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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT: JULY 22, 1996
(Date of earliest event reported)
INCYTE PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 0-27488 94-3136539
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
3174 PORTER DRIVE, PALO ALTO, CALIFORNIA 94304
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (415) 855-0555
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Item 2. Acquisition or Disposition of Assets.
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On July 22, 1996, the Registrant, Incyte Pharmaceuticals, Inc. ("Incyte"),
acquired all of the outstanding shares of capital stock of Genome Systems, Inc.,
a privately held corporation ("Genome Systems"). Genome Systems provides genomic
research products and services used by scientists to assist in the
identification and isolation of novel genes. Pursuant to the Securities Exchange
Agreement dated as of July 22, 1996 among Incyte, Genome Systems and the
securityholders of Genome Systems listed therein (the "Exchange Agreement"),
Incyte exchanged 204,073 shares of its common stock, $.001 par value ("Incyte
Common Stock") for all of the outstanding shares of capital stock of Genome
Systems and issued an option to purchase 10,741 shares of Incyte Common Stock in
exchange for the outstanding option to purchase shares of capital stock of
Genome Systems (the "Exchange"), and Genome Systems became a wholly-owned
subsidiary of Incyte.
Item 7. Financial Statements and Exhibits.
---------------------------------
(a) Financial Statements of Business Acquired.
Financial statements of Genome Systems, if required to be filed, will
be filed as soon as practicable, but not later than 60 days after the
date hereof, as it is impracticable to include such financial
statements herewith.
(b) Pro Forma Financial Information.
Pro forma financial information, if required to be filed, will be
filed as soon as practicable, but not later than 60 days after the
date hereof, as it is impracticable to include such financial
information herewith.
(c) Exhibits
2.1 Securities Exchange Agreement, dated as of July 22, 1996, among Incyte
Pharmaceuticals, Inc., Genome Systems, Inc., and the securityholders
of Genome Systems, Inc. listed therein.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: August 6, 1996.
INCYTE PHARMACEUTICALS, INC.
By /s/ Denise M. Gilbert
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Name Denise M. Gilbert
--------------------------------
Title Executive Vice President
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EXHIBIT INDEX
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Exhibit
Number Description
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2.1 Securities Exchange Agreement, dated as of July 22, 1996, among
Incyte Pharmaceuticals, Inc., Genome Systems, Inc., and the
securityholders of Genome Systems, Inc. listed therein.
Exhibit 2.1
SECURITIES EXCHANGE AGREEMENT
BY AND AMONG
INCYTE PHARMACEUTICALS, INC.,
GENOME SYSTEMS, INC.
DAVID A. SMOLLER, PAUL GOLD,
MARK CUNNINGHAM
AND
VYSIS, INC.
July 22, 1996
TABLE OF CONTENTS
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Page
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ARTICLE 1 PURCHASE AND SALE................................................. 1
1.1 Closing Date........................................................1
1.2 The Exchange........................................................2
1.3 Delivery of Securities at Closing...................................2
1.4 Tax Treatment.......................................................2
1.5 Accounting Treatment................................................2
ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF THE COMPANY
AND THE SECURITYHOLDERS........................................... 3
2.1 Representations and Warranties of the Company
and Certain Securityholders....................................... 3
2.1.1 Organization............................................ 3
2.1.2 Capital Structure....................................... 3
2.1.3 Equity Investments...................................... 5
2.1.4 Authority............................................... 5
2.1.5 No Conflict with Other Instruments...................... 5
2.1.6 Governmental Consents................................... 5
2.1.7 Financial Statements.................................... 6
2.1.8 Payables; Receivables................................... 6
2.1.9 Absence of Changes...................................... 7
2.1.10 Properties.............................................. 9
2.1.11 Environmental Matters................................... 9
2.1.12 Taxes................................................... 10
2.1.13 Employees............................................... 11
2.1.14 Compliance with Law..................................... 11
2.1.15 Litigation.............................................. 11
2.1.16 Contracts............................................... 12
2.1.17 No Default.............................................. 13
2.1.18 Proprietary Rights...................................... 13
2.1.19 Insurance............................................... 15
2.1.20 Brokers or Finders...................................... 15
2.1.21 Related Parties......................................... 15
2.1.22 Certain Advances........................................ 15
2.1.23 Underlying Documents.................................... 16
2.1.24 No Misleading Statements................................ 16
2.2 Additional Representations and Warranties of
the Securityholders............................................... 16
2.2.1 Authority............................................... 16
2.2.2 No Conflict with Other Instruments...................... 16
2.2.3 Ownership of Securities................................. 17
2.2.4 Disclosure.............................................. 17
2.2.5 Exchange Entirely for Own Account....................... 17
2.2.6 Reliance Upon the Securityholder's
Representations......................................... 17
2.2.7 Receipt of Information.................................. 18
2.2.8 Restricted Securities................................... 18
2.2.9 Legends................................................. 18
2.2.10 Brokers or Finders...................................... 19
2.2.11 Vysis Status............................................ 19
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Page
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ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE
PURCHASER......................................................... 19
3.1 Organization...................................................... 19
3.2 Authority......................................................... 19
3.3 No Conflict with Other Instruments.................................20
3.4 Governmental Consents..............................................20
3.5 SEC Documents......................................................20
3.6 Shares of Purchaser Common.........................................21
3.7 Litigation.........................................................21
3.8 Brokers or Finders.................................................21
3.9 Acquisition for Investment.........................................21
ARTICLE 4 ADDITIONAL COVENANTS...............................................21
4.1 Expenses...........................................................21
4.2 Agreements by Securityholders......................................22
4.3 Nasdaq Listing.....................................................22
ARTICLE 5 CONDITIONS PRECEDENT...............................................22
5.1 Conditions to Each Party's Obligations to
Effect the Exchange................................................22
5.2 Conditions to Obligations of the Purchaser.........................23
5.3 Conditions to Obligations of the
Securityholders....................................................25
ARTICLE 6 INDEMNIFICATION....................................................25
6.1 Survival...........................................................25
6.2 Indemnification by the Securityholders.............................26
6.3 Indemnification by the Purchaser...................................26
6.4 Limitations as to Amount--the Securityholders......................27
6.5 Limitations as to Amount--the Purchaser............................27
6.6 Procedure for Indemnification--Third Party
Claims.............................................................27
6.7 Escrow Fund....................................................... 29
6.8 Escrow Period..................................................... 29
6.9 Protection of Escrow Fund......................................... 29
6.10 Distributions; Voting............................................. 29
6.11 Claims Upon Escrow Fund........................................... 30
6.12 Objections to Claims.............................................. 30
6.13 Resolution of Conflicts........................................... 31
6.14 Distribution upon Termination of Escrow Period.................. . 31
ARTICLE 7 AMENDMENT AND WAIVER.............................................. 31
7.1 Amendment........................................................ 31
7.2 Extension; Waiver................................................. 31
ARTICLE 8 ADDITIONAL REPRESENTATIONS, WARRANTIES AND
AGREEMENTS OF THE PRINCIPAL SECURITYHOLDERS....................... 32
8.1 Tax and Accounting Treatment...................................... 32
8.2 Reliance Upon Representations, Warranties and
Covenants......................................................... 32
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Page
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8.3 Additional Representations, Warranties and
Covenants of the Principal Securityholders........................ 32
8.4 Resignations...................................................... 33
ARTICLE 9 ADDITIONAL AGREEMENTS OF THE SECURITYHOLDERS
AND THE COMPANY................................................... 33
9.1 Shareholder Agreement............................................. 33
9.2 Company Registration Rights Agreement............................. 33
ARTICLE 10 GENERAL........................................................... 34
10.1 Notices........................................................... 34
10.2 Headings.......................................................... 34
10.3 Counterparts...................................................... 34
10.4 Binding Nature.................................................... 35
10.5 Applicable Law.................................................... 35
Appendix A Form of Employment and Non-Competition
Agreement
Appendix B Purchaser Option
Appendix C Registration Rights Agreement
Appendix D Escrow Agreement
Exhibit 5.2(e) Form of Opinion of Stinson, Mag & Fizzell,
P.C.
Exhibit 5.2(f) Form of Opinion of Counsel to Vysis, Inc.
Exhibit 5.3(d) Form of Opinion of Pillsbury Madison & Sutro
LLP
Schedule 1.2 Consideration for the Exchange
Schedule 2.1.11(c) Schedule of Certain Environmental Matters
* All Appendices and Exhibits and Schedule 2.1.11(c) are not
filed with this Agreement. The Registrant hereby agrees to
furnish supplementally to the Securities and Exchange Commission
a copy of any omitted Appendix, Exhibit or Schedule upon
request.
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SECURITIES EXCHANGE AGREEMENT
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THIS SECURITIES EXCHANGE AGREEMENT dated as of the 22nd day
of July, 1996, by and among INCYTE PHARMACEUTICALS, INC., a
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Delaware corporation ("Incyte" or the "Purchaser"), GENOME
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SYSTEMS, INC., a Missouri corporation (the "Company"), and DAVID
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A. SMOLLER, PAUL GOLD, MARK CUNNINGHAM and VYSIS, INC., an
- - ---------- --------- --------------- -----------
Illinois corporation (each a "Securityholder," and collectively
the "Securityholders").
This Agreement is made with reference to the following
facts:
A. The Purchaser desires, subject to the terms and
conditions hereinafter set forth, to acquire all of the rights
of equity ownership of the Company through the exchange (the
"Exchange") by the Purchaser of (i) shares of its common stock,
$.001 par value (the "Purchaser Common"), for all of the issued
and outstanding shares of common stock, par value $1.00 per
share (the "Company Common"), and Series A Preferred Stock,
without par value (the "Company Preferred"), of the Company and
(ii) an option to purchase shares of Purchaser Common for the
outstanding option, dated June 23, 1994, to acquire 1,000 shares
of Company Preferred (the "Company Option" and, together with
such shares of Company Common and Company Preferred, the
"Securities"), and the Securityholders desire, subject to the
terms and conditions hereinafter set forth, to effect the
Exchange.
B. The parties desire to make certain representations,
warranties and agreements in connection with the Exchange and
desire to prescribe certain conditions precedent to such
purchase and sale, including the condition of the Purchaser's
obligations hereunder that certain of the Securityholders enter
into Employment and Non-Competition Agreements in substantially
the form attached hereto as Appendix A to, among other things,
secure to the Purchaser the benefits of this Agreement,
including the goodwill of the business of the Company.
NOW, THEREFORE, in consideration of the mutual covenants
and conditions contained herein, the Purchaser and the
Securityholders agree as follows:
ARTICLE 1
PURCHASE AND SALE
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1.1 Closing Date. The Closing under this Agreement (the
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"Closing") shall be held simultaneously with the execution of
this Agreement. The Closing shall be deemed to be effective as
of the close of business on the date of execution of this
Agreement. Such date on which the Closing is to be held is
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herein referred to as the "Closing Date." The Closing shall be
held at the offices of Pillsbury Madison & Sutro LLP,
235 Montgomery Street, San Francisco, California, at 10:00 A.M.
on such date, or at such other time and place as the Purchaser
and the Securityholders may agree upon in writing.
1.2 The Exchange.
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(a) At the Closing, the Purchaser shall issue to the
Securityholders owning Company Common and Company Preferred that
number of shares of Purchaser Common determined as set forth in
the succeeding sentence. The aggregate number of shares of
Purchaser Common to be delivered by the Purchaser at the Closing
shall be determined by dividing 95% of $8,000,000 by the average
closing price of the Purchaser Common as quoted by The Nasdaq
Stock Market for the 30 consecutive trading days ending on and
including July 19, 1996 (the "Average Closing Price"), and
rounding down to the nearest whole share. Each such
Securityholder shall receive that number of shares of the
Purchaser Common set forth in Schedule 1.2.
(b) At the Closing, the Purchaser shall issue to the
holder of the Company Option an option (the "Purchaser Option")
in the form attached hereto as Appendix B. The number of shares
of Purchaser Common subject to the Purchaser Option shall be
determined by dividing 5% of $8,000,000 by the Average Closing
Price and rounding down to the nearest whole share and the
exercise price per share shall be equal to $500 divided by such
number of shares, all as set forth in Schedule 1.2. The Company
and Mark Cunningham hereby agree that, as of and conditioned
upon the Closing and the issuance of the Purchaser Option in the
Exchange, the Company Option shall be terminated and shall have
no further force or effect.
1.3 Delivery of Securities at Closing. At the Closing,
---------------------------------
the Securityholders shall deliver to the Purchaser certificates
evidencing the Securities which are duly endorsed for transfer
thereon or by means of duly executed stock powers attached
thereto against delivery by the Purchaser of (i) irrevocable
instructions to the Purchaser's Transfer Agent to issue that
number of shares of the Purchaser Common in the names of the
respective Securityholders, in accordance with Section 1.2 and
(ii) the Purchaser Option.
1.4 Tax Treatment. The parties intend that the Exchange
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will be a tax-free reorganization within the meaning of
Section 368 of the Internal Revenue Code of 1986, as amended
(the "Code").
1.5 Accounting Treatment. The parties intend that the
--------------------
Exchange shall be treated as a pooling of interests for
accounting purposes.
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ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
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AND THE SECURITYHOLDERS
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2.1 Representations and Warranties of the Company and
-------------------------------------------------
Certain Securityholders. Except as otherwise specifically set
- - -----------------------
forth on the disclosure schedule certified by David A. Smoller
and Paul Gold as Securityholders and as officers of the Company
and delivered by the Company to the Purchaser prior to the
execution of this Agreement (the "Disclosure Schedule"), David
A. Smoller and Paul Gold (together, the "Principal
Securityholders") and the Company severally represent and
warrant to the Purchaser as follows:
2.1.1 Organization. The Company is a corporation duly
------------
organized, validly existing and in good standing under the laws
of the State of Missouri and has all corporate power and
authority to own, lease and operate its properties and to carry
on its business as now being conducted. The Company is
qualified to do business as a foreign corporation and is in good
standing under the laws of each state or other jurisdiction in
which the nature of its business requires such qualification,
except where the failure to be so qualified would not have a
material adverse effect on the business of the Company. The
states or jurisdictions in which the Company is so qualified are
listed on the Disclosure Schedule. The Securityholders have
delivered or made available to the Purchaser true, complete and
correct copies of its (a) Articles of Incorporation and Bylaws,
as amended to the date hereof, (b) minutes of all of directors'
and shareholders' meetings, complete and accurate as of the date
hereof, (c) stock certificate books and all other records of the
Company, which collectively correctly set forth the record
ownership of all outstanding shares of capital stock and all
rights to purchase capital stock of the Company, and (d) form of
stock certificates, option agreements and rights to purchase
shares of capital stock of the Company.
2.1.2 Capital Structure.
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(a) The authorized capital stock of the Company consists
of 30,000 shares of Company Common and 3,000 shares of Company
Preferred. As of the date of this Agreement (without giving
effect to the exercise of the Company Option), there were issued
and outstanding 17,600 shares of Company Common and 1,400 shares
of Company Preferred convertible into shares of Company Common
at the rate of one share of Company Common for each share of
Company Preferred, subject to adjustment as set forth in the
Company's Articles of Incorporation. As of the date of this
Agreement, sufficent shares of authorized but unissued Company
Common have been reserved for issuance upon conversion of the
Company Preferred and upon the exercise of the Company Option.
The rights, preferences and privileges of the Company Common and
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the Company Preferred are as set forth in the Company's Articles
of Incorporation.
(b) Other than as described paragraph (a) above and other
than the Registration Rights Agreement dated June 23, 1994 among
the Company and the Securityholders (the "Company Registration
Rights Agreement"), there are no other outstanding shares of
capital stock or other equity securities of the Company and no
other options, warrants, calls, conversion rights, commitments
or agreements of any character to which the Company is a party
or by which the Company may be bound that do or may obligate the
Company to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of the Company's capital
stock or securities convertible into or exchangeable for capital
stock of the Company or that do or may obligate the Company to
grant, extend or enter into any such option, warrant, call,
conversion right, commitment or agreement.
(c) All outstanding shares of the Company's capital stock
are, and any shares of the Company's capital stock issued upon
exercise of the Company Option (subject to receipt of the
exercise price as provided therein) will be, validly issued,
fully paid and nonassessable and not subject to preemptive
rights created by statute, the Company's Articles of
Incorporation or Bylaws or any agreement to which the Company is
a party or by which the Company may be bound. All outstanding
securities of the Company have been issued in compliance with
applicable federal and state securities laws.
(d) Schedule 2.1.2 in the Disclosure Schedule contains a
complete and accurate list of, and the number of shares owned of
record by, the holders of outstanding Company Common, Company
Preferred, and the Company Option, including the addresses of
such holders. The Disclosure Schedule identifies the vesting
schedule, applicable legends, and repurchase rights or other
risks of forfeiture of any outstanding security of the Company.
(e) Except for the Company Option, the Company does not
have in effect any stock option, stock appreciation rights or
other equity-related stock incentive plan.
(f) Except for any restrictions imposed by applicable
state and federal securities laws, there is no right of first
refusal, co-sale right, right of participation, right of first
offer, option or other restriction on transfer applicable to any
shares of Company Common or Company Preferred, other than those
set forth in the Shareholder Agreement dated June 23, 1994 by
and among the Company and the Securityholders (the "Shareholder
Agreement"), which rights thereunder have been waived or made
otherwise inapplicable with respect to the transactions
contemplated by this Agreement.
(g) Except for the Shareholder Agreement, the Company is
not a party or subject to any agreement or understanding that
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affects or relates to the voting or giving of written consent
with respect to any outstanding security of the Company. Each
Principal Securityholder represents and warrants that to the
best of such Securityholder's knowledge, there is no voting
trust, proxy, or other agreement or understanding between or
among any persons that affects or relates to the voting or
giving of written consent with respect to any outstanding
security of the Company.
2.1.3 Equity Investments. The Company does not own any
------------------
equity interest, directly or indirectly, in any corporation,
partnership, joint venture, trust, firm or other entity.
2.1.4 Authority. The Company has all requisite corporate
---------
power and authority to enter into this Agreement, to execute,
deliver and perform its obligations hereunder, and to consummate
the transactions contemplated hereby. The execution and
delivery of this Agreement, the performance by the Company of
its obligations hereunder and the consummation of the
transactions contemplated hereby, have been duly and validly
authorized by all necessary corporate action on the part of the
Company, including approval by its Board of Directors. No vote
of the Company's shareholders is required in connection with the
transactions set forth in this Agreement. This Agreement has
been duly executed by the Company and constitutes the valid and
binding obligation of the Company.
2.1.5 No Conflict with Other Instruments. Except as set
----------------------------------
forth in the Disclosure Schedule, the execution, delivery and
performance of this Agreement and the transactions contemplated
hereby (a) will not result in any violation of, conflict with,
constitute a breach, violation or default (with or without
notice or lapse of time, or both) under, give rise to a right of
termination, cancellation, forfeiture or acceleration of any
material obligation or loss of any material benefit under, or
result in the creation or encumbrance on any of the properties
or assets of the Company pursuant to (i) any provision of the
Articles of Incorporation or Bylaws of the Company or (ii) any
contract listed on the Disclosure Schedule pursuant to Section
2.1.16 or any other material agreement, contract, understanding,
note, mortgage, indenture, lease, franchise, license, permit or
other instrument to which the Company is a party or by which it
or any of its properties or assets is bound, or (b) to the best
knowledge of the Company and the Principal Securityholders,
conflict with or result in any breach or violation of any
statute, judgment, decree, order, rule or governmental
regulation applicable to the Company or its properties or
assets.
2.1.6 Governmental Consents. Except as set forth in the
---------------------
Disclosure Schedule, no consent, approval, order or
authorization of, or registration, declaration of, or
qualification or filing with, any court, administrative agency,
commission, regulatory authority or other governmental or
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administrative body or instrumentality, whether domestic or
foreign, is required by or with respect to the Company in
connection with the execution, delivery and performance of this
Agreement by the Company or the consummation by the Company of
the transactions contemplated hereby, except for such consents,
approvals, orders, authorizations, registrations, declarations,
qualifications or filings as may be required under state
securities or Blue Sky laws in connection with the transactions
set forth herein or which the failure to obtain would not have a
material adverse effect on the Company or the consummation by
the Company of the transactions contemplated hereby.
2.1.7 Financial Statements. The Company has furnished to
--------------------
the Purchaser a complete and accurate copy of the Company's
balance sheet as of December 31, 1995, and its statements of
income and cash flow statements for the years ended December 31,
1995 and 1994, and the Company's unaudited balance sheet and
statement of income as of and for the five months ended May 31,
1996. The balance sheet at May 31, 1996 is hereinafter referred
to as the "Balance Sheet," and all such financial statements are
hereinafter referred to collectively as the "Financial State-
ments." The Financial Statements are complete and correct in
all material respects and have been prepared in accordance with
generally accepted accounting principles ("GAAP") applied on a
consistent basis throughout the periods indicated except that
they do not contain full footnote disclosures in accordance with
GAAP, and are consistent with each other. The Financial
Statements fairly present the financial condition and operating
results of the Company as of the dates, and for the periods,
indicated therein, subject to normal year-end adjustments. At
the date of the Balance Sheet (the "Balance Sheet Date") and as
of the Closing Date, the Company had and will have no liabili-
ties or obligations, secured or unsecured (whether accrued,
absolute, contingent or otherwise) not reflected on the Balance
Sheet or the accompanying notes thereto except for liabilities
and obligations as may have arisen in the ordinary course of
business prior to the date of the Balance Sheet and which, under
GAAP, would not have been required to be reflected on the
Balance Sheet and except for liabilities incurred in the ordi-
nary course of business since the date of the Balance Sheet
which are allowed pursuant to Section 2.1.9. Attached as
Schedule 2.1.7 to the Disclosure Schedule is the Company's 12-
month budget for the 12 months ending June 30, 1997 that sets
forth its budgeted revenues and expenses for its base business
(excluding revenues and costs associated with the anticipated
cDNA mapping collaboration between the Company and the
Purchaser).
2.1.8 Payables; Receivables.
---------------------
(a) The Company has delivered to the Purchaser accurate
and complete schedules setting forth agings of accounts payable
and accounts receivable of the Company in the aggregate and by
creditor or debtor, as the case may be (for the period zero (0)
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to thirty (30) days, thirty (30) to ninety (90) days and greater
than ninety (90) days, if applicable), as of the Balance Sheet
Date.
(b) All of the Company's general ledgers, books and
records are located at the Company's principal place of
business. The Company does not have any of its records,
systems, controls, data or information recorded, stored,
maintained, operated or otherwise wholly or partly dependent
upon or held by any means (including any electronic, mechanical
or photographic process, whether computerized or not) that
(including all means of access thereto and therefrom) are not
under the exclusive ownership and direct control of the Company.
2.1.9 Absence of Changes. Since the Balance Sheet Date,
------------------
except as otherwise contemplated by this Agreement or set forth
in the Disclosure Schedule, the Company has conducted its
business only in the ordinary and usual course and, without
limiting the generality of the foregoing:
(a) There have been no changes in the condition
(financial or otherwise), business, net worth, assets, proper-
ties, employees, operations, obligations or liabilities of the
Company which, in the aggregate, have had or may be reasonably
expected to have a material adverse effect on the condition,
business, net worth, assets, prospects, properties or operations
of the Company;
(b) The Company has not issued, or authorized for
issuance, or entered into any commitment to issue, any equity
security, bond, note or other security of the Company;
(c) The Company has not incurred additional debt for
borrowed money or incurred any obligation or liability except in
the ordinary and usual course of business and in any event not
in excess of $5,000 for any single occurrence;
(d) The Company has not paid any obligation or
liability, or discharged, settled or satisfied any claim, lien
or encumbrance, except for current liabilities in the ordinary
and usual course of business and in any event not in excess of
$5,000 for any single occurrence;
(e) The Company has not declared or made any dividend,
payment or other distribution on or with respect to any share of
capital stock of the Company;
(f) The Company has not purchased, redeemed or otherwise
acquired or committed itself to acquire, directly or indirectly,
any share or shares of capital stock of the Company;
(g) The Company has not mortgaged, pledged, or otherwise
encumbered any of its assets or properties, except for liens for
current taxes which are not yet delinquent and purchase-money
-7-
liens arising out of the purchase or sale of services or
products made in the ordinary and usual course of business and
in any event not in excess of $2,500 for any single item or
$10,000 in the aggregate;
(h) The Company has not disposed of, or agreed to
dispose of, by sale, lease, license or otherwise, any other
asset or property, tangible or intangible, except, in the case
of such other assets and property, in the ordinary and usual
course of business, and in each case for a consideration
believed to be at least equal to the fair value of such asset or
property and in any event not in excess of $5,000 for any single
item or $10,000 in the aggregate;
(i) The Company has not purchased or agreed to purchase
or otherwise acquire any securities of any corporation, partner-
ship, joint venture, firm or other entity; except as authorized
in writing by the Purchaser, the Company has not made any
expenditure or commitment for the purchase, acquisition,
construction or improvement of a capital asset, except in the
ordinary and usual course of business and in any event not in
excess of $5,000 for any single item or $10,000 in the
aggregate;
(j) The Company has not entered into any transaction or
contract, or made any commitment to do the same, except in the
ordinary and usual course of business;
(k) Except as disclosed in Schedule 2.1.9(k) to the
Disclosure Schedule, the Company has not sold, assigned, trans-
ferred or conveyed, or committed itself to sell, assign, trans-
fer or convey, any Proprietary Rights (as defined in Section
2.1.18);
(l) The Company has not adopted or amended any bonus,
incentive, profit-sharing, stock option, stock purchase,
pension, retirement, deferred-compensation, severance, life
insurance, medical or other benefit plan, agreement, trust, fund
or arrangement for the benefit of employees of any kind whatso-
ever, nor entered into or amended any agreement relating to
employment, services as an independent contractor or consultant,
or severance or termination pay, nor agreed to do any of the
foregoing;
(m) The Company has not effected or agreed to effect any
change in its directors, officers or key employees; and
(n) The Company has not effected or committed itself to
effect any amendment or modification in its Articles of
Incorporation or Bylaws.
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2.1.10 Properties.
----------
(a) The Company owns no real property. The Balance
Sheet reflects all of the real and personal property used by the
Company in its business or otherwise held by the Company, except
for (i) property acquired or disposed of in the ordinary and
usual course of the business of the Company since the Balance
Sheet Date, and (ii) real and personal property not required
under GAAP to be reflected thereon. The Company has good and
marketable title to all assets and properties listed on the
Balance Sheet and thereafter acquired, free and clear of any
imperfections of title, lien, claim, encumbrance, restriction,
charge or equity of any nature whatsoever, except for the lien
of current taxes not yet delinquent and purchase money liens
arising out of the purchase or sale of services or products made
in the ordinary course of business. All of the material fixed
assets and properties reflected on the Balance Sheet or
thereafter acquired are in operating condition for the
requirements of the business as presently conducted by the
Company.
(b) Except for its offices and laboratory space in St.
Louis, Missouri (the "Property"), the Company does not lease any
real property, and has no real property under option to
purchase. The Property is held under valid, existing and
enforceable leases. To the knowledge of the Company and the
Principal Securityholders, the Property and the operations of
the Company thereon do not violate any applicable material
building code, zoning requirement or classification, or
pollution control ordinance or statute relating to the Property
or to such operations.
2.1.11 Environmental Matters. Except as set forth on
---------------------
Schedule 2.1.11(c), which is deemed to be delivered as part of
the Disclosure Schedule, and except for such exceptions or
breaches of this Section 2.1.11 which will not result in
aggregate fines and other penalties in excess of $7,500:
(a) To the knowledge of the Company and the Principal
Securityholders, the Company is in compliance with all
applicable local, state and federal statutes, orders, rules,
ordinances, regulations and codes and all applicable judicial or
adminstrative interpretations thereof relating to pollution or
protection of the environment, including, without limitation,
laws relating to exposures, emissions, discharges, releases or
threatened releases of Hazardous Substances (as hereinafter
defined) into or on land, ambient air, surface water,
groundwater or structures (including the protection, cleanup,
removal, remediation or damage thereof), or otherwise related to
the manufacture, processing, distribution, use, treatment,
storage, disposal, transport, discharge or handling of Hazardous
Substances (collectively, "Environmental Laws"). The Company
has not received any notice of any investigation, claim or
proceeding against the Company relating to Hazardous Substances
-9-
or any action pursuant to or violation or alleged violation
under any Environmental Law, and the Company is not aware of any
fact or circumstance which will impose any environmental
liability upon the Company. "Hazardous Substances" shall mean
any pollutant, contaminant, material, substance, waste, chemical
or compound regulated, restricted or prohibited by any law,
regulation or ordinance or designated by any governmental agency
to be hazardous, toxic, radioactive, biohazardous or otherwise a
danger to health or the environment.
(b) To the best knowledge of the Company and the
Principal Securityholders, there are no Hazardous Substances
currently in, under or on the soil, sediment, surface water or
groundwater, or on or under any properties owned, leased or
occupied by the Company. The Company has not disposed of any
Hazardous Substances on such properties in violation of any
Environmental Law. There is no present release or threatened
release by the Company of any Hazardous Substances in, on or
under such properties in violation of any Environmental Law. To
the knowledge of the Company and the Principal Stockholders, the
Company has not disposed of any materials at any site being
investigated or remediated for contamination or possible con-
tamination of the environment.
(c) The Company has all permits, licenses and approvals
required by Environmental Laws for the use and occupancy of, and
for all operations and activities conducted on, the Property,
and (i) to the knowledge of the Company and the Principal
Securityholders, the Company is in compliance with all such
permits, licenses and approvals and (ii) all such permits,
licenses and approvals have not, to the knowledge of the Company
and the Principal Securityholders, been revoked, and to the
extent permitted by law, will be transferred to the Purchaser at
the Closing.
2.1.12 Taxes. The Company has accurately and completely
-----
filed with the appropriate United States, state, local and
foreign governmental agencies all tax returns and reports
required to be filed (subject to permitted extensions applicable
to such filings), and has paid or accrued in full all taxes,
duties, charges, withholding obligations and other governmental
liabilities as well as any interest, penalties, assessments or
deficiencies, if any, due to, or claimed to be due by, any
governmental authority (including taxes on properties, income,
franchises, licenses, sales and payrolls). (All such items are
collectively referred to herein as "Taxes"). The Balance Sheet
fully accrues or reserves all current and deferred Taxes. The
Company is not a party to any pending action or proceeding, nor,
to the knowledge of the Company and the Principal
Securityholders, is any such action or proceeding threatened by
any governmental authority for the assessment or collection of
Taxes. No liability for Taxes has been incurred other than in
the ordinary course of business. There are no liens for Taxes
except for liens for property taxes not yet delinquent. The
-10-
Company is not a party to any Tax sharing, Tax allocation, Tax
indemnity or statute of limitations extension or waiver
agreement and has never been included on any consolidated
combined or unitary return with any other entity.
2.1.13 Employees. The Company has provided the Purchaser
---------
with a true and correct list setting forth all employees and
consultants of the Company as of the date thereof, together with
their titles or positions, dates of hire, regular work location
and current compensation. The Company does not have any
employment contract with any officer or employee or any other
consultant or person which is not terminable by it at will
without liability, except as the right of the Company to
terminate its respective employees at will may be limited by
applicable federal or Missouri law. Except for the Company
Option, the Company has no deferred compensation, pension,
health, profit sharing, bonus, stock purchase, stock option,
hospitalization, insurance, severance or any other employee
pension benefit (as defined in the Employee Retirement Income
Security Act of 1974 or otherwise) or welfare benefit plan or
obligation covering any of its officers or employees. There are
no controversies or labor disputes or union organization activi-
ties pending or, to the knowledge of the Company and the
Principal Securityholders threatened, between the Company and
any of its employees. The Company is not a party to or bound by
any union or collective bargaining unit. To the best knowledge
of the Company and the Principal Securityholders, the Company
has complied with all applicable state and federal equal
employment opportunity and other laws related to employment.
2.1.14 Compliance with Law. All material licenses, fran-
-------------------
chises, permits, clearances, consents, certificates and other
evidences of authority of the Company which are necessary to the
conduct of the Company's business ("Permits") are in full force
and effect and the Company is not in violation of any Permit in
any material respect. Except for exceptions which would not
have a material adverse effect on the condition (financial or
otherwise), business, net worth, assets, properties or
operations of the Company, the business of the Company has been
conducted in accordance with all applicable laws, regulations,
orders and other requirements of governmental authorities.
2.1.15 Litigation. There is no claim, dispute, action,
----------
proceeding, notice, order, suit, appeal or, to the knowledge of
the Company and the Principal Securityholders, investigation, at
law or in equity, pending against the Company, or involving any
of its assets or properties, before any court, agency,
authority, arbitration panel or other tribunal, and to the
knowledge of the Company none have been threatened. Neither the
Company nor any Principal Securityholder is aware of any facts
which, if known to shareholders, customers, governmental
authorities or other persons, would result in any such valid
claim, dispute, action, proceeding, suit or appeal. The Company
is not subject to any order, writ, injunction or decree of any
-11-
court, agency, authority, arbitration panel or other tribunal,
nor is it in default with respect to any notice, order, writ,
injunction or decree.
2.1.16 Contracts. The Disclosure Schedule contains a
---------
complete list of each executory contract and agreement in the
following categories to which the Company is a party, or by
which it is bound in any respect: (a) agreements for the pur-
chase, sale, lease or other disposition of equipment, goods,
materials, research and development, supplies, studies or
capital assets, or for the performance of services, in any case
involving more than $5,000; (b) contracts or agreements for the
joint performance of work or services, and all other joint ven-
ture and collaboration agreements; (c) management or employment
contracts, consulting contracts, collective bargaining
contracts, termination and severance agreements; (d) notes,
mortgages, deeds of trust, loan agreements, security agreement,
guarantees, debentures, indentures, credit agreements and other
evidences of indebtedness; (e) pension, retirement, profit-
sharing, deferred compensation, bonus, incentive, life
insurance, hospitalization or other employee benefit plans or
arrangements (including, without limitation, any contracts or
agreements with trustees, insurance companies or others relating
to any such employee benefit plan or arrangement); (f) stock
option, stock purchase, warrant, repurchase or other contracts
or agreements relating to any share of capital stock of the
Company; (g) contracts or agreements with agents, brokers,
consignees, sale representatives or distributors; (h) contracts
or agreements with any director, officer, employee, consultant
or shareholder; (i) powers of attorney or similar authorizations
granted by the Company to third parties; (j) patents, licenses,
sublicenses, royalty agreements and other contracts or
agreements to which the Company is a party, or otherwise
subject, relating to technical assistance or to Proprietary
Rights as defined in Section 2.1.18 of this Agreement; and
(k) other material contracts. The Disclosure Schedule sets
forth true and complete financial terms of the agreements
between the Company and Gold Biotechnology, Inc. ("GBI") with
respect to (i) the loan from GBI to the Company and (ii) the
sublease of building space from the Company to GBI; the parties
thereto shall endeavor in good faith to complete definitive
documentation with respect to such agreements, including such
other terms as shall be commercially customary for documents of
such nature, as promptly as practicable following the Closing.
Neither the Company nor, to the best of the Company's and
the Principal Securityholders' knowledge, any of its employees
has entered into any contract or agreement containing covenants
limiting the right of the Company to compete in any business or
with any person. As used in this Agreement, the terms
"contract" and "agreement" include every contract, agreement,
commitment, understanding and promise, whether written or oral.
-12-
2.1.17 No Default.
----------
(a) Each of the contracts, agreements or other
instruments referred to in Section 2.1.16 of this Agreement is a
legal, binding and enforceable obligation by or against the
Company, subject to the effect of applicable bankruptcy, insol-
vency, reorganization, moratorium or other similar federal or
state laws affecting the rights of creditors and the effect or
availability of rules of law governing specific performance,
injunctive relief or other equitable remedies. To the best of
the Company's and the Principal Securityholders' knowledge, no
party with whom the Company has an agreement or contract is in
default thereunder or has breached any terms or provisions
thereof which is material to the conduct of the Company's
business.
(b) The Company has performed, or is now performing, the
obligations of, and the Company is not in material default (or
would by the lapse of time and/or the giving of notice be in
material default) in respect of, any contract, agreement or
commitment binding upon it or its assets or properties and
material to the conduct of its business. No third party has
notified the Company or the Principal Securityholders of any
material claim, dispute or controversy with respect to any of
the executory contracts of the Company, nor has the Company
received notice or warning of any material alleged
nonperformance, material delay in delivery or other material
noncompliance by the Company with respect to its obligations
under any of those contracts, nor are there any facts which
exist indicating that any of those contracts may be totally or
partially terminated or suspended by the other parties thereto
by reason of the Company's failure to perform in accordance with
the contracts' terms.
2.1.18 Proprietary Rights.
------------------
(a) The Company has provided the Purchaser in writing a
complete and correct list (the "Intellectual Property Disclosure
Schedule") of (1) all patents and applications for patents,
trademarks, trade names, service marks, and copyrights, and
applications therefor, owned or used by the Company or in which
it has any rights or licenses and (2) all trade secrets owned or
used by the Company or in which it has any rights or licenses
which are material to the Company. Such list specifies, as
applicable: (i) the title of the patent, trademark, trade name,
service mark, copyright or application therefor; (ii) the
jurisdiction by or in which such patent, trademark, trade name,
service mark or copyright has been issued or registered or in
which an application has been filed, including the registration
or application numbers; and (iii) material licenses, sublicenses
and similar agreements to which the Company is a party or
pursuant to which any other party is authorized to use, exercise
or receive any benefit from any Proprietary Rights (as defined
below) of the Company. The Company has provided the Purchaser
-13-
with copies of all written agreements of the Company with each
officer, employee or consultant of the Company providing the
Company with title and ownership to patents, patent
applications, trade secrets, inventions and inventions developed
or used by the Company in its business. All of such agreements
are valid, enforceable and legally binding, subject to the
effect or availability of rules of law governing specific
performance, injunctive relief or other equitable remedies
(regardless of whether any such remedy is considered in a
proceeding at law or in equity).
(b) To the best knowledge of the Company and the
Principal Securityholders, the Company owns or possesses or has
the right to use all patents, patent applications, trademarks,
trademark applications, trade secrets, service marks, trade
names, copyrights, inventions, drawings, designs, proprietary
know-how or information, or other rights with respect thereto
(collectively referred to as "Proprietary Rights"), used in the
business of the Company, and the same are sufficient to conduct
the Company's business as it has been and is now being
conducted. To the best knowledge of the Company and the
Principal Securityholders, except as set forth on Schedule
2.1.9(k) in the Disclosure Schedule, the Company has the rights
to use, sell, license, sublicense, assign, transfer, convey or
dispose of such Proprietary Rights and the products, processes
and materials covered thereby.
(c) To the best knowledge of the Company and the
Principal Securityholders, except as set forth on Schedule
2.1.18(c) or Schedule 2.1.9(k) in the Disclosure Schedule, the
operations of the Company do not conflict with or infringe, and
no one has asserted to the Company that such operations conflict
with or infringe, any Proprietary Rights, owned, possessed or
used by any third party. There are no claims, disputes,
actions, proceedings, suits or appeals pending against the
Company with respect to any Proprietary Rights and, to the best
knowledge of the Company and the Principal Securityholders, none
has been threatened against the Company. To the best knowledge
of the Company and the Principal Securityholders, except as set
forth on Schedule 2.1.18(c) or Schedule 2.1.9(k) in the
Disclosure Schedule, there are no facts which would reasonably
serve as a basis for any claim that the Company does not have
the right to use and to transfer the right or use, free of any
rights or claims of others, all Proprietary Rights in the
development, manufacture, use, sale or other disposition of any
or all products or services presently being used, furnished or
sold in the conduct of the business of the Company as it has
been and is now being conducted. To the best knowledge of the
Company and the Principal Securityholders, the Proprietary
Rights referred to in the preceding sentence are free of any
unresolved ownership disputes with respect to any third party
and to the Company's and the Principal Securityholders' best
knowledge there is no unauthorized use, infringement or mis-
appropriation of any of such Proprietary Rights by any third
-14-
party, including any employee or former employee of the Company
nor is there any breach of any license, sublicense or other
other agreement authorizing another party to use such
Proprietary Rights. The Company has not entered into any
agreement granting any third party the right to bring
infringement actions with respect to, or otherwise to enforce
rights with respect to, any such Proprietary Right.
(d) Except as set forth in the Intellectual Property
Disclosure Schedule, there are no pending, or to the best
knowledge of the Company and the Principal Securityholders,
threatened proceedings before any patent or trademark authority
to which the Company is a party.
(e) To the best knowledge of the Company and the
Principal Securityholders, no employee or officer of or
consultant to the Company is in violation of any term of any
employment contract, proprietary information and inventions
agreement, non-competition agreement, or any other contract or
agreement relating to the relationship of any such employee or
consultant with the Company or any previous employer.
2.1.19 Insurance. The Company has provided the Purchaser
---------
with copies of all insurance policies to which the Company is a
party or is a beneficiary or named insured, and such policies
are listed on the Disclosure Schedule. There have been no
claims in excess of $5,000 asserted under any of the insurance
policies of the Company in respect of all general liability,
professional liability, errors and omissions, and worker's
compensation, and medical claims since the Company's
incorporation.
2.1.20 Brokers or Finders. The Company has not dealt with
------------------
any broker or finder in connection with the transactions contem-
plated by this Agreement. The Company has not incurred, and
shall not incur, directly or indirectly, any liability for any
brokerage or finders' fees or agents' commissions or any similar
charges in connection with this Agreement or any transaction
contemplated hereby.
2.1.21 Related Parties. Except for Paul Gold, who owns a
---------------
majority interest in GBI, no officer or director of the Company,
or any affiliate of any such person, has, either directly or
indirectly, (a) an interest in any corporation, partnership,
firm or other person or entity which furnishes or sells services
or products which are similar to those furnished or sold by the
Company, or (b) a beneficial interest in any contract or
agreement to which the Company is a party or by which the
Company may be bound.
2.1.22 Certain Advances. There are no receivables of the
----------------
Company owing from directors, officers, employees, consultants
or shareholders of the Company, or owing by any affiliate of any
director or officer of the Company, other than advances in the
-15-
ordinary and usual course of business to officers and employees
for reimbursable business expenses which are not in excess of
$5,000 for any one individual.
2.1.23 Underlying Documents. Copies of any underlying
--------------------
documents listed or described as having been disclosed to the
Purchaser pursuant to this Agreement have been furnished to the
Purchaser. All such documents furnished to the Purchaser are
true and correct copies, and there are no amendments or modifi-
cations thereto, that have not been disclosed in writing to the
Purchaser.
2.1.24 No Misleading Statements. No representation or
------------------------
warranty made herein, in the Disclosure Schedule, or in the
Appendices, Schedules and Exhibits attached hereto or any
written statement or certificate furnished or to be furnished to
the Purchaser pursuant hereto or in connection with the
transactions contemplated hereby (when read together) contains
any untrue statement of a material fact or omits to state a
material fact necessary to make any statement of fact contained
herein not misleading.
2.2 Additional Representations and Warranties of the
------------------------------------------------
Securityholders. Each Securityholder severally represents and
- - ---------------
warrants to the Purchaser as follows:
2.2.1 Authority. Such Securityholder has all power to
---------
execute and deliver this Agreement and to carry out and perform
such Securityholder's respective obligations under the terms of
this Agreement and the related agreements required to be entered
into as conditions of Closing under Article 5 hereof. Assuming
the termination of the Shareholder Agreement as contemplated in
Section 9.1 hereof, such Securityholder has the sole power to
exchange, assign, transfer and deliver his or its Securities
hereunder, either as his or its sole and separate property or as
community property, as may be applicable to such Securityholder,
free and clear of all voting trust arrangements, liens,
encumbrances, equities, security interests, restrictions and
claims whatsoever. This Agreement, when executed and delivered
by such Securityholder, will constitute the valid and legally
binding obligation of such Securityholder, legally enforceable
against such Securityholder in accordance with the terms of this
Agreement, subject to the effect of bankruptcy, insolvency,
reorganization, moratorium and other similar laws relating to or
affecting the rights of creditors generally, limitations imposed
by federal or state law or equitable principles upon the
specific enforceability of any of the remedies, covenants or
other provisions of this Agreement, and upon the availability of
injunctive relief or other equitable remedies.
2.2.2 No Conflict with Other Instruments. The execution,
----------------------------------
delivery and performance of this Agreement and the transactions
contemplated hereby (a) will not result in any violation of,
conflict with, constitute a breach, violation or default (with
-16-
or without notice or lapse of time, or both) under (i) any
provision of the Articles of Incorporation or Bylaws or other
charter or governing document of such Securityholder or (ii) any
agreement, contract, understanding, note, mortgage, indenture,
lease, franchise, license, permit or other instrument to which
such Securityholder is a party or by which such Securityholder
or any of his or its properties or assets is bound, or (b) to
the best knowledge of such Securityholder, conflict with or
result in any breach or violation of any statute, judgment,
decree, order, rule or governmental regulation applicable to
such Securityholder or his or its properties or assets.
2.2.3 Ownership of Securities. Such Securityholder has
-----------------------
good and marketable title to the Securities to be exchanged by
such Securityholder pursuant to this Agreement and, upon
delivery of and exchange for such Securities hereunder, the
Purchaser will acquire good and marketable title thereto, free
and clear of all voting trust arrangements, liens, encumbrances,
equities, security interests, restrictions and claims
whatsoever. Except for the Shareholder Agreement, such
Securityholder is not a party to any voting trust, proxy, or
other agreement or understanding between or among any persons
that affects or relates to the voting or giving of written
consent with respect to any outstanding security of the Company.
2.2.4 Disclosure. Such Securityholder is not aware that
----------
any of the representations and warranties set forth in Section
2.1 above is untrue or inaccurate in any material respect. The
exchange of the Securities held by such Securityholder pursuant
to this Agreement is not prompted by any adverse information
concerning the Company that is not set forth in the
representations and warranties set forth in Section 2.1 hereof
or in the Disclosure Schedule.
2.2.5 Exchange Entirely for Own Account. This Agreement
---------------------------------
is made with such Securityholder in reliance upon such
Securityholder's representation to the Purchaser, which by the
execution of this Agreement such Securityholder hereby confirms,
that the Purchaser Common to be received by each Securityholder
will be acquired for investment for the Securityholder's own
account, not as a nominee or agent, and not with a view to the
resale or distribution of any part thereof, and that such
Securityholder has no present intention of selling, granting any
participation in, or otherwise distributing the same. By
executing this Agreement, such Securityholder further represents
that he or it does not have any contract, undertaking, agreement
or arrangement with any person to sell, transfer or grant
participations to such person or to any third person, with
respect to any of the Purchaser Common.
2.2.6 Reliance Upon the Securityholder's Representations.
--------------------------------------------------
Such Securityholder understands that the Purchaser Common is not
registered under the Securities Act on the ground that the sale
provided for in this Agreement and the issuance of securities
-17-
hereunder is exempt from registration under the Securities Act
of 1933 (the "Securities Act") pursuant to Section 4(2) thereof,
and that the Purchaser's reliance on such exemption is based on
such Securityholder's representations set forth herein. Such
Securityholder realizes that the basis for the exemption may not
be present if, notwithstanding such representations, such
Securityholder has in mind merely acquiring the Purchaser Common
for a fixed or determinable period in the future, or for a
market rise, or for sale if the market does not rise. Such
Securityholder has no such intention.
2.2.7 Receipt of Information. Such Securityholder
----------------------
believes it has received all the information it considers
necessary or appropriate for deciding whether to acquire the the
Purchaser Common. Such Securityholder further represents that
it has had an opportunity to ask questions and receive answers
from the Purchaser regarding the terms and conditions of the
offering of the Purchaser Common and the business, properties,
prospects and financial condition of the Purchaser and to obtain
additional information (to the extent the Purchaser possessed
such information or could acquire it without unreasonable effort
or expense) necessary to verify the accuracy of any information
furnished to it or to which it had access.
2.2.8 Restricted Securities. Such Securityholder
---------------------
understands that the Purchaser Common may not be sold,
transferred or otherwise disposed of without registration under
the Securities Act or an exemption therefrom, and that in the
absence of an effective registration statement covering the
Purchaser Common or an available exemption from registration
under the Securities Act, the Purchaser Common must be held
indefinitely. In particular, such Securityholder is aware that
the the Purchaser Common may not be sold pursuant to Rule 144
promulgated under the Securities Act unless all of the
conditions of that Rule are met. Among the conditions for use
of Rule 144 is the availability of current information to the
public about the Purchaser. Such information is now available,
but may not be in the future.
2.2.9 Legends. It is understood that the certificates
-------
evidencing the Purchaser Common may bear one or all of the
following legends:
(a) "These securities have not been registered under the
Securities Act of 1933. They may not be sold, offered for sale,
pledged or hypothecated in the absence of a registration
statement in effect with respect to the securities under such
Act or an opinion of counsel satisfactory to the Purchaser that
such registration is not required or unless sold pursuant to
Rule 144 of such Act or another applicable exemption."
(b) Any legend required by the laws of the State of
California or other jurisdiction.
-18-
2.2.10 Brokers or Finders. Such Securityholder has not
------------------
dealt with any broker or finder in connection with the
transactions contemplated by this Agreement. Such
Securityholder has not incurred, and shall not incur, directly
or indirectly, any liability for any brokerage or finders' fees
or agents' commissions or any similar charges in connection with
this Agreement or any transaction contemplated hereby.
2.2.11 Vysis Status. Vysis, Inc. represents and warrants
------------
that it was previously named Imagenetics Incorporated
("Imagenetics"), and accordingly possesses all rights, privilege
and powers and is subject to all the restrictions, liabilities
and obligations of Imagenetics with respect to the Company
Preferred, the Shareholder Agreement and the Company
Registration Rights Agreement.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
-----------------------------------------------
The Purchaser represents and warrants to the
Securityholders as follows:
3.1 Organization. The Purchaser is a corporation duly
------------
incorporated, validly existing and in good standing under the
laws of Delaware. The Purchaser is duly qualified to do
business and is in good standing in each other jurisdiction in
which it owns or leases property or conducts business, except
where the failure to be so qualified would not have a material
adverse effect on the business of the Purchaser. The Purchaser
has all requisite corporate power and authority to own, lease
and operate its properties and to carry on its business as now
being conducted, and possesses all licenses, franchises, rights
and privileges material to the conduct of its business.
3.2 Authority. The Purchaser has all requisite
---------
corporate power and authority to enter into this Agreement and
the related agreements contemplated herein, to execute, deliver
and perform its obligations hereunder and thereunder and to
consummate the transactions contemplated hereby and thereby.
The execution and delivery of this Agreement and the related
agreements contemplated herein, the performance by the Purchaser
of its obligations hereunder and thereunder, and the
consummation of the transactions contemplated hereby and thereby
have been duly authorized by all necessary corporate action on
the part of the Purchaser, including approval by its Board of
Directors. No vote of the Purchaser's stockholders is required
in connection with the transactions set forth in this Agreement.
This Agreement has been duly executed and delivered by the
Purchaser and constitutes the valid and binding obligation of
the Purchaser.
-19-
3.3 No Conflict with Other Instruments. The execution,
----------------------------------
delivery and performance by the Purchaser of this Agreement and
the consummation by the Purchaser of the transactions
contemplated hereby (a) will not result in any violation of,
conflict with, constitute a breach, violation or default (with
or without notice or lapse of time, or both) under, give rise to
a right of termination, cancellation, forfeiture or acceleration
of any material obligation or loss of any material benefit
under, or result in the creation or encumbrance on any of the
properties or assets of the Purchaser pursuant to (i) any
provision of the Certificate of Incorporation or Bylaws of the
Purchaser or (ii) any material agreement, contract,
understanding, note, mortgage, indenture, lease, franchise,
license, permit or other instrument to which the Purchaser is a
party or by which it or any of its properties or assets is
bound, or (b) to the best knowledge of the Purchaser, conflict
with or result in any breach or violation of any statute,
judgment, decree, order, rule or governmental regulation
applicable to the Purchaser or its properties or assets.
3.4 Governmental Consents. No consent, approval, order
---------------------
or authorization of, or registration, declaration of, or
qualification or filing with, any court, administrative agency,
commission, regulatory authority or other governmental or
administrative body or instrumentality, whether domestic or
foreign, is required by or with respect to the Purchaser in
connection with the execution, delivery and performance of this
Agreement by the Purchaser or the consummation by the Purchaser
of the transactions contemplated hereby, except for (a) such
consents, approvals, orders, authorizations, registrations,
declarations, qualifications or filings as may be required under
state securities or Blue Sky laws in connection with the
transactions set forth herein or which the failure to obtain
would not have a material adverse effect on the Purchaser or the
consummation by the Purchaser of the transactions contemplated
hereby, and (b) the listing of the the Purchaser Common on The
Nasdaq Stock Market.
3.5 SEC Documents. The Purchaser has furnished to the
-------------
Company a true and complete copy of the Purchaser's Annual
Report on Form 10-K for the year ended December 31, 1995, the
Purchaser's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1996 and the Purchaser's Proxy Statement for its
Annual Meeting of Stockholders held on May 21, 1996, all filed
with the Securities and Exchange Commission ("SEC") under the
Securities Exchange Act of 1934, as amended, all Form 8-K's
filed by the Purchaser with respect to any event or condition
occurring or existing after January 1, 1996, and all amendments
to any of the foregoing (the "Purchaser SEC Filings"). As of
the respective filing dates, the Purchaser SEC filings complied
in all material respects with the requirements of the Securities
Exchange Act of 1934, as amended, and the Purchaser SEC Filings
did not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or
-20-
necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not
misleading.
3.6 Shares of Purchaser Common. The shares of the
--------------------------
Purchaser Common will, when issued and delivered to the
Securityholders in accordance with this Agreement, be duly
authorized, validly issued, fully paid and nonassessable.
3.7 Litigation. There is no claim, dispute, action,
----------
proceeding, notice, order, suit, appeal or, to the knowledge of
the Purchaser, investigation, at law or in equity, pending
against the Purchaser, or involving any of its assets or
properties, before any court, agency, authority, arbitration
panel or other tribunal, and to the knowledge of the Purchaser
none have been threatened, that might prevent or materially
adversely affect the consummation of the transactions
contemplated by this Agreement. The Purchaser is not aware of
any facts which, if known to shareholders, customers, govern-
mental authorities or other persons, would result in any such
valid claim, dispute, action, proceeding, suit or appeal. The
Purchaser is not subject to any order, writ, injunction or
decree of any court, agency, authority, arbitration panel or
other tribunal that would prevent or materially adversely affect
the consummation of the transactions contemplated by this
Agreement, nor is it in default with respect to any notice,
order, writ, injunction or decree that would prevent or
materially adversely affect the consummation of the transactions
contemplated by this Agreement.
3.8 Brokers or Finders. The Purchaser has not dealt
------------------
with any broker or finder in connection with the transactions
contemplated by this Agreement. The Purchaser has not incurred,
and shall not incur, directly or indirectly, any liability for
any brokerage or finders' fees or agents commissions or any
similar charges in connection with this Agreement or any
transaction contemplated hereby.
3.9 Acquisition for Investment. The Purchaser is
--------------------------
acquiring the Securities for its own account and not with the
present view to sell such Securities in connection with the
distribution thereof. The Purchaser has no present intention to
liquidate the Company or merge or consolidate the Company with
or into any other entity.
ARTICLE 4
ADDITIONAL COVENANTS
--------------------
4.1 Expenses. The Purchaser, the Company and the
--------
Securityholders shall each pay its or their own fees and
expenses incurred incident to the preparation and carrying out
-21-
of the transactions herein contemplated (including legal,
accounting and travel).
4.2 Agreements by Securityholders. Each Securityholder
-----------------------------
agrees that he or it will not offer, sell, transfer, assign,
mortgage, pledge or otherwise dispose of or encumber any of the
Purchaser Common delivered to him or it by this Agreement (a) if
such action would prevent the Purchaser from accounting for the
acquisition of the Securities as a "pooling of interests" and
(b) unless (i) in the opinion of counsel to the Purchaser or in
the opinion of the Division of Corporate Finance of the
Securities and Exchange Commission (the "Commission") expressed
in a no-action letter (which letter and the request therefor
shall be in form and substance satisfactory to counsel for
Purchaser), registration of such shares under the Securities
Act, and the rules and regulations of the Commission thereunder,
as then in effect, is not required in connection with such
transaction; (ii) sale of the Purchaser Common is permissible
under Rule 144 of the Commission under the Securities Act; or
(iii) a registration statement under the Securities Act is then
in effect with respect to such shares and the purchaser or
transferee has been furnished with a prospectus meeting the
requirements of Section 10 of the Securities Act. Each
Securityholder further agrees that the Purchaser may endorse on
any certificate for shares to be delivered to or on behalf of
Securityholder pursuant to this Agreement an appropriate legend
or legends as described in Section 2.2.9 of this Agreement, and
that the Purchaser may instruct its transfer agent not to
transfer any such shares unless advised by the Purchaser that
such provisions have been complied with.
4.3 Nasdaq Listing. Promptly following the Closing, the
--------------
Purchaser shall submit an application for listing on The Nasdaq
Stock Market of the shares of the Purchaser Common to be issued
to the Securityholders.
ARTICLE 5
CONDITIONS PRECEDENT
--------------------
5.1 Conditions to Each Party's Obligations to Effect the
----------------------------------------------------
Exchange. The respective obligations of each of the parties to
- - --------
effect the exchange of the Securities for Purchaser Common shall
be subject to the fulfillment at or prior to the Closing of the
following conditions:
(a) All corporate action required by law or by this
Agreement with respect to this Agreement shall have been taken
by the appropriate parties.
(b) None of the parties hereto shall be subject to any
injunction against the consummation of the transactions
contemplated by this Agreement, and there shall not be pending
-22-
any litigation or proceeding by any person, and there shall not
have been overtly threatened the institution of any litigation
or proceeding by any person, to restrain or prohibit the
consummation of the transactions contemplated by this Agreement.
(c) All legal requirements for the valid consummation by
the Securityholders, the Company, and the Purchaser of the
transactions contemplated by this Agreement shall have been
fulfilled; all authorizations, consents and approvals of all
governmental authorities required to be obtained in order to
permit consummation of the transactions contemplated by this
Agreement shall have been obtained.
(d) The Purchaser and each of David A. Smoller, Paul
Gold and Mark Cunningham shall have entered into employment and
non-competition agreements in substantially the form attached
hereto as Appendix A pursuant to which such persons will perform
certain services for the Purchaser after the Closing
(e) The Purchaser and the Securityholders shall have
entered into the Registration Rights Agreement in the form
attached hereto as Appendix C.
(f) The Purchaser and the Securityholders shall have
entered into the Escrow Agreement with the Escrow Agent named
therein in the form attached hereto as Appendix D.
(g) No preliminary or permanent injunction or other
order, decree or ruling issued by a court of competent
jurisdiction or by a governmental, regulatory or administrative
agency or commission nor any statute, rule, regulation or
executive order promulgated or enacted by any governmental
authority shall be in effect, which would prevent the
consummation of the transactions contemplated hereby; provided,
however, that the parties shall use their best efforts to seek
to obtain the removal of any such order, decree or ruling.
There shall be no litigation pending or threatened by any
regulatory body or private party in which (i) an injunction is
or may be sought against the transactions contemplated hereby,
or (ii) relief is or may be sought against any party hereto as a
result of this Agreement, and in which, in the good faith
judgment of the Board of Directors of either the Purchaser or
the Company (relying on the advice of their respective legal
counsel), such regulatory body or private party has a reasonable
possibility of prevailing and such relief would have a material
adverse effect upon either party.
5.2 Conditions to Obligations of the Purchaser. The
------------------------------------------
obligations of the Purchaser to consummate this Agreement are
subject to the satisfaction on or prior to the Closing Date of
the following conditions, unless waived by the Purchaser:
(a) The Purchaser shall have received all written
certificates and other documents evidencing the Securities.
-23-
(b) The representations and warranties of the Company
and the Securityholders set forth in this Agreement and the
schedules and exhibits hereto delivered by the Company or the
Securityholders, and in any written statement or certificate
that shall be delivered to the Purchaser under this Agreement,
shall be true and correct as of the date of this Agreement and
as if made at and as of the Closing Date.
(c) The Company and each of the Securityholders shall
have performed in all material respects all obligations required
to be performed by each under this Agreement on or prior to the
Closing Date.
(d) The Purchaser shall have been satisfied that the
Exchange will qualify for pooling-of-interests accounting
treatment in accordance with GAAP and all applicable rules,
regulations and policies of the SEC.
(e) The Purchaser shall have received an opinion dated
the Closing Date of Stinson, Mag & Fizzell, P.C., counsel to the
Company and the Securityholders (other than Vysis, Inc.), in
substantially the form attached hereto as Exhibit 5.2(e).
(f) The Purchaser shall have received an opinion dated
the Closing Date of William E. Murray, Esq., counsel to Vysis,
Inc., in substantially the form attached hereto as Exhibit
5.2(f).
(g) All consents, filings, permits, approvals and
waivers from third parties and governmental authorities
necessary for the consummation of the transactions as
contemplated hereby and to the continued validity and
effectiveness of the Company's Proprietary Rights shall have
been obtained or timely filed, as applicable, in each case
subject to no term, condition or restriction unacceptable to the
Purchaser in its sole judgment.
(h) Unless otherwise provided in Section 8.4 hereof, the
Company and the Securityholders shall cause each of the
directors and officers of the Company to deliver to the
Purchaser prior to the Closing Date his or her resignation as a
director or officer, respectively, of the Company, to be
effective immediately upon the Closing Date.
(i) No preliminary or permanent injunction or other
order, decree or ruling issued by a court of competent
jurisdiction or by a governmental, regulatory or administrative
agency or commission nor any statute, rule, regulation or
executive order promulgated or enacted by any governmental
authority shall be in effect, which would prevent the
consummation of the transactions contemplated hereby; provided,
however, that the parties shall use their best efforts to seek
to obtain the removal of any such order, decree or ruling.
There shall be no litigation pending or threatened by any
-24-
regulatory body or private party in which relief is or may be
sought that imposes material limitations on the ability of the
Purchaser effectively to acquire or hold or to exercise full
rights of ownership to the Securities or to operate the business
of the Company.
5.3 Conditions to Obligations of the Securityholders.
------------------------------------------------
The obligations of the Securityholders to consummate the
transactions contemplated hereby are subject to the satisfaction
on or prior to the Closing Date of the following additional
conditions unless waived by the Securityholders:
(a) The representations and warranties of the Purchaser
set forth in this Agreement shall be true and correct as of the
date of this Agreement and as if made at and as of the Closing
Date.
(b) The Purchaser shall have performed in all material
respects all obligations required to be performed by each under
this Agreement on or prior to the Closing Date.
(c) The Securityholders shall have received documents
evidencing the irrevocable instructions contemplated by Section
1.3 to issue the Purchaser Common as set forth in Schedule 1.2
and the Purchaser Option.
(d) The Securityholders shall have received an opinion
dated the Closing Date of Pillsbury Madison & Sutro LLP, counsel
to the Purchaser, in substantially the form attached hereto as
Exhibit 5.3(d).
ARTICLE 6
INDEMNIFICATION
---------------
6.1 Survival. All representations, warranties and
--------
agreements contained in this Agreement or in any certificate or
document delivered pursuant to this Agreement shall survive the
Closing notwithstanding any investigation conducted with respect
thereto or any knowledge acquired as to the accuracy or
inaccuracy of any such representation or warranty. The waiver
of any condition based on the accuracy of any representation or
warranty, or the performance or compliance of any covenant or
obligation, will not affect the right to indemnification. The
representations and warranties of the Securityholders set forth
in Article 2 (other than Sections 2.1.7, 2.1.8, 2.1.9, 2.1.11,
2.1.12, 2.1.15, 2.1.16, 2.1.17 and 2.1.18) and the related
obligations of indemnity contained in this Article 6 and the
representations and warranties of the Purchaser set forth in
Article 3 and the related obligations of indemnity contained in
this Article 6 shall terminate on March 31, 1997. The
representations and warranties of the Securityholders set forth
in Sections 2.1.7, 2.1.8, 2.1.9, 2.1.12, 2.1.15, 2.1.16, 2.1.17
-25-
and 2.1.18 and the related obligations of indemnity contained in
this Article 6 shall terminate on the second anniversary of the
Closing Date.
6.2 Indemnification by the Securityholders. Each
--------------------------------------
Securityholder shall severally indemnify and hold harmless the
Purchaser and its agents, representatives, employees, officers,
directors, stockholders, controlling persons and affiliates
(collectively, the "Purchaser Indemnified Persons"), and shall
reimburse the Purchaser Indemnified Persons for, any loss,
liability, claim, damage, expense (including, but not limited
to, costs of investigation and defense and reasonable attorneys'
fees) or diminution of value, whether or not involving a third-
party claim (collectively, "Damages") arising from or in
connection with (a) any inaccuracy in any of the representations
and warranties of the Securityholders in this Agreement or in
any certificate or document delivered by the Securityholders or
the Company pursuant to this Agreement, or any actions,
omissions or state of facts inconsistent with any such
representation or warranty, (b) any failure by the
Securityholders to perform or comply with any covenant in this
Agreement, (c) any claim by any person for brokerage or finder's
fees or commissions or similar payments based upon any agreement
or understanding alleged to have been made by any such person
with the Company (or any person acting on its behalf) in
connection with this Agreement, or (d) any matters set forth on
Schedule 2.1.11(c) to the extent that such matters result in
Damages in the aggregate exceeding $7,500; provided, however,
that Mark Cunningham and Vysis, Inc. shall not be liable
hereunder for any Damages arising from or in connection with any
inaccuracy of the representations and warranties set forth in
Section 2.1 or Article 8 of this Agreement or any breach of any
covenant contained in Article 8 of this Agreement; and provided,
further, that with respect to Damages arising from or in
connection with any inaccuracy of the representations and
warranties set forth in Section 2.2 of this Agreement, each
Securityholder shall be liable hereunder only for inaccuracies
in the representations and warranties of such Securityholder in
Section 2.2.
6.3 Indemnification by the Purchaser. The Purchaser
--------------------------------
shall indemnify and hold harmless each Securityholder, and its
agents, representatives, employees, officers, directors,
stockholders, controlling persons and affiliates (collectively,
the "Securityholder Indemnified Persons") and shall reimburse
the Securityholder Indemnified Persons for, any Damages arising
from or in connection with (a) any inaccuracy in any of the
representations and warranties of the Purchaser in this
Agreement or in any certificate delivered by the Purchaser pur-
suant to this Agreement, or any actions, omissions or state of
facts inconsistent with any such representation or warranty,
(b) any failure by the Purchaser to perform or comply with any
covenant in this Agreement, or (c) any claim by any Person for
brokerage or finder's fees or commissions or similar payments
-26-
based upon any agreement or understanding alleged to have been
made by such Person with the Purchaser (or any Person acting on
its behalf) in connection with any of the transactions
contemplated by this Agreement.
6.4 Limitations as to Amount--the Securityholders. The
---------------------------------------------
Securityholders shall have no liability (for indemnification or
otherwise) with respect to the matters described in clause (a)
of Section 6.2 or, to the extent relating to any failure to
perform or comply prior to the Closing Date, clause (b) of
Section 6.2 until the total of all Damages with respect thereto
exceeds $50,000. However, this Section shall not apply to any
misrepresentation or breach of warranty of which either the
Securityholders had actual knowledge or any intentional failure
to perform or comply with any agreement and the Securityholders
shall be liable for all Damages with respect thereto. The
liability of each Securityholder under this Article 6 shall be
limited to the percentage of $8,000,000 that the shares of
Purchaser Common to be received by such Securityholder in the
Exchange bears to the total number of shares of Purchaser Common
to be issued in the Exchange, as set forth in Schedule 1.2
(treating as issued for purposes of this Article 6 the shares of
Purchaser Common underlying the Purchaser Option).
6.5 Limitations as to Amount--the Purchaser. The
---------------------------------------
Purchaser shall have no liability (for indemnification or
otherwise) with respect to the matters described in clause (a)
or (b) of Section 6.3 until the total of all Damages with
respect thereto exceeds $50,000. However, this Section shall
not apply to any intentional misrepresentation or breach of
warranty or any intentional failure to perform or comply with
any agreement and the Purchaser shall be liable for all Damages
with respect thereto.
6.6 Procedure for Indemnification--Third Party Claims.
-------------------------------------------------
Promptly after receipt by an indemnified party under Section 6.2
or Section 6.3 of notice of the commencement of any action,
arbitration, audit, hearing, investigation, litigation or suit
commenced ("Proceeding") against it, such indemnified party
shall, if a claim in respect thereof is to be made against an
indemnifying party under such Section, give notice to the
indemnifying party of the commencement thereof, but the failure
so to notify the indemnifying party shall not relieve it of any
liability that it may have to any indemnified party except to
the extent the indemnifying party demonstrates that the defense
of such action is prejudiced thereby. In case any such
Proceeding shall be brought against an indemnified party and it
shall give notice to the indemnifying party of the commencement
thereof, the indemnifying party shall, unless the claim involves
Taxes, be entitled to participate therein and, to the extent
that it shall wish (unless (a) the indemnifying party is also a
party to such Proceeding and the indemnified party determines in
good faith that joint representations would be inappropriate or
(b) the indemnifying party fails to provide reasonable assurance
-27-
to the indemnified party of its financial capacity to defend
such Proceeding and provide indemnification with respect
thereto), to assume the defense thereof with counsel
satisfactory to such indemnified party and, after notice from
the indemnifying party to such indemnified party of its election
so to assume the defense thereof, the indemnifying party shall
not be liable to such indemnified party under such Section for
any fees of other counsel or any other expenses with respect to
the defense of such Proceeding, in each case subsequently
incurred by such indemnified party in connection with the
defense thereof, other than reasonable costs of investigation.
If an indemnifying party assumes the defense of such a
Proceeding, (x) no compromise or settlement thereof may be
effected by the indemnifying party without the indemnified
party's consent unless (i) there is no finding or admission of
any violation by the indemnified party of any federal, state,
local, municipal, foreign, international or other administrative
order, law, ordinance, principle of common law, regulation,
statute or treaty or any violation of the rights of any person
and no effect on any other claims that may be made against the
indemnified party and (ii) the sole relief provided is monetary
damages that are paid in full by the indemnifying party and
(y) the indemnifying party shall have no liability with respect
to any compromise or settlement thereof effected without its
consent. If notice is given to an indemnifying party of the
commencement of any Proceeding and it does not, within ten (10)
days after the indemnified party's notice is given, give notice
to the indemnified party of its election to assume the defense
thereof, the indemnifying party shall be bound by any
determination made in such action or any compromise or
settlement thereof effected by the indemnified party.
Notwithstanding the foregoing, if an indemnified party
determines in good faith that there is a reasonable probability
that a Proceeding may adversely affect it or its affiliates
other than as a result of monetary damages, such indemnified
party may, by notice to the indemnifying party, assume the
exclusive right to defend, compromise or settle such Proceeding,
but the indemnifying party shall not be bound by any determi-
nation of a Proceeding so defended or any compromise or
settlement thereof effected without its consent (which shall not
be unreasonably withheld).
For any environmental remediation or cleanup subject to
indemnification under Section 6.2, the remediation or cleanup
will be considered complete when all actions required by any
governmental authority have been completed and each relevant
governmental authority approves, in writing, unconditional
closure of the site (with respect to all reporting,
investigative, remedial or monitoring activities). No
indemnifying party shall have the power or right to (a)consent
to (i) remediation or cleanup standards for the Property, or
(ii) any limitation or restriction upon the use or occupancy of
the Property, or (b) propose the cessation of any remediation or
-28-
cleanup without first obtaining the written consent of
Purchaser.
6.7 Escrow Fund. As partial security for the indemnity
-----------
provided for in Section 6.2 hereof, ten percent (10%) of the
Purchaser Common to be received by each Securityholder pursuant
to this Agreement (the resulting number being rounded up to the
nearest whole share) (the "Escrow Shares") shall be registered
in the name of such Securityholder but be deposited (with a
medallion signature guaranteed executed assignment in blank)
with First Trust of California, National Association (or other
institution selected by the Purchaser with the reasonable
consent of the Securityholders) as escrow agent (the "Escrow
Agent"), such deposit to constitute an escrow fund (the "Escrow
Fund") to be governed by the terms set forth herein and in the
Escrow Agreement to be signed by all parties thereto. Upon
compliance with the terms hereof and the terms of the Escrow
Agreement, the Purchaser shall be entitled to obtain indemnity
from the Escrow Fund for all Damages covered by the indemnity
provided for in Section 6.2 hereof. The Escrow Shares shall not
be included in the registration statement to be filed by the
Purchaser pursuant to Section 2.1 of the Registration Rights
Agreement.
6.8 Escrow Period. The Escrow Fund shall remain in
-------------
existence for a period (the "Escrow Period") ending on the
earlier to occur of (i) the March 31, 1997 and (ii) the date the
Purchaser releases publicly its audited financial statements for
the year ending December 31, 1996.
6.9 Protection of Escrow Fund. The Escrow Agent shall
-------------------------
hold and safeguard the Escrow Fund during the Escrow Period,
shall treat the Escrow Fund as a trust fund in accordance with
the terms of this Agreement and not as the property of the
Purchaser, and shall hold and dispose of the Escrow Fund only in
accordance with the terms hereof and of the Escrow Agreement.
6.10 Distributions; Voting.
---------------------
(a) Any cash dividends, dividends payable in securities
or other distributions of any kind (excluding any shares
received upon a stock split, stock dividend or recapitalization)
made in respect of any securities in the Escrow Fund shall be
paid out to the Securityholders.
(b) The Escrow Agent shall have voting rights with
respect to the shares of stock contributed to the Escrow Fund by
the Securityholders so long as such stock or other voting
securities are held in the Escrow Fund. The Escrow Agent shall
be required to vote the shares held in escrow in accordance with
the instructions of the Securityholders in whose name the
Purchaser Common is registered.
-29-
6.11 Claims Upon Escrow Fund.
-----------------------
(a) Upon receipt by the Escrow Agent on or before the
last day of the Escrow Period of a certificate signed by the
Chief Executive Officer or Chief Financial Officer of the
Purchaser (an "Officer's Certificate"):
(i) stating that a Purchaser Indemnified
Person has paid or properly accrued Damages in an
aggregate stated amount to which such party is
entitled to payment pursuant to this Agreement, and
(ii) specifying in reasonable detail the indi-
vidual items of Damages included in the amount so
stated, the date each such item was paid or properly
accrued, and the nature of the misrepresentation,
breach of warranty or claim to which such item is
related, the Escrow Agent shall, subject to the
provisions of Section 6.12 hereof, deliver to the
Purchaser Indemnified Person out of the Escrow Fund,
as promptly as practicable, the number of shares of
Purchaser Common or amount of other assets held in the
Escrow Fund to compensate the Purchaser Indemnified
Person for or against such Damages.
(b) For the purposes of this Article 6, each share of
Purchaser Common in the Escrow Fund shall be valued at an amount
equal to the average closing price per share of Purchaser Common
on The Nasdaq Stock Market as reported in the Western edition of
the Wall Street Journal for the twenty (20) trading days
preceding the date Damages are fixed.
(c) In lieu of depositing a portion of the Purchaser
Option in the Escrow Fund, the holder of the Purchaser Option
agrees, upon written notification from the Purchaser, to take
all action necessary to cancel the requisite number of shares
underlying such Purchaser Option to satisfy such person's
liabilities under this Article 6.
6.12 Objections to Claims. At the time of delivery of an
--------------------
Officer's Certificate to the Escrow Agent, the Escrow Agent
shall deliver a duplicate copy of such certificate to each
Securityholder and for a period of thirty (30) days after such
delivery, the Escrow Agent shall make no delivery of Purchaser
Common or other property pursuant to Section 6.11 hereof. After
the expiration of such thirty (30) day period, the Escrow Agent
shall make delivery of the Purchaser Common or other property in
the Escrow Fund in accordance with Section 6.11 hereof, provided
that no such payment or delivery may be made if any
Securityholder shall object in a written statement to the claim
made in the Officer's Certificate, and such statement shall have
been delivered to the Escrow Agent prior to the expiration of
such thirty (30) day period.
-30-
6.13 Resolution of Conflicts. If a Securityholder shall
-----------------------
object in writing to the payment to the Purchaser Indemnified
Persons in respect of any claim or claims made in any Officer's
Certificate, the objecting Securityholder and the Purchaser
shall attempt in good faith to agree upon the rights of the
respective parties with respect to each of such claims within
sixty (60) days after objection by either the objecting
Securityholder or the Purchaser. If the objecting
Securityholder and the Purchaser should so agree on a claim, a
memorandum setting forth such agreement shall be prepared and
signed by both parties and shall be furnished to the Escrow
Agent. The Escrow Agent shall be entitled to rely on any such
memorandum and distribute the Purchaser Common or other property
from the Escrow Fund in accordance with the terms thereof. If
the objecting Securityholder and the Purchaser are unable to
agree with respect to a claim, the Escrow Agent shall make
payment with respect thereto only in accordance with (i) a final
and binding arbitration award or (ii) a final non-appealable
order of a court of competent jurisdiction.
6.14 Distribution upon Termination of Escrow Period.
----------------------------------------------
Promptly following termination of the Escrow Period, the Escrow
Agent shall deliver to each Securityholder all of the Purchaser
Common or other property or rights to the Purchaser Common of
such Securityholder in the Escrow Fund in excess of any amount
of such Purchaser Common or other property sufficient, in the
reasonable judgment of the Purchaser, to satisfy any unsatisfied
claims applicable to such Securityholder specified in any
Officer's Certificate theretofore properly delivered to the
Escrow Agent. As soon as any such claim is resolved, the Escrow
Agent shall deliver to each Securityholder such Purchaser Common
or rights to Purchaser Common or other property of such
Securityholder in excess of any amount of such Purchaser Common
or other property sufficient, in the reasonable judgment of
Purchaser, to satisfy any remaining unsatisfied claims
applicable to such Securityholder. As soon as all such claims
have been resolved, the Escrow Agent shall deliver to each
Securityholder all the Purchaser Common or rights to Purchaser
Common or other property of such Securityholder remaining in the
Escrow Fund and not required to satisfy such claims.
ARTICLE 7
AMENDMENT AND WAIVER
--------------------
7.1 Amendment. This Agreement may not be amended except
---------
by an instrument in writing signed on behalf of each of the
parties hereto.
7.2 Extension; Waiver. At any time prior to the
-----------------
Closing, the Purchaser, may (a) extend the time for the per-
formance of any of the obligations or other acts of the other
parties hereto, (b) waive any inaccuracies in the representa-
-31-
tions and warranties contained herein or in any document
delivered pursuant hereto and (c) waive compliance with any of
the agreements or conditions for the benefit thereof contained
herein. Any agreement on the part of a party hereto to any such
extension or waiver shall be valid if set forth in an instrument
in writing signed on behalf of such party.
ARTICLE 8
ADDITIONAL REPRESENTATIONS, WARRANTIES AND AGREEMENTS
-----------------------------------------------------
OF THE PRINCIPAL SECURITYHOLDERS
--------------------------------
Each Principal Securityholder represents and warrants to
and agrees with the Purchaser and the Company as follows:
8.1 Tax and Accounting Treatment. Such Securityholder
----------------------------
understands and agrees that it is intended that the Exchange
will be treated as a "reorganization" for federal income tax
purposes and as a "pooling of interests" in accordance with
generally accepted accounting principles and the applicable
General Rules and Regulations published by the SEC. Such
Securityholder further understands and agrees that such
Securityholder may be deemed to be an "affiliate" of Seller for
application of the pooling of interests requirements, although
nothing contained herein should be construed as an admission of
such fact.
8.2 Reliance Upon Representations, Warranties and
---------------------------------------------
Covenants. Such Securityholder understands that, since the
- - ---------
Exchange is expected to be accounted for as a "pooling of
interests" and such Securityholder may be an "affiliate" of the
Company (as such term is used in Rule 145 promulgated under the
Securities Act, SEC Accounting Series Release No. 135 ("ASR No.
135") and SEC Staff Accounting Bulletin No. 65), the shares of
Purchaser Common that such Securityholder will acquire under the
Exchange or otherwise may only be disposed of in conformity with
the limitations described in this Article 8. Such
Securityholder has been informed that the treatment of the
Exchange as a pooling of interests for financial accounting
purposes is dependent upon the accuracy of certain of the
representations and warranties and the compliance with certain
of the obligations set forth in this Article 8. Such
Securityholder understands that the representations and
warranties and covenants of Securityholder set forth in this
Article 8 will be relied upon by Purchaser, the Company, their
respective counsel and accounting firms and other
securityholders of the Company.
8.3 Additional Representations, Warranties and Covenants
----------------------------------------------------
of the Principal Securityholders.
- - --------------------------------
8.3.1 Such Securityholder has no present intention or plan
to sell, exchange or otherwise dispose of the Purchaser Common
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to be received by such Securityholder in the Exchange such that
the Securityholder would retain a continuing interest through
stock ownership in the Purchaser that is equal in value, as of
the Closing, to less than 50% of the value of all formerly
outstanding stock of the Company that was held by such
Securityholder.
8.3.2 Such Securityholder will not sell, transfer,
exchange, pledge or otherwise dispose of or in any other way
reduce his risk of ownership or investment in, or make any offer
or agreement relating to any of the foregoing with respect to
any of the Purchaser Common received by such Securityholder in
the Exchange from and after the Closing until the Purchaser
shall have publicly released a report that shall include the
combined financial results of the Purchaser and the Company for
a period of at least 30 days of combined operations of the
Purchaser and the Company within the meaning of ASR No. 135.
8.3.3 Such Securityholder also understands that stop
transfer instructions will be given to the Purchaser's transfer
agent with respect to certificates evidencing the Purchaser
Common to be issued to such Securityholder hereunder. Such stop
transfer instructions will be promptly rescinded upon the
issuance of the financial report referred to in Section 8.3.2.
8.4 Resignations. Each of the Principal Securityholders
------------
represents and warrants that the Principal Securityholders
constitute the only directors and officers of the Company.
Effective as of and conditioned upon the Closing, each Principal
Securityholder resigns as a director of the Company and agrees
to resign as an officer if requested by the Purchaser.
ARTICLE 9
ADDITIONAL AGREEMENTS OF THE SECURITYHOLDERS AND THE COMPANY
------------------------------------------------------------
9.1 Shareholder Agreement. Each Securityholder hereby
---------------------
waives any rights under the Shareholder Agreement that may
accrue to such Securityholder as a result of the execution and
delivery of this Agreement by the other Securityholders and the
consummation of the transactions contemplated hereby, and hereby
agrees that the terms and provisions of the Shareholder
Agreement are inapplicable with respect to the transactions
contemplated hereby. The Company and each Securityholder also
agrees that, effective as of the Closing, the Shareholder
Agreement is hereby terminated and shall be of no further force
and effect.
9.2 Company Registration Rights Agreement. The Company
-------------------------------------
and each Securityholder also agrees that, effective as of the
Closing, the Company Registration Rights Agreement is hereby
terminated and shall be of no further force and effect.
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ARTICLE 10
GENERAL
-------
10.1 Notices. Any notice, request, instruction or other
-------
document to be given hereunder by any party to the other shall
be in writing and delivered personally or sent by certified
mail, postage prepaid, by telecopy (with receipt confirmed), or
by courier service, as follows:
(a) If to the Purchaser to:
Incyte Pharmaceuticals, Inc.
3174 Porter Avenue
Palo Alto, CA 94304
Attn: Chief Executive Officer
Fax: (415) 855-0572
with a copy to:
Pillsbury Madison & Sutro LLP
235 Montgomery Street
San Francisco, CA 94104
Attn: Stanton D. Wong
Fax: (415) 983-1200
(b) If to the Securityholders to:
to their respective addresses shown on the signature pages
hereto
with a copy to:
Stinson, Mag & Fizzell, P.C.
100 South Fourth Street
St. Louis, MO 63102
Attn: John W. Finger
Fax: (314) 259-4599
or to such other persons as may be designated in writing by the
parties, by a notice given as aforesaid.
10.2 Headings. The headings of the several sections of
--------
this Agreement are inserted for convenience of reference only
and are not intended to affect the meaning or interpretation of
this Agreement.
10.3 Counterparts. This Agreement may be executed in
------------
counterparts, and when so executed each counterpart shall be
deemed to be an original, and said counterparts together shall
constitute one and the same instrument.
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10.4 Binding Nature. This Agreement shall be binding upon
--------------
and inure to the benefit of the parties hereto. No party may
assign or transfer any rights under this Agreement.
10.5 Applicable Law. This Agreement shall be governed by,
--------------
construed and enforced in accordance with the laws of the State
of California as applied to contracts entered into solely
between residents of, and to be performed entirely in, such
state.
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IN WITNESS WHEREOF, the parties have caused this Agreement
to be executed, all as of the date first above written.
INCYTE PHARMACEUTICALS, INC.
By /s/ Randal W. Scott
---------------------------------
Title Executive Vice President
------------------------------
GENOME SYSTEMS, INC.
By /s/ David A. Smoller
---------------------------------
Title President
------------------------------
SECURITYHOLDERS:
/s/ David A. Smoller
------------------------------------
David A. Smoller, Ph.D.
Address: 9339 Pine Avenue
St. Louis, MO 63144
/s/ Paul Gold
------------------------------------
Paul Gold, Ph.D.
Address: 8 Mosley Acres
Creve Coeur, MO 63141
/s/ Mark Cunningham
------------------------------------
Mark Cunningham
Address: 2370 Martin Drive
Florissant, MO 63033
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VYSIS, INC.
By /s/ John Bishop
---------------------------------
Title President
------------------------------
Address: 3100 Woodcreek Drive
Downers Grove, IL 60515
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SCHEDULE 1.2
Number of Shares of
Company Common Number of Shares of
Owned Immediately Purchaser Common to
Prior to the be issued in the
Securityholder Exchange(1) Exchange(2)
- - -------------- -------------------- --------------------
David A. Smoller 8,800 94,518
Paul Gold 8,800 94,518
Vysis, Inc. 1,400 15,037
------ -------
Total 19,000 204,073
Average Closing Price of Incyte Common Stock for 30 consecutive
trading days ending on and including July 19, 1996: $37.2417
Purchaser Option: Based upon the Average Closing Price, the
Purchaser Option shall entitle Mark Cunningham to purchase
10,741 shares of Incyte Common Stock at an exercise price of
$.0465506 per share.
- - --------
(1) Assumes the conversion of all outstanding shares of Company
Preferred into Company Common.
(2) The total number of shares of Purchaser Common is
calculated as set forth in Section 1.2(b) of the Securities
Exchange Agreement to which this Schedule 1.2 is attached.
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