d) the Company is
not under any contractual or other obligation to disclose any proprietary
information relating to the Company Intellectual Property, any trade secret
material to the Company or the Company Intellectual Property Licenses except
pursuant to the nondisclosure agreements listed on such Schedule 2.14, nor, to
the best knowledge of the Company, is any other party to the Company
Intellectual Property Licenses under any such obligation to disclose proprietary
information included in or relating to Company Intellectual Property, any trade
secret material to the Company or
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the Company Intellectual Property Licenses to any person or entity, and no event
has taken place, including the execution of this Agreement or any related change
in the Company's business activities, that would give rise to such obligation.
2.15 CORPORATE BOOKS AND RECORDS
The Company has furnished to Targeted or its representatives for their
examination true and complete copies of (a) the Certificate of Incorporation and
Bylaws of the Company as currently in effect, including all amendments thereto,
(b) the minute books of the Company, and (c) the stock transfer books of the
Company. Such minutes reflect all meetings of the Company's Stockholders, Board
of Directors and any committees thereof since the Company's inception, and such
minutes accurately reflect in all material respects the events of and actions
taken at such meetings. Such stock transfer books accurately reflect all
issuances and transfers of shares of capital stock of the Company since its
inception.
2.16 LICENSES, PERMITS, AUTHORIZATIONS, ETC.
Except as identified in Schedules 2.1 and 2.5 to the Company Disclosure
Memorandum and except where the failure to have any of the following would not
result in a Material Adverse Effect, the Company has received all governmental
approvals, authorizations, consents, licenses, orders, registrations and permits
of all agencies, whether federal, state, local or foreign that are currently
required in order for the Company to conduct its business as it is currently
conducted. The Company has not received any notifications of any asserted
present failure by it to have obtained any such governmental approval,
authorization, consent, license, order, registration or permit, or past and
unremedied failure to obtain such items.
2.17 COMPLIANCE WITH LAWS
Except as described on Schedule 2.17 to the Company Disclosure Memorandum
and except where the failure to have any of the following would not result in a
Material Adverse Effect, the Company has at all times complied, and is in
compliance, with all federal, state, local and foreign laws, rules, regulations,
ordinances, decrees and orders applicable to it, to its employees, or to the
Company Real Property and the Company's personal property, including, without
limitation, all such laws, rules, ordinances, decrees and orders relating to
intellectual property protection, antitrust matters, consumer protection,
currency exchange, environmental protection, equal employment opportunity,
health and occupational safety, pension and employee benefit matters, securities
and investor protection matters, labor and employment matters, and
trading-with-the-enemy matters. The Company has not received any notification of
any asserted present or past unremedied failure by the Company to comply with
any of such laws, rules, ordinances, decrees or orders.
2.18 INSURANCE
The Company maintains (a) insurance on all of its property that insures
against loss or damage by fire or other casualty and (b) insurance against
liabilities, claims and risks of a nature and in such amounts as are normal and
customary in its industry for companies of similar size and financial condition.
All insurance policies of the Company are in full force and effect, all premiums
with respect thereto covering all periods up to and including the date this
representation is made have been paid, and no notice of cancellation or
termination has been received with respect to any such policy. Such policies are
sufficient for compliance with all requirements of law currently applicable to
the Company and of all agreements to which the Company is a party, will remain
in full force and effect through the respective expiration dates of such
policies without the payment of additional premiums, and will not in any way be
affected by, or terminate or lapse by reason of, the transactions contemplated
by this Agreement. The Company has not been refused any insurance with respect
to its assets or operations, nor has its coverage been limited, by any insurance
carrier to which it has applied for any such insurance or with which it has
carried insurance.
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2.19 BROKERS OR FINDERS
Except as set forth on Schedule 2.19 to the Company Disclosure Memorandum,
the Company has not incurred, and will not incur, directly or indirectly, as a
result of any action taken by or on behalf of the Company, any liability for
brokerage or finders' fees or agents' commissions or any similar charges in
connection with the Merger, this Agreement or any transaction contemplated
hereby.
2.20 ABSENCE OF QUESTIONABLE PAYMENTS
Neither the Company, nor, to the Company's knowledge, any director,
officer, agent, employee or other Person acting on behalf of the Company, has
used any Company funds for improper or unlawful contributions, payments, gifts
or entertainment, or made any improper or unlawful expenditures relating to
political activity to domestic or foreign government officials or others. The
Company has adequate financial controls to prevent such improper or unlawful
contributions, payments, gifts, entertainment or expenditures. Neither the
Company nor, to the Company's Knowledge, any current director, officer, agent,
employee or other Person acting on behalf of the Company, has accepted or
received any improper or unlawful contributions, payments, gifts or
expenditures. The Company has at all times complied, and is in compliance, in
all material respects with the Foreign Corrupt Practices Act and, to its
Knowledge, in all material respects with all foreign laws and regulations
relating to prevention of corrupt practices.
2.21 BANK ACCOUNTS
Schedule 2.21 to the Company Disclosure Memorandum sets forth the names and
locations of all banks, trust companies, savings and loan associations and other
financial institutions at which the Company maintains safe deposit boxes or
accounts of any nature and the names of all Persons authorized to draw thereon,
make withdrawals therefrom or have access thereto.
2.22 INSIDER INTERESTS
Except as set forth on Schedule 2.22 to the Company Disclosure Memorandum,
no Stockholder or officer or director or other representative of the Company has
any interest (other than as a Stockholder) (a) in any property, real or
personal, tangible or intangible, used in or directly pertaining to the business
of the Company, including, without limitation, inventions, patents, trademarks
or trade names, or (b) in any agreement, contract, arrangement or obligation
relating to the Company, its present or prospective business or its operations.
Except as set forth on Schedule 2.22 to the Company Disclosure Memorandum, there
are no agreements, understandings or proposed transactions between the Company
and any of its officers, directors, holders, affiliates or any affiliate
thereof. The Company and its officers and directors have no interest, either
directly or indirectly, in any entity, including, without limitation, any
corporation, partnership, joint venture, proprietorship, firm, licensee,
business or association (whether as an employee, officer, director, shareholder,
agent, independent contractor, security holder, creditor, consultant or
otherwise) that presently (i) provides any services, produces or sells any
products or product lines, or engages in any activity which is the same, similar
to or competitive with any activity or business in which the Company is now
engaged or proposes to engage; (ii) is a supplier, customer or creditor, or has
an existing contractual relationship with any of the Company's employees (or
persons performing similar functions); or (iii) has any direct or indirect
interest in any asset or property, real or personal, tangible or intangible, of
the Company or any property, real or personal, tangible or intangible, that is
necessary or desirable for the present or anticipated future conduct of the
Company's business.
2.23 FULL DISCLOSURE
No information furnished by the Company to Targeted or its representatives
in this Agreement (including, but not limited to, all information in the Company
Disclosure Memorandum and the other Exhibits hereto) or by the Company to the
Stockholders in connection with their approval of the Merger and execution and
delivery of this Agreement, contains any untrue statement of a material fact or
omits to state a material fact necessary in order to make the statements so made
or information so delivered not misleading.
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2.24 EXEMPTION FROM HSR ACT
The Company is not a "person," nor does it "control," nor is it "controlled
by" or "under common control with" or otherwise part of any "ultimate parent
entity" that has total assets or net sales of One Hundred Million Dollars
($100,000,000) or more (in each case as such terms are defined and amounts
calculated under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, together with the regulations thereunder (collectively, the "HSR
Act")); and, assuming the accuracy of Targeted's representation set forth in
Section 3.7 hereof, the consummation of the transactions contemplated hereby
will not give rise to any requirement on the part of any party to file any
notification or other report pursuant to the HSR Act.
ARTICLE III -- REPRESENTATIONS AND WARRANTIES
OF TARGETED AND ACQUISITION
To induce the Company to enter into and perform this Agreement, Targeted
and Acquisition jointly and severally represent and warrant to the Company, as
of the date of this Agreement and as of the Closing as follows in this Article
III:
3.1 ORGANIZATION
Targeted is a corporation organized, validly existing and in good standing
under the laws of the state of Washington. Acquisition is a corporation duly
organized and validly existing under the laws of the state of Delaware. Each of
Targeted and Acquisition has full corporate power and authority to own, operate
and lease its properties and assets and to carry on its business as now
conducted and as proposed to be conducted, to execute, deliver and perform this
Agreement, and to carry out the transactions contemplated hereby. Targeted is
duly qualified and licensed as a foreign corporation to do business and is in
good standing in each jurisdiction where the character of Targeted's properties
occupied, owned or held under lease or the nature of the business conducted by
Targeted makes such qualification necessary, except where such failure to
qualify or be licensed would not result in a Material Adverse Effect.
3.2 ENFORCEABILITY
All corporate action on the part of Targeted and Acquisition and their
respective officers, directors and shareholders necessary for the authorization,
execution, delivery and performance of this Agreement the consummation of the
Merger and the performance of all of their respective obligations under this
Agreement have been taken or will be taken prior to the Effective Time. This
Agreement has been duly executed and delivered by Targeted, and this Agreement
is a legal, valid and binding obligation of Targeted, enforceable against
Targeted in accordance with its terms. This Agreement has been duly executed and
delivered by Acquisition and this Agreement is a legal, valid and binding
obligation of Acquisition, enforceable against Acquisition in accordance with
its terms.
3.3 TARGETED COMMON STOCK
The Targeted Common Stock to be issued pursuant to this Agreement has been
duly authorized for issuance, and such Targeted Common Stock, when issued and
delivered to the Stockholders in accordance with the terms of this Agreement,
will be validly issued, fully paid and nonassessable.
3.4 NO APPROVALS; NO CONFLICTS
The execution, delivery and performance of this Agreement by Acquisition
and Targeted and the consummation by them of the transactions contemplated
hereby will not (a) constitute a violation (with or without the giving of notice
or lapse of time, or both) of (i) any judgment, decree or order of any court or
other governmental authority or (ii) in any material respect, any law, rule or
regulation applicable to Targeted or Acquisition, (b) require any consent,
approval or authorization of, or declaration, filing or registration with, any
Person, except compliance with applicable securities laws, the approval of
Targeted's shareholders and the filing of all documents necessary to consummate
the Merger with the Delaware Secretary of State (the consent of all
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such Persons to be duly obtained at or prior to the Closing), (c) result in a
default (with or without the giving of notice or lapse of time, or both) under,
acceleration or termination of, or the creation in any party of the right to
accelerate, terminate, modify or cancel, any agreement, lease, note or other
restriction, encumbrance, obligation or liability to which Targeted or
Acquisition is a party or by which either of them is bound or to which any of
their assets are subject, (d) result in the creation of any lien or encumbrance
upon the assets of Targeted or upon any outstanding shares of Targeted Common
Stock or other securities of Targeted, (e) conflict with or result in a breach
of or constitute a default under any provision of the Articles of Incorporation
or Bylaws of Targeted or the Certificate of Incorporation or Bylaws of
Acquisition, or (f) invalidate or adversely affect any material permit, license,
authorization or status used in the conduct of the business of Targeted.
3.5 CAPITALIZATION
The authorized capital stock of Targeted consists of Forty Million
(40,000,000) shares of common stock, $.01 par value per share, of which
12,317,183 shares were issued and outstanding as of December 31, 1995, and Six
Million (6,000,000) shares of preferred stock, $.01 par value per share, none of
which are issued and outstanding. Such issued and outstanding shares of Targeted
Common Stock are duly authorized, validly issued, fully paid and nonassessable
and issued in compliance with all applicable securities laws. The total number
of outstanding options and warrants to purchase Targeted Common Stock, as of
December 31, 1995, were 1,032,417 and 892,614, respectively.
3.6 SEC DOCUMENTS
(a) Targeted has furnished the Company with true and complete copies of its
Annual Report on Form 10-K for the fiscal year ended December 31, 1995, its
Proxy Statement relating to its 1996 Annual Meeting of shareholders on May 2,
1996, its Annual Report to Shareholders for the fiscal year ended December 31,
1995, the prospectus relating to its initial public offering and the prospectus
relating to its public offering of units completed in July 1995 (collectively,
the "SEC Documents"). As of their respective filing dates, (i) each of the SEC
Documents complied in all material respects with the requirements of the
Securities Act, the Securities Exchange Act of 1934, as amended, and the rules
and regulations of the SEC promulgated thereunder, and (ii) none of the SEC
Documents contained any untrue statement of a material fact or omitted to state
a material fact necessary in order to make the statements contained in the SEC
Documents not misleading.
(b) Each of the financial statements (including, in each case, any notes
thereto) contained in the SEC Documents was prepared in conformity with GAAP,
consistently applied throughout the periods covered thereby, and fairly presents
the financial position, results of operations and changes in financial position
of Targeted as of the dates and for the periods indicated, subject, in the case
of unaudited statements, to normal recurring period-end audit adjustments which
will not exceed One Hundred Thousand Dollars ($100,000) in the aggregate. Except
as set forth on Schedule 3.6(b) to the Targeted Disclosure Memorandum, Targeted
has no liabilities or obligations of any type required to be set forth on a
balance sheet, or disclosed in the footnotes thereto, in accordance with GAAP as
of the date of such balance sheet, which are not fully reflected or reserved
against in Targeted's balance sheet dated as of December 31, 1995 or the notes
thereto, except liabilities or obligations incurred since December 31, 1995 in
the ordinary course of business and consistent with Targeted's operating budget
for 1996. Targeted maintains standard systems of accounting which are adequate
for its business. Except as set forth on Schedule 3.6(b) to the Disclosure
Memorandum of Targeted, delivered to the Company on the date hereof (the
"Targeted Disclosure Memorandum"), Targeted has not agreed to be a guarantor,
indemnitor, surety or other obligor of any indebtedness of any other Person.
(c) Except as disclosed in the SEC Documents, Targeted has not been a party
to, nor has there otherwise been, any transaction of a type required to be
reported pursuant to Item 404 of Regulation S-K (Certain Relationships and
Related Transactions).
3.7 EXEMPTION FROM HSR ACT
Targeted is not a "person," nor does it "control," nor is it "controlled
by" or "under common control with" or otherwise part of any "ultimate parent
entity" that has total assets or net sales of One Hundred Million
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Dollars ($100,000,000) or more (in each case as such terms are defined and
amounts calculated under the HSR Act); and, assuming the accuracy of the
Company's representation set forth in Section 2.24 hereof, the consummation of
the transactions contemplated hereby will not give rise to any requirement on
the part of any party to file any notification or other report pursuant to the
HSR Act.
3.8 SUBSIDIARIES AND AFFILIATES
Except for Acquisition, Targeted does not own, directly or indirectly, any
ownership, equity, profits or voting interest in, or otherwise control, any
corporation, partnership, joint venture or other entity, and has no agreement or
commitment to purchase any such interest.
3.9 ABSENCE OF CERTAIN CHANGES OR EVENTS
Except as specifically set forth on Schedule 3.9 to the Targeted Disclosure
Memorandum, or as disclosed in the SEC Documents, and except for transactions
specifically contemplated in this Agreement, since December 31, 1995, neither
Targeted nor any of its officers or directors in their representative capacities
on behalf of Targeted has:
(a) taken any action or entered into or agreed to enter into any
material transaction, agreement or commitment other than in the ordinary
course of business;
(b) forgiven or canceled any indebtedness or waived any claims or
rights of material value (including, without limitation, any indebtedness
owing by any shareholder, officer, director, employee or affiliate of
Targeted);
(c) granted, other than in the ordinary course of business and
consistent with past practice, any increase in the compensation of
directors, officers, employees or consultants (including any such increase
pursuant to any employment agreement or bonus, pension, profit-sharing,
lease payment or other plan or commitment) or any increase in the
compensation payable or to become payable to any director, officer,
employee or consultant;
(d) suffered any Material Adverse Effect;
(e) borrowed or agreed to borrow any money, incurred or become subject
to, whether directly or by way of assumption or guarantee or otherwise, any
obligations or liabilities (absolute, accrued, contingent or otherwise) in
excess of One Hundred Thousand Dollars ($100,000), except liabilities and
obligations incurred in the ordinary course of business and consistent with
past practice, or increased, or experienced any change in any assumptions
underlying or methods of calculating, any bad debt, contingency or other
reserves;
(f) paid, discharged or satisfied any claims, liabilities or
obligations (absolute, accrued, contingent or otherwise) other than the
payment, discharge or satisfaction in the ordinary course of business and
consistent with past practice of claims, liabilities and obligations
reflected or reserved against in the financial statements contained in the
SEC Documents or incurred or which became payable in the ordinary course of
business and consistent with past practice since December 31, 1995, or
prepaid any obligation having a fixed maturity of more than ninety (90)
days from the date such obligation was issued or incurred;
(g) permitted or allowed any of its material property or assets (real,
personal or mixed, tangible or intangible) to be subjected to any mortgage,
pledge, lien, security interest, encumbrance, restriction or charge, except
(i) assessments for current taxes not yet due and payable, (ii) landlord's
liens for rental payments not yet due and payable, and (iii) mechanics',
materialmen's, carriers' and other similar statutory liens securing
indebtedness that was incurred in the ordinary course of business and is
not yet due and payable;
(h) sold, transferred or otherwise disposed of any of its material
properties or assets (real, personal or mixed, tangible or intangible);
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(i) disposed of or permitted to lapse any rights to the use of any
trademark, trade name, patent or copyright, or disposed of or disclosed to
any Person, other than representatives of the Company or other persons
subject to confidentiality agreements with Targeted, any trade secret,
formula, process or know-how not theretofore a matter of public knowledge;
(j) except for capital expenditures reflected in Targeted's 1996
capital expenditure budget (a copy of which has been provided to the
Company), made any single capital expenditure or commitment in excess of
One Hundred Thousand Dollars ($100,000) for additions to property, plant,
equipment or intangible capital assets or made aggregate capital
expenditures in excess of One Hundred Thousand Dollars ($100,000) for
additions to property, plant, equipment or intangible capital assets;
(k) made any material change in any method of accounting or accounting
practice or internal control procedure;
(l) issued any capital stock or other securities, or declared, paid or
set aside for payment any dividend or other distribution in respect of its
capital stock (except for (i) grants of options to purchase Targeted Common
Stock under the 1992 Restated Stock Option Plan or the 1994 Stock Option
Plan for Nonemployee Directors (together, the "Targeted Stock Option
Plans") or (ii) the issuance of Targeted Common Stock upon the exercise of
options granted under the Targeted Stock Option Plans), or redeemed,
purchased or otherwise acquired, directly or indirectly, any shares of
capital stock or other securities of Targeted, or otherwise permitted the
withdrawal by any of the holders of capital stock of Targeted of any cash
or other assets (real, personal or mixed, tangible or intangible), in
compensation, indebtedness or otherwise, other than payments of
compensation in the ordinary course of business and consistent with past
practice;
(m) paid, loaned or advanced any material amount to, or sold,
transferred or leased any properties or assets (real, personal or mixed,
tangible or intangible) to, or entered into any agreement or arrangement
with, any Targeted shareholder or any of Targeted's officers, directors or
employees or any affiliate of any Targeted shareholder or any of Targeted's
officers, directors or employees, except compensation paid to officers and
employees at rates not exceeding the rates of compensation paid during the
fiscal year last ended, and except for compensation increased in the
ordinary course of business and consistent with past practice;
(n) received notice of, or otherwise obtained knowledge of: (i) any
claim, action, suit, arbitration, proceeding or investigation involving,
pending against or threatened against Targeted or any employee of Targeted
before or by any court or governmental or nongovernmental department,
commission, board, bureau, agency or instrumentality, or any other Person;
(ii) any outstanding or unsatisfied judgments, orders, decrees or
stipulations to which Targeted or any employee of Targeted is a party and
where such items in subparagraphs (i) and (ii) above relate directly to the
transactions contemplated herein;
(o) entered into or agreed to any sale, assignment, transfer or
license of any patents, trademarks, copyrights, trade secrets or other
intangible assets of Targeted or any amendment or change to any existing
license or other agreement relating to intellectual property, other than in
the ordinary course of business; or
(p) agreed, whether in writing or otherwise, to take any action
described in this Section 3.9.
3.10 TAXES
Except as described on Schedule 3.10 to the Targeted Disclosure Memorandum,
(a) Targeted has duly and timely filed, including valid extensions, with the
appropriate governmental agencies (domestic and foreign) all Returns for all
Taxes required to have been filed with respect to Targeted and its business, (b)
the deductions giving rise to net operating loss carryovers showing on the
Returns will be upheld by the applicable taxing authority in the amount so
reported, and (c) except as set forth on Schedule 3.10 to the Targeted
Disclosure Memorandum, Targeted has paid in full or provided for all Taxes that
are due or claimed to be due by any governmental agency (whether or not shown as
due on the Returns). Except as described on Schedule 3.10 to the Targeted
Disclosure Memorandum, (i) the reserves and provisions for Taxes reflected in
the financial statements included in the SEC Documents are adequate, in all
material respects, for the payment of Taxes not yet due and payable or not yet
assessed for the period covered by such financial statements; (ii) no unresolved
claim for
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assessment or collection of Taxes has been asserted or threatened against
Targeted, and no audit or investigation by any governmental authority is under
way with respect to Taxes, interest or other governmental charges; (iii)
Targeted has not filed or entered into any election, consent or extension
agreement or any waiver that extends any applicable statute of limitations; and
(iv) Targeted has not filed any consent to the application of Section 341(f)(2)
of the Code to any assets held, acquired or to be acquired by it. There are no
tax liens on any property or assets of Targeted other than liens for current
taxes not yet payable. To Targeted's knowledge, no claim has been made by an
authority in any jurisdiction where Targeted does not file Returns that Targeted
is or may be subject to taxation by that jurisdiction. Targeted has not made any
payments, is not obligated to make any payments, and is not a party to any
agreement that could obligate it to make any payments that will not be
deductible under Section 280G of the Code.
3.11 PROPERTY
(a) Targeted owns no real property and leases no real property other than
as set forth in the SEC Documents, which contain a complete and accurate
description, in all material respects, of all real property of Targeted which is
leased, rented or used by Targeted (the "Targeted Real Property").
(b) Except as set forth on Schedule 3.11(b) of the Targeted Disclosure
Memorandum, Targeted's leasehold interest in each parcel of the Targeted Real
Property is free and clear of all material liens, mortgages, pledges, deeds of
trust, security interests, charges, encumbrances and other adverse claims or
interests of any kind. Each material lease of the Targeted Real Property, or any
part thereof, is valid, binding and enforceable in accordance with its terms
against the parties thereto and any other Person with an interest in such
Targeted Real Property, Targeted has performed in all material respects all
obligations imposed upon it thereunder, and neither Targeted nor any other party
thereto is in default thereunder nor is there any event which with notice or
lapse of time, or both, would constitute a default thereunder. Except as set
forth on Schedule 3.4 to the Targeted Disclosure Memorandum, no consent is
required from any Person under any lease or other agreement or instrument
relating to the Targeted Real Property in connection with the consummation of
the transactions contemplated by this Agreement and Targeted has not received
notice that any party to any such lease or other agreement or instrument intends
to cancel, terminate or refuse to renew the same or to exercise or decline to
exercise any option or other right thereunder. Targeted has not granted any
lease, sublease, tenancy or license of, or entered into any rental agreement or
contract of sale with respect to, any portion of the Targeted Real Property.
(c) Except as described on Schedule 3.11(c) to the Targeted Disclosure
Memorandum, Targeted's offices, laboratories and laboratory equipment are of
quality consistent with industry standards, are in good operating condition and
repair, normal wear and tear excepted, are adequate for the uses to which they
are being put, and comply in all material respects with applicable safety,
health, environmental, Food and Drug Administration ("FDA"), and other laws,
regulations, and guidelines.
(d) Except as set forth on Schedule 3.11(d) to the Targeted Disclosure
Memorandum or as disclosed in the SEC Documents, and except for (i) assessments
for current taxes not yet due and payable, (ii) lessor's liens for rental
payments incurred in the ordinary course of business and not yet due and
payable, and (iii) mechanics', materialmen's, carriers' and other similar
statutory liens securing indebtedness that was incurred in the ordinary course
of business and is not yet due and payable, Targeted's personal property is free
and clear of all material liens.
(e) Targeted has not granted any lease, sublease, tenancy or license of any
portion of its personal property.
(f) Neither the whole nor any portion of the leaseholds or any other assets
or property of Targeted is subject to any currently outstanding governmental
decree or order to be sold or is being condemned, expropriated or otherwise
taken by any public authority with or without payment of compensation therefor,
nor, to Targeted's knowledge, has any such condemnation, expropriation or taking
been proposed.
3.12 CONTRACTS
The SEC Documents contain a complete and accurate list of all material
contracts, agreements and understandings, oral or written, to which Targeted is
currently a party or by which Targeted is currently bound,
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including, without limitation, security agreements, license agreements, joint
venture agreements, credit agreements, instruments relating to the borrowing of
money, research contracts and scientific collaboration or cooperation
agreements. Except as listed in the SEC Documents and except as set forth on
Schedule 3.12 to the Targeted Disclosure Memorandum, all contracts set forth in
the SEC Documents are valid, binding and enforceable in accordance with their
terms against each party thereto, are in full force and effect, Targeted has
performed in all material respects all obligations imposed upon it thereunder,
and neither Targeted nor, to the best of Targeted's Knowledge, any other party
thereto is in default thereunder, nor has any event occurred which with notice
or lapse of time, or both, would constitute a default by Targeted or, to the
best of Targeted's Knowledge, any other party thereunder. To the extent
requested by the Company, true and complete copies of each such written contract
(or written summaries of the terms of any such oral contract) have been
heretofore delivered to the Company. Targeted has not received notice, nor does
Targeted otherwise have Knowledge, that any party to any such contract intends
to cancel, terminate or refuse to renew such contract or to exercise or decline
to exercise any option or right thereunder.
3.13 CLAIMS AND LEGAL PROCEEDINGS
Except as disclosed in the SEC Documents, there are no claims, actions,
suits, arbitrations, investigations or proceedings pending against or involving
or, to Targeted's best knowledge, threatened against Targeted before or by any
court or governmental or nongovernmental department, commission, board, bureau,
agency or instrumentality, or any other Person. There are no outstanding or
unsatisfied judgments, orders, decrees or stipulations to which Targeted is a
party which involve the transactions contemplated herein. Schedule 3.13 to the
Targeted Disclosure Memorandum sets forth a description of any material disputes
which have been settled or resolved by litigation or arbitration within the last
five (5) years.
3.14 LABOR AND EMPLOYMENT MATTERS
(a) Except as set forth on Schedule 3.14 to the Targeted Disclosure
Memorandum, Targeted is in compliance, in all material respects, with all
Federal, state or other applicable laws, domestic or foreign, respecting
employment and employment practices, terms and conditions of employment and
wages and hours, and has not, and is not, engaged in any unfair labor practice;
(b) No unfair labor practice complaint against Targeted is pending before
the National Labor Relations Board;
(c) There is no labor strike, dispute, slowdown or stoppage actually
pending or threatened against or involving Targeted; and
(d) Except as provided on Schedule 3.14 of the Targeted Disclosure
Memorandum, no claim in respect of the Company's obligations arising in
connection with the employment of any employee is pending or, to the knowledge
of Targeted, threatened, against Targeted.
3.15 EMPLOYEE BENEFIT PLANS
(a) Employee Benefit Plans. Schedule 3.15(a) to the Targeted Disclosure
Memorandum sets forth an accurate and complete list of each of Targeted's
Employee Benefits Plans.
(b) Compliance With Laws. Except as provided in Schedule 3.15 to the
Targeted Disclosure Memorandum, with respect to each Employee Benefit Plan of
Targeted:
(i) Targeted is, and at all times has been, in compliance in all
material respects with, and such Employee Benefit Plan is, and at all times
has been, maintained and operated in all material respects in compliance
with, the terms of such Employee Benefit Plan and all applicable laws,
rules and regulations, including, but not limited to, ERISA and the Code;
(ii) neither Targeted nor any other fiduciary of such Employee Benefit Plan
has engaged in any transaction or acted or failed to act in a manner that
violates the fiduciary requirements of Section 404 of ERISA with respect to
such Employee Benefit Plan; and (iii) no event has occurred or, to the best
knowledge of Targeted, is threatened or about to occur which would
constitute a prohibited transaction under Section 406 of ERISA or under
Section 4975 of the Code.
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(c) Pension Plans. Neither Targeted nor any ERISA Affiliate (as defined
below) has ever maintained or contributed to, or had an obligation to contribute
to, (i) any multiemployer plan within the meaning of Section 3(37) or Section
4001(a)(3) of ERISA or (ii) any employee benefit plan, fund program, contract or
arrangement that is subject to Section 412 of the Code, Section 302 of ERISA or
Title IV of ERISA or (iii) any plan that is intended to be qualified under
Section 401(a) of the Code. "ERISA Affiliate," as used in Article III hereof,
means any entity, whether or not incorporated, that is part of a group that
includes Targeted and that is treated as a single employer under Section 414(b),
(c), (m), or (o) of the Code with Targeted.
(d) Welfare Plans. Each Employee Benefit Plan of Targeted that constitutes
a "group health plan," within the meaning of Section 4980B(g)(2) of the Code or
Section 607(1) of ERISA, has been operated at all times in all material respects
in compliance with the requirements of Section 4980B of the Code and Part 6 of
Title I of ERISA. No Employee Benefit Plan of Targeted that is an "employee
welfare benefit plan," within the meaning of Section 3(1) of ERISA, provides or
has any obligation to provide benefits with respect to current or former
employees of Targeted or any other entity beyond their retirement or other
termination of service, including, without limitation, post-retirement (or
post-termination) medical, dental, life insurance, severance or any other
similar benefit, whether provided on an insured or self-insured basis, other
than benefits mandated by applicable law, including, but not limited to,
continuation coverage required to be provided under Section 4980B of the Code or
Part 6 of Subtitle B of Title I of ERISA.
(e) Contributions. All contributions and other payments required to have
been made by Targeted (including any pre-tax or post-tax contributions or
payments by employees or their dependents) to any Employee Benefit Plan (or to
any person pursuant to the terms thereof) have been so made or, if not yet due,
the amount of any such payment or contribution obligation has been properly
reflected in Targeted's financial statements (except for obligations accrued in
the ordinary course of business after December 31, 1995).
(f) Other Claims and Investigations. There are no actions, suits or claims
(other than routine claims for benefits) pending or, to the best knowledge of
Targeted, threatened with respect to any Employee Benefit Plan of Targeted or
against the assets of any such Employee Benefit Plan. None of the Employee
Benefit Plans of Targeted is currently under investigation, audit or review,
directly or indirectly, by the IRS or the DOL, and, to the best knowledge of
Targeted, no such action is contemplated or under consideration by the IRS or
DOL.
(g) Other Binding Commitments. Targeted has no agreement, arrangement,
commitment or obligation, whether formal or informal, whether written or
unwritten, and whether legally binding or not, to create any plan, policy,
program, contract or arrangement not identified in Schedule 3.15 to the Targeted
Disclosure Memorandum or to modify or amend any of its existing Employee Benefit
Plans.
(h) ERISA Affiliates. Targeted has no liability or potential liability to
participants, beneficiaries or any other person or entity under any employee
benefit plan, policy, program, practice, contract or arrangement currently (or
previously) maintained or contributed to by any ERISA Affiliate.
(i) Payments Resulting From Transactions. The consummation of any
transaction contemplated by this Agreement will not result in any (i) payment
(whether of severance pay or otherwise) becoming due from Targeted to any
officer, employee, former employee or director thereof or to the trustee under
any "rabbi trust" or similar arrangement; (ii) benefit under any Employee
Benefit Plan of Targeted being established or becoming accelerated, vested or
payable; or (iii) payment or series of payments by Targeted, directly or
indirectly, to any person that would constitute a "parachute payment" within the
meaning of Section 280G of the Code.
3.16 PATENTS, TRADEMARKS, ETC.
Set forth on Schedule 3.16 to the Targeted Disclosure Memorandum is a true
and complete list of all patents, trademarks, service marks, trade names, brand
names, and registered copyrights, and any applications for any of the foregoing
(collectively, the "Targeted Intellectual Property") of any kind used now or
within the two (2) year period immediately preceding the date of this Agreement
in the business of Targeted. Such Schedule 3.16 contains a complete and accurate
list of all licenses or agreements that in any way affect the rights of Targeted
to any of the Targeted Intellectual Property or any trade secret material to
Targeted (the "Targeted Intellectual Property Licenses"). No claim with respect
to the Targeted Intellectual Property, any trade secret material to
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Targeted, or any Intellectual Property License is currently pending or, to the
best knowledge of Targeted, overtly threatened by any Person, nor does Targeted
know of any valid grounds for any bona fide claim, except as set forth on such
Schedule 3.16, (a) to the effect that any Targeted operation, Targeted
Intellectual Property, trade secret material to Targeted, or Targeted
Intellectual Property License infringes or misappropriates any copyright,
patent, trademark, service mark or trade secret; (b) to the effect that any
other Person infringes on the Targeted Intellectual Property or misappropriates
any trade secret material to Targeted; (c) challenging the ownership, validity
or effectiveness of any of the Targeted Intellectual Property or trade secret
material to Targeted; or (d) challenging Targeted's license under, or other
legally enforceable right under, any Targeted Intellectual Property License. The
consummation of the transactions contemplated hereby will not alter or impair
Targeted's rights to any of the Targeted Intellectual Property, any trade secret
material to Targeted or under any Targeted Intellectual Property License. With
respect to any Targeted Intellectual Property or trade secret material to
Targeted, Targeted owns or has the right to use such Targeted Intellectual
Property or trade secret in its business. Except as set forth on such Schedule
3.16 in respect of the Targeted Intellectual Property Licenses or otherwise, and
except where the failure to so own or be licensed would not have a Material
Adverse Effect upon Targeted, Targeted is the sole and exclusive owner or the
exclusive licensee pursuant to the Targeted Intellectual Property Licenses of
the Targeted Intellectual Property.
Except as set forth on such Schedule 3.16, each of the Targeted
Intellectual Property Licenses is valid, binding and enforceable in accordance
with its terms against the parties thereto; Targeted has performed all
obligations imposed upon it under each of the Targeted Intellectual Property
Licenses; and neither Targeted nor any other party thereto is in default
thereunder, nor, to Targeted's best knowledge, is there any event that with
notice or lapse of time, or both, would constitute a default thereunder. Except
as set forth on such Schedule 3.16, Targeted has not received notice that any
party to any of the Targeted Intellectual Property Licenses intends to cancel,
terminate or refuse to renew the same or to exercise or decline to exercise any
option or other right thereunder. Except as set forth on such Schedule 3.16, no
licenses, sublicenses, covenants or agreements have been granted or entered into
by Targeted in respect of any of the Targeted Intellectual Property or any trade
secret material to Targeted except the Targeted Intellectual Property Licenses.
No director, officer, shareholder or employee of Targeted owns, directly or
indirectly, in whole or in part, any of the Targeted Intellectual Property or
any trade secret material to Targeted. To Targeted's best knowledge, none of its
officers, employees, consultants, distributors, agents, representatives or
advisors have entered into any agreement relating to Targeted's business
regarding know-how, trade secrets, assignment of rights in inventions, or
prohibition or restriction of competition or solicitation of customers, or any
other similar restrictive agreement or covenant, whether written or oral, with
any Person other than Targeted.
Except as set forth on such Schedule 3.16, to Targeted's knowledge, no
Person has asserted any claim of infringement or other interference with
third-party rights with respect to the Targeted Intellectual Property or any
trade secret material to Targeted. Except as set forth on such Schedule 3.16,
(a) during the two (2) year period immediately preceding the date of this
Agreement, Targeted has not disclosed other than in the ordinary course
consistent with past practice any proprietary information relating to the
Targeted Intellectual Property, any trade secret material to Targeted or the
Targeted Intellectual Property Licenses to any person other than to the Company;
(b) Targeted has at all times maintained reasonable procedures to protect and
have enforced all trade secrets of Targeted; (c) Targeted has disclosed trade
secrets to other Persons solely as required for the conduct of Targeted's
business and solely under nondisclosure agreements that are enforceable by
Targeted and, upon the Closing, will be enforceable by Acquisition or Targeted
in accordance with their terms; and (d) Targeted is not under any contractual or
other obligation to disclose any proprietary information relating to the
Targeted Intellectual Property, any trade secret material to Targeted or the
Targeted Intellectual Property Licenses except pursuant to the nondisclosure
agreements listed on such Schedule 3.16, nor, to the best knowledge of Targeted,
is any other party to the Targeted Intellectual Property Licenses under any such
obligation to disclose proprietary information included in or relating to
Targeted Intellectual Property, any trade secret material to Targeted or the
Targeted Intellectual Property Licenses to any person or entity, and no event
has taken place, including the execution of this Agreement or any related change
in Targeted's business activities, that would give rise to such obligation.
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3.17 LICENSES, PERMITS, AUTHORIZATIONS, ETC.
Except as identified in Schedule 3.4 to the Targeted Disclosure Memorandum,
and except where the failure to have any of the following would not result in a
Material Adverse Effect, Targeted has received all governmental approvals,
authorizations, consents, licenses, orders, registrations and permits of all
agencies, whether federal, state, local or foreign that are currently required
in order for Targeted to conduct its business as it is currently conducted.
Targeted has not received any notifications of any asserted present failure by
it to have obtained any such governmental approval, authorization, consent,
license, order, registration or permit, or past and unremedied failure to obtain
such items.
3.18 COMPLIANCE WITH LAWS
Except as described on Schedule 3.18 to the Targeted Disclosure Memorandum,
and except where the failure to have any of the following would not result in a
Material Adverse Effect, Targeted has at all times complied, and is in
compliance, with all federal, state, local and foreign laws, rules, regulations,
ordinances, decrees and orders applicable to it, to its employees, or to the
Targeted Real Property and Targeted's personal property, including, without
limitation, all such laws, rules, ordinances, decrees and orders relating to
intellectual property protection, antitrust matters, consumer protection,
currency exchange, environmental protection, equal employment opportunity,
health and occupational safety, pension and employee benefit matters, securities
and investor protection matters, labor and employment matters, and
trading-with-the-enemy matters. Targeted has not received any notification of
any asserted present or past unremedied failure by Targeted to comply with any
of such laws, rules, ordinances, decrees or orders.
3.19 INSURANCE
Targeted maintains (a) insurance on all of its property that insures
against loss or damage by fire or other casualty and (b) insurance against
liabilities, claims and risks of a nature and in such amounts as are normal and
customary in its industry for companies of similar size and financial condition.
All insurance policies of Targeted are in full force and effect, all premiums
with respect thereto covering all periods up to and including the date this
representation is made have been paid, and no notice of cancellation or
termination has been received with respect to any such policy. Such policies are
sufficient for compliance with all requirements of law currently applicable to
Targeted and of all agreements to which Targeted is a party, will remain in full
force and effect through the respective expiration dates of such policies
without the payment of additional premiums, and will not in any way be affected
by, or terminate or lapse by reason of, the transactions contemplated by this
Agreement. Targeted has not been refused any insurance with respect to its
assets or operations, nor has its coverage been limited, by any insurance
carrier to which it has applied for any such insurance or with which it has
carried insurance.
3.20 BROKERS OR FINDERS
Except as set forth on Schedule 3.20 to the Targeted Disclosure Memorandum,
Targeted has not incurred, and will not incur, directly or indirectly, as a
result of any action taken by or on behalf of Targeted, any liability for
brokerage or finders' fees or agents' commissions or any similar charges in
connection with the Merger, this Agreement or any transaction contemplated
hereby.
3.21 ABSENCE OF QUESTIONABLE PAYMENTS
Neither Targeted nor, to Targeted's knowledge, any director, officer,
agent, employee or other Person acting on behalf of Targeted, has used any
Company funds for improper or unlawful contributions, payments, gifts or
entertainment, or made any improper or unlawful expenditures relating to
political activity to domestic or foreign government officials or others.
Targeted has adequate financial controls to prevent such improper or unlawful
contributions, payments, gifts, entertainment or expenditures. Neither Targeted
nor, to Targeted's Knowledge, any current director, officer, agent, employee or
other Person acting on behalf of Targeted, has accepted or received any improper
or unlawful contributions, payments, gifts or expenditures. Targeted has at all
times complied, and is in compliance, in all material respects with the Foreign
Corrupt Practices Act and, to its
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Knowledge, in all material respects with all foreign laws and regulations
relating to prevention of corrupt practices.
3.22 FULL DISCLOSURE
No information furnished by Targeted to the Company or its representatives
in this Agreement (including, but not limited to, all information in the
Targeted Disclosure Memorandum and the other Exhibits hereto) contains any
untrue statement of a material fact or omits to state a material fact necessary
in order to make the statements so made or information so delivered not
misleading. Targeted has provided to the Company all information requested by
the Company or its representatives in the course of their due diligence
investigation of Targeted.
ARTICLE IV -- COVENANTS
The parties further covenant and agree as set forth in this Article IV.
4.1 CONDUCT OF BUSINESS BY THE COMPANY PENDING THE MERGER
Except as set forth on Schedule 4.1 of the Company Disclosure Memorandum,
unless Targeted shall otherwise agree in writing, the business of the Company
shall be conducted in and only in, and the Company shall not take any action
except in, the ordinary course of business and in a manner consistent with past
practice and in accordance with applicable law; and the Company shall use its
commercially reasonable best efforts to preserve substantially intact the
business organization of the Company, to keep available the services of the
current officers, employees and consultants of the Company and to preserve the
current relationships of the Company with persons with which the Company has
significant business relations. By way of amplification and not limitation,
except as otherwise contemplated by this Agreement, the Company shall not,
between the date of this Agreement and the Effective Time, directly or
indirectly do, or propose to do, any of the following without the prior written
consent of Targeted:
(a) amend or otherwise change its Certificate of Incorporation or
Bylaws or equivalent organizational documents;
(b) issue, sell, pledge, dispose of, grant, encumber or authorize the
issuance, sale, pledge, disposition, grant or encumbrance of (i) any shares
of capital stock of any class of the Company (except for issuances of
Company Common Stock upon exercise of options or warrants outstanding on
the date hereof), or any options, warrants, convertible securities or other
rights of any kind to acquire any shares of such capital stock, or any
other ownership interest (including, without limitation, any phantom
interest), of the Company or (ii) any assets of the Company, except for
sales in the ordinary course of business and in a manner consistent with
past practice;
(c) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with respect
to any of its capital stock;
(d) reclassify, combine, split, subdivide, redeem, purchase or
otherwise acquire, directly or indirectly, any of its capital stock;
(e)(i) acquire (including, without limitation, by merger,
consolidation, or acquisition of stock or assets) any corporation,
partnership, other business organization or division thereof or any
material amount of assets; (ii) incur any indebtedness for borrowed money
or issue any debt securities or assume, guarantee or endorse, or otherwise
as an accommodation become responsible for, the obligations of any Person,
or make any loans or advances, in each case except in the ordinary course
of business and consistent with past practice; (iii) enter into any
contract or agreement other than in the ordinary course of business,
consistent with past practice; (iv) authorize any single capital
expenditure which is in excess of Ten Thousand Dollars ($10,000) or capital
expenditures which are, in the aggregate, in excess of Twenty-Five Thousand
($25,000) for the Company taken as a whole; or (v) enter into or amend any
contract, agreement, commitment or arrangement with respect to any matter
set forth in this paragraph (e);
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(f) enter into any employment, consulting or agency agreement, or
increase the compensation payable or to become payable to its officers,
employees or consultants, except as disclosed in Schedule 4.1(f) to the
Company Disclosure Memorandum and except for increases in accordance with
existing agreements or past practices for employees of the Company who are
not officers of the Company, or grant any severance or termination pay to,
or enter into any employment or severance agreement with, any director,
officer or other employee of the Company, or establish, adopt, enter into
or amend any collective bargaining, bonus, profit sharing, thrift,
compensation, stock option, restricted stock, pension, retirement, deferred
compensation, employment, termination, severance or other plan, agreement,
trust, fund, policy or arrangement for the benefit of any director, officer
or employee;
(g) take any action, other than reasonable and usual actions in the
ordinary course of business and consistent with past practice, with respect
to accounting policies or procedures (including, without limitation,
procedures with respect to the payment of accounts payable and collection
of accounts receivable);
(h) make any tax election or settle or compromise any material
federal, state, local or foreign income tax liability;
(i) pay, discharge or satisfy 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 and consistent with past practice, of liabilities reflected or
reserved against in the Company Balance Sheet or which subsequently become
payable in the ordinary course of business and consistent with past
practice;
(j) take any action that would or is reasonably likely to result in
any of the representations and warranties of the Company set forth in this
Agreement being untrue, or in any covenant of the Company set forth in this
Agreement being breached, or in any of the conditions to the Merger
specified in Article V hereof not being satisfied; or
(k) take or agree to take any action specified in Section 2.7 hereof,
or enter into any other material transaction other than those specified
above, or agree to do any of the foregoing.
4.2 CONDUCT OF BUSINESS BY TARGETED PENDING THE MERGER
Except as set forth on Schedule 4.2 of the Targeted Disclosure Memorandum,
unless the Company shall otherwise agree in writing, the business of Targeted
shall be conducted in a manner consistent, in all material respects, with the
description of such business in Targeted's Annual Report on Form 10-K for the
year ended December 31, 1995.
4.3 ACCESS TO INFORMATION; CONFIDENTIALITY
From the date hereof to the Effective Time, each party to this Agreement
(for purposes of this Section 4.3, the "Disclosing Party") shall, and shall
cause the officers, directors, employees, auditors and agents of the Disclosing
Party to, afford the officers, employees and agents of any of the other parties
to this Agreement (for purposes of this Section 4.3, the "Receiving Party")
complete access at all reasonable times to the officers, employees, agents,
properties, offices, plants and other facilities, books and records of the
Disclosing Party and shall furnish the Receiving Party with all financial,
operating and other data and information as the Receiving Party, through its
officers, employees or agents, may reasonably request. From the date hereof
until the Effective Time, upon request the Disclosing Party shall provide the
Receiving Party with monthly and other financial statements of the Disclosing
Party as they become available internally at the Disclosing Party, all of which
financial statements shall fairly present the financial position and results of
operations of the Disclosing Party as of the dates and for the periods therein
specified. No investigation pursuant to this Section 4.3 shall affect any
representation or warranty in this Agreement of any party hereto or any
condition to the obligations of the parties hereto. The parties shall continue
to comply with and to perform their respective obligations under the Mutual
Confidential Disclosure Agreement between Targeted and the Company entered into
as of January 22, 1996 (the
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"Confidentiality Agreement"), which shall be deemed terminated without any
further action by the parties hereto at the Effective Time.
4.4 NO ALTERNATIVE TRANSACTIONS
Unless this Agreement shall have been terminated in accordance with its
terms, the Company shall not, directly or indirectly, through any officer,
director, agent or otherwise, solicit, initiate or encourage the submission of
any proposal or offer from any Person relating to any acquisition or purchase of
all or (other than in the ordinary course of business) any portion of the assets
of, or any equity interest in, the Company or any business combination with the
Company or participate in any negotiations regarding, or furnish to any other
Person any information with respect to, or otherwise cooperate or negotiate in
any way with, or assist or participate in, facilitate or encourage, any effort
or attempt by any other Person to do or seek any of the foregoing. The Company
immediately shall cease and cause to be terminated any existing discussions or
negotiations with any parties conducted heretofore with respect to any of the
foregoing. The Company shall notify Targeted promptly if any such proposal or
offer, or any inquiry or contact with any Person with respect thereto, is made
and shall, in any such notice to Targeted, indicate in reasonable detail the
identity of the Person making such proposal, offer, inquiry or contact and the
terms and conditions of such proposal, offer, inquiry or contact. The Company
agrees not to release any third party from, or waive any provision of, any
confidentiality or standstill agreement to which the Company is a party.
4.5 NOTIFICATION OF CERTAIN MATTERS
Each party to this Agreement shall give prompt notice to the other of (a)
the occurrence or nonoccurrence of any event which would be likely to cause any
representation or warranty of such party contained in this Agreement to be
untrue or inaccurate and (b) any failure of such party to comply with or satisfy
any covenant, condition or agreement to be complied with or satisfied by it
hereunder; provided, however, that the delivery of any notice pursuant to this
Section 4.5 shall not limit or otherwise affect the remedies available to any
party hereunder.
4.6 FURTHER ACTION; REASONABLE BEST EFFORTS
Upon the terms and subject to the conditions hereof, each of the parties
hereto shall use its commercially reasonable best efforts to take, or cause to
be taken, all appropriate action, and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated hereby, including,
without limitation, using its commercially reasonable best efforts to obtain all
waivers, licenses, permits, consents, approvals, authorizations, qualifications
and orders of governmental authorities and parties to contracts with the Company
as are necessary for the consummation of the transactions contemplated hereby
and to fulfill the conditions to the Merger. In case at any time after the
Effective Time any further action is necessary or desirable to carry out the
purposes of this Agreement, each party to this Agreement shall use its
commercially reasonable best efforts to take all such action. No party to this
Agreement will take any action that would result in disqualification of the
Merger as a tax-free reorganization under Section 368(a) of the Code. After the
Closing Date, each party hereto, at the request of and without any further cost
or expense to the other parties, will take any further action necessary or
desirable to carry out the purposes of this Agreement to vest in the Surviving
Corporation full title to all properties, assets and rights of the Company and
to effect the issuance of the Targeted Common Stock to the Stockholders pursuant
to the terms and conditions hereof.
4.7 PUBLICITY
Targeted and the Company shall consult with each other before issuing any
press release or otherwise making any public statements with respect to this
Agreement and shall not issue any such press release or make any such public
statement prior to such consultations, except as may be required by law or any
listing agreement with the Nasdaq Stock Market.
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4.8 REGISTRATION STATEMENT
(a) Targeted shall (i) prior to the first anniversary of the Effective
Date, prepare and file with the SEC a registration statement (the "Registration
Statement") covering the sale (subject to Section 4.17 hereof), on the Nasdaq
National Market, of fifty percent (50%) of the shares of Targeted Common Stock
issued as the Merger Consideration and (ii) use its commercially reasonable best
efforts, subject to receipt of necessary information from the Stockholders, to
cause the Registration Statement to become effective on or before the first
anniversary of the Effective Date and to remain effective (subject to the
provisions of Section 4.8(b) hereof) for a period ending twenty-four (24) months
after the Effective Date. If for any reason the Registration Statement shall not
become effective prior to the expiration of the two (2) week period beginning on
the first anniversary of the Effective Date, Targeted shall pay as liquidated
damages to the Stockholders an aggregate amount in cash of Two Hundred Fifty
Thousand Dollars ($250,000). Notwithstanding any other provision in this
Agreement, such payment shall be the Stockholders' exclusive remedy for any
damages relating to any delay in the effective date of the Registration
Statement.
(b) Upon written notice given to the Stockholders, Targeted may elect to
suspend the use of the prospectus forming part of the Registration Statement (i)
by any Stockholder, upon the failure of such Stockholder to provide information
necessary in order to make the prospectus true, complete and correct in all
material respects as to sales by such Stockholder or (ii) for additional periods
that do not in the aggregate exceed sixty (60) days during the course of the
calendar year (each sixty (60) days is hereinafter referred to as a "Suspension
Period") as a result of business developments or other transactions involving
Targeted the existence of which would make the Registration Statement inaccurate
or misleading in any material respect. Targeted agrees in good faith to seek to
minimize any need to invoke the provisions of this Section 4.8(b). The
Stockholders hereby covenant that they will not sell any Targeted Common Stock
pursuant to such prospectus during the period commencing at the time at which
Targeted gives the Stockholders written notice of such suspension and ending at
the earliest to occur of any of the following: (i) seventy-two (72) hours after
the time at which the aforementioned business developments or other transactions
are disclosed by Targeted to the public generally, if the Stockholders first
make written inquiry to Targeted, and Targeted does not respond within
forty-eight (48) hours of such inquiry as to whether the matter disclosed was
the reason for suspending the prospectus; (ii) the time Targeted gives the
Stockholders written notice that the Stockholders may thereafter effect sales
pursuant to such prospectus; or (iii) the completion of a Suspension Period.
4.9 BOARD OF DIRECTORS
Promptly following the Closing, the Board of Directors of Targeted (the
"Board") shall appoint Austin M. Long, III and Martin P. Sutter to the Board.
Targeted shall have no commitment to maintain either such Board seat beyond the
initial term for which either of such individuals may be elected by the
shareholders of Targeted.
4.10 CONSULTING AGREEMENTS; SCIENTIFIC ADVISORY BOARD; CLINICAL ADVISORY BOARD
Each of Targeted and the Company shall use its commercially reasonable best
efforts to obtain (a) consulting agreements between Targeted and each of Drs.
Leaf Huang and Mien-Chie Hung (the "Consulting and Scientific Advisory Board
Agreements"), each such agreement to be substantially in the form attached
hereto as Exhibit 4.10, and pursuant to which, among other things, such
individuals shall agree to provide consulting services to Targeted, at their
current compensation levels, for a term of five (5) years, subject to Targeted's
right to terminate any such agreement after four (4) years, and to serve as
members of Targeted's Scientific Advisory Board, and (b) the commitment of Dr.
Gabriel Lopez-Berestein to serve as a member of a Clinical Advisory Board to be
established by Targeted no later than December 31, 1996.
4.11 SEVERANCE AGREEMENTS
(a) Except as may be agreed to by Targeted, the Company shall not enter
into any agreement, plan or arrangement covering any director, officer or
employee of the Company that provides for the making of any payments, the
acceleration of vesting of any benefit or right or any other entitlement upon
the termination of such individual's employment with the Company.
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(b) Neither Targeted nor the Surviving Corporation shall be under any
obligation to employ any employee of the Company; provided, however, that each
employee of the Company will be asked to continue employment for at least three
(3) months following the Effective Date (the "Transition Period"). Upon the
expiration of the Transition Period, if such employee is not offered employment
beyond the Transition Period, Targeted shall make severance payments to such
employee equal to six (6) months' base salary at the rate in effect for such
terminated employee as of the Effective Date.
4.12 CONVERSION OF OUTSTANDING BRIDGE LOAN
The Company shall use its commercially reasonable best efforts to cause the
loans described on Schedule 2.3(c)(ii) to the Company Disclosure Memorandum (the
"Bridge Loans") attached hereto to be converted into shares of Company Common
Stock on or before the Effective Date.
4.13 DEVELOPMENT OF TECHNOLOGY
Targeted or its licensee shall use its commercially reasonable best efforts
to develop (a) the E1A product consistent with the provisions of the Option
Agreement, dated December 28, 1995, and the Outline of Principal Terms dated
February 22, 1996, for development of the E1A product in Europe, (including
continuing the current collaborative relationships, at current levels of
funding, with Drs. Leaf Huang and Mien-Chie Hung for a period of not less than
four (4) years; provided, however, that if either of such individuals shall
terminate his Consultant and Scientific Advisory Board Agreement prior to the
end of such four (4) year term, Targeted shall be entitled to discontinue all
such funding) and (b) the nucleic acid-based CML product (including continuing
the current collaborative relationship, at current levels of funding, with Dr.
Gabriel Lopez-Berestein for a period of not less than four (4) years).
Notwithstanding the foregoing, if Targeted shall decide after the Effective Time
to discontinue commercial development of the CML product, it shall seek to
negotiate a sublicensing agreement with a third party with respect thereto;
provided however, that upon the first anniversary of the determination to
discontinue such commercial development, if Targeted shall have failed to
procure a sublicensing agreement, it shall negotiate a return of the rights to
develop the CML product to the University of Texas.
4.14 SURVIVAL OF INDEMNIFICATION
To the fullest extent permitted by law, from and after the Effective Time,
all rights to indemnification now existing in favor of the employees, agents,
directors or officers of the Company with respect to their activities as such
prior to the Effective Time, as provided in the Company's Certificate of
Incorporation or Bylaws, or any agreement in effect in respect of the Company,
in each case as in effect on the date hereof, shall survive the Merger and shall
continue in full force and effect in accordance with the terms of any such
arrangement.
4.15 COMPANY STOCKHOLDERS' MEETING; TARGETED SHAREHOLDERS' MEETING
(a) The Company, acting through its Board of Directors, shall, in
accordance with applicable law and the Company's Certificate of Incorporation
and Bylaws, (i) duly call, give notice of, convene and hold an annual or special
meeting of its stockholders as soon as practicable for the purpose of
considering and taking action on this Agreement (the "Company Stockholders'
Meeting"), (ii) include in such notice the recommendation of the Board of
Directors that the Stockholders approve and adopt this Agreement and the
transactions contemplated hereby, and (iii) use its commercially reasonable best
efforts to obtain such approval and adoption. Except as provided by applicable
law, the Company shall not postpone, adjourn or otherwise reschedule the date of
the Company Stockholders' Meeting without the prior written consent of Targeted.
(b) Targeted, acting through its Board of Directors, shall, in accordance
with applicable law and Targeted's Articles of Incorporation and Bylaws, (i)
with the cooperation of the Company, prepare and file with the SEC a proxy
statement in connection with the Merger, (ii) duly call, give notice of, convene
and hold a special meeting of its shareholders as soon as practicable for the
purpose of considering and taking action on this Agreement, (iii) include in
such notice the recommendation of the Board of Directors that the shareholders
approve and adopt this Agreement and the transactions contemplated hereby, and
(iv) use its commercially reasonable best efforts to obtain such approval and
adoption.
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4.16 PRIVATE PLACEMENT MEMORANDUM
As promptly as practicable following the execution of this Agreement,
Targeted shall prepare for delivery to each of the Stockholders, a private
placement memorandum relating to the issuance of the Merger Consideration (the
"Private Placement Memorandum"). The Private Placement Memorandum shall not
contain any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements made in the Private Placement
Memorandum not misleading.
4.17 LOCK UP AGREEMENTS
The Company shall use its commercially reasonable best efforts to cause
each Stockholder to execute a Lock Up Agreement (the "Lock Up Agreement")
pursuant to which such Stockholder shall agree not to sell or otherwise transfer
or dispose of any Targeted Common Stock received in the Merger during the thirty
(30) month period beginning with the Effective Date; provided, however, that
such shares of Targeted Common Stock shall be released from the restrictions of
the Lock Up Agreement in increments of twenty percent (20%) for each full six
(6) month period following the Effective Date; provided further, that the last
installment of twenty percent (20%) of the shares of Targeted Common Stock to be
released from such Lock Up Agreement shall include all of the Escrowed Shares
(as defined in Section 8.5.1 hereof). Upon issuance of any Additional
Consideration after shares have been released from the restrictions of the Lock
Up Agreements, twenty percent (20%) of the shares issued as Additional
Consideration shall be immediately released from the restrictions of the Lock Up
Agreements for each full six (6) month period which shall have elapsed since the
Effective Date.
4.18 INVESTOR QUESTIONNAIRE
The Company shall use its commercially reasonable best efforts to cause
each Stockholder to execute and deliver to Targeted an investor questionnaire in
the form of Exhibit 4.18 hereto.
ARTICLE V -- CONDITIONS PRECEDENT TO OBLIGATIONS OF
ACQUISITION AND TARGETED
The obligations of Acquisition and Targeted to perform and observe the
covenants, agreements and conditions hereof to be performed and observed by them
at or before the Closing shall be subject to the satisfaction of the following
conditions, which may be expressly waived only in writing signed by Targeted:
5.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES
The representations and warranties of the Company contained herein
(including applicable Exhibits or Schedules to the Company Disclosure
Memorandum) shall have been true and correct, in all material respects, when
made and shall be true and correct, in all material respects, as of the Closing
Date as though made on that date.
5.2 PERFORMANCE OF AGREEMENTS
The Company shall have performed, in all material respects, all obligations
and agreements and complied with all covenants and conditions contained in this
Agreement to be performed and complied with by the Company at or before the
Closing.
5.3 OPINIONS OF COUNSEL FOR THE COMPANY
Targeted shall have received (a) the opinion letter of Mayor, Day, Caldwell
& Keeton, L.L.P., counsel for the Company, dated the Closing Date, substantially
in the form attached hereto as Exhibit 5.3 and (b) an opinion from Morgan &
Finnegan, L.L.P., patent counsel for the Company, concerning the effect, if any,
of this Agreement on the rights granted to the Company by the agreements listed
in "Licensing and Related Agreements" of Schedule 2.10.
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5.4 COMPANY STOCKHOLDER APPROVAL
The holders of Company Common Stock and the holders of Company Preferred
Stock shall have duly and validly approved the Merger by a vote in accordance
with Delaware Law and all other applicable laws and regulations and the
Company's Certificate of Incorporation and Bylaws.
5.5 TARGETED SHAREHOLDER APPROVAL
The shareholders of Targeted shall have duly and validly approved the
issuance of the Targeted Common Stock to be issued in connection with the Merger
by a vote in accordance with all applicable laws and regulations.
5.6 RESIGNATIONS
Targeted shall have received copies of resignations effective as of the
Closing Date of all persons who are officers or directors of the Company
immediately prior to the Effective Time.
5.7 TERMINATION OF AGREEMENTS
(a) The Company shall have terminated that certain employment agreement
between the Company and Martin H. Lindenberg dated as of February 24, 1994,
without liability to the Company other than the payment of severance benefits
pursuant to the terms of such agreement.
(b) The Company shall have terminated each of the agreements set forth on
Exhibit 5.7 hereof without liability to the Company and, with respect to the
Targeted Common Stock to be issued in the Merger, shall have received written
waivers of any repurchase obligations, rights of first refusal or other similar
provisions existing in favor of any of the Stockholders.
5.8 COMPLIANCE CERTIFICATE
Targeted shall have received a certificate of the Company, executed by its
President and the Treasurer, dated the Closing Date, in form and substance
satisfactory to Targeted, certifying that the conditions to the obligations of
Targeted and Acquisition have been fulfilled.
5.9 APPROVALS AND CONSENTS
All transfers of permits or licenses, and all approvals of or notices to
public agencies, federal, state, local or foreign, the granting or delivery of
which is necessary for the consummation of the transactions contemplated hereby
or for the continued operation of the Company, shall have been obtained, and all
waiting periods specified by law shall have passed. All other consents,
approvals and notices referred to in this Agreement shall have been obtained or
delivered.
5.10 PROCEEDINGS AND DOCUMENTS; SECRETARY'S CERTIFICATE
All corporate and other proceedings in connection with the transactions
contemplated hereby and all documents and instruments incident to such
transactions, shall have been approved by Targeted's counsel (which approval
shall not be unreasonably withheld), and Targeted shall have received a
certificate of the Secretary of the Company, in form and substance satisfactory
to Targeted, as to the authenticity and effectiveness of the actions of the
Board of Directors and Stockholders of the Company authorizing the Merger and
the transactions contemplated by this Agreement and such other documents as are
specified by Targeted's counsel.
5.11 COMPLIANCE WITH LAWS
The consummation of the transactions contemplated by this Agreement shall
be legally permitted by all laws and regulations to which Targeted or the
Company is subject.
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5.12 LEGAL PROCEEDINGS
No order of any court or administrative agency shall be in effect which
enjoins, restrains, conditions or prohibits consummation of this Agreement and
no litigation, investigation or administrative proceeding shall be pending or
threatened which would enjoin, restrain, condition or prevent consummation of
this Agreement.
5.13 TAX-FREE REORGANIZATION
Targeted shall have received an opinion of Perkins Coie that the Merger
will constitute a reorganization under Section 368(a)(1) and (a)(2)(E) of the
Code and that neither Targeted nor Acquisition will recognize any gain or loss
with respect to the Merger. Such opinion will be based on certain
representations and warranties contained in a certificate supplied by Targeted
and the Company and certain significant Stockholders.
5.14 DELIVERY OF AUDITED FINANCIAL STATEMENTS
The Company shall have delivered to Targeted balance sheets, statements of
income and expense, statements of cash flow, and statements of stockholders'
equity of the Company as of and for the fiscal year ended December 31, 1995, as
audited by, and together with the report of, Arthur Andersen & Co., independent
certified public accountants. Stockholders' equity and net working capital, as
reflected in the unaudited balance sheet as of December 31, 1995, shall not be
materially different from stockholders' equity and net working capital,
reflected in the unaudited financial statements as of and for the fiscal year
ended December 31, 1995.
5.15 EXERCISE OR CANCELLATION OF OPTIONS AND WARRANTS
All Options and Warrants shall have been exercised in full or canceled
without liability to the Company.
5.16 CONSULTING AGREEMENTS; ADVISORY BOARDS
Targeted shall have received (a) executed Consulting and Scientific
Advisory Agreements from Drs. Leaf Huang and Mien-Chie Hung, and (b) the
commitment of Dr. Gabriel Lopez-Berestein to serve as a member of a Clinical
Advisory Board to be established by Targeted by December 31, 1996.
5.17 BRIDGE LOANS
(a) The Company shall have received from the holders of the Bridge Loans an
aggregate amount in cash equal to Five Hundred Fifty Thousand Dollars
($550,000), which amount shall be added to the outstanding balance of the Bridge
Loans prior to the conversion of such loans into shares of Company Common Stock.
(b) The Bridge Loans (including the amount described in Section 5.17(a)
hereof) shall have been converted into shares of Company Common Stock.
5.18 UNIVERSITY OF TENNESSEE LICENSE AGREEMENT
The Company shall have obtained the written agreement, which shall be
reasonably satisfactory to Targeted, of the University of Tennessee Research
Corporation ("UTRC") that will resolve any and all outstanding contract issues
between UTRC, the Company and Aronex Pharmaceuticals, Inc.
ARTICLE VI -- CONDITIONS PRECEDENT TO OBLIGATIONS
OF THE COMPANY
The obligations of the Company to perform and observe the covenants,
agreements and conditions hereof to be performed and observed by them at or
before the Closing shall be subject to the satisfaction of the following
conditions, which may be expressly waived only in writing signed by the Company.
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6.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES
The representations and warranties of Targeted and Acquisition contained
herein shall have been true and correct, in all material respects, when made and
shall be true and correct, in all material respects, as of the Closing Date as
though made on that date.
6.2 PERFORMANCE OF AGREEMENTS
Targeted and Acquisition shall have performed, in all material respects,
all obligations and agreements and complied with all covenants and conditions
contained in this Agreement to be performed and complied with by them at or
before the Closing.
6.3 OPINION OF COUNSEL
The Stockholders shall have received the opinion letter of Perkins Coie,
counsel for Targeted and Acquisition, dated the Closing Date, substantially in
the form attached hereto as Exhibit 6.3.
6.4 COMPLIANCE CERTIFICATE
The Company shall have received a certificate of Targeted, executed by an
officer of Targeted, dated the Closing Date, substantially in form and substance
satisfactory to the Company, certifying that the conditions to the obligations
of the Company have been fulfilled.
6.5 LEGAL PROCEEDINGS
No order of any court or administrative agency shall be in effect which
enjoins, restrains, conditions or prohibits consummation of this Agreement and
no litigation, investigation or administrative proceeding shall be pending or
threatened which would enjoin, restrain, condition or prevent consummation of
this Agreement.
6.6 APPROVALS AND CONSENTS
All transfers of permits or licenses, and all approvals of or notices to
public agencies, federal, state, local or foreign, the granting or delivery of
which is necessary for the consummation of the transactions contemplated hereby
or for the continued operation of the Company, shall have been obtained, and all
waiting periods specified by law shall have passed. All other consents,
approvals and notices referred to in this Agreement shall have been obtained or
delivered.
6.7 COMPLIANCE WITH LAWS
The consummation of the transactions contemplated by this Agreement shall
be legally permitted by all laws and regulations to which Targeted or the
Company is subject.
6.8 TAX-FREE REORGANIZATION
The Company shall have received an opinion of Mayor, Day, Caldwell &
Keeton, L.L.P. that the Merger will constitute a reorganization under Section
368(a)(1) and (a)(2)(E) of the Code, that the Company will not recognize any
gain or loss and that the Stockholders will recognize no gain or loss with
respect to shares of Company Common Stock converted into the Merger
Consideration, except with respect to cash received in lieu of fractional shares
of Targeted Common Stock and a portion of the Additional Consideration
representing imputed interest under the Code. Such opinion will be based on
certain representations and warranties by Targeted and the Company, and certain
significant Stockholders.
6.9 TARGETED SHAREHOLDER APPROVAL
The shareholders of Targeted shall have duly and validly approved the
issuance of the Targeted Common Stock to be issued in connection with the Merger
by a vote in accordance with all applicable laws and regulations.
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6.10 PROCEEDINGS AND DOCUMENTS; SECRETARY'S CERTIFICATE
All corporate and other proceedings in connection with the transactions
contemplated hereby and all documents and instruments incident to such
transactions, shall have been approved by the Company's counsel (which approval
shall not be unreasonably withheld), and the Company shall have received a
certificate of the Secretary of Targeted and a certificate of the Secretary of
Acquisition, in form and substance satisfactory to the Company, as to the
authenticity and effectiveness of the actions of the Board of Directors and
shareholders of Targeted and the Board of Directors and stockholder of
Acquisition authorizing the Merger and the transactions contemplated by this
Agreement and such other documents as are specified by the Company's counsel.
ARTICLE VII -- TERMINATION, AMENDMENT AND WAIVER
7.1 TERMINATION
This Agreement may be terminated and the Merger may be abandoned at any
time prior to the Effective Time (notwithstanding any approval of this Agreement
by the Stockholders of the Company):
(a) by mutual written consent duly authorized by the Boards of
Directors of the Company and Targeted;
(b) by either the Company or Targeted, if the Merger has not been
consummated by June 30, 1996; provided, however, that the right to
terminate this Agreement under this paragraph (b) shall not be available to
any party whose failure to fulfill any obligation under this Agreement has
been the cause of, or resulted in, the failure of the Effective Time to
occur on or before such date;
(c) by either the Company or Targeted, if there shall be any law or
regulation that makes consummation of the Merger illegal or otherwise
prohibited or if any judgment, injunction, order or decree enjoining
Targeted, Acquisition or the Company from consummating the Merger is
entered and such judgment, injunction, order or decree shall become final
and nonappealable; provided, however, that the party seeking to terminate
this Agreement pursuant to this paragraph (c) shall have used all
reasonable efforts to remove such judgment, injunction, order or decree;
(d) by the Company, in the event of a material breach by Targeted of
any representation, warranty or agreement contained herein which has not
been cured or is not curable by the Effective Date;
(e) by Targeted, in the event of a material breach by the Company of
any representation, warranty or agreement contained herein which has not
been cured or is not curable by the Effective Date;
(f) by Targeted, in the event the Company's Stockholders fail to
approve the Merger; or
(g) by the Company, in the event Targeted's shareholders fail to
approve the issuance of Targeted Common Stock pursuant to the Merger.
7.2 EFFECT OF TERMINATION
(a) Except as specifically provided in this Section 7.2, in the event of
the termination of this Agreement pursuant to Section 7.1 hereof, there shall be
no further obligation on the part of any party hereto, except that nothing
herein shall relieve any party from liability for any willful breach hereof.
(b) If Targeted shall terminate this Agreement pursuant to Section 7.1(e)
or 7.1(f) hereof, the Company shall pay a fee of Three Hundred Fifty Thousand
Dollars ($350,000) to Targeted.
(c) If the Company shall terminate this Agreement pursuant to Section
7.1(d) or 7.1(g) hereof, Targeted shall pay a fee of Three Hundred Fifty
Thousand Dollars ($350,000) to the Company.
7.3 AMENDMENT
This Agreement may be amended by Targeted and the Company at any time prior
to the Effective Time; provided, however, that no amendment may be made which
would reduce the amount or change the type of
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consideration into which each share of Company Common Stock and Preferred Stock
shall be converted upon consummation of the Merger. This Agreement may not be
amended except by an instrument in writing signed by Targeted, Acquisition and
the Company.
7.4 WAIVER
At any time prior to the Effective Time, any party hereto may (a) extend
the time for the performance of any obligation or other act of any other party
hereto, (b) waive any inaccuracy in the representations and warranties contained
herein or in any document delivered pursuant hereto, or (c) waive compliance
with any agreement or condition contained herein. Any such extension or waiver
shall be valid only if set forth in an instrument in writing signed by the party
or parties to be bound thereby.
ARTICLE VIII -- SURVIVAL AND INDEMNIFICATION
8.1 SURVIVAL
All representations and warranties contained in this Agreement or in any
certificate delivered pursuant hereto shall survive the Closing for a period of
one (1) year, and, except as set forth in Section 8.3(e) hereof, shall not be
deemed waived or otherwise affected by any investigation made or any knowledge
acquired with respect thereto, or by any notice delivered pursuant to Section
6.4 hereof. The covenants and agreements contained in this Agreement shall
survive the Closing and shall continue until all obligations with respect
thereto shall have been performed or satisfied or shall have been terminated in
accordance with their terms.
8.2 INDEMNIFICATION
(a) Subject to Section 8.3 hereof, from and after the Closing Date, the
Stockholders shall jointly and severally indemnify and hold Targeted and its
officers, directors and affiliates (the "Targeted Indemnified Parties") harmless
from and against, and shall reimburse the Targeted Indemnified Parties for, any
and all losses, damages, debts, liabilities, obligations, judgments, orders,
awards, writs, injunctions, decrees, fines, penalties, taxes, costs or expenses
(including, but not limited to, any legal or accounting fees or expenses)
("Losses") arising out of or in connection with:
(i) any breach of any representation or warranty made by the Company
in this Agreement or in any certificate delivered pursuant hereto or
thereto; and
(ii) any failure by the Company to perform or comply, in whole or in
part, with any covenant or agreement in this Agreement, except as provided
in Section 8.3(d) hereof.
(b) Subject to Section 8.3 hereof, from and after the Closing Date,
Targeted shall indemnify and hold the Stockholders and their affiliates (the
"Stockholder Indemnified Parties," together with the Targeted Indemnified
Parties, the "Indemnified Parties") harmless from and against, and shall
reimburse the Stockholder Indemnified Parties for Losses arising out of or in
connection with:
(i) any breach of any representation or warranty made by Targeted in
this Agreement or in any certificate delivered pursuant hereto or thereto;
and
(ii) any failure by Targeted to perform or comply, in whole or in
part, with any covenant or agreement in this Agreement, except as provided
in Section 8.3(d) hereof.
8.3 THRESHOLD AND LIMITATIONS
(a) No Indemnified Party shall be entitled to receive any indemnification
payment with respect to any Losses until the aggregate Losses for which such
Indemnified Parties would be otherwise entitled to receive indemnification
exceed One Hundred Fifty Thousand Dollars ($150,000) (the "Threshold");
provided, however, that once such aggregate Losses exceed the Threshold, such
Indemnified Parties shall be entitled to indemnification for the aggregate
amount of all Losses.
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(b) In no event shall the liability of any of the Stockholders hereunder
for Losses incurred by Targeted Indemnified Parties exceed an amount equal to
such Stockholder's pro-rata interest in the escrow.
(c) In no event shall the liability of Targeted hereunder for Losses
incurred by Stockholder Indemnified Parties exceed, in the aggregate, Two
Million Dollars ($2,000,000).
(d) No claim for indemnification may be made by an Indemnified Party if
notice of such claim is made under Section 8.4(a) or Section 8.4(d) after one
year from the Effective Date.
(e) If any Indemnified Party has actual knowledge of the breach of this
Agreement by another party at or prior to the Closing Date and fails to notify
the breaching party of such breach in writing at or prior to the Closing Date,
the party with such actual knowledge shall be deemed to have waived all rights
of indemnification with respect to such breach.
8.4 PROCEDURE FOR INDEMNIFICATION
(a) A Targeted Indemnified Party shall notify Austin M. Long III and Martin
P. Sutter as representatives for the Stockholders (the "Representatives"), and a
Stockholder Indemnified Party shall notify Targeted, in writing reasonably
promptly after the assertion against the Indemnified Party of any claim by a
third party (a "Third Party Claim") in respect of which the Indemnified Party
intends to base a claim for indemnification hereunder, but the failure or delay
so to notify the Representatives or Targeted, as the case may be, shall not
relieve the indemnifying party of any obligation or liability that they may have
to the Indemnified Party except to the extent that the Representatives or
Targeted, as the case may be, demonstrate that the indemnifying party's ability
to defend or resolve such Third Party Claim is adversely affected thereby.
(b)(i) Subject to the rights of or duties to any insurer or other third
party having potential liability therefor, the Representatives or Targeted, as
the case may be, shall have the right, upon written notice given to the
Indemnified Party within thirty (30) days after receipt of the notice from the
Indemnified Party of any Third Party Claim, to assume the defense or handling of
such Third Party Claim, at the sole expense of the Representatives or Targeted,
as the case may be, in which case the provisions of Section 8.4(b)(ii) hereof
shall govern.
(ii) The Representatives or Targeted, as the case may be, shall select
counsel reasonably acceptable to the Indemnified Party in connection with
conducting the defense or handling of such Third Party Claim, and the
Representatives or Targeted, as the case may be, shall defend or handle the same
in consultation with the Indemnified Party and shall keep the Indemnified Party
timely apprised of the status of such Third Party Claim. The indemnifying party
shall not, without the prior written consent of the Indemnified Party, agree to
a settlement of any Third Party Claim, unless (A) the settlement provides an
unconditional release and discharge of the Indemnified Party and the Indemnified
Party is reasonably satisfied with such discharge and release and (B) in the
case of indemnification by the Stockholders, Targeted shall not have reasonably
objected to any such settlement on the ground that the circumstances surrounding
the settlement could result in an adverse impact on the business, operations,
assets, liabilities (absolute, accrued, contingent or otherwise), condition
(financial or otherwise) or prospects of Targeted or the business conducted by
the Company. The Indemnified Party shall cooperate with the Representatives or
Targeted, as the case may be, and shall be entitled to participate in the
defense or handling of such Third Party Claim with its own counsel and at its
own expense.
(c)(i) If the Representatives or Targeted, as the case may be, do not give
written notice to the Indemnified Party within thirty (30) days after receipt of
the notice from the Indemnified Party of any Third Party Claim of the election
by the Representatives or Targeted, as the case may be, to assume the defense or
handling of such Third Party Claim, the provisions of Section 9.4(c)(ii) hereof
shall govern.
(ii) The Indemnified Party may, at the expense of the Representatives or
Targeted, as the case may be, (which shall be paid from time to time by such
party or parties as such expenses are incurred by the Indemnified Party), select
counsel in connection with conducting the defense or handling of such Third
Party Claim and defend or handle such Third Party Claim in such manner as it may
deem appropriate, provided, however, that the Indemnified Party shall keep the
Representatives or Targeted, as the case may be, timely apprised of the status
of such Third Party Claim and shall not settle such Third Party Claim without
the prior written consent of the Representatives or Targeted, as the case may
be, which consent shall not be unreasonably withheld. If the
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Indemnified Party defends or handles such Third Party Claim, the Representatives
or Targeted, as the case may be, shall cooperate with the Indemnified Party and
shall be entitled to participate in the defense or handling of such Third Party
Claim with its own counsel and at its own expense.
(d) If the Indemnified Party intends to seek indemnification hereunder,
other than for a Third Party Claim, then it shall notify the Representatives or
Targeted, as the case may be, in writing ninety (90) days after its discovery of
facts upon which it intends to base its claim for indemnification hereunder, but
the failure or delay so to notify the Representatives or Targeted, as the case
may be, shall not relieve the indemnifying party of any obligation or liability
that the indemnifying party may have to the Indemnified Party except to the
extent that the Representatives or Targeted, as the case may be, demonstrate
that the ability to defend or resolve such claim is adversely affected thereby.
(e) The Indemnified Party may notify the Representatives or Targeted, as
the case may be, of a claim even though the amount thereof plus the amount of
other claims previously notified by the Indemnified Party aggregate less than
the Threshold.
8.5 ESCROW
8.5.1 ESCROWED SHARES
At the Effective Time, the Stockholders shall be deemed to have pledged
three hundred sixty three thousand six hundred thirty six (363,636) shares of
the aggregate Common Equivalent Closing Consideration ("Escrowed Shares") to
Targeted as the sole and exclusive mechanism (subject to the provisions of
Section 8.6 hereof) to satisfy potential claims for indemnification by Targeted
and its affiliates under this Article VIII. Any liability of the Stockholders
for indemnification under this Article VIII will be set off against the Escrowed
Shares.
8.5.2 PLEDGE
The Escrowed Shares (which shall include for purposes of this Section 8.5
any distributions accrued or made thereon after the date of this Agreement and
any other securities or property which may be issued after the date hereof in
exchange for such shares in any merger or recapitalization or similar
transaction involving Targeted) shall be deemed as of the Effective Time to be
pledged by the Stockholders to, and shall be held by, Targeted pursuant to this
Agreement. The Stockholders shall deliver to Targeted at the Closing appropriate
stock powers endorsed in blank and such other documentation as Targeted may
reasonably prescribe to carry out the purposes of this Section 8.5. So long as
any Escrowed Shares are held by Targeted hereunder, Targeted shall have, and the
Stockholders hereby grant, effective as of the Effective Time, a perfected,
first-priority security interest in such Escrowed Shares to secure payment of
amounts payable by the Stockholders in respect of indemnification claims for any
Losses.
8.5.3 RELEASE OF ESCROWED SHARES
Targeted shall hold the Escrowed Shares in accordance with this Agreement
and shall transfer the Escrowed Shares only as follows:
(a) Escrowed Shares shall be retransferred to Targeted in respect of
indemnification claims made by Targeted under this Article VIII when, and
to the extent, authorized under Section 8.5.4 hereof.
(b) On the Escrow Termination Date (as defined below), any Escrowed
Shares then remaining pledged to Targeted (which shall exclude shares
re-retransferred to Targeted under Section 8.5.3(a)) shall be released to
the Stockholders pro rata in accordance with their percentage ownership of
the Escrowed Shares.
Except as otherwise set forth in Section 8.5.4 hereof, for purposes of this
Agreement, the "Escrow Termination Date" shall mean the date one year after the
Effective Date.
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8.5.4 CLAIMS PROCEDURE
The procedure for payment from the Escrowed Shares of indemnification
amounts to which Targeted or other Indemnified Parties may become entitled under
this Article VIII shall be as follows:
(a) Subject to the limitation that written notice of any claim for
indemnification hereunder must be given to the Representatives not later
than the Escrow Termination Date, from time to time as Targeted determines
that it or another Indemnified Party is entitled to an indemnification
payment under this Article VIII, Targeted may give written notice of the
claim for a Loss to the Representatives describing in such notice the
nature of the claim, the amount thereof if then ascertainable and, if not
then ascertainable, the estimated maximum amount thereof, and the
provisions in this Agreement on which the claim is based. Such loss or
claim must be reasonably likely to be incurred or asserted at the time such
notice is given.
(b) If Targeted has not received written objection to a claim for a
Loss in accordance with Section 8.5.4(a) from the Representatives within
thirty (30) days after notice of such claim is delivered (the "Response
Period"), the claim stated in such notice shall be deemed, for purposes of
delivering Escrowed Shares to Targeted, to be approved by the
Representatives, and Targeted shall promptly thereafter transfer to the
Indemnified Party from the Escrowed Shares an amount of Escrowed Shares
equal in value to the amount of such claim. The Escrowed Shares to be
transferred shall be rounded to the nearest whole share and shall be valued
on the basis of the last reported sale price of Targeted's Common Stock on
the Nasdaq National Market on the date the notice of claim was delivered.
(c) If within the Response Period Targeted shall have received from
the Representatives a written objection to the claim specifying the nature
of and grounds for such objection, then such claim shall be deemed to be an
"Open Claim," and Targeted shall reserve within the Escrowed Shares an
amount of Escrowed Shares equal to the amount of such Open Claim (which
amount designated for each Open Claim is referred to herein as the "Claim
Reserve Amount"). The number of Escrowed Shares to be reserved shall be
determined (rounded to the nearest whole share) by dividing the amount of
the Open Claim by the average of the last reported sale price of Targeted
Common Stock on the Nasdaq National Market over the twenty (20) trading
days preceding such written objection. The number of Escrowed Shares
included in the Claim Reserve Amount shall be increased or reduced, as the
case may be, on a quarterly basis based on the average of the last reported
sale prices of Targeted Common Stock on the Nasdaq National Market over the
then preceding twenty (20) trading days.
(d) The Claim Reserve Amount for each Open Claim shall be transferred
by Targeted from the Escrowed Shares only in accordance with either (i) a
mutual agreement among Targeted and the Representatives, which shall be
memorialized in writing, or (ii) a final and binding arbitration decision
or order pertaining to the Open Claim, except that on the Escrowed
Termination Date all Escrowed Shares not previously distributed or then
required to be distributed to Targeted in accordance with this Section 8.5
shall be released to the Stockholders pro rata in accordance with Schedule
2.4(b) to the Company Disclosure Memorandum, whether or not all Open Claims
have then been resolved.
8.5.5 VOTING
The Escrowed Shares shall be held of record by the Stockholders, who shall
have full right to vote the Escrowed Shares on all matters coming before the
shareholders of Targeted.
8.5.6 MERGER OR RECAPITALIZATION
In the event of any merger or recapitalization or similar transaction
involving Targeted prior to the time when all Escrowed Shares have been
transferred or released in accordance with the terms of this Section 8.5, such
Escrowed Shares shall be converted or exchanged in accordance with such
transaction in the same manner as other shares of Targeted Common Stock, and any
securities or property issued in conversion or exchange thereof shall then be
included within the definition of Escrowed Shares and shall otherwise become
subject to this Agreement in lieu of such shares of Targeted Common Stock. If as
a result of any such transaction the shareholders of Targeted immediately before
the transaction will not own in excess of fifty percent (50%) of the
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voting capital stock of Targeted immediately after the transaction, the Escrow
Termination Date shall be deemed to be the closing date of such transaction and
the Escrowed Shares shall be retransferred to Targeted or released to the
Stockholders, as the case may be, as provided herein.
8.5.7 TAXATION OF DIVIDENDS
Each Stockholder hereby acknowledges that, for federal and state income tax
purposes, any dividends or other distributions with respect to the Escrowed
Shares shall be income of the Stockholders.
8.5.8 DISPOSITION OF ESCROWED SHARES
Subject to the provisions of Section 5.15 of this Agreement, upon delivery
of written instructions to Targeted, a Stockholder may elect to sell some or all
of such Stockholder's Escrowed Shares. The instructions shall specify the number
of Escrowed Shares to be sold and shall consist of a written direction to
Targeted to deliver to the broker executing such sale, as specified in such
instructions, (i) certificates representing the Escrowed Shares to be sold, (ii)
stock powers, endorsed in blank in proper form for transfer, for such Escrowed
Shares, (iii) an irrevocable order (not a limit order or other order imposing
restrictions or conditions on the sale) to such broker to sell such Escrowed
Shares at the market, and (iv) written instructions to Targeted and the broker
executing such sale to deliver the net proceeds of such sale directly to
Targeted for deposit into escrow in accordance with this Agreement. Such
instructions shall include a specific direction to Targeted to invest the net
proceeds received upon any such sale in specified securities in one or more of
the following categories: (w) investment grade United States municipal
obligations, (x) direct obligations of the United States government or agencies
thereof, (y) investment grade United States corporate bonds, or (z) rated no
load mutual funds consisting of one or more of the foregoing categories of
securities. Returns on such investments shall be added to the proceeds held in
escrow.
8.6 REMEDIES
The indemnification provisions of this Article VIII are the sole and
exclusive remedy of any party to this Agreement for a breach of any
representation, warranty or covenant contained herein, except with respect to
any claim based on fraud in the inducement or a similar theory (including,
without limitation, claims based upon Rule 10b-5 under the Securities Exchange
Act of 1934, as amended), and provided that nothing in this Agreement shall
preclude a Stockholder from seeking any remedy otherwise available to such
Stockholder as a shareholder of Targeted. Notwithstanding the preceding
sentence, each of the parties acknowledges and agrees that the other parties
hereto would be damaged irreparably in the event any of the provisions of this
Agreement are not performed in accordance with their specific terms or otherwise
are breached. Accordingly, each of the parties hereto agrees the other parties
hereto shall be entitled to an injunction to prevent breaches of the provisions
of this Agreement and to enforce specifically this Agreement and the terms and
provisions hereof (including the indemnification provisions hereof) in any
competent court having jurisdiction over the parties, in addition to any other
remedy to which they may be entitled at law or in equity.
ARTICLE IX -- GENERAL
9.1 EXPENSES
Regardless of whether the transactions contemplated by this Agreement are
consummated each party shall pay its own fees and expenses incident to the
negotiation, preparation and execution of this Agreement (including legal and
accounting fees and expenses); provided, however, that, should any action be
brought hereunder, the attorneys' fees and expenses of the prevailing party
shall be paid by the other party to such action.
9.2 NOTICES
Any notice or demand desired or required to be given hereunder shall be in
writing given by personal delivery, certified or registered mail, confirmed
facsimile transmission, or overnight courier service, in each case addressed as
respectively set forth below or to such other address as any party shall have
previously designated
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by such a notice. The effective date of any notice or request shall be the date
of personal delivery, four (4) days after the date of mailing by certified or
registered mail, the date on which successful facsimile transmission is
confirmed, or the date undertaken for delivery by a reputable overnight courier
service, as the case may be, in each case properly addressed as provided herein
and with all charges prepaid.
TO TARGETED OR ACQUISITION:
Targeted Genetics Corporation
1100 Olive Way, Suite 100
Seattle, Washington 98101
Fax: (206) 521-7872
Attention: Chief Executive Officer
with a copy to:
Perkins Coie
1201 Third Avenue, 40th Floor
Seattle, Washington 98101-3099
Fax: (206) 583-8500
Attention: Stephen M. Graham
TO THE COMPANY:
RGene Therapeutics, Inc.
2170 Buckhorne Place, Suite 230
The Woodlands, Texas 77380
Fax: (713) 367-1661
Attention: President
with a copy to:
Mayor, Day, Caldwell & Keeton
700 Louisiana
Nations Bank Building, 19th Floor
Houston, Texas 77002
Fax: (713) 225-7047
Attention: Richard Mayor
9.3 SEVERABILITY
If any term or other provision of this Agreement is invalid, illegal or
incapable of being enforced by any rule of law, or public policy, all other
conditions and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner adverse to any party. Upon
such determination that any term or other provision is invalid, illegal or
incapable of being enforced, the parties hereto shall negotiate in good faith to
modify this Agreement so as to effect the original intent of the parties as
closely as possible in a mutually acceptable manner in order that the
transactions contemplated hereby are consummated as originally contemplated to
the fullest extent possible.
9.4 ENTIRE AGREEMENT
This Agreement and the Confidentiality Agreement constitute the entire
agreement among the parties with respect to the subject matter hereof and
thereof and supersede all prior agreements and undertakings, both written and
oral, among the parties, or any of them, with respect to the subject matter
hereof and thereof.
9.5 ASSIGNMENT
This Agreement shall not be assigned by operation of law or otherwise,
except that Targeted may assign all or any of its rights and obligations
hereunder to any of its affiliates; provided, however, that no such assignment
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shall relieve the assigning party of its obligations hereunder if such assignee
does not perform such obligations, and further provided that any such assignment
shall not change the consideration due to the Stockholders hereunder.
9.6 PARTIES IN INTEREST
This Agreement shall be binding upon and inure solely to the benefit of
each party hereto, and nothing in this Agreement, express or implied, is
intended to or shall confer upon any other Person (other than the Stockholders
upon consummation of the Merger) any right, benefit or remedy of any nature
whatsoever under or by reason of this Agreement.
9.7 HEADINGS
The descriptive headings contained in this Agreement are included for
convenience of reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
9.8 COUNTERPARTS
This Agreement may be executed and delivered (including by facsimile
transmission) in one or more counterparts, and by the different parties hereto
in separate counterparts, each of which when executed and delivered shall be
deemed to be an original but all of which taken together shall constitute one
and the same agreement.
9.9 GOVERNING LAW
This Agreement shall be governed by, and construed in accordance with, the
laws of the state of Delaware applicable to contracts executed in and to be
performed in that state.
9.10 KNOWLEDGE
"Knowledge," "Know," "best of Knowledge" and similar terms shall mean the
actual knowledge, after a reasonable amount of investigation, of the most senior
managerial employee of a party with responsibility for the matter as to which
knowledge is imputed.
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IN WITNESS WHEREOF, the parties hereto have entered into and signed this
Agreement as of the date and year first above written.
TARGETED GENETICS CORPORATION
By /s/ H. STEWART PARKER
------------------------------------
Its President and Chief Executive
Officer
TGC ACQUISITION CORPORATION
By /s/ H. STEWART PARKER
------------------------------------
Its President and Chief Executive
Officer
RGENE THERAPEUTICS, INC.
By /s/ MARTIN H. LINDENBERG, M.D.
------------------------------------
Its President and Chief Executive
Officer
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