AGREEMENT AND PLAN OF MERGER AND CONTRIBUTION
BY AND AMONG
CYTRX CORPORATION
VAXCEL, INC.,
VAXCEL MERGER SUBSIDIARY, INC.,
AND
ZYNAXIS, INC.
Dated as of December 6, 1996
TABLE OF CONTENTS
Page
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PARTIES................................................................ 1
SECTION 351 PLAN....................................................... 1
ARTICLE 1 - SUMMARY OF THE CONTRIBUTION AND THE MERGER................. 2
1.1 Contribution by CytRx......................................... 2
1.2 Issuance of Shares............................................ 2
1.3 Merger........................................................ 2
1.4 Time and Place of Closing..................................... 2
1.5 Effective Time................................................ 3
ARTICLE 2 - TERMS OF MERGER AND MANAGEMENT AFTER THE MERGER............ 3
2.1 Charter....................................................... 3
2.2 Bylaws........................................................ 3
2.3 Directors and Officers of Surviving Corporation............... 3
2.4 Board of Directors of Vaxcel.................................. 3
2.5 Officers of Vaxcel............................................ 3
ARTICLE 3 - MANNER OF CONVERTING SHARES................................ 4
3.1 Conversion of Shares.......................................... 4
3.2 Shares Held by Zynaxis or Vaxcel.............................. 4
3.3 Dissenting Shareholders....................................... 5
3.4 Fractional Shares............................................. 5
3.5 Conversion of Stock Options; Restricted Stock................. 6
3.6 Conversion of Financing Warrants.............................. 7
3.7 Conversion of Warrants Other Than Financing Warrants.......... 7
3.8 Conversion of Promissory Notes................................ 8
ARTICLE 4 - EXCHANGE OF SHARES......................................... 8
4.1 Exchange Procedures........................................... 8
4.2 Rights of Former Zynaxis Shareholders......................... 9
ARTICLE 5 - REPRESENTATIONS AND WARRANTIES OF ZYNAXIS.................. 10
5.1 Organization, Standing, and Power............................. 10
5.2 Authority; No Breach By Agreement............................. 10
5.3 Capital Stock................................................. 11
5.4 Zynaxis Subsidiaries.......................................... 11
5.5 SEC Filings; Financial Statements............................. 12
5.6 Absence of Undisclosed Liabilities............................ 13
5.7 Absence of Certain Changes or Events.......................... 13
5.8 Tax Matters................................................... 13
5.9 Assets........................................................ 15
5.10 Intellectual Property......................................... 15
5.11 Environmental Matters......................................... 16
5.12 Compliance with Laws.......................................... 17
5.13 Labor Relations............................................... 17
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5.14 Employee Benefit Plans........................................ 18
5.15 Material Contracts............................................ 19
5.16 Legal Proceedings............................................. 20
5.17 Reports....................................................... 20
5.18 Statements True and Correct................................... 21
5.19 Regulatory Matters............................................ 21
5.20 Charter Provisions............................................ 21
ARTICLE 6 - REPRESENTATIONS AND WARRANTIES OF CYTRX, VAXCEL
AND VAXCEL MERGER SUB.................................................. 21
6.1 Organization, Standing, and Power............................. 22
6.2 Authority; No Breach By Agreement............................. 22
6.3 Capital Stock................................................. 23
6.4 Vaxcel Subsidiaries........................................... 24
6.5 Vaxcel Financial Statements................................... 25
6.6 Absence of Undisclosed Liabilities............................ 25
6.7 Absence of Certain Changes or Events.......................... 25
6.8 Tax Matters................................................... 25
6.9 Assets........................................................ 26
6.10 Intellectual Property......................................... 27
6.11 Environmental Matters......................................... 28
6.12 Compliance With Laws.......................................... 28
6.13 Labor Relations............................................... 29
6.14 Employee Benefit Plans........................................ 29
6.15 Material Contracts............................................ 31
6.16 Legal Proceedings............................................. 31
6.17 Reports....................................................... 32
6.18 Statements True and Correct................................... 32
6.19 Regulatory Matters............................................ 33
ARTICLE 7 - CONDUCT OF BUSINESS PENDING CONSUMMATION................... 33
7.1 Affirmative Covenants of Zynaxis.............................. 33
7.2 Negative Covenants of Zynaxis................................. 33
7.3 Covenants of Vaxcel........................................... 35
7.4 Adverse Changes in Condition.................................. 35
7.5 Reports....................................................... 35
ARTICLE 8 - ADDITIONAL AGREEMENTS...................................... 36
8.1 Registration Statement; Proxy Statement; Shareholder Approval. 36
8.2 Applications.................................................. 37
8.3 Filings with State Offices.................................... 37
8.4 Agreement as to Efforts to Consummate......................... 37
8.5 Investigation and Confidentiality............................. 37
8.6 Press Releases................................................ 38
8.7 Certain Actions............................................... 38
8.8 State Antitakeover Laws....................................... 39
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8.9 Charter Provisions............................................ 39
8.10 Cure of Defaults.............................................. 39
8.11 Negotiation of Malvern Lease Amendment........................ 39
8.12 Nasdaq Listing................................................ 40
8.13 Agreements of Affiliates...................................... 40
8.14 Use of Proceeds of Senior Credit Facility..................... 40
8.15 Registration Rights Agreement................................. 40
ARTICLE 9 - CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE.......... 40
9.1 Conditions to Obligations of Each Party....................... 40
9.2 Conditions to Obligations of CytRx, Vaxcel and Vaxcel Merger
Sub........................................................... 42
9.3 Conditions to Obligations of Zynaxis.......................... 44
ARTICLE 10 - TERMINATION............................................... 45
10.1 Termination................................................... 45
10.2 Effect of Termination......................................... 46
10.3 Non-Survival of Representations and Covenants................. 46
ARTICLE 11 - MISCELLANEOUS............................................. 46
11.1 Definitions................................................... 46
11.2 Expenses...................................................... 58
11.3 Brokers and Finders........................................... 59
11.4 Entire Agreement.............................................. 60
11.5 Amendments.................................................... 60
11.6 Waivers....................................................... 60
11.7 Assignment.................................................... 61
11.8 Notices....................................................... 61
11.9 Governing Law................................................. 62
11.10 Counterparts.................................................. 62
11.11 Captions; Articles and Sections............................... 62
11.12 Interpretations............................................... 62
11.13 Severability.................................................. 62
SIGNATURES............................................................. 63
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LIST OF EXHIBITS
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EXHIBIT NUMBER DESCRIPTION
--------------- -----------
1. Warrant Agreement. ((S) 1.2).
2. Agreement of Affiliates. ((S) 8.13).
3. Matters as to which Xxxxxx, Xxxxx & Xxxxxxx will opine. ((S)
9.2(d)).
4. Matters as to which Xxxxxx & Bird will opine. ((S) 9.3(d)).
5. Form of Charter Amendments. ((S) 11.1(a)).
6. Example of Calculation of Exchange Ratio. ((S) 11.1(a)).
7. Liquidation Agreement. ((S) 11.1(a)).
8. Note Exchange Agreement. ((S) 11.1(a)).
9. Preferred Stock and Warrant Agreement. ((S) 11.1(a)).
10. Registration Rights Agreement. ((S) 11.1(a)).
11. Secured Loan Agreement. ((S) 11.1(a)).
12. Senior Secured Note. ((S) 11.1(a)).
13. Shareholder Voting Agreement. ((S) 11.1(a)).
14. Technology Development Agreement. ((S) 11.1(a)).
15. Zynaxis Pledge Agreement. ((S) 11.1(a)).
16. Zynaxis Security Agreement. ((S) 11.1(a)).
17. Zynaxis Vaccine Technologies Collateral Assignment of License
Agreement. ((S) 11.1(a)).
18. Zynaxis Vaccine Technologies Guaranty. ((S)11.1(a)).
19. Zynaxis Vaccine Technologies Security Agreement. ((S)11.1(a)).
THE REGISTRANT HEREBY AGREES TO FURNISH SUPPLEMENTALLY A COPY OF ANY OMITTED
EXHIBIT OR SCHEDULE TO THE SECURITIES AND EXCHANGE COMMISSION UPON REQUEST.
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AGREEMENT AND PLAN OF MERGER AND CONTRIBUTION
---------------------------------------------
THIS AGREEMENT AND PLAN OF MERGER AND CONTRIBUTION (this "Agreement") is
made and entered into as of December 6, 1996, by and among CYTRX CORPORATION
("CytRx"), a Delaware corporation, ""VAXCEL, INC. ("Vaxcel"), a Delaware
corporation and a wholly owned subsidiary of CytRx, VAXCEL MERGER SUBSIDIARY,
INC. ("Vaxcel Merger Sub"), a Georgia corporation, and a newly formed, wholly
owned subsidiary of Vaxcel, and ZYNAXIS, INC. ("Zynaxis"), a Pennsylvania
corporation.
SECTION 351 PLAN""
------------------
The respective Boards of Directors of CytRx, Vaxcel, Vaxcel Merger Sub and
Zynaxis are of the opinion that the transactions described herein are in the
best interests of the Parties to this Agreement and their respective
shareholders. This Agreement provides for the issuance to CytRx of shares of
Vaxcel Common Stock and a warrant to purchase shares of Vaxcel Common Stock in
exchange for CytRx's contribution to Vaxcel of the Senior Secured Note and an
amount of cash equal to the difference, as of the Closing Date, between the
aggregate principal and interest balance outstanding under the Senior Credit
Facility and Four Million Dollars ($4,000,000). This Agreement also provides
for the issuance of shares of Vaxcel Common Stock to the existing shareholders
of Zynaxis in exchange for the contribution to Vaxcel by the existing
shareholders of Zynaxis of all of the outstanding shares of Zynaxis Capital
Stock by means of a merger of Vaxcel Merger Sub with and into Zynaxis. At the
Effective Time of the Merger, the outstanding shares of the Zynaxis Capital
Stock shall be converted into the right to receive shares of Vaxcel Common Stock
(except as provided herein) and the outstanding shares of Vaxcel Merger Sub
Common Stock shall be converted into Zynaxis Common Stock. As a result,
shareholders of Zynaxis shall become shareholders of Vaxcel and Zynaxis shall
continue to conduct its business and operations as a wholly owned subsidiary of
Vaxcel. The transactions described in this Agreement are subject to the
approval of the shareholders of Zynaxis, and the satisfaction of certain other
conditions described in this Agreement. It is the intention of the Parties to
this Agreement that the transactions contemplated by this Agreement shall
qualify for federal income tax purposes for treatment under Section 351 of the
Internal Revenue Code. The execution of this Agreement by each of the Parties
hereto shall constitute its adoption by such Party.
Simultaneously with the execution of this Agreement: (i) CytRx is extending
the Senior Credit Facility to Zynaxis; (ii) CytRx and Zynaxis are entering into
a Liquidation Agreement pursuant to which CytRx will serve as Zynaxis's agent
and assist Zynaxis in selling its assets and settling its liabilities prior to
the Merger; (iii) holders of Zynaxis Preferred Stock, warrants and convertible
notes issued by Zynaxis are entering into agreements regarding the exchange of
their warrants and the exchange of their convertible notes for shares of Zynaxis
Common Stock in the Merger and certain other matters; and (iv) Vaxcel and
Zynaxis are entering into the Technology Development Agreement.
Certain terms used in this Agreement are defined in Section 11.1 of this
Agreement.
NOW, THEREFORE, in consideration of the above and the mutual warranties,
representations, covenants, and agreements set forth herein, the Parties agree
as follows:
ARTICLE 1
SUMMARY OF THE CONTRIBUTION AND THE MERGER
------------------------------------------
1.1 CONTRIBUTION BY CYTRX. For the consideration hereinafter provided and
---------------------
subject to the terms and conditions of this Agreement, at the Closing, CytRx
shall contribute to Vaxcel the Senior Credit Facility and a cash payment (the
"Cash Payment") in an amount equal to the difference, as of the Closing Date,
between Four Million Dollars ($4,000,000) and the sum of: (i) the aggregate
principal and interest balance outstanding under the Senior Secured Note; and
(ii) (A) the Per Share Price multiplied by (B) the number of votes entitled to
be cast by the holders of Zynaxis Capital Stock who elect to exercise their
statutory dissenters' rights or their objection rights, if any, under Section
2545 of the PBCL in excess of three percent (3%) of the votes that could be cast
by all holders of Zynaxis Capital Stock voting together as a single class. The
Cash Payment shall be made by wire transfer of immediately available funds to an
account specified in writing by Vaxcel.
1.2 ISSUANCE OF SHARES. Subject to the terms and conditions of this
------------------
Agreement, at the Closing, Vaxcel shall: (i) deliver to CytRx, in exchange for
the contribution of the Senior Secured Note and the Cash Payment, one warrant
agreement substantially in the form of Exhibit 1 hereto (the "CytRx Warrant")
and one certificate representing One Million Three Hundred Seventy Four Thousand
Nine Hundred Ninety-Six (1,374,996) shares of Vaxcel Common Stock; and (ii)
deliver to CytRx one certificate representing a number of shares of Vaxcel
Common Stock equal to the product of the Exchange Ratio, as defined below, times
the number of votes entitled to be cast by the holders of Zynaxis Capital Stock
who elect to exercise their statutory dissenters' rights or their objection
rights, if any, under Section 2545 of the PBCL. Each certificate of Vaxcel
Common Stock issued pursuant to this Section 1.2 shall be registered in the name
of CytRx, free and clear of any Liens.
1.3 MERGER. Subject to the terms and conditions of this Agreement, at the
------
Effective Time, Vaxcel Merger Sub shall be merged with and into Zynaxis in
accordance with the provisions of Section 1921 et seq. of the PBCL and Sections
14-2-1101 and 14-2-1107 of the GBCC and with the effects provided in Section
1929 of the PBCL and Section 14-2-1106 of the GBCC (the "Merger"). Zynaxis shall
be the Surviving Corporation resulting from the Merger and shall become a wholly
owned Subsidiary of Vaxcel and shall continue to be governed by the Laws of the
Commonwealth of Pennsylvania. The Merger shall be consummated pursuant to the
terms of this Agreement, which has been approved and adopted by the respective
Boards of Directors of CytRx, Zynaxis, Vaxcel Merger Sub, and Vaxcel and by
Vaxcel, as the sole shareholder of Vaxcel Merger Sub.
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1.4 TIME AND PLACE OF CLOSING. The closing of the transactions
-------------------------
contemplated hereby (the "Closing") will take place at 10:00 A.M. on the date on
which the Effective Time occurs (or the immediately preceding day if the
Effective Time is earlier than 10:00 A.M.), or at such other time as the
Parties, acting through their authorized officers, may mutually agree. The
Closing shall be held at such location as may be mutually agreed upon by the
Parties.
1.5 EFFECTIVE TIME. The Merger and other transactions contemplated by
--------------
this Agreement shall become effective upon the last to occur of: (i) the filing
of the Articles of Merger in the Department of State of the Commonwealth of
Pennsylvania and (ii) the filing of the Certificate of Merger with the Secretary
of State of the State of Georgia (the "Effective Time"). Subject to the terms
and conditions hereof, unless otherwise mutually agreed upon in writing by the
authorized officers of each Party, the Parties shall use their reasonable
efforts to cause the Effective Time to occur on the first business day following
the last to occur of (i) the effective date (including expiration of any
applicable waiting period) of the last required Consent of any Regulatory
Authority having authority over and approving or exempting the Merger, and (ii)
the date on which the shareholders of Zynaxis approve this Agreement to the
extent such approval is required by applicable Law.
ARTICLE 2
TERMS OF MERGER AND
-------------------
MANAGEMENT AFTER THE MERGER
---------------------------
2.1 CHARTER. The Articles of Incorporation, as amended, of Zynaxis in
-------
effect immediately prior to the Effective Time shall be the Articles of
Incorporation of the Surviving Corporation until duly amended or repealed.
2.2 BYLAWS. The Bylaws of Zynaxis in effect immediately prior to the
------
Effective Time shall be the Bylaws of the Surviving Corporation until duly
amended or repealed.
2.3 DIRECTORS AND OFFICERS OF SURVIVING CORPORATION. Xxxx X. Xxxxxx,
-----------------------------------------------
Xxxxxxx X. Xxxxxxxx, Xx., Xxxx X. Xxxxxxx, Xxxxxxx X. XxXxxx, Xx., and Xxxx
Xxxxxx shall serve as the directors of the Surviving Corporation from and after
the Effective Time in accordance with the Bylaws of the Surviving Corporation
until their successors are elected and qualify. The following persons shall
serve as the officers of the Surviving Corporation from and after the Effective
Time in accordance with the Bylaws of the Surviving Corporation until their
successors are elected and qualify: Xxxx Xxxxxx, President and Chief Executive
Officer; Xxxx Xxxxxx, Vice President -Research and Development; and Xxxx X.
Xxxxxxxx, Chief Financial Officer, Controller and Secretary.
2.4 BOARD OF DIRECTORS OF VAXCEL. Xxxx X. Xxxxxx, Xxxxxxx X. Xxxxxxxx,
----------------------------
Jr., Xxxx X. Xxxxxx, Xxxx X. Xxxxxxx, Xxxxxxx X. XxXxxx, Xx., and Xxxx Xxxxxx
shall serve as the directors of Vaxcel from and after the Effective Time in
accordance with the Bylaws of Vaxcel until their successors are elected and
qualify.
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2.5 OFFICERS OF VAXCEL. The officers of Vaxcel in office immediately
------------------
prior to the Effective Time, together with such additional persons as may
thereafter be elected, shall serve as the officers of Vaxcel from and after the
Effective Time in accordance with the Bylaws of Vaxcel until their successors
are elected and qualify.
ARTICLE 3
MANNER OF CONVERTING SHARES
---------------------------
3.1 CONVERSION OF SHARES. Subject to the provisions of this Article 3, at
--------------------
the Effective Time, by virtue of the Merger and without any action on the part
of Vaxcel, Vaxcel Merger Sub or Zynaxis, or the shareholders of any of the
foregoing, the shares of the constituent corporations shall be converted as
follows:
(a) Each share of capital stock of Vaxcel issued and outstanding
immediately prior to the Effective Time shall remain issued and outstanding
from and after the Effective Time.
(b) Each share of Vaxcel Merger Sub Common Stock issued and outstanding
immediately prior to the Effective Time shall cease to be outstanding and
shall be converted into one share of Zynaxis Common Stock.
(c) Each share of Zynaxis Common Stock (excluding shares held by any
Zynaxis Company or any Vaxcel Company, and excluding shares held by
shareholders who perfect their statutory dissenters' rights or objection
rights under Section 2545 of the PBCL as provided in Section 3.3) issued and
outstanding immediately prior to the Effective Time shall cease to be
outstanding and shall be converted into and exchanged for the right to receive
a number of shares of Vaxcel Common Stock equal to the Exchange Ratio.
(d) Each share of Zynaxis Preferred Stock (excluding shares held by any
Zynaxis Company or any Vaxcel Company, and excluding shares held by
shareholders who perfect their statutory dissenters' rights or objection
rights under Section 2545 of the PBCL as provided in Section 3.3) issued and
outstanding immediately prior to the Effective Time shall cease to be
outstanding and shall be converted into and exchanged for the right to receive
a number of shares of Vaxcel Common Stock equal to two times the Exchange
Ratio.
3.2 SHARES HELD BY ZYNAXIS OR VAXCEL. Each of the shares of Zynaxis
--------------------------------
Common Stock held by any Zynaxis Company or by any Vaxcel Company shall be
canceled and retired at the Effective Time and no consideration shall be issued
in exchange therefor.
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3.3 DISSENTING SHAREHOLDERS.
-----------------------
(a) Any holder of shares of Zynaxis Capital Stock who perfects his or
her dissenters' rights in accordance with and as contemplated by Section 1930 of
the PBCL shall be entitled to receive the value of such shares in cash as
determined pursuant to such provision of Law; provided, that no such payment
shall be made to any dissenting shareholder unless and until such dissenting
shareholder has complied with the applicable provisions of the PBCL and
surrendered to Zynaxis the certificate or certificates representing the shares
for which payment is being made. In the event that after the Effective Time a
dissenting shareholder of Zynaxis fails to perfect, or effectively withdraws or
loses, his right to appraisal and of payment for his shares, Vaxcel shall issue
and deliver the consideration to which such holder of shares of Zynaxis Capital
Stock is entitled under this Article 3 (without interest) upon surrender by such
holder of the certificate or certificates representing shares of Zynaxis Capital
Stock held by him. If and to the extent required by applicable Law, Vaxcel will
establish (or cause to be established) an escrow account with an amount
sufficient to satisfy the maximum aggregate payment that may be required to be
paid to dissenting shareholders. Upon satisfaction of all claims of dissenting
shareholders, the remaining escrowed amount, reduced by payment of the fees and
expenses of the escrow agent, will be returned to Vaxcel.
(b) Any holder of shares of Zynaxis Capital Stock who objects to the
transaction and in accordance with and as contemplated by Sections 2544 and 2546
of the PBCL shall be entitled to receive the value of such shares in cash as
determined pursuant to such provision of Law; provided, that no such payment
shall be made to any objecting shareholder unless and until such objecting
shareholder has complied with the applicable provisions of the PBCL and
surrendered to Zynaxis the certificate or certificates representing the shares
for which payment is being made. In the event that after the Effective Time an
objecting shareholder of Zynaxis fails to give proper notice and surrender his
certificates as required by Section 2547 of the PBCL, or otherwise effectively
withdraws or loses his right to appraisal and of payment for his shares, Vaxcel
shall issue and CytRx and Vaxcel shall deliver the consideration to which such
holder of shares of Zynaxis Capital Stock is entitled under this Article 3
(without interest) upon surrender by such holder of the certificate or
certificates representing shares of Zynaxis Capital Stock held by him. If and to
the extent required by applicable Law, Vaxcel will establish (or cause to be
established) an escrow account with an amount sufficient to satisfy the maximum
aggregate payment that may be required to be paid to objecting shareholders.
Upon satisfaction of all claims of objecting shareholders, the remaining
escrowed amount, reduced by payment of the fees and expenses of the escrow
agent, will be returned to Vaxcel.
3.4 FRACTIONAL SHARES. Notwithstanding any other provision of this
-----------------
Agreement, each holder of shares of Zynaxis Common Stock and each holder of
shares of Zynaxis Preferred Stock exchanged pursuant to the Merger who would
otherwise have been entitled to receive a fraction of a share of Vaxcel Common
Stock (after taking into account all whole shares delivered by such holder)
shall receive, in lieu thereof, cash (without interest) in an amount equal to
such fractional part of a share of Vaxcel Common Stock divided by the Exchange
Ratio and multiplied by the Per Share Price.
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3.5 CONVERSION OF STOCK OPTIONS; RESTRICTED STOCK.
---------------------------------------------
(a) At the Effective Time, each option or other Equity Right to
purchase shares of Zynaxis Common Stock pursuant to stock options or stock
appreciation rights ("Zynaxis Options") granted by Zynaxis under the Zynaxis
Stock Plan which are outstanding at the Effective Time, whether or not
exercisable, shall be converted into and become rights with respect to Vaxcel
Common Stock, and Vaxcel shall assume each Zynaxis Option, in accordance with
the terms of the Zynaxis Stock Plan and stock option agreement by which it is
evidenced, except that from and after the Effective Time, (i) Vaxcel and its
Compensation Committee shall be substituted for Zynaxis and the Committee of
Zynaxis's Board of Directors (including, if applicable, the entire Board of
Directors of Zynaxis) administering such Zynaxis Stock Plan, (ii) each Zynaxis
Option assumed by Vaxcel may be exercised solely for shares of Vaxcel Common
Stock (or cash, if so provided under the terms of such Zynaxis Option), (iii)
the number of shares of Vaxcel Common Stock subject to such Zynaxis Option shall
be equal to the number of shares of Zynaxis Common Stock subject to such Zynaxis
Option immediately prior to the Effective Time multiplied by the Exchange Ratio,
and (iv) the per share exercise price under each such Zynaxis Option shall be
adjusted by dividing the per share exercise price under each such Zynaxis Option
by the Exchange Ratio and rounding up to the nearest cent. Notwithstanding the
provisions of clause (iii) of the preceding sentence, Vaxcel shall not be
obligated to issue any fraction of a share of Vaxcel Common Stock upon exercise
of Zynaxis Options and any fraction of a share of Vaxcel Common Stock that
otherwise would be subject to a converted Zynaxis Option shall represent the
right to receive a cash payment upon exercise of such converted Zynaxis Option
equal to the product of such fraction and the difference between the market
value of one share of Vaxcel Common Stock at the time of exercise of such Option
and the per share exercise price of such Zynaxis Option. The market value of one
share of Vaxcel Common Stock at the time of exercise of an Option shall be the
last sale price of a share of Vaxcel Common Stock on the Nasdaq SmallCap Market
(as reported by The Wall Street Journal or, if not reported thereby, any other
authoritative source selected by Vaxcel) on the last trading day preceding the
date of exercise. In addition, notwithstanding the provisions of clauses (iii)
and (iv) of the first sentence of this Section 3.5, each Zynaxis Option which is
an "incentive stock option" shall be adjusted as required by Section 424 of the
Internal Revenue Code, and the regulations promulgated thereunder, so as not to
constitute a modification, extension or renewal of the option, within the
meaning of Section 424(h) of the Internal Revenue Code. Each of Zynaxis and
Vaxcel agrees to take all necessary steps to effectuate the foregoing provisions
of this Section 3.5, including using its reasonable efforts to obtain from each
holder of a Zynaxis Option any Consent or Contract that may be deemed necessary
or advisable in order to effect the transactions contemplated by this Section
3.5. Anything in this Agreement to the contrary notwithstanding, Vaxcel shall
have the right, in its sole discretion, not to deliver the consideration
provided in this Section 3.5 to a former holder of a Zynaxis Option who has not
delivered such Consent or Contract.
(b) As soon as practicable after the Effective Time, Vaxcel shall
deliver to the participants in the Zynaxis Stock Plan an appropriate notice
setting forth such participant's rights
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pursuant thereto and the grants subjec t to the Zynaxis Stock Plan shall
continue in effect on the same terms and conditions (subject to the adjustments
required by Section 3.5(a) after giving effect to the Merger), and Vaxcel shall
comply with the terms of the Zynaxis Stock Plan to ensure, to the extent
required by, and subject to the provisions of, such Zynaxis Stock Plan, that
Zynaxis Options which qualified as incentive stock options prior to the
Effective Time continue to qualify as incentive stock options after the
Effective Time. At or prior to the Effective Time, Vaxcel shall take all
corporate action necessary to reserve for issuance sufficient shares of Vaxcel
Common Stock for delivery upon exercise of Zynaxis Options assumed by it in
accordance with this Section 3.5. As soon as practicable after the Effective
Time, Vaxcel shall file a registration statement on Form S-3 or Form S-8, as the
case may be (or any successor or other appropriate forms), with respect to the
shares of Vaxcel Common Stock subject to such options and shall use its
reasonable efforts to maintain the effectiveness of such registration statements
(and maintain the current status of the prospectus or prospectuses contained
therein) for so long as such options remain outstanding.
(c) All contractual restrictions or limitations on transfer with
respect to Zynaxis Common Stock awarded under the Zynaxis Stock Plan or any
other plan, program, Contract or arrangement of any Zynaxis Company, to the
extent that such restrictions or limitations shall not have already lapsed
(whether as a result of the Merger or otherwise), and except as otherwise
expressly provided in such plan, program, Contract or arrangement, shall remain
in full force and effect with respect to shares of Vaxcel Common Stock into
which such restricted stock is converted pursuant to Section 3.1.
3.6 CONVERSION OF FINANCING WARRANTS. At the Effective Time, each warrant
--------------------------------
to purchase shares of Zynaxis Common Stock which is outstanding at the Effective
Time and is held by a party to the Preferred Stock and Warrant Agreement shall
be exchanged for a warrant to purchase Vaxcel Common Stock in accordance with
the terms of the Preferred Stock and Warrant Agreement.
3.7 CONVERSION OF WARRANTS OTHER THAN FINANCING WARRANTS. At the
----------------------------------------------------
Effective Time, each warrant to purchase shares of Zynaxis Common Stock which is
outstanding at the Effective Time and is not being exchanged for a warrant to
purchase Vaxcel Common Stock in accordance with Section 3.6 and pursuant to the
Preferred Stock and Warrant Agreement (a "Non-Financing Warrant") shall be
converted into and become a warrant to purchase shares of Vaxcel Common Stock,
and Vaxcel shall assume each such warrant, in accordance with the terms of the
warrant agreement by which it is evidenced, except that from and after the
Effective Time, (i) each Non-Financing Warrant assumed by Vaxcel may be
exercised solely for shares of Vaxcel Common Stock, (ii) the number of shares of
Vaxcel Common Stock subject to such Non-Financing Warrant shall be equal to the
number of shares of Zynaxis Common Stock subject to such Non-Financing Warrant
immediately prior to the Effective Time multiplied by the Exchange Ratio, and
(iii) the per share exercise price under each such Non-Financing Warrant shall
be adjusted by dividing the per share exercise price under each such Non-
Financing Warrant by the Exchange Ratio and rounding up to the nearest cent.
Notwithstanding the provisions of clause (ii) of the preceding sentence, Vaxcel
shall not be
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obligated to issue any fraction of a share of Vaxcel Common Stock upon exercise
of such Non-Financing Warrants and any fraction of a share of Vaxcel Common
Stock that otherwise would be subject to a converted Non-Financing Warrant shall
represent the right to receive a cash payment upon exercise of such converted
Non-Financing Warrant equal to the product of such fraction and the difference
between the market value of one share of Vaxcel Common Stock at the time of
exercise of such converted Non-Financing Warrant and the per share exercise
price of such converted Non-Financing Warrant. The market value of one share of
Vaxcel Common Stock at the time of exercise of a converted Non-Financing Warrant
shall be the last sale price of a share of Vaxcel Common Stock on the Nasdaq
SmallCap Market (as reported by The Wall Street Journal or, if not reported
thereby, any other authoritative source selected by Vaxcel) on the last trading
day preceding the date of exercise.
(b) As soon as practicable after the Effective Time, Vaxcel shall
deliver to the holders of Non-Financing Warrants an appropriate notice setting
forth such participant's rights pursuant thereto and the converted Non-Financing
Warrants shall continue in effect on the same terms and conditions (subject to
the adjustments required by Section 3.7(a) after giving effect to the Merger).
At or prior to the Effective Time, Vaxcel shall take all corporate action
necessary to reserve for issuance sufficient shares of Vaxcel Common Stock for
delivery upon exercise of converted Non-Financing Warrants assumed by it in
accordance with this Section 3.7.
3.8 CONVERSION OF PROMISSORY NOTES. At the Effective Time, each
------------------------------
promissory note on which Zynaxis is the obligor and which is held by a party to
the Note Exchange Agreement shall be exchanged for shares of Vaxcel Common Stock
in accordance with the terms of the Note Exchange Agreement.
ARTICLE 4
EXCHANGE OF SHARES
------------------
4.1 EXCHANGE PROCEDURES. Promptly after the Effective Time, Vaxcel and
-------------------
Zynaxis shall cause the exchange agent selected by Vaxcel (the "Exchange Agent")
to mail to each holder of record of a certificate or certificates which
represented shares of Zynaxis Capital Stock immediately prior to the Effective
Time (the "Certificates") appropriate transmittal materials and instructions
(which shall specify that delivery shall be effected, and risk of loss and title
to such Certificates shall pass, only upon proper delivery of such Certificates
to the Exchange Agent). The Certificate or Certificates of Zynaxis Capital Stock
so delivered shall be duly endorsed as the Exchange Agent may require. In the
event of a transfer of ownership of shares of Zynaxis Capital Stock represented
by Certificates that are not registered in the transfer records of Zynaxis, the
consideration provided in Section 3.1 may be issued to a transferee if the
Certificates representing such shares are delivered to the Exchange Agent,
accompanied by all documents required to evidence such transfer and by evidence
satisfactory to the Exchange Agent that any applicable stock transfer taxes have
been paid. If any Certificate shall have been lost, stolen, mislaid or
destroyed, upon receipt of (i) an affidavit of that fact from the holder
claiming such Certificate to be lost, mislaid, stolen or destroyed, (ii) such
bond, security or
- 8 -
indemnity as Vaxcel and the Exchange Agent may reasonably require and (iii) any
other documents necessary to evidence and effect the bona fide exchange thereof,
the Exchange Agent shall issue to such holder the consideration into which the
shares represented by such lost, stolen, mislaid or destroyed Certificate shall
have been converted. The Exchange Agent may establish such other reasonable and
customary rules and procedures in connection with its duties as it may deem
appropriate. After the Effective Time, each holder of shares of Zynaxis Capital
Stock (other than shares to be canceled pursuant to Section 3.2, or as to which
statutory dissenters' rights have been perfected as provided in Section 3.3(a),
or as to which proper notice has been given as provided in Section 3.3(b))
issued and outstanding at the Effective Time shall surrender the Certificate or
Certificates representing such shares to the Exchange Agent and shall promptly
upon surrender thereof receive in exchange therefor the consideration provided
in Section 3.1, together with all undelivered dividends or distributions in
respect of such shares (without interest thereon) pursuant to Section 4.2. To
the extent required by Section 3.4, each holder of shares of Zynaxis Capital
Stock issued and outstanding at the Effective Time also shall receive, upon
surrender of the Certificate or Certificates, cash in lieu of any fractional
share of Vaxcel Common Stock to which such holder may be otherwise entitled
(without interest). Vaxcel shall not be obligated to deliver the consideration
to which any former holder of Zynaxis Capital Stock is entitled as a result of
the Merger until such holder surrenders such holder's Certificate or
Certificates for exchange as provided in this Section 4.1. Any other provision
of this Agreement notwithstanding, neither Vaxcel, the Surviving Corporation nor
the Exchange Agent shall be liable to a holder of Zynaxis Capital Stock for any
amounts paid or property delivered in good faith to a public official pursuant
to any applicable abandoned property, escheat or similar Law. Adoption of this
Agreement by the shareholders of Zynaxis shall constitute ratification of the
appointment of the Exchange Agent.
4.2 RIGHTS OF FORMER ZYNAXIS SHAREHOLDERS. At the Effective Time, the
-------------------------------------
stock transfer books of Zynaxis shall be closed as to holders of Zynaxis Capital
Stock immediately prior to the Effective Time and no transfer of Zynaxis Capital
Stock by any such holder shall thereafter be made or recognized. Until
surrendered for exchange in accordance with the provisions of Section 4.1, each
Certificate theretofore representing shares of Zynaxis Capital Stock (other than
shares to be canceled pursuant to Section 3.2, or as to which statutory
dissenters' rights have been perfected as provided in Section 3.3(a), or as to
which proper notice has been given as provided in Section 3.3(b)) shall from and
after the Effective Time represent for all purposes only the right to receive
the consideration provided in Sections 3.1 and 3.4 in exchange therefor,
subject, however, to the Surviving Corporation's obligation to pay any dividends
or make any other distributions with a record date prior to the Effective Time
which have been declared or made by Zynaxis in respect of such shares of Zynaxis
Capital Stock in accordance with the terms of this Agreement and which remain
unpaid at the Effective Time. To the extent permitted by Law, former
shareholders of record of Zynaxis shall be entitled to vote after the Effective
Time at any meeting of Vaxcel shareholders the number of whole shares of Vaxcel
Common Stock into which their respective shares of Zynaxis Capital Stock are
converted, regardless of whether such holders have exchanged their Certificates
for certificates representing Vaxcel Common Stock in accordance with the
provisions of this Agreement. Whenever a dividend or other distribution is
declared by Vaxcel on the Vaxcel Common Stock,
- 9 -
the record date for which is at or after the Effective Time, the declaration
shall include dividends or other distributions on all shares of Vaxcel Common
Stock issuable pursuant to this Agreement, but beginning 30 days after the
Effective Time no dividend or other distribution payable to the holders of
record of Vaxcel Common Stock as of any time subsequent to the Effective Time
shall be delivered to the holder of any Certificate until such holder surrenders
such Certificate for exchange as provided in Section 4.1. However, upon
surrender of such Certificate, both the Vaxcel Common Stock certificate
(together with all such undelivered dividends or other distributions without
interest) and any undelivered dividends and cash payments payable hereunder
(without interest) shall be delivered and paid with respect to each share
represented by such Certificate.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF ZYNAXIS
-----------------------------------------
Zynaxis hereby represents and warrants to Vaxcel as follows:
5.1 ORGANIZATION, STANDING, AND POWER. Zynaxis is a corporation duly
---------------------------------
organized, validly existing, and in good standing under the Laws of the
Commonwealth of Pennsylvania, and has the corporate power and authority to carry
on its business as now conducted and to own, lease and operate its Assets.
Zynaxis is duly qualified or licensed to transact business as a foreign
corporation in good standing in the States of the United States and foreign
jurisdictions where the character of its Assets or the nature or conduct of its
business requires it to be so qualified or licensed, except for such
jurisdictions in which the failure to be so qualified or licensed is not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on Zynaxis. The minute book and other organizational documents for
Zynaxis have been made available to Vaxcel for its review and, except as
disclosed in Section 5.1 of the Zynaxis Disclosure Memorandum, are true and
complete in all material respects as of the date of this Agreement and
accurately reflect in all material respects all amendments thereto and all
proceedings of the Board of Directors and shareholders thereof.
5.2 AUTHORITY; NO BREACH BY AGREEMENT.
---------------------------------
(a) Zynaxis has the corporate power and authority necessary to
execute, deliver, and perform its obligations under this Agreement and to
consummate the transactions contemplated hereby. The execution, delivery, and
performance of this Agreement and the consummation of the transactions
contemplated herein, including the Merger, have been duly and validly authorized
by all necessary corporate action in respect thereof on the part of Zynaxis,
subject to the adoption of this Agreement: (i) by a majority vote of the votes
cast by all shareholders entitled to vote thereon (the holders of shares of
Zynaxis Common Stock and the holders of shares of Zynaxis Preferred Stock,
voting on an as-converted basis), and (ii) by a majority of the votes cast by
all holders of Zynaxis Preferred Stock entitled to vote thereon, voting as a
class. These are the only shareholder votes required for approval of this
Agreement and consummation of the transactions contemplated herein, including
the Merger, by Zynaxis.
- 10 -
Subject to approval of this Agreement by the shareholders of Zynaxis, this
Agreement represents a legal, valid, and binding obligation of Zynaxis,
enforceable against Zynaxis in accordance with its terms.
(b) The execution and delivery of this Agreement by Zynaxis, and,
upon approval of this Agreement and the transactions contemplated hereby by the
shareholders of Zynaxis, the consummation by Zynaxis of the transactions
contemplated hereby and the compliance by Zynaxis with any of the provisions
hereof, will not (i) conflict with or result in a breach of any provision of
Zynaxis's Articles of Incorporation, as amended, or Bylaws or the certificate or
articles of incorporation or bylaws of any Zynaxis Subsidiary or any resolution
adopted by the board of directors or the shareholders of any Zynaxis Company, or
(ii) except as disclosed in Section 5.2 of the Zynaxis Disclosure Memorandum,
constitute or result in a Default under, or require any Consent pursuant to, or
result in the creation of any Lien on any Asset of any Zynaxis Company under,
any Contract or Permit of any Zynaxis Company, or, (iii) subject to receipt of
the requisite Consents referred to in Section 9.1(b), constitute or result in a
Default under, or require any Consent pursuant to, any Law or Order applicable
to any Zynaxis Company or any of their respective material Assets (including any
Vaxcel Company or any Zynaxis Company becoming subject to or liable for the
payment of any Tax or any of the Assets owned by any Vaxcel Company or any
Zynaxis Company being reassessed or revalued by any Taxing authority).
(c) Other than in connection or compliance with the provisions of the
Securities Laws, applicable state corporate and securities Laws, and rules of
the NASD, and other than Consents required from Regulatory Authorities, and
other than notices to or filings with the Internal Revenue Service or the
Pension Benefit Guaranty Corporation with respect to any employee benefit plans,
no notice to, filing with, or Consent of, any public body or authority is
necessary for the execution, delivery and performance by Zynaxis of its
obligations under this Agreement.
5.3 CAPITAL STOCK.
-------------
(a) The authorized capital stock of Zynaxis consists of (i)
25,000,000 shares of Zynaxis Common Stock, of which 10,338,768 shares are issued
and outstanding, and (ii) 2,000,000 shares of preferred stock, 1,500,000 shares
of which are designated Series A Convertible Preferred Stock and of which
1,412,500 shares are issued and outstanding. The Conversion Price (as that term
is defined in the Statement With Respect to Shares) of the Zynaxis Preferred
Stock is One Dollar ($1.00) per share. All of the issued and outstanding shares
of capital stock of Zynaxis are duly and validly issued and outstanding and are
fully paid and nonassessable under the PBCL. None of the outstanding shares of
Zynaxis Capital Stock has been issued in violation of any preemptive rights of
the current or past shareholders of Zynaxis.
(b) Except as set forth in Section 5.3(a) or as disclosed in Section
5.3 of the Zynaxis Disclosure Memorandum, there are no shares of capital stock
or other equity securities of Zynaxis outstanding and no outstanding Equity
Rights relating to the Zynaxis Capital Stock.
- 11 -
5.4 ZYNAXIS SUBSIDIARIES. Zynaxis has disclosed in Section 5.4 of the
--------------------
Zynaxis Disclosure Memorandum all of the Zynaxis Subsidiaries (in each case
identifying its jurisdiction of incorporation, each jurisdiction in which it is
qualified and/or licensed to transact business, and the number of shares owned
by Zynaxis and percentage ownership interest represented by such share
ownership). Except as disclosed in Section 5.4 of the Zynaxis Disclosure
Memorandum, Zynaxis or one of its Subsidiaries owns all of the issued and
outstanding shares of capital stock (or other equity interests) of each Zynaxis
Subsidiary. No capital stock (or other equity interest) of any Zynaxis
Subsidiary is or may become required to be issued (other than to another Zynaxis
Company) by reason of any Equity Rights, and there are no Contracts by which any
Zynaxis Subsidiary is bound to issue (other than to another Zynaxis Company)
additional shares of its capital stock (or other equity interests) or Equity
Rights or by which any Zynaxis Company is or may be bound to transfer any shares
of the capital stock (or other equity interests) of any Zynaxis Subsidiary
(other than to another Zynaxis Company). There are no Contracts relating to the
rights of any Zynaxis Company to vote or to dispose of any shares of the capital
stock (or other equity interests) of any Zynaxis Subsidiary. All of the shares
of capital stock (or other equity interests) of each Zynaxis Subsidiary held by
a Zynaxis Company are fully paid and nonassessable under the applicable
corporation Law of the jurisdiction in which such Subsidiary is incorporated or
organized and are owned by the Zynaxis Company free and clear of any Lien,
except as contemplated in the Transaction Documents. Except as disclosed in
Section 5.4 of the Zynaxis Disclosure Memorandum, each Zynaxis Subsidiary is a
corporation, and each such Subsidiary is duly organized, validly existing, and
(as to corporations) in good standing under the Laws of the jurisdiction in
which it is incorporated or organized, and has the corporate power and authority
necessary for it to own, lease, and operate its Assets and to carry on its
business as now conducted. Each Zynaxis Subsidiary is duly qualified or licensed
to transact business as a foreign corporation in good standing in the States of
the United States and foreign jurisdictions where the character of its Assets or
the nature or conduct of its business requires it to be so qualified or
licensed, except for such jurisdictions in which the failure to be so qualified
or licensed is not reasonably likely to have, individually or in the aggregate,
a Material Adverse Effect on Zynaxis. The minute book and other organizational
documents for each Zynaxis Subsidiary have been made available to Vaxcel for its
review, and, except as disclosed in Section 5.4 of the Zynaxis Disclosure
Memorandum, are true and complete in all material respects as in effect as of
the date of this Agreement and accurately reflect in all material respects all
amendments thereto and all proceedings of the Board of Directors and
shareholders thereof.
5.5 SEC FILINGS; FINANCIAL STATEMENTS.
---------------------------------
(a) Zynaxis has timely filed and made available to Vaxcel all SEC
Documents required to be filed by Zynaxis since December 31, 1992 (the "Zynaxis
SEC Reports"). The Zynaxis SEC Reports (i) at the time filed, complied in all
material respects with the applicable requirements of the Securities Laws and
(ii) did not, at the time they were filed (or, if amended or superseded by a
filing prior to the date of this Agreement, then on the date of such filing)
contain any untrue statement of a material fact or omit to state a material fact
required to be stated in such Zynaxis SEC Reports or necessary in order to make
the statements in such Zynaxis SEC
- 12 -
Reports, in light of the circumstances under which they were made, not
misleading. No Zynaxis Subsidiary is required to file any SEC Documents.
(b) Each of the Zynaxis Financial Statements (including, in each
case, any related notes) contained in the Zynaxis SEC Reports, including any
Zynaxis SEC Reports filed after the date of this Agreement until the Effective
Time, complied or will comply as to form in all material respects with the
applicable published rules and regulations of the SEC with respect thereto, was
prepared in accordance with GAAP applied on a consistent basis throughout the
periods involved (except as may be indicated in the notes to such financial
statements or, in the case of unaudited interim statements, as permitted by Form
10-Q of the SEC), and fairly presented in all material respects the consolidated
financial position of Zynaxis and its Subsidiaries as at the respective dates
and the consolidated results of operations and cash flows for the periods
indicated, except that the unaudited interim financial statements were or are
subject to normal and recurring year-end adjustments which were not or are not
expected to be material in amount or effect.
5.6 ABSENCE OF UNDISCLOSED LIABILITIES. Except as disclosed in Section
----------------------------------
5.6 of the Zynaxis Disclosure Memorandum, no Zynaxis Company has any Liabilities
that are reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on Zynaxis, except Liabilities which are accrued or reserved
against in the consolidated balance sheets of Zynaxis as of December 31, 1995
and June 30, 1996, included in the Zynaxis Financial Statements delivered prior
to the date of this Agreement or reflected in the notes thereto. Except as
disclosed in Section 5.6 of the Zynaxis Disclosure Memorandum, no Zynaxis
Company has incurred or paid any Liability since June 30, 1996, except for such
Liabilities incurred or paid (i) in the ordinary course of business consistent
with past business practice and which are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Zynaxis or (ii)
in connection with the transactions contemplated by this Agreement. Except as
disclosed in Section 5.6 of the Zynaxis Disclosure Memorandum or in the Zynaxis
Financial Statements, no Zynaxis Company is directly or indirectly liable, by
guarantee, indemnity, or otherwise, upon or with respect to, or obligated, by
discount or repurchase agreement or in any other way, to provide funds in
respect to, or obligated to guarantee or assume any Liability of any Person for
any amount in excess of $10,000.
5.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December 31, 1995, except
------------------------------------
as disclosed in the Zynaxis Financial Statements delivered prior to the date of
this Agreement or as disclosed in Section 5.7 of the Zynaxis Disclosure
Memorandum, (i) there have been no events, changes, or occurrences which have
had, or are reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on Zynaxis, and (ii) the Zynaxis Companies have not
taken any action, or failed to take any action, prior to the date of this
Agreement, which action or failure, if taken after the date of this Agreement,
would represent or result in a material breach or violation of any of the
covenants and agreements of Zynaxis provided in Article 7.
- 13 -
5.8 TAX MATTERS.
-----------
(a) All material Tax Returns required to be filed by or on behalf of
any of the Zynaxis Companies have been timely filed or requests for extensions
have been timely filed, granted, and have not expired for periods ended on or
before December 31, 1995, and on or before the date of the most recent fiscal
year end immediately preceding the Effective Time, and all Tax Returns filed are
complete and accurate. All Taxes shown on filed Tax Returns have been paid. As
of the date of this Agreement, there is no audit examination, deficiency, or
refund Litigation with respect to any Taxes, except as reserved against in the
Zynaxis Financial Statements delivered prior to the date of this Agreement. All
Taxes and other Liabilities due with respect to completed and settled
examinations or concluded Litigation have been paid. There are no Liens with
respect to Taxes upon any of the Assets of the Zynaxis Companies, except for any
such Liens which are not reasonably likely to have a Material Adverse Effect on
Zynaxis.
(b) None of the Zynaxis Companies has executed an extension or waiver
of any statute of limitations on the assessment or collection of any Tax due
(excluding such statutes that relate to years currently under examination by the
Internal Revenue Service or other applicable taxing authorities) that is
currently in effect.
(c) The provision for any Taxes due or to become due for any of the
Zynaxis Companies for the period or periods through and including the date of
the respective Zynaxis Financial Statements that has been made and is reflected
on such Zynaxis Financial Statements is sufficient to cover all such Taxes.
(d) Deferred Taxes of the Zynaxis Companies have been provided for in
accordance with GAAP.
(e) None of the Zynaxis Companies is a party to any Tax allocation or
sharing agreement and none of the Zynaxis Companies has been a member of an
affiliated group filing a consolidated federal income Tax Return (other than a
group the common parent of which was Zynaxis) or has any Liability for Taxes of
any Person (other than Zynaxis and its Subsidiaries) under Treasury Regulation
Section 1.1502-6 (or any similar provision of state, local or foreign Law) as a
transferee or successor or by Contract or otherwise .
(f) Each of the Zynaxis Companies is in compliance with, and its
records contain all information and documents (including properly completed IRS
Forms W-9) necessary to comply with, all applicable information reporting and
Tax withholding requirements under federal, state, and local Tax Laws, and such
records identify with specificity all accounts subject to backup withholding
under Section 3406 of the Internal Revenue Code.
(g) Except as disclosed in Section 5.8 of the Zynaxis Disclosure
Memorandum, none of the Zynaxis Companies has made any payments, is obligated to
make any
- 14 -
payments, or is a party to any Contract that could obligate it to make any
payments that would be disallowed as a deduction under Section 280G or 162(m) of
the Internal Revenue Code.
(h) There has not been an ownership change, as defined in Internal
Revenue Code Section 382(g), of the Zynaxis Companies that occurred during or
after any taxable period in which the Zynaxis Companies incurred a net operating
loss that carries over to any taxable period ending after December 31, 1995.
(i) No Zynaxis Company has or has had in any foreign country a
permanent establishment, as defined in any applicable tax treaty or convention
between the United States and such foreign country.
5.9 ASSETS.
------
(a) Except as disclosed in Section 5.9 of the Zynaxis Disclosure
Memorandum or as disclosed or reserved against in the Zynaxis Financial
Statements delivered prior to the date of this Agreement, the Zynaxis Companies
have good and marketable title, free and clear of all Liens, to all of their
respective Assets, except for any such Liens or other defects of title which are
not reasonably likely to have a Material Adverse Effect on Zynaxis.
(b) Except as disclosed in Section 5.9(b) of the Zynaxis Disclosure
Memorandum, the accounts receivable of the Zynaxis Companies as set forth on the
most recent balance sheet included in the Zynaxis Financial Statements delivered
prior to the date of this Agreement or arising since the date thereof are valid
and genuine; have arisen solely out of bona fide sales and deliveries of goods,
performance of services and other business transactions in the ordinary course
of business consistent with past practice; are not subject to valid defenses,
set-offs or counterclaims. The allowance for collection losses on such balance
sheet has been determined in accordance with GAAP.
(c) All Assets which are material to Zynaxis's business on a
consolidated basis, held under leases or subleases by any of the Zynaxis
Companies, are held under valid Contracts enforceable in accordance with their
respective terms (except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, or other Laws affecting the
enforcement of creditors' rights generally and except that the availability of
the equitable remedy of specific performance or injunctive relief is subject to
the discretion of the court before which any proceedings may be brought), and
each such Contract is in full force and effect.
(d) Set forth in Section 5.9(d) of the Zynaxis Disclosure Memorandum
is a description of each insurance policy maintained by any of the Zynaxis
Companies, including the type of policy, the name of the insurer, the coverage
limits and the premiums. None of the Zynaxis Companies has received notice from
any insurance carrier that (i) any policy of insurance will be canceled or that
coverage thereunder will be reduced or eliminated, or (ii) premium costs with
respect to such policies of insurance will be substantially increased.
- 15 -
There are presently no claims for amounts exceeding in any individual case
$5,000 pending under such policies of insurance and no notices of claims in
excess of such amounts have been given by any Zynaxis Company under such
policies.
(f) The Assets of the Zynaxis Companies include all Assets required
to operate the business of the Zynaxis Companies as presently conducted. The
Zynaxis Companies have no Inventory.
5.10.INTELLECTUAL PROPERTY. Except as disclosed in Section 5.10 of the
---------------------
Zynaxis Disclosure Memorandum, each Zynaxis Company owns or has a license to use
all of the Intellectual Property used by such Zynaxis Company in the course of
its business. Each Zynaxis Company is the owner of or has a license to any
Intellectual Property sold or licensed to a third party by such Zynaxis Company
in connection with such Zynaxis Company's business operations, and such Zynaxis
Company has the right to convey by sale or license any Intellectual Property so
conveyed. Except as disclosed in Section 5.10 of the Zynaxis Disclosure
Memorandum, no Zynaxis Company is in Default under any of its Intellectual
Property licenses. Except as disclosed in Section 5.10 of the Zynaxis Disclosure
Memorandum, no proceedings have been instituted, or are pending or to the
Knowledge of Zynaxis threatened, which challenge the rights of any Zynaxis
Company with respect to Intellectual Property used, sold or licensed by such
Zynaxis Company in the course of its business, nor has any person claimed or
alleged any rights to such Intellectual Property. To the Knowledge of Zynaxis,
the conduct of the business of the Zynaxis Companies does not infringe any
Intellectual Property of any other person. Except as disclosed in Section 5.10
of the Zynaxis Disclosure Memorandum, no Zynaxis Company is obligated to pay any
recurring royalties to any Person with respect to any such Intellectual
Property. Except as disclosed in Section 5.10 of the Zynaxis Disclosure
Memorandum, every officer, director, or employee of any Zynaxis Company is a
party to a Contract which requires such officer, director or employee to assign
any interest in any Intellectual Property to a Zynaxis Company and to keep
confidential any trade secrets, proprietary data, customer information, or other
business information of a Zynaxis Company, and, to the Knowledge of Zynaxis, no
such officer, director or employee is party to any Contract with any Person
other than a Zynaxis Company which requires such officer, director or employee
to assign any interest in any Intellectual Property to any Person other than a
Zynaxis Company or to keep confidential any trade secrets, proprietary data,
customer information, or other business information of any Person other than a
Zynaxis Company. Except as disclosed in Section 5.10 of the Zynaxis Disclosure
Memorandum, to the Knowledge of Zynaxis, no officer, director or employee of any
Zynaxis Company is party to any Contract which restricts or prohibits such
officer, director or employee from engaging in activities competitive with any
Person, including any Zynaxis Company.
5.11 ENVIRONMENTAL MATTERS.
---------------------
(a) Each Zynaxis Company, its Participation Facilities, and its
Operating Properties are, and have been, in compliance with all Environmental
Laws.
- 16 -
(b) There is no Litigation pending or, to the Knowledge of Zynaxis,
threatened before any court, governmental agency, or authority or other forum in
which any Zynaxis Company or any of its Operating Properties or Participation
Facilities (or Zynaxis in respect of such Operating Property or Participation
Facility) has been or, with respect to threatened Litigation, may be named as a
defendant (i) for alleged noncompliance (including by any predecessor) with any
Environmental Law or (ii) relating to the release, discharge, spillage, or
disposal into the environment of any Hazardous Material, whether or not
occurring at, on, under, adjacent to, or affecting (or potentially affecting) a
site owned, leased, or operated by any Zynaxis Company or any of its Operating
Properties or Participation Facilities, nor is there any reasonable basis for
any Litigation of a type described in this sentence.
(c) During the period of (i) any Zynaxis Company's ownership or
operation of any of their respective current properties, (ii) any Zynaxis
Company's participation in the management of any Participation Facility, or
(iii) any Zynaxis Company's holding of a security interest in an Operating
Property, there have been no releases, discharges, spillages, or disposals of
Hazardous Material in, on, under, adjacent to, or affecting (or potentially
affecting) such properties. Prior to the period of (i) any Zynaxis Company's
ownership or operation of any of their respective current properties, (ii) any
Zynaxis Company's participation in the management of any Participation Facility,
or (iii) any Zynaxis Company's holding of a security interest in a Operating
Property, to the Knowledge of Zynaxis, there were no releases, discharges,
spillages, or disposals of Hazardous Material in, on, under, or affecting any
such property, Participation Facility or Operating Property.
5.12 COMPLIANCE WITH LAWS. Each Zynaxis Company has in effect all Permits
--------------------
necessary for it to own, lease, or operate its material Assets and to carry on
its business as now conducted, except for those Permits the absence of which are
not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on Zynaxis, and there has occurred no Default under any such
Permit other than Defaults which are not reasonably likely to have, individually
or in the aggregate, a Material Adverse Effect on Zynaxis. Except as disclosed
in Section 5.12 of the Zynaxis Disclosure Memorandum, none of the Zynaxis
Companies:
(a) is in Default under any of the provisions of its Articles of
Incorporation, as amended, or Bylaws (or other governing instruments);
(b) is in Default under any Laws, Orders, or Permits applicable to
its business or employees conducting its business, except for Defaults which
are not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on Zynaxis; or
(c) since January 1, 1993, has received any notification or
communication from any agency or department of federal, state, or local
government or any Regulatory Authority or the staff thereof (i) asserting that
any Zynaxis Company is not in compliance with any of the Laws or Orders which
such governmental authority or Regulatory Authority enforces, where such
noncompliance is reasonably likely to have, individually or in the aggregate,
a Material Adverse Effect on Zynaxis, (ii) threatening to revoke any Permits,
the revocation
- 17 -
of which is reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on Zynaxis, or (iii) requiring any Zynaxis Company to
enter into or consent to the issuance of a cease and desist order, formal
agreement, directive, commitment, or memorandum of understanding, or to adopt
any Board resolution or similar undertaking.
Copies of all material reports, correspondence, notices and other documents
relating to any inspection, audit, monitoring or other form of review or
enforcement action by a Regulatory Authority have been made available to Vaxcel.
5.13 LABOR RELATIONS. No Zynaxis Company is the subject of any Litigation
---------------
asserting that it or any other Zynaxis Company has committed an unfair labor
practice (within the meaning of the National Labor Relations Act or comparable
state Law) or seeking to compel it or any other Zynaxis Company to bargain with
any labor organization as to wages or conditions of employment, nor is any
Zynaxis Company party to any collective bargaining agreement, nor is there any
strike or other labor dispute involving any Zynaxis Company, pending or
threatened, nor to the Knowledge of Zynaxis, is there any activity involving any
Zynaxis Company's employees seeking to certify a collective bargaining unit or
engaging in any other organization activity.
5.14 EMPLOYEE BENEFIT PLANS.
----------------------
(a) Zynaxis has disclosed in Section 5.14 of the Zynaxis Disclosure
Memorandum, and has delivered or made available to Vaxcel prior to the execution
of this Agreement, copies in each case of, all pension, retirement, profit-
sharing, deferred compensation, stock option, employee stock ownership,
severance pay, vacation, bonus, or other incentive plan, all other written
employee programs, arrangements, or agreements, all medical, vision, dental, or
other health plans, all life insurance plans, and all other employee benefit
plans or fringe benefit plans, including "employee benefit plans" as that term
is defined in Section 3(3) of ERISA, currently adopted, maintained by, sponsored
in whole or in part by, or contributed to by any Zynaxis Company or ERISA
Affiliate (as defined below) thereof for the benefit of employees, retirees,
dependents, spouses, directors, independent contractors, or other beneficiaries
and under which employees, retirees, dependents, spouses, directors, independent
contractors, or other beneficiaries are eligible to participate (collectively,
the "Zynaxis Benefit Plans"). Any of the Zynaxis Benefit Plans which is an
"employee pension benefit plan," as that term is defined in Section 3(2) of
ERISA, is referred to herein as a "Zynaxis ERISA Plan." Each Zynaxis ERISA Plan
which is also a "defined benefit plan" (as defined in Section 414(j) of the
Internal Revenue Code) is referred to herein as a "Zynaxis Pension Plan." No
Zynaxis Pension Plan is or has been a multiemployer plan within the meaning of
Section 3(37) of ERISA.
(b) All Zynaxis Benefit Plans are in compliance with the applicable
terms of ERISA, the Internal Revenue Code, and any other applicable Laws the
breach or violation of which are reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on Zynaxis. Each Zynaxis ERISA Plan
which is intended to be qualified under Section 401(a) of the Internal Revenue
Code has received a favorable determination letter from the Internal
- 18 -
Revenue Service, and Zynaxis is not aware of any circumstances likely to result
in revocation of any such favorable determination letter. To the Knowledge of
Zynaxis, no Zynaxis Company has engaged in a transaction with respect to any
Zynaxis Benefit Plan that, assuming the taxable period of such transaction
expired as of the date hereof, would subject any Zynaxis Company to a Tax
imposed by either Section 4975 of the Internal Revenue Code or Section 502(i) of
ERISA that, individually or in the aggregate, is reasonably likely to have a
Material Adverse Effect on Zynaxis.
(c) No Zynaxis Pension Plan has any "unfunded current liability," as
that term is defined in Section 302(d)(8)(A) of ERISA, and the fair market value
of the assets of any such plan exceeds the plan's "benefit liabilities," as that
term is defined in Section 4001(a)(16) of ERISA when determined under actuarial
factors that would apply if the Zynaxis Pension Plan were terminated in
accordance with all applicable legal requirements. Since the date of the most
recent actuarial valuation, there has been (i) no material change in the
financial position of any Zynaxis Pension Plan, (ii) no change in the actuarial
assumptions with respect to any Zynaxis Pension Plan, and (iii) no increase in
benefits under any Zynaxis Pension Plan as a result of plan amendments or
changes in applicable Law which is reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on Zynaxis or materially adversely
affect the funding status of any such plan. Neither any Zynaxis Pension Plan nor
any "single-employer plan," within the meaning of Section 4001(a)(15) of ERISA,
currently or formerly maintained by any Zynaxis Company, or the single-employer
plan of any entity which is considered one employer with Zynaxis under Section
4001 of ERISA or Section 414 of the Internal Revenue Code or Section 302 of
ERISA (whether or not waived) (an "ERISA Affiliate") has an "accumulated funding
deficiency" within the meaning of Section 412 of the Internal Revenue Code or
Section 302 of ERISA. No Zynaxis Company has provided, or is required to
provide, security to a Zynaxis Pension Plan or to any single-employer plan of an
ERISA Affiliate pursuant to Section 401(a)(29) of the Internal Revenue Code.
(d) No Liability under Subtitle C or D of Title IV of ERISA has been
or is expected to be incurred by any Zynaxis Company with respect to any
ongoing, frozen, or terminated single-employer plan or the single-employer plan
of any ERISA Affiliate. No Zynaxis Company has incurred any withdrawal Liability
with respect to a multiemployer plan under Subtitle B of Title IV of ERISA
(regardless of whether based on contributions of an ERISA Affiliate). No notice
of a "reportable event," within the meaning of Section 4043 of ERISA for which
the 30-day reporting requirement has not been waived, has been required to be
filed for any Zynaxis Pension Plan or by any ERISA Affiliate within the 12-month
period ending on the date hereof.
(e) Except as disclosed in Section 5.14 of the Zynaxis Disclosure
Memorandum, no Zynaxis Company has any Liability for retiree health and life
benefits under any of the Zynaxis Benefit Plans and there are no restrictions on
the rights of such Zynaxis Company to amend or terminate any such retiree health
or benefit Plan without incurring any Liability thereunder.
- 19 -
(f) Except as disclosed in Section 5.14 of the Zynaxis Disclosure
Memorandum, neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i) result in any
payment (including severance, unemployment compensation, golden parachute, or
otherwise) becoming due to any director or any employee of any Zynaxis Company
from any Zynaxis Company under any Zynaxis Benefit Plan or otherwise, (ii)
increase any benefits otherwise payable under any Zynaxis Benefit Plan, or (iii)
result in any acceleration of the time of payment or vesting of any such
benefit.
(g) The actuarial present values of all accrued deferred compensation
entitlements (including entitlements under any executive compensation,
supplemental retirement, or employment agreement) of employees and former
employees of any Zynaxis Company and their respective beneficiaries, other than
entitlements accrued pursuant to funded retirement plans subject to the
provisions of Section 412 of the Internal Revenue Code or Section 302 of ERISA,
have been fully reflected on the Zynaxis Financial Statements to the extent
required by and in accordance with GAAP.
5.15 MATERIAL CONTRACTS. Except as disclosed in Section 5.15 of the
------------------
Zynaxis Disclosure Memorandum or otherwise reflected in the Zynaxis Financial
Statements, none of the Zynaxis Companies, nor any of their respective Assets,
businesses, or operations, is a party to, or is bound or affected by, or
receives benefits under, (i) any employment, severance, termination, consulting,
or retirement Contract providing for aggregate payments to any Person in any
calendar year in excess of $10,000, (ii) any Contract relating to the borrowing
of money by any Zynaxis Company or the guarantee by any Zynaxis Company of any
such obligation (other than Contracts evidencing trade payables and Contracts
relating to borrowings or guarantees made in the ordinary course of business),
(iii) any Contract which prohibits or restricts any Zynaxis Company from
engaging in any business activities in any geographic area, line of business or
otherwise in competition with any other Person, (iv) any Contract between or
among Zynaxis Companies, (v) any Contract involving Intellectual Property (other
than Contracts entered into in the ordinary course with customers and "shrink-
wrap" software licenses), (vi) any Contract relating to the provision of data
processing, network communication, or other technical services to or by any
Zynaxis Company, (vii) any Contract relating to the purchase or sale of any
goods or services (other than Contracts entered into in the ordinary course of
business and involving payments under any individual Contract not in excess of
$20,000), and (viii) any other Contract or amendment thereto that would be
required to be filed as an exhibit to a Form 10-K filed by Zynaxis with the SEC
as of the date of this Agreement (together with all Contracts referred to in
Sections 5.9 and 5.14(a), the "Zynaxis Contracts"). With respect to each Zynaxis
Contract and except as disclosed in Section 5.15 of the Zynaxis Disclosure
Memorandum: (i) the Contract is in full force and effect; (ii) no Zynaxis
Company is in Default thereunder; (iii) no Zynaxis Company has repudiated or
waived any material provision of any such Contract; and (iv) no other party to
any such Contract is, to the Knowledge of Zynaxis, in Default in any respect or
has repudiated or waived any material provision thereunder. Except as disclosed
in Section 5.15 of the Zynaxis Disclosure Memorandum, all of the indebtedness of
any Zynaxis Company for money borrowed is prepayable at any time by such Zynaxis
Company without penalty or premium.
- 20 -
5.16 LEGAL PROCEEDINGS. Except as disclosed in Section 5.16 of the Zynaxis
-----------------
Disclosure Memorandum, there is no Litigation instituted or pending, or, to the
Knowledge of Zynaxis, threatened (or unasserted but considered probable of
assertion and which if asserted would have at least a reasonable probability of
an unfavorable outcome) against any Zynaxis Company, or against any director,
employee or employee benefit plan of any Zynaxis Company, or against any Asset,
interest, or right of any of them, that are reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Zynaxis, nor are
there any Orders of any Regulatory Authorities, other governmental authorities,
or arbitrators outstanding against any Zynaxis Company that is reasonably likely
to have, individually or in the aggregate, a Material Adverse Effect on Zynaxis.
Section 5.16 of the Zynaxis Disclosure Memorandum contains a summary of all
Litigation as of the date of this Agreement to which any Zynaxis Company is a
party and which names a Zynaxis Company as a defendant or cross-defendant or for
which any Zynaxis Company has any potential Liability.
5.17 REPORTS. Since January 1, 1993, or the date of organization, if
-------
later, each Zynaxis Company has timely filed all reports and statements,
together with any amendments required to be made with respect thereto, that it
was required to file with Regulatory Authorities (except, in the case of state
securities authorities, failures to file which are not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on Zynaxis).
As of their respective dates, each of such reports and documents, including the
financial statements, exhibits, and schedules thereto, complied in all material
respects with all applicable Laws. As of its respective date, each such report
and document did not, in all material respects, contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements made therein, in light of the circumstances
under which they were made, not misleading.
5.18 STATEMENTS TRUE AND CORRECT. No statement, certificate, instrument, or
---------------------------
other writing furnished or to be furnished by any Zynaxis Company or any
officer, director, employee or Subsidiary thereof to any Vaxcel Company pursuant
to this Agreement or any other document, agreement, or instrument referred to
herein contains or will contain any untrue statement of material fact or will
omit to state a material fact necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading. None of the
information supplied or to be supplied by any Zynaxis Company or any officer,
director, employee or Subsidiary thereof for inclusion in the Registration
Statement to be filed by Vaxcel with the SEC will, when the Registration
Statement becomes effective, be false or misleading with respect to any material
fact, or omit to state any material fact necessary to make the statements
therein not misleading. None of the information supplied or to be supplied by
any Zynaxis Company or any officer, director, employee or Subsidiary thereof for
inclusion in the Proxy Statement to be mailed to Zynaxis's shareholders in
connection with the Shareholders' Meeting, and any other documents to be filed
by a Zynaxis Company or any officer, director, employee or Subsidiary thereof
with the SEC or any other Regulatory Authority in connection with the
transactions contemplated hereby, will, at the respective time such documents
are filed, and with respect to the Proxy Statement, when first mailed to the
shareholders of Zynaxis, be false or misleading
- 21 -
with respect to any material fact, or omit to state any material fact necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading, or, in the case of the Proxy Statement or any
amendment thereof or supplement thereto, at the time of the Shareholders'
Meeting, be false or misleading with respect to any material fact, or omit to
state any material fact necessary to correct any statement in any earlier
communication with respect to the solicitation of any proxy for the
Shareholders' Meeting. All documents that any Zynaxis Company or any officer,
director, employee or Subsidiary thereof is responsible for filing with any
Regulatory Authority in connection with the transactions contemplated hereby
will comply as to form in all material respects with the provisions of
applicable Law.
5.19 REGULATORY MATTERS. No Zynaxis Company or any officer, director,
------------------
employee or Subsidiary thereof has taken or agreed to take any action or has any
Knowledge of any fact or circumstance that is reasonably likely to materially
impede or delay receipt of any Consents of Regulatory Authorities referred to in
Section 7.1(b) or result in the imposition of a condition or restriction of the
type referred to in the last sentence of such Section.
5.20 CHARTER PROVISIONS. Each Zynaxis Company has taken all action so that
------------------
the entering into of this Agreement and the consummation of the Merger and the
other transactions contemplated by this Agreement do not and will not result in
the grant of any rights to any Person under the Articles of Incorporation, as
amended, Bylaws or other governing instruments of any Zynaxis Company, except
such rights as exist on the date hereof, or restrict or impair the ability of
Vaxcel or any of its Subsidiaries to vote, or otherwise to exercise the rights
of a shareholder with respect to, shares of any Zynaxis Company that may be
directly or indirectly acquired or controlled by them.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF CYTRX, VAXCEL AND VAXCEL MERGER SUB
---------------------------------------------------------------------
CytRx, Vaxcel and Vaxcel Merger Sub hereby represent and warrant to Zynaxis
as follows:
6.1 ORGANIZATION, STANDING, AND POWER.
---------------------------------
(a) CytRx is a corporation duly organized, validly existing, and in
good standing under the Laws of the State of Delaware, and has the corporate
power and authority to carry on its business as now conducted and to own, lease
and operate its Assets. CytRx is duly qualified or licensed to transact business
as a foreign corporation in good standing in the states of the United States and
foreign jurisdictions where the character of its Assets or the nature or conduct
of its business requires it to be so qualified or licensed, except for such
jurisdictions in which the failure to be so qualified or licensed is not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on CytRx.
- 22 -
(b) Vaxcel is a corporation duly organized, validly existing, and in
good standing under the Laws of the State of Delaware, and has the corporate
power and authority to carry on its business as now conducted and to own, lease
and operate its Assets. Vaxcel is duly qualified or licensed to transact
business as a foreign corporation in good standing in the States of the United
States and foreign jurisdictions where the character of its Assets or the nature
or conduct of its business requires it to be so qualified or licensed, except
for such jurisdictions in which the failure to be so qualified or licensed is
not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on Vaxcel. The minute book and other organizational documents for
Vaxcel have been made available to Zynaxis for its review and, except as
disclosed in Section 6.1 of the Vaxcel Disclosure Memorandum, are true and
complete in all material respects as of the date of this Agreement and
accurately reflect in all material respects all amendments thereto and all
proceedings of the Board of Directors and shareholders thereof.
(c) Vaxcel Merger Sub is a corporation duly organized, validly
existing, and in good standing under the Laws of the State of Georgia, and has
the corporate power and authority to carry on its business as now conducted and
to own, lease and operate its Assets. The minute book and other organizational
documents for Vaxcel Merger Sub have been made available to Zynaxis for its
review and are true and complete in all material respects as of the date of this
Agreement and accurately reflect in all material respects all amendments thereto
and all proceedings of the Board of Directors and shareholders thereof.
6.2 AUTHORITY; NO BREACH BY AGREEMENT.
---------------------------------
(a) Each of CytRx, Vaxcel and Vaxcel Merger Sub has the corporate
power and authority necessary to execute, deliver and perform its obligations
under this Agreement and to consummate the transactions contemplated hereby. The
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated herein, including the Merger, have been duly and
validly authorized by all necessary corporate action in respect thereof on the
part of such corporations. Vaxcel, as the sole shareholder of Vaxcel Merger Sub,
has voted all outstanding shares of Vaxcel Merger Sub Common Stock in favor of
adoption of this Agreement, as and to the extent required by applicable Law.
This Agreement represents a legal, valid, and binding obligation of each of
CytRx, Vaxcel and Vaxcel Merger Sub, enforceable against each of CytRx, Vaxcel
and Vaxcel Merger Sub in accordance with its terms.
(b) Neither the execution and delivery of this Agreement by CytRx,
Vaxcel and Vaxcel Merger Sub, nor the consummation by CytRx, Vaxcel and Vaxcel
Merger Sub of the transactions contemplated hereby, nor compliance by CytRx,
Vaxcel and Vaxcel Merger Sub with any of the provisions hereof, will (i)
conflict with or result in a breach of any provision of the Certificate of
Incorporation or Bylaws of any of CytRx, Vaxcel or Vaxcel Merger Sub, or any
resolution adopted by the Board of Directors or the Shareholders of any Vaxcel
Company, or (ii) constitute or result in a Default under, or require any Consent
pursuant to, or result in the creation of any Lien on any Asset of any Vaxcel
Company under, any Contract or Permit of any Vaxcel Company, or, (iii) subject
to receipt of the requisite Consents referred to in Section 9.1(b), constitute
or result in a Default under, or require any Consent pursuant to, any Law or
- 23 -
Order applicable to any Vaxcel Company or any of their respective material
Assets (including any Vaxcel Company or any Zynaxis Company becoming subject to
or liable for the payment of any Tax or any of the Assets owned by any Vaxcel
Company or any Zynaxis Company being reassessed or revalued by any Taxing
authority).
(c) Other than in connection or compliance with the provisions of the
Securities Laws, applicable state corporate and securities Laws, and rules of
the NASD, and other than Consents required from Regulatory Authorities, and
other than notices to or filings with the Internal Revenue Service or the
Pension Benefit Guaranty Corporation with respect to any employee benefit plans,
no notice to, filing with, or Consent of, any public body or authority is
necessary for the execution, delivery and performance by CytRx, Vaxcel and
Vaxcel Merger Sub of their obligations under this Agreement.
6.3 CAPITAL STOCK
-------------
(a) The authorized capital stock of Vaxcel consists of (i) 30,000,000
shares of Vaxcel Common Stock, of which 8,250,004 are issued and outstanding,
and (ii) 2,000,000 shares of Vaxcel Preferred Stock, none of which are issued
and outstanding. All of the issued and outstanding shares of Vaxcel Capital
Stock are, and all of the shares of Vaxcel Common Stock to be issued in exchange
for shares of Zynaxis Common Stock upon consummation of the Merger, when issued
in accordance with the terms of this Agreement, will be, duly and validly issued
and outstanding and fully paid and nonassessable under the DGCL. None of the
outstanding shares of Vaxcel Capital Stock has been, and none of the shares of
Vaxcel Common Stock to be issued in exchange for shares of Zynaxis Common Stock
upon consummation of the Merger will be, issued in violation of any preemptive
rights of the current or past stockholders of Vaxcel.
(b) The authorized capital stock of Vaxcel Merger Sub consists of (i)
1,000 shares of Common Stock, of which 500 shares are issued and outstanding as
of the date of this Agreement. All of the issued and outstanding shares of
Vaxcel Merger Sub Common Stock are duly and validly issued and fully paid and
nonassessable under the GBCC. None of the outstanding shares of Vaxcel Merger
Sub Common Stock has been issued in violation of any preemptive rights of the
current or past shareholders of Vaxcel Merger Sub.
(c) Except as set forth in Sections 6.3(a) and 6.3(b), or as
disclosed in Section 6.3 of the Vaxcel Disclosure Memorandum, there are no
shares of capital stock or other equity securities of Vaxcel or Vaxcel Merger
Sub outstanding and no outstanding Equity Rights relating to Vaxcel or Vaxcel
Merger Sub Capital Stock.
Vaxcel and Vaxcel Merger Sub hereby represent and warrant to Zynaxis as
follows:
6.4 VAXCEL SUBSIDIARIES. Vaxcel has disclosed in Section 6.4 of the
-------------------
Vaxcel Disclosure Memorandum all of the Vaxcel Subsidiaries as of the date of
this Agreement that are corporations (identifying its jurisdiction of
incorporation, each jurisdiction in which the character of its Assets or the
nature or conduct of its business requires it to be qualified and/or licensed to
-24-
transact business, and the number of shares owned and percentage ownership
interest represented by such share ownership) and all of the Vaxcel Subsidiaries
that are general or limited partnerships or other non-corporate entities
(identifying the Law under which such entity is organized, each jurisdiction in
which the character of its Assets or the nature or conduct of its business
requires it to be qualified and/or licensed to transact business, and the amount
and nature of the ownership interest therein). Except as disclosed in Section
6.4 of the Vaxcel Disclosure Memorandum, Vaxcel or one of its Subsidiaries owns
all of the issued and outstanding shares of capital stock (or other equity
interests) of each Vaxcel Subsidiary. No capital stock (or other equity
interest) of any Vaxcel Subsidiary is or may become required to be issued (other
than to another Vaxcel Company) by reason of any Equity Rights, and there are no
Contracts by which any Vaxcel Subsidiary is bound to issue (other than to
another Vaxcel Company) additional shares of its capital stock (or other equity
interests) or Equity Rights or by which any Vaxcel Company is or may be bound to
transfer any shares of the capital stock (or other equity interests) of any
Vaxcel Subsidiary (other than to another Vaxcel Company). There are no Contracts
relating to the rights of any Vaxcel Company to vote or to dispose of any shares
of the capital stock (or other equity interests) of any Vaxcel Subsidiary. All
of the shares of capital stock (or other equity interests) of each Vaxcel
Subsidiary held by a Vaxcel Company are fully paid and nonassessable under the
applicable corporation Law of the jurisdiction in which such Subsidiary is
incorporated or organized and are owned by the Vaxcel Company free and clear of
any Lien. Each Vaxcel Subsidiary is duly organized, validly existing, and (as to
corporations) in good standing under the Laws of the jurisdiction in which it is
incorporated or organized, and has the power and authority necessary for it to
own, lease and operate its Assets and to carry on its business as now conducted.
Each Vaxcel Subsidiary is duly qualified or licensed to transact business as a
foreign corporation in good standing in the States of the United States and
foreign jurisdictions where the character of its Assets or the nature or conduct
of its business requires it to be so qualified or licensed, except for such
jurisdictions in which the failure to be so qualified or licensed is not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on Vaxcel. The minute book and other organizational documents for each
Vaxcel Subsidiary have been made available to Zynaxis for its review, and are
true and complete in all material respects as in effect as of the date of this
Agreement and accurately reflect in all material respects all amendments thereto
and all proceedings of the Board of Directors and shareholders thereof.
6.5 VAXCEL FINANCIAL STATEMENTS. The books and records of Vaxcel are
---------------------------
accurate and complete. The Vaxcel Financial Statements have been prepared from
such books and records and reflect, in all material respects and in reasonable
detail, the transactions and assets and liabilities of Vaxcel.
6.6 ABSENCE OF UNDISCLOSED LIABILITIES. No Vaxcel Company has any
----------------------------------
Liabilities that are reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Vaxcel, except Liabilities which are
accrued or reserved against in the consolidated balance sheets of Vaxcel as of
December 31, 1995 and September 30, 1996, included in the Vaxcel Financial
Statements delivered prior to the date of this Agreement or reflected in the
notes thereto. No Vaxcel Company has incurred or paid any Liability since
September 30, 1996,
-25-
except for such Liabilities incurred or paid (i) in the ordinary course of
business consistent with past business practice and which are not reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
Vaxcel or (ii) in connection with the transactions contemplated by this
Agreement. Except as disclosed in the Vaxcel Financial Statements, no Vaxcel
Company is directly or indirectly liable, by guarantee, indemnity, or otherwise,
upon or with respect to, or obligated, by discount or repurchase agreement or in
any other way, to provide funds in respect to, or obligated to guarantee or
assume any Liability of any Person for any amount in excess of $10,000.
6.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December 31, 1995, except
------------------------------------
as disclosed in the Vaxcel Financial Statements delivered prior to the date of
this Agreement, (i) there have been no events, changes or occurrences which have
had, or are reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on Vaxcel, and (ii) the Vaxcel Companies have not taken
any action, or failed to take any action, prior to the date of this Agreement,
which action or failure, if taken after the date of this Agreement, would
represent or result in a material breach or violation of any of the covenants
and agreements of Vaxcel provided in Article 7.
6.8 TAX MATTERS.
-----------
(a) All material Tax Returns required to be filed by or on behalf of
any of the Vaxcel Companies have been timely filed or requests for extensions
have been timely filed, granted, and have not expired for periods ended on or
before December 31, 1995, and on or before the date of the most recent fiscal
year end immediately preceding the Effective Time and all Tax Returns filed are
complete and accurate. All material Taxes shown on filed Tax Returns have been
paid. As of the date of this Agreement, there is no audit examination,
deficiency, or refund Litigation with respect to any Taxes except as reserved
against in the Vaxcel Financial Statements delivered prior to the date of this
Agreement. All Taxes and other Liabilities due with respect to completed and
settled examinations or concluded Litigation have been paid. There are no Liens
with respect to Taxes upon any of the Assets of the Vaxcel Companies, except for
such Liens which are not reasonably likely to have a Material Adverse Effect on
Vaxcel.
(b) None of the Vaxcel Companies has executed an extension or waiver
of any statute of limitations on the assessment or collection of any Tax due
(excluding such statutes that relate to years currently under examination by the
Internal Revenue Service or other applicable taxing authorities) that is
currently in effect.
(c) The provision for any Taxes due or to become due for any of the
Vaxcel Companies for the period or periods through and including the date of the
respective Vaxcel Financial Statements that has been made and is reflected on
such Vaxcel Financial Statements is sufficient to cover all such Taxes.
-26-
(d) Deferred Taxes of the Vaxcel Companies have been provided for in
accordance with GAAP.
(e) None of the Vaxcel Companies is a party to any Tax allocation or
sharing agreement and none of the Vaxcel Companies has been a member of an
affiliated group filing a consolidated federal income Tax Return (other than a
group the common parent of which was Vaxcel) has any Liability for Taxes of any
Person (other than Vaxcel and its Subsidiaries) under Treasury Regulation
Section 1.1502-6 (or any similar provision of state, local or foreign Law) as a
transferee or successor or by Contract or otherwise .
(f) Each of the Vaxcel Companies is in compliance with, and its
records contain all information and documents (including properly completed IRS
Forms W-9) necessary to comply with, all applicable information reporting and
Tax withholding requirements under federal, state, and local Tax Laws, and such
records identify with specificity all accounts subject to backup withholding
under Section 3406 of the Internal Revenue Code.
6.9 ASSETS.
------
(a) Except as reserved against in the Vaxcel Financial Statements
delivered prior to the date of this Agreement, the Vaxcel Companies have good
and marketable title, free and clear of all Liens, to all of their respective
Assets, except for any such Liens or other defects of title which are not
reasonably likely to have a Material Adverse Effect on Vaxcel. All tangible
properties used in the businesses of the Vaxcel Companies are in good condition,
reasonable wear and tear excepted, and are usable in the ordinary course of
business consistent with Vaxcel's past practices of the Vaxcel Companies.
(b) The Vaxcel Companies have no Inventory.
(c) The accounts receivable of the Vaxcel Companies as set forth on
the most recent balance sheet included in the Vaxcel Financial Statements
delivered to the date of this Agreement or arising since the date thereof are
valid and genuine; have arisen solely out of bona fide sales and deliveries of
goods, performance of services and other business transactions in the ordinary
course of business consistent with past practice; are not subject to valid
defenses, set-offs or counterclaims; and are collectible within 90 days after
billing at the full recorded amount thereof less, in the case of accounts
receivable appearing on the most recent balance sheet included in the Vaxcel
Financial Statements delivered prior to the date of this Agreement, the recorded
allowance for collection losses on such balance sheet. The allowance for
collection losses on such balance sheet has been determined in accordance with
GAAP.
(d) All Assets which are material to Vaxcel's business on a
consolidated basis, held under leases or subleases by any of the Vaxcel
Companies, are held under valid Contracts enforceable in accordance with their
respective terms (except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other Laws affecting the
enforcement of creditors' rights generally and except that the availability of
the equitable remedy
-27-
of specific performance or injunctive relief is subject to the discretion of the
court before which any proceedings may be brought), and each such Contract is in
full force and effect.
(e) The Vaxcel Companies currently maintain insurance similar in
amounts, scope and coverage to that maintained by other peer companies. None of
the Vaxcel Companies has received notice from any insurance carrier that (i)
such insurance will be canceled or that coverage thereunder will be reduced or
eliminated, or (ii) premium costs with respect to such policies of insurance
will be substantially increased. There are presently no claims for amounts
exceeding in any individual case $5,000 pending under such policies of insurance
and no notices of claims in excess of such amount have been given by any Vaxcel
Company under such policies.
(f) The Assets of the Vaxcel Companies include all Assets required to
operate the business of the Vaxcel Companies as presently conducted.
6.10 INTELLECTUAL PROPERTY. Each Vaxcel Company owns or has a license to
---------------------
use all of the Intellectual Property used by such Vaxcel Company in the course
of its business. Each Vaxcel Company is the owner of or has a license to any
Intellectual Property sold or licensed to a third party by such Vaxcel Company
in connection with such Vaxcel Company's business operations, and such Vaxcel
Company has the right to convey by sale or license any Intellectual Property so
conveyed. No Vaxcel Company is in Default under any of its Intellectual Property
licenses. No proceedings have been instituted, or are pending or, to the
Knowledge of Vaxcel, threatened, which challenge the rights of any Vaxcel
Company with respect to Intellectual Property used, sold or licensed by such
Vaxcel Company in the course of its business, nor has any person claimed or
alleged any rights to such Intellectual Property. To the knowledge of Vaxcel and
Vaxcel Merger Sub, the conduct of the business of the Vaxcel Companies does not
infringe any Intellectual Property of any other person. Except as disclosed in
Section 6.10 of the Vaxcel Disclosure Memorandum, no Vaxcel Company is obligated
to pay any recurring royalties to any Person with respect to any such
Intellectual Property. Every officer, director, or employee of any Vaxcel
Company is a party to a Contract which requires such officer, director or
employee to assign any interest in any Intellectual Property to a Vaxcel Company
and to keep confidential any trade secrets, proprietary data, customer
information, or other business information of a Vaxcel Company, and to the
Knowledge of Vaxcel and Vaxcel Merger Sub, no such officer, director or employee
is party to any Contract with any Person other than a Vaxcel Company which
requires such officer, director or employee to assign any interest in any
Intellectual Property to any Person other than a Vaxcel Company or to keep
confidential any trade secrets, proprietary data, customer information, or other
business information of any Person other than a Vaxcel Company. To the Knowledge
of Vaxcel and Vaxcel Merger Sub, no officer, director or employee of any Vaxcel
Company is party to any Contract which restricts or prohibits such officer,
director or employee from engaging in activities competitive with any Person,
including any Vaxcel Company.
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6.11 ENVIRONMENTAL MATTERS.
---------------------
(a) Each Vaxcel Company, its Participation Facilities, and its
Operating Properties are, and have been, in compliance with all Environmental
Laws.
(b) There is no Litigation pending or, to the Knowledge of Vaxcel and
Vaxcel Merger Sub, threatened before any court, governmental agency, or
authority or other forum in which any Vaxcel Company or any of its Operating
Properties or Participation Facilities (or Vaxcel in respect of such Operating
Property or Participation Facility) has been or, with respect to threatened
Litigation, may be named as a defendant (i) for alleged noncompliance (including
by any predecessor) with any Environmental Law or (ii) relating to the release,
discharge, spillage, or disposal into the environment of any Hazardous Material,
whether or not occurring at, on, under, adjacent to, or affecting (or
potentially affecting) a site owned, leased, or operated by any Vaxcel Company
or any of its Operating Properties or Participation Facilities nor is there any
reasonable basis for any Litigation of a type described in this sentence.
(c) During the period of (i) any Vaxcel Company's ownership or
operation of any of their respective current properties, (ii) any Vaxcel
Company's participation in the management of any Participation Facility, or
(iii) any Vaxcel Company's holding of a security interest in a Operating
Property, there have been no releases, discharges, spillages, or disposals of
Hazardous Material in, on, under, adjacent to, or affecting (or potentially
affecting) such properties. Prior to the period of (i) any Vaxcel Company's
ownership or operation of any of their respective current properties, (ii) any
Vaxcel Company's participation in the management of any Participation Facility,
or (iii) any Vaxcel Company's holding of a security interest in a Operating
Property, to the Knowledge of Vaxcel, there were no releases, discharges,
spillages, or disposals of Hazardous Material in, on, under, or affecting any
such property, Participation Facility or Operating Property.
6.12 COMPLIANCE WITH LAWS. Each Vaxcel Company has in effect all Permits
--------------------
necessary for it to own, lease or operate its material Assets and to carry on
its business as now conducted, except for those Permits the absence of which are
not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on Vaxcel, and there has occurred no Default under any such
Permit, other than Defaults which are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Vaxcel. None of
the Vaxcel Companies:
(a) is in Default under its Certificate of Incorporation or Bylaws (or
other governing instruments); or
(b) is in Default under any Laws, Orders or Permits applicable to its
business or employees conducting its business, except for Defaults which
are not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on Vaxcel; or
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(c) since January 1, 1993, has received any notification or communication
from any agency or department of federal, state, or local government or any
Regulatory Authority or the staff thereof (i) asserting that any Vaxcel
Company is not in compliance with any of the Laws or Orders which such
governmental authority or Regulatory Authority enforces, where such
noncompliance is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Vaxcel, (ii) threatening to revoke
any Permits, the revocation of which is reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Vaxcel, or
(iii) requiring any Vaxcel Company to enter into or consent to the issuance
of a cease and desist order, formal agreement, directive, commitment or
memorandum of understanding, or to adopt any Board resolution or similar
undertaking.
6.13 LABOR RELATIONS. No Vaxcel Company is the subject of any
---------------
Litigation asserting that it or any other Vaxcel Company has committed an unfair
labor practice (within the meaning of the National Labor Relations Act or
comparable state Law) or seeking to compel it or any other Vaxcel Company to
bargain with any labor organization as to wages or conditions of employment, nor
is any Vaxcel Company party to any collective bargaining agreement, nor is there
any strike or other labor dispute involving any Vaxcel Company, pending or
threatened, nor to the Knowledge of Vaxcel, is there any activity involving any
Vaxcel Company's employees seeking to certify a collective bargaining unit or
engaging in any other organization activity.
6.14 EMPLOYEE BENEFIT PLANS.
----------------------
(a) Vaxcel has delivered or made available to Zynaxis prior to
the execution of this Agreement copies in each case of all pension, retirement,
profit-sharing, deferred compensation, stock option, employee stock ownership,
severance pay, vacation, bonus, or other incentive plan, all other written
employee programs, arrangements, or agreements, all medical, vision, dental, or
other health plans, all life insurance plans, and all other employee benefit
plans or fringe benefit plans, including "employee benefit plans" as that term
is defined in Section 3(3) of ERISA, currently adopted, maintained by, sponsored
in whole or in part by, or contributed to by any Vaxcel Company or ERISA
Affiliate thereof for the benefit of employees, retirees, dependents, spouses,
directors, independent contractors, or other beneficiaries and under which
employees, retirees, dependents, spouses, directors, independent contractors, or
other beneficiaries are eligible to participate (collectively, the "Vaxcel
Benefit Plans"). Any of the Vaxcel Benefit Plans which is an "employee pension
benefit plan," as that term is defined in Section 3(2) of ERISA, is referred to
herein as a "Vaxcel ERISA Plan." Each Vaxcel ERISA Plan which is also a "defined
benefit plan" (as defined in Section 414(j) of the Internal Revenue Code) is
referred to herein as a "Vaxcel Pension Plan." No Vaxcel Pension Plan is or has
been a multiemployer plan within the meaning of Section 3(37) of ERISA.
(b) All Vaxcel Benefit Plans are in compliance with the applicable
terms of ERISA, the Internal Revenue Code, and any other applicable Laws the
breach or violation of which are reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on Vaxcel. Each Vaxcel ERISA Plan which
is intended to be qualified under Section 401(a) of the Internal Revenue Code
has received a favorable determination letter from the Internal
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Revenue Service, and Vaxcel is not aware of any circumstances likely to result
in revocation of any such favorable determination letter. To the Knowledge of
Vaxcel, no Vaxcel Company has engaged in a transaction with respect to any
Vaxcel Benefit Plan that, assuming the taxable period of such transaction
expired as of the date hereof, would subject any Vaxcel Company to a Tax imposed
by either Section 4975 of the Internal Revenue Code or Section 502(i) of ERISA
that, individually or in the aggregate, is reasonably likely to have a Material
Adverse Effect on Vaxcel.
(c) No Vaxcel Pension Plan has any "unfunded current liability," as
that term is defined in Section 302(d)(8)(A) of ERISA, and the fair market value
of the assets of any such plan exceeds the plan's "benefit liabilities," as that
term is defined in Section 4001(a)(16) of ERISA when determined under actuarial
factors that would apply if the Vaxcel Pension Plan were terminated in
accordance with all applicable legal requirements. Since the date of the most
recent actuarial valuation, there has been (i) no material change in the
financial position of a Vaxcel Pension Plan, (ii) no change in the actuarial
assumptions with respect to any Vaxcel Pension Plan, and (iii) no increase in
benefits under any Vaxcel Pension Plan as a result of plan amendments or changes
in applicable Law which is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Vaxcel or materially adversely affect
the funding status of any such plan. Neither any Vaxcel Pension Plan nor any
"single-employer plan," within the meaning of Section 4001(a)(15) of ERISA,
currently or formerly maintained by any Vaxcel Company, or the single-employer
plan of any ERISA Affiliate has an "accumulated funding deficiency" within the
meaning of Section 412 of the Internal Revenue Code or Section 302 of ERISA. No
Vaxcel Company has provided, or is required to provide, security to a Vaxcel
Pension Plan or to any single-employer plan of an ERISA Affiliate pursuant to
Section 401(a)(29) of the Internal Revenue Code.
(d) No Liability under Subtitle C or D of Title IV of ERISA has been
or is expected to be incurred by any Vaxcel Company with respect to any ongoing,
frozen or terminated single-employer plan or the single-employer plan of any
ERISA Affiliate. No Vaxcel Company has incurred any withdrawal Liability with
respect to a multiemployer plan under Subtitle B of Title IV of ERISA
(regardless of whether based on contributions of an ERISA Affiliate). No notice
of a "reportable event," within the meaning of Section 4043 of ERISA for which
the 30-day reporting requirement has not been waived, has been required to be
filed for any Vaxcel Pension Plan or by any ERISA Affiliate within the 12-month
period ending on the date hereof.
(e) No Vaxcel Company has any Liability for retiree health and life
benefits under any of the Vaxcel Benefit Plans and there are no restrictions on
the rights of such Vaxcel Company to amend or terminate any such retiree health
or benefit Plan without incurring any Liability thereunder.
(f) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i) result in any
payment (including severance, unemployment compensation, golden parachute, or
otherwise) becoming due to any
-31-
director or any employee of any Vaxcel Company from any Vaxcel Company under any
Vaxcel Benefit Plan or otherwise, (ii) increase any benefits otherwise payable
under any Vaxcel Benefit Plan, or (iii) result in any acceleration of the time
of payment or vesting of any such benefit.
(g) The actuarial present values of all accrued deferred compensation
entitlements (including entitlements under any executive compensation,
supplemental retirement, or employment agreement) of employees and former
employees of any Vaxcel Company and their respective beneficiaries, other than
entitlements accrued pursuant to funded retirement plans subject to the
provisions of Section 412 of the Internal Revenue Code or Section 302 of ERISA,
have been fully reflected on the Vaxcel Financial Statements to the extent
required by and in accordance with GAAP.
6.15 MATERIAL CONTRACTS. Except as disclosed in Section 6.15 of the Vaxcel
------------------
Disclosure Memorandum or otherwise reflected in the Vaxcel Financial Statements,
none of the Vaxcel Companies, nor any of their respective Assets, businesses, or
operations, is a party to, or is bound or affected by, or receives benefits
under, (i) any employment, severance, termination, consulting or retirement
Contract providing for aggregate payments to any Person in any calendar year in
excess of $10,000, (ii) any Contract relating to the borrowing of money by any
Vaxcel Company or the guarantee by any Vaxcel Company of any such obligation
(other than Contracts evidencing trade payables and Contracts relating to
borrowings or guarantees made in the ordinary course of business), (iii) any
Contract which prohibits or restricts any Vaxcel Company from engaging in any
business activities in any geographic area, line of business or otherwise in
competition with any other Person, (iv) any Contract between or among Vaxcel
Companies, (v) any Contract involving Intellectual Property (other than
Contracts entered into in the ordinary course with customers and "shrink-wrap"
software licenses), (vi) any Contract relating to the provision of data
processing, network communication, or other technical services to or by any
Vaxcel Company, and (vii) any Contract relating to the purchase or sale of any
goods or services (other than Contracts entered into in the ordinary course of
business and involving payments under any individual Contract not in excess of
$20,000) (together with all Contracts referred to in Sections 6.9 and 6.14(a),
the "Vaxcel Contracts"). With respect to each Vaxcel Contract: (i) the Contract
is in full force and effect; (ii) no Vaxcel Company is in Default thereunder;
(iii) no Vaxcel Company has repudiated or waived any material provision of any
such Contract; and (iv) no other party to any such Contract is, to the Knowledge
of Vaxcel, in Default in any respect or has repudiated or waived any material
provision thereunder. All of the indebtedness of any Vaxcel Company for money
borrowed is prepayable at any time by such Vaxcel Company without penalty or
premium.
6.16 LEGAL PROCEEDINGS. There is no Litigation instituted or pending, or,
-----------------
to the Knowledge of Vaxcel, threatened (or unasserted but considered probable of
assertion and which if asserted would have at least a reasonable probability of
an unfavorable outcome) against any Vaxcel Company, or against any director,
employee or employee benefit plan of any Vaxcel Company, or against any Asset,
interest, or right of any of them, that is reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Vaxcel, nor are
there any Orders of any Regulatory Authorities, other governmental authorities,
or arbitrators outstanding against
-32-
any Vaxcel Company, that are reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Vaxcel.
6.17 REPORTS. Since January 1, 1993, or the date of organization if later,
-------
each Vaxcel Company has timely filed all reports and statements, together with
any amendments required to be made with respect thereto, that it was required to
file with Regulatory Authorities (except, in the case of state securities
authorities, failures to file which are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Vaxcel). As of
their respective dates, each of such reports and documents, including the
financial statements, exhibits, and schedules thereto, complied in all material
respects with all applicable Laws. As of its respective date, each such report
and document did not, in all material respects, contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements made therein, in light of the circumstances
under which they were made, not misleading.
6.18 STATEMENTS TRUE AND CORRECT. No statement, certificate, instrument or
---------------------------
other writing furnished or to be furnished by any Vaxcel Company or any officer,
director, employee or Subsidiary thereof to Zynaxis pursuant to this Agreement
or any other document, agreement or instrument referred to herein contains or
will contain any untrue statement of material fact or will omit to state a
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. None of the
information supplied or to be supplied by any Vaxcel Company or any officer,
director, employee or Subsidiary thereof for inclusion in the Registration
Statement to be filed by Vaxcel with the SEC, will, when the Registration
Statement becomes effective, be false or misleading with respect to any material
fact, or omit to state any material fact necessary to make the statements
therein not misleading. None of the information supplied or to be supplied by
any Vaxcel Company or any officer, director, employee or Subsidiary thereof for
inclusion in the Proxy Statement to be mailed to Zynaxis's shareholders in
connection with the Shareholders' Meeting, and any other documents to be filed
by any Vaxcel Company or any officer, director, employee or Subsidiary thereof
with any Regulatory Authority in connection with the transactions contemplated
hereby, will, at the respective time such documents are filed, and with respect
to the Proxy Statement, when first mailed to the shareholders of Zynaxis, be
false or misleading with respect to any material fact, or omit to state any
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, or, in the case of the
Proxy Statement or any amendment thereof or supplement thereto, at the time of
the Shareholders' Meeting, be false or misleading with respect to any material
fact, or omit to state any material fact necessary to correct any statement in
any earlier communication with respect to the solicitation of any proxy for the
Shareholders' Meeting. All documents that any Vaxcel Company or any officer,
director, employee or Subsidiary thereof is responsible for filing with any
Regulatory Authority in connection with the transactions contemplated hereby
will comply as to form in all material respects with the provisions of
applicable Law.
6.19 REGULATORY MATTERS. Neither CytRx nor any Vaxcel Company or any
------------------
officer, director, employee or Subsidiary thereof has taken or agreed to take
any action or has any
-33-
Knowledge of any fact or circumstance that is reasonably likely to materially
impede or delay receipt of any Consents of Regulatory Authorities referred to in
Section 9.1(b) or result in the imposition of a condition or restriction of the
type referred to in the last sentence of such Section.
ARTICLE 7"7
CONDUCT OF BUSINESS PENDING CONSUMMATION
----------------------------------------
7.1 AFFIRMATIVE COVENANTS OF ZYNAXIS. From the date of this
--------------------------------
Agreement until the earlier of the Effective Time or the termination of this
Agreement, unless the prior written consent of Vaxcel shall have been obtained,
and except as otherwise expressly contemplated by the Transaction Documents or
disclosed in the Zynaxis Disclosure Memorandum, Zynaxis shall and shall cause
each of its Subsidiaries to (a) operate its business only in the usual, regular,
and ordinary course, (b) preserve intact its business organization and Assets
and maintain its rights and franchises, and (C) take no action which would (i)
materially adversely affect the ability of any Party to obtain any Consents
required for the transactions contemplated hereby without imposition of a
condition or restriction of the type referred to in the last sentences of
Section 9.1(b) or 9.1(C), or (ii) materially adversely affect the ability of any
Party to perform its covenants and agreements under this Agreement.
7.2 NEGATIVE COVENANTS OF ZYNAXIS. From the date of this Agreement
-----------------------------
until the earlier of the Effective Time or the termination of this Agreement,
unless the prior written consent of Vaxcel shall have been obtained, and except
as otherwise expressly contemplated by the Transaction Documents or disclosed in
the Zynaxis Disclosure Memorandum, Zynaxis covenants and agrees that it will not
do or agree or commit to do, or permit any of its Subsidiaries to do or agree or
commit to do, any of the following:
(a) amend the Articles of Incorporation, as amended, Bylaws, or other
governing instruments of any Zynaxis Company; or
(b) incur any additional debt obligation or other obligation for
borrowed money except in the ordinary course of the business of the Zynaxis
Companies consistent with past practices, or impose, or suffer the
imposition, on any Asset of any Zynaxis Company of any Lien or permit any
such Lien to exist; or
(c) repurchase, redeem, or otherwise acquire or exchange (other than
exchanges in the ordinary course under employee benefit plans), directly or
indirectly, any shares, or any securities convertible into any shares, of
the capital stock of any Zynaxis Company, or declare or pay any dividend or
make any other distribution in respect of Zynaxis's capital stock; or
(d) except as pursuant to the conversion of Zynaxis Preferred Stock
or the exercise of stock options or warrants listed in Section 5.3 of the
Zynaxis Disclosure Memorandum, issue, sell, pledge, encumber, authorize the
issuance of, enter into any Contract to issue,
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sell, pledge, encumber, or authorize the issuance of, or otherwise permit
to become outstanding, any additional shares of capital stock of any
Zynaxis Company, or any stock appreciation rights, or any option, warrant,
or other Equity Right; or
(e) adjust, split, combine or reclassify any capital stock of any
Zynaxis Company or issue or authorize the issuance of any other securities
in respect of or in substitution for shares of Zynaxis Capital Stock, or
sell, lease, mortgage or otherwise dispose of or otherwise encumber any
shares of capital stock of any Zynaxis Subsidiary (unless any such shares
of stock are sold or otherwise transferred to another Zynaxis Company); or
(f) sell, lease, mortgage or otherwise dispose of or otherwise
encumber any Asset other than in the ordinary course of business for
reasonable and adequate consideration; or
(g) except for purchases of U.S. Treasury securities or U.S.
Government agency securities, which in either case have maturities of three
years or less, purchase any securities or make any material investment,
either by purchase of stock or securities, contributions to capital, Asset
transfers, or purchase of any Assets, in any Person other than a wholly
owned Zynaxis Subsidiary, or otherwise acquire direct or indirect control
over any Person, other than in connection with foreclosures in the ordinary
course of business; or
(h) grant any increase in compensation or benefits to the employees
or officers of any Zynaxis Company, except in accordance with past practice
disclosed in Section 7.2(h) of the Zynaxis Disclosure Memorandum or as
required by Law; pay any severance or termination pay or any bonus other
than pursuant to written policies or Contracts in effect on the date of
this Agreement and disclosed in Section 7.2(h) of the Zynaxis Disclosure
Memorandum or as required by Law; and enter into or amend any severance
agreements with officers of any Zynaxis Company; grant any material
increase in fees or other increases in compensation or other benefits to
directors of any Zynaxis Company except in accordance with past practice
disclosed in Section 7.2(h) of the Zynaxis Disclosure Memorandum; or
(i) enter into or amend any employment Contract between any Zynaxis
Company and any Person (unless such amendment is required by Law) that the
Zynaxis Company does not have the unconditional right to terminate without
Liability (other than Liability for services already rendered), at any time
on or after the Closing; or
(j) adopt any new employee benefit plan of any Zynaxis Company or
terminate or withdraw from, or make any material change in or to, any
existing employee benefit plans of any Zynaxis Company other than any such
change that is required by Law or that, in the opinion of counsel, is
necessary or advisable to maintain the tax qualified status of any such
plan, or make any distributions from such employee benefit plans, except as
required by Law, the terms of such plans or consistent with past practice;
or
-35-
(k) make any significant change in any Tax or accounting methods or
systems of internal accounting controls, except as may be appropriate to
conform to changes in Tax Laws or regulatory accounting requirements or
GAAP; or
(l) commence any Litigation other than in accordance with past
practice, settle any Litigation involving any Liability of any Zynaxis
Company for material money damages or restrictions upon the operations of
any Zynaxis Company; or
(m) enter into, modify, amend or terminate any material Contract
(including any loan Contract with an unpaid balance exceeding $10,000) or
waive, release, compromise or assign any material rights or claims.
7.3 COVENANTS OF VAXCEL. From the date of this Agreement until the
-------------------
earlier of the Effective Time or the termination of this Agreement, unless the
prior written consent of Zynaxis shall have been obtained, and except as
otherwise expressly contemplated herein, Vaxcel covenants and agrees that it
shall (a) continue to conduct its business and the business of its Subsidiaries
in a manner designed, in its reasonable judgment, to enhance the long-term value
of the Vaxcel Common Stock and the business prospects of the Vaxcel Companies
and to the extent consistent therewith use all reasonable efforts to preserve
intact the Vaxcel Companies' core businesses and goodwill with their respective
employees and the communities they serve, and (b) take no action which would (i)
materially adversely affect the ability of any Party to obtain any Consents
required for the transactions contemplated hereby without imposition of a
condition or restriction of the type referred to in the last sentences of
Section 9.1(b) or 9.1(C), or (ii) materially adversely affect the ability of any
Party to perform its covenants and agreements under this Agreement; provided,
that the foregoing shall not prevent any Vaxcel Company from acquiring any
Assets or other businesses or from discontinuing or disposing of any of its
Assets or business if such action is, in the reasonable judgment of Vaxcel,
desirable in the conduct of the business of Vaxcel and its Subsidiaries,
provided that such actions shall not materially delay the Effective Time or
materially hinder consummation of the Merger. Vaxcel further covenants and
agrees that it will not, without the prior written consent of Zynaxis, which
consent shall not be unreasonably withheld, amend the Certificate of
Incorporation or Bylaws of Vaxcel or, except as expressly contemplated by this
Agreement or the Transaction Documents, in any manner adverse to the holders of
Zynaxis Capital Stock as compared to rights of holders of Vaxcel Common Stock
generally as of the date of this Agreement.
7.4 ADVERSE CHANGES IN CONDITION. Each Party agrees to give written
----------------------------
notice promptly to the other Party upon becoming aware of the occurrence or
impending occurrence of any event or circumstance relating to it or any of its
Subsidiaries which (i) is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on it or (ii) would cause or constitute a
material breach of any of its representations, warranties, or covenants
contained herein, and to use its reasonable efforts to prevent or promptly to
remedy the same.
7.5 REPORTS. Each Party and its Subsidiaries shall file all reports
-------
required to be filed by it with Regulatory Authorities between the date of this
Agreement and the Effective
-36-
Time and shall deliver to the other Party copies of all such reports promptly
after the same are filed. If financial statements are contained in any such
reports filed with the SEC, such financial statements will fairly present the
consolidated financial position of the entity filing such statements as of the
dates indicated and the consolidated results of operations, changes in
shareholders' equity, and cash flows for the periods then ended in accordance
with GAAP (subject in the case of interim financial statements to normal
recurring year-end adjustments that are not material). As of their respective
dates, such reports filed with the SEC will comply in all material respects with
the Securities Laws and will not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. Any financial statements contained in any other
reports to another Regulatory Authority shall be prepared in accordance with
Laws applicable to such reports.
ARTICLE 8"8
ADDITIONAL AGREEMENTS
---------------------
8.1 REGISTRATION STATEMENT; PROXY STATEMENT; SHAREHOLDER APPROVAL.
-------------------------------------------------------------
(a) As soon as practicable after the date hereof Vaxcel shall prepare and
file the Registration Statement with the SEC to register the issuance of the
Merger Shares and to register for resale by the holders thereof the Affiliate
Shares, the Lock-Up Shares and the Warrant Shares (collectively, the "Resale
Shares"), and shall use its reasonable efforts to cause the Registration
Statement to become effective under the 1933 Act and take any action required to
be taken under the applicable state Blue Sky or securities Laws in connection
with the issuance of the Merger Shares and the resale of the Resale Shares upon
consummation of the transactions contemplated by the Transaction Documents.
Zynaxis shall cooperate in the preparation and filing of the Registration
Statement and shall furnish all information concerning it and the holders of
Zynaxis Capital Stock and Equity Rights of Zynaxis as Vaxcel may reasonably
request in connection with such action. Zynaxis shall call a Shareholders'
Meeting, to be held as soon as reasonably practicable after the Registration
Statement is declared effective by the SEC, for the purpose of voting upon
adoption of this Agreement and such other related matters as it deems
appropriate. In connection with the Shareholders' Meeting, (i) Zynaxis and
Vaxcel shall prepare and file with the SEC a Proxy Statement and mail such Proxy
Statement to the shareholders of Zynaxis, (ii) the Parties shall furnish to each
other all information concerning them that they may reasonably request in
connection with such Proxy Statement, (iii) the Board of Directors of Zynaxis
shall recommend to its shareholders the approval of the matters submitted for
approval (subject to the Board of Directors of Zynaxis, after having consulted
with and considered the advice of outside counsel, reasonably determining in
good faith that the making of such recommendation, or the failure to withdraw or
modify its recommendation, would constitute a breach of fiduciary duties of the
members of such Board of Directors to Zynaxis's shareholders under applicable
Law), and (iv) the Board of Directors and officers of Zynaxis shall use their
reasonable efforts to obtain such shareholders' approval (subject to the Board
of Directors of Zynaxis after having consulted with and considered the advice of
outside counsel, reasonably
-37-
determining in good faith that the taking of such actions would constitute a
breach of fiduciary duties of the members of such Board of Directors to
Zynaxis's shareholders under applicable Law). Vaxcel and Zynaxis shall make all
necessary filings with respect to the Merger under the Securities Laws.
(b) Vaxcel shall use its best efforts to maintain the effectiveness
of the Registration Statement until the earlier of (i) the date on which the
Resale Shares may be sold without restriction under the 1933 Act or (ii) the
fifth anniversary of the Closing Date subject to such periods of time when
Vaxcel must suspend the use of the prospectus forming a part of the Registration
Statement until such time as an amendment is filed and declared effective or an
appropriate report is filed by Vaxcel with the SEC.
8.2 APPLICATIONS. The Parties shall promptly prepare and file, and
------------
each of the Parties shall cooperate with each of the other Parties in the
preparation and, where appropriate, filing of, applications with all Regulatory
Authorities having jurisdiction over the transactions contemplated by this
Agreement seeking the requisite Consents necessary to consummate the
transactions contemplated by this Agreement. The Parties shall deliver to each
other copies of all filings, correspondence and orders to and from all
Regulatory Authorities in connection with the transactions contemplated hereby.
8.3 FILINGS WITH STATE OFFICES. Upon the terms and subject to the
conditions of this Agreement, Zynaxis and Vaxcel Merger Sub shall execute and
file the Articles of Merger in the Department of State of the Commonwealth of
Pennsylvania and the Certificate of Merger with the Secretary of State of the
State of Georgia in connection with the Merger.
8.4 AGREEMENT AS TO EFFORTS TO CONSUMMATE. Subject to the terms and
-------------------------------------
conditions of this Agreement, each Party agrees to use, and to cause its
Subsidiaries to use, its reasonable efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, all things necessary, proper, or
advisable under applicable Laws to consummate and make effective, as soon as
reasonably practicable after the date of this Agreement, the transactions
contemplated by this Agreement, including using its reasonable efforts to lift
or rescind any Order adversely affecting its ability to consummate the
transactions contemplated herein and to cause to be satisfied the conditions
referred to in Article 9; provided, that nothing herein shall preclude either
Party from exercising its rights under this Agreement. Each Party shall use, and
shall cause each of its Subsidiaries to use, its reasonable efforts to obtain
all Consents necessary or desirable for the consummation of the transactions
contemplated by this Agreement.
8.5 INVESTIGATION AND CONFIDENTIALITY.
---------------------------------
(a) Prior to the Effective Time, each Party shall keep the other
Parties advised of all material developments relevant to its business and the
consummation of the Merger and shall permit the other Parties to make or cause
to be made such investigation of the business and properties of it and its
Subsidiaries and of their respective financial and legal conditions as the other
Party reasonably requests, provided that such investigation shall be reasonably
related to
-38-
the transactions contemplated hereby and shall not interfere unnecessarily with
normal operations. No investigation by a Party shall affect the representations
and warranties of the other Party.
(b) In addition to the Parties' respective obligations under the
Confidentiality Agreement, which is hereby reaffirmed and adopted, and
incorporated by reference herein each Party shall, and shall cause its advisers
and agents to, maintain the confidentiality of all confidential information
furnished to it by the other Party concerning its and its Subsidiaries'
businesses, operations, and financial positions and shall not use such
information for any purpose except in furtherance of the transactions
contemplated by this Agreement. If this Agreement is terminated prior to the
Effective Time, each Party shall promptly return or certify the destruction of
all documents and copies thereof, and all work papers containing confidential
information received from the other Party.
(c) Each Party agrees to give the other Party notice as soon as
practicable after any determination by it of any fact or occurrence relating to
the other Party which it has discovered through the course of its investigation
and which represents, or is reasonably likely to represent, either a material
breach of any representation, warranty, covenant or agreement of the other Party
or which has had or is reasonably likely to have a Material Adverse Effect on
the other Party.
8.6 PRESS RELEASES. Prior to the Effective Time each of the Parties
--------------
shall consult with the other Parties as to the form and substance of any press
release or other public disclosure materially related to this Agreement or any
other transaction contemplated hereby; provided, that nothing in this Section
8.6 shall be deemed to prohibit any Party from making any disclosure which its
counsel deems necessary or advisable in order to satisfy such Party's disclosure
obligations imposed by Law.
8.7 CERTAIN ACTIONS. Except with respect to the Transaction
---------------
Documents, no Zynaxis Company nor any officer, director, employee or Subsidiary
thereof nor any Representatives thereof retained by any Zynaxis Company shall
directly or indirectly solicit any Acquisition Proposal by any Person. Except to
the extent the Board of Directors of Zynaxis, after having consulted with and
considered the advice of outside counsel, reasonably determines in good faith
that the failure to take such actions would constitute a breach of fiduciary
duties of the members of such Board of Directors to Zynaxis's shareholders under
applicable Law, no Zynaxis Company or any officer, director, employee or
Subsidiary or Representative thereof shall furnish any non-public information
that it is not legally obligated to furnish, negotiate with respect to, or enter
into any Contract with respect to, any Acquisition Proposal, but Zynaxis may
communicate information about such an Acquisition Proposal to its shareholders
if and to the extent that it is required to do so in order to comply with its
legal obligations as advised by outside counsel. Zynaxis shall promptly advise
Vaxcel following the receipt of any Acquisition Proposal and the details
thereof, and advise Vaxcel of any developments with respect to such Acquisition
Proposal promptly upon the occurrence thereof. Zynaxis shall (i) immediately
cease and cause to be terminated any existing activities, discussions or
negotiations with any Persons
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conducted heretofore with respect to any of the foregoing, and (ii) direct and
use its reasonable efforts to cause all of its officer, director, employee or
Subsidiaries and Representatives not to engage in any of the foregoing.
8.8 STATE ANTITAKEOVER LAW. Each Zynaxis Company shall exerts its
-----------------------
best efforts to take all necessary and reasonably possible steps to assure that
the entering into of the Transaction Documents will not and, upon performance of
the covenants set forth in the Transaction Documents, no facet of the
consummation of the transactions contemplated by the Transaction Documents will:
(a) be prohibited by any provision of the PBCL, including Chapter 25
of the PBCL (the "Antitakeover Laws");
(b) cause any shareholder of Zynaxis to exercise any right or remedy
under the Antitakeover Laws;
(c) cause the rights of CytRx to vote the shares of Vaxcel Common
Stock issued pursuant to this Agreement or to exercise its rights as a
shareholder of Vaxcel with respect to such shares to be impaired by action
of any provision of the Antitakeover Laws or otherwise;
(d) cause CytRx to be subject to any Liability, including any
obligation or potential obligation to pay money or disgorge profits (other
than an obligation to make payments pursuant to Subchapter E of the
Antitakeover Laws), under the provisions of the Antitakeover Laws; or
(e) cause the termination, impairment, modification, or extension of
any Contract to which Zynaxis is a party by action of the provisions of the
Antitakeover Laws.
8.9 CHARTER PROVISIONS. Each Zynaxis Company shall take all
------------------
necessary action to ensure that the entering into of this Agreement and the
consummation of the Merger and the other transactions contemplated by the
Transaction Documents do not and will not result in the grant of any rights to
any Person under the Articles of Incorporation, as amended, Bylaws or other
governing instruments of any Zynaxis Company, except such rights as exist on the
date hereof, or restrict or impair the ability of Vaxcel or any of its
Subsidiaries to vote, or otherwise to exercise the rights of a shareholder with
respect to, shares of any Zynaxis Company that may be directly or indirectly
acquired or controlled by them.
8.10 CURE OF DEFAULTS. Zynaxis shall use proceeds from its initial
----------------
loan under the Senior Credit Facility to cure all Defaults under the Secretech
License Agreement and the Malvern Lease by 5:00 p.m. on the earlier of: (i)
November 27, 1996 or (ii) the fifth (5/th/) business day after Zynaxis first
receives money from CytRx pursuant to the Senior Credit Facility, and after such
cure shall not Default under the Secretech License Agreement.
-40-
8.11 NEGOTIATION OF MALVERN LEASE AMENDMENT. Zynaxis shall negotiate
--------------------------------------
in good faith to obtain an amendment to the Malvern Lease and releases from the
Adolor Sublease that are reasonably satisfactory to CytRx.
8.12 NASDAQ LISTING. Vaxcel shall use its reasonable efforts to list,
--------------
prior to the Effective Time, on the Nasdaq SmallCap Market, the shares of Vaxcel
Common Stock to be issued pursuant to this Agreement and upon exercise of
outstanding warrants and options to purchase shares of Zynaxis Common Stock that
are assumed by Vaxcel in the Merger, and Vaxcel shall give all notices and make
all required filings with the NASD in connection with the transactions
contemplated herein.
8.13 AGREEMENTS OF AFFILIATES. Zynaxis has disclosed in Section 8.13
------------------------
of the Zynaxis Disclosure Memorandum all Persons whom it reasonably believes is
an "affiliate" of Zynaxis for purposes of Rule 145 under the 1933 Act. Zynaxis
shall use its reasonable efforts to cause each such Person to deliver to Vaxcel
not later than 30 days after the date of this Agreement, a written agreement,
substantially in the form of Exhibit 2"2, providing that such Person will not
sell, pledge, transfer, or otherwise dispose of the shares of Zynaxis Capital
Stock held by such Person except as contemplated by such agreement or by this
Agreement and will not sell, pledge, transfer, or otherwise dispose of the
shares of Vaxcel Common Stock to be received by such Person upon consummation of
the Merger except in compliance with applicable provisions of the 1933 Act and
the rules and regulations thereunder.
8.14 USE OF PROCEEDS OF SENIOR CREDIT FACILITY. Zynaxis shall use
-----------------------------------------
proceeds of loans made under the Senior Credit Facility only in accordance with
the Secured Loan Agreement.
8.15 REGISTRATION RIGHTS AGREEMENT. At the Closing CytRx and Vaxcel
-----------------------------
shall enter into the Registration Rights Agreement.
ARTICLE 9
CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE
-------------------------------------------------
9.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY. The respective
---------------------------------------
obligations of each Party to perform this Agreement and consummate the Merger
and the other transactions contemplated by the Transaction Documents are subject
to the satisfaction of the following conditions, unless waived by both Parties
pursuant to Section 11.6:
(A) SHAREHOLDER APPROVAL. The holders of Zynaxis Common Stock voting
--------------------
together with holders of Zynaxis Preferred Stock (on an as-converted basis)
and the holders of Zynaxis Preferred Stock voting as a separate class of
Zynaxis shall have approved (i) the Charter Amendments, (ii) this Agreement
and the consummation of the transactions contemplated hereby, including the
Merger, as and to the extent required by Law, by the
-41-
provisions of any governing instruments or by the rules of the NASD, (iii)
the sale of substantially all of the Assets of Zynaxis as contemplated in
the Liquidation Agreement as and to the extent required by Law, the
provisions of any governing instruments, or by the rules of the NASD, and
(iv) such other related matters deemed necessary by the Parties to assure
that the transactions contemplated by the Transaction Documents are
permitted under the Law as and to the extent required by Law, by the
provisions of any governing instruments, or by the rules of the NASD.
(B) REGULATORY APPROVALS. All Consents of, filings and registrations
--------------------
with, and notifications to, all Regulatory Authorities required for
consummation of the Merger shall have been obtained or made and shall be in
full force and effect and all waiting periods required by Law shall have
expired. No Consent obtained from any Regulatory Authority which is
necessary to consummate the transactions contemplated hereby shall be
conditioned or restricted in a manner (including requirements relating to
the raising of additional capital or the disposition of Assets) which in
the reasonable judgment of the Boards of Directors of either CytRx or
Vaxcel would so materially adversely impact the economic or business
benefits of the transactions contemplated by this Agreement that, had such
condition or requirement been known, such Party would not, in its
reasonable judgment, have entered into this Agreement.
(C) CONSENTS AND APPROVALS. Each Party shall have obtained any and
----------------------
all Consents required for consummation of the Merger (other than those
referred to in Section 9.1(b)) or for the preventing of any Default under
any Contract or Permit of such Party which, if not obtained or made, is
reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on such Party. No Consent so obtained which is necessary to
consummate the transactions contemplated hereby shall be conditioned or
restricted in a manner which in the reasonable judgment of the Boards of
Directors of either CytRx or Vaxcel would so materially adversely impact
the economic or business benefits of the transactions contemplated by this
Agreement that, had such condition or requirement been known, such Party
would not, in its reasonable judgment, have entered into this Agreement.
(D) LEGAL PROCEEDINGS. No court or governmental or regulatory
-----------------
authority of competent jurisdiction shall have enacted, issued,
promulgated, enforced or entered any Law or Order (whether temporary,
preliminary or permanent) or taken any other action which prohibits,
restricts or makes illegal consummation of the transactions contemplated by
this Agreement.
(E) REGISTRATION STATEMENT. The Registration Statement shall be
----------------------
effective under the 1933 Act, no stop orders suspending the effectiveness
of the Registration Statement shall have been issued, no action, suit,
proceeding or investigation by the SEC to suspend the effectiveness thereof
shall have been initiated and be continuing, and all necessary approvals
under state securities Laws or the 1933 Act or 1934 Act relating to the
issuance or trading of the shares of Vaxcel Common Stock issuable pursuant
to the transaction contemplated by this Agreement shall have been received.
-42-
(F) EXCHANGE LISTING. The shares of Vaxcel Common Stock issuable
----------------
pursuant to the Merger shall have been approved for listing on the Nasdaq
SmallCap Market.
(G) TAX MATTERS. Each Party shall have received a written opinion of
-----------
counsel from Xxxxxx & Bird, in form reasonably satisfactory to such Parties
(the "Tax Opinion"), to the effect that for federal income tax purposes the
Contributions in exchange for Vaxcel Common Stock will constitute a
transaction described in Section 351 of the Internal Revenue Code. In
rendering such Tax Opinion, such counsel shall be entitled to rely upon
representations of CytRx, Vaxcel, and Zynaxis reasonably satisfactory in
form and substance to such counsel.
(H) ANTITAKEOVER LAWS. No facet of the consummation of the
-----------------
transactions contemplated by the Transaction Documents shall have been
found to:
(i) be prohibited by any provision of the PBCL, including the
Antitakeover Laws;
(ii) cause the rights of CytRx to vote the shares of Vaxcel
Common Stock issued pursuant to this Agreement or to exercise its
rights as a shareholder of Vaxcel with respect to such shares to be
impaired by action of any provision of the Antitakeover Laws or
otherwise;
(iii) cause CytRx to be subject to any Liability, including any
obligation or potential obligation to pay money or disgorge profits
(other than an obligation to make payments pursuant to Subchapter E
of the Antitakeover Laws), under the provisions of the Antitakeover
Laws;
(iv) cause the termination, impairment, modification or extension
of a Contract to which Zynaxis is a party by action of the
provisions of the Antitakeover Laws; or
(v) except as set forth in Section 8.9 of the Zynaxis Disclosure
Memorandum, result in the grant of any rights to any Person under
the Articles of Incorporation, Bylaws, or other governing
instruments of any Zynaxis Company.
9.2 CONDITIONS TO OBLIGATIONS OF CYTRX, VAXCEL AND VAXCEL MERGER SUB.
----------------------------------------------------------------
The obligations of CytRx, Vaxcel and Vaxcel Merger Sub to perform this Agreement
and consummate the Merger and the other transactions contemplated hereby are
subject to the satisfaction of the following conditions, unless waived by CytRx,
Vaxcel and Vaxcel Merger Sub pursuant to Section 11.6(a):
(A) REPRESENTATIONS AND WARRANTIES. For purposes of this Section
9.2(a), the accuracy of the representations and warranties of Zynaxis set
forth in this Agreement shall
-43-
be assessed as of the date of this Agreement and as of the Effective Time
with the same effect as though all such representations and warranties had
been made on and as of the Effective Time (provided that representations
and warranties which are confined to a specified date shall speak only as
of such date). The representations and warranties made in Sections 5.18 and
5.19 with respect to officers, directors, employees and Subsidiaries of
Zynaxis shall be true and correct with respect to all Affiliates of
Zynaxis. The representations and warranties set forth in Section 5.3 shall
be true and correct (except for inaccuracies which are de minimus in
amount). The representations and warranties set forth in Sections 5.19 and
5.20 shall be true and correct in all material respects. There shall not
exist inaccuracies in the representations and warranties of Zynaxis set
forth in this Agreement (including the representations and warranties set
forth in Sections 5.3, 5.19 and 5.20) such that the aggregate effect of
such inaccuracies has, or is reasonably likely to have, a Material Adverse
Effect on Zynaxis; provided that, for purposes of this sentence only, those
representations and warranties which are qualified by references to
"material" or "Material Adverse Effect" or to the "Knowledge" of any Person
shall be deemed not to include such qualifications.
(B) PERFORMANCE OF AGREEMENTS AND COVENANTS. Each and all of the
---------------------------------------
agreements and covenants of Zynaxis to be performed and complied with
pursuant to , the Transaction Documents prior to the Effective Time shall
have been duly performed and complied with in all material respects.
(C) CERTIFICATES. Zynaxis shall have delivered to Vaxcel (i) a
------------
certificate, dated as of the Effective Time and signed on its behalf by its
chief executive officer, to the effect that the conditions set forth in
Section 9.1 as relates to Zynaxis and in Section 9.2(a) and 9.2(b) have
been satisfied, and (ii) certified copies of resolutions duly adopted by
Zynaxis's Board of Directors and shareholders evidencing the taking of all
corporate action necessary to authorize the execution, delivery and
performance of this Agreement, and the consummation of the transactions
contemplated hereby, all in such reasonable detail as Vaxcel and its
counsel shall request.
(D) OPINION OF COUNSEL. CytRx and Vaxcel shall have received an
------------------
opinion of Xxxxxx, Xxxxx & Xxxxxxx LLP, counsel to Zynaxis, dated as of the
Closing, in form reasonably satisfactory to Vaxcel, as to the matters set
forth in Exhibit 3"3.
(E) AFFILIATES AGREEMENTS. Vaxcel shall have received from each
---------------------
affiliate of Zynaxis the affiliates letter referred to in Section 8.13.
(F) EXECUTION OF AGREEMENTS. The Transaction Documents shall have
-----------------------
been executed and delivered by each of the intended Parties thereto and no
Party shall be in Default thereunder .
-44-
(G) EXECUTION OF MALVERN LEASE AMENDMENT. Zynaxis shall have entered
------------------------------------
into an amendment to the Malvern Lease that is reasonably satisfactory to
CytRx, Vaxcel and Vaxcel Merger Sub.
(H) RELEASES FROM ADOLOR LEASE. Zynaxis shall have obtained releases
--------------------------
from liability under the Adolor Sublease that are satisfactory to CytRx,
Vaxcel and Vaxcel Merger Sub.
(I) BOARD RESOLUTIONS REGARDING ZYNAXIS OPTIONS. The Board of
-------------------------------------------
Directors of Zynaxis and all relevant committees thereof shall have adopted
resolutions that in the judgment of CytRx and its counsel are sufficient to
prevent immediate vesting of outstanding Zynaxis Options, to approve the
treatment of outstanding Zynaxis Options in the Merger and to find the
options to be received "comparable" to currently outstanding Zynaxis
Options within the meaning of the Zynaxis Stock Plan.
(J) DISSENTERS. The holders of shares of Zynaxis Capital Stock
----------
having the right to vote no more than ten percent (10%) of the votes that
could be cast by all holders of Zynaxis Capital Stock voting together as a
single class shall have elected to exercise their statutory dissenters'
rights or their objection rights, if any, under Section 2545 of the PBCL.
(K) EXECUTION OF PREFERRED STOCK AND WARRANT AGREEMENT. Every holder
--------------------------------------------------
of shares of Zynaxis Preferred Stock or of Warrants referenced in the
Preferred Stock and Warrant Agreement shall have executed the Preferred
Stock and Warrant Agreement.
9.3 CONDITIONS TO OBLIGATIONS OF ZYNAXIS. The obligations of Zynaxis
------------------------------------
to perform this Agreement and consummate the Merger and the other transactions
contemplated hereby are subject to the satisfaction of the following conditions,
unless waived by Zynaxis pursuant to Section 11.6(b):
(A) REPRESENTATIONS AND WARRANTIES. For purposes of this Section
------------------------------
9.3(a), the accuracy of the representations and warranties of Vaxcel set
forth in this Agreement shall be assessed as of the date of this Agreement
and as of the Effective Time with the same effect as though all such
representations and warranties had been made on and as of the Effective
Time (provided that representations and warranties which are confined to a
specified date shall speak only as of such date). The representations and
warranties set forth in Section 6.3 shall be true and correct (except for
inaccuracies which are de minimus in amount). There shall not exist
inaccuracies in the representations and warranties of Vaxcel set forth in
this Agreement (including the representations and warranties set forth in
Section 6.3) such that the aggregate effect of such inaccuracies has, or is
reasonably likely to have, a Material Adverse Effect on Vaxcel; provided
that, for purposes of this sentence only, those representations and
warranties which are qualified by references to "material" or "Material
Adverse Effect" or to the "Knowledge" of any Person shall be deemed not to
include such qualifications.
-45-
(B) PERFORMANCE OF AGREEMENTS AND COVENANTS. Each and all of the
---------------------------------------
agreements and covenants of Vaxcel to be performed and complied with
pursuant to , the Transaction Documents prior to the Effective Time shall
have been duly performed and complied with in all material respects.
(C) CERTIFICATES. Vaxcel shall have delivered to Zynaxis (i) a
------------
certificate, dated as of the Effective Time and signed on its behalf by its
chief executive officer, to the effect that the conditions set forth in
Section 9.1 as relates to Vaxcel and in Section 9.3(a) and 9.3(b) have been
satisfied, and (ii) certified copies of resolutions duly adopted by CytRx's
Board of Directors, Vaxcel's Board of Directors, CytRx as sole shareholder
of Vaxcel, Vaxcel Merger Sub's Board of Directors and Vaxcel as sole
shareholder of Vaxcel Merger Sub evidencing the taking of all corporate
action necessary to authorize the execution, delivery and performance of
this Agreement, and the consummation of the transactions contemplated
hereby, all in such reasonable detail as Zynaxis and its counsel shall
request.
(D) OPINION OF COUNSEL. Zynaxis shall have received an opinion of
------------------
Xxxxxx & Bird, counsel to CytRx and Vaxcel, dated as of the Effective Time,
in form reasonably acceptable to Zynaxis, as to the matters set forth in
Exhibit 4"4.
ARTICLE 10
TERMINATION
-----------
10.1 TERMINATION. Notwithstanding any other provision of this
-----------
Agreement, and notwithstanding the approval of this Agreement by the
shareholders of Zynaxis, this Agreement may be terminated and the Merger
abandoned at any time prior to the Effective Time:
(a) By mutual consent of CytRx and Zynaxis; or
(b) By either CytRx or Zynaxis (provided that the terminating Party
is not then in material breach of any representation, warranty, covenant,
or other agreement contained in this Agreement) in the event of a material
breach by the other Party of any representation or warranty contained in
this Agreement which cannot be or has not been cured within 30 days after
the giving of written notice to the breaching Party of such breach and
which breach is reasonably likely, in the opinion of the non-breaching
Party, to have, individually or in the aggregate, a Material Adverse Effect
on the breaching Party; or
(c) By either CytRx or Zynaxis (provided that the terminating Party
is not then in material breach of any representation, warranty, covenant,
or other agreement contained in this Agreement) in the event of a material
breach by the other Party of any covenant or agreement contained in this
Agreement which cannot be or has not been cured within 30 days after the
giving of written notice to the breaching Party of such breach; or
-46-
(d) By either CytRx or Zynaxis (provided that the terminating Party
is not then in material breach of any representation, warranty, covenant,
or other agreement contained in this Agreement) in the event (i) any
Consent of any Regulatory Authority required for consummation of the Merger
and the other transactions contemplated hereby shall have been denied by
final nonappealable action of such authority or if any action taken by such
authority is not appealed within the time limit for appeal, or (ii) the
shareholders of Zynaxis fail to vote their approval of the matters relating
to this Agreement and the transactions contemplated hereby at the
Shareholders' Meeting where such matters were presented to such
shareholders for approval and voted upon; or
(e) By any Party in the event that the Merger shall not have been
consummated by March 31, 1997, if the failure to consummate the
transactions contemplated hereby on or before such date is not caused by
any breach of this Agreement by the Party electing to terminate pursuant to
this Section 10.1(e); or
(f) By either CytRx or Zynaxis (provided that the terminating Party
is not then in material breach of any representation, warranty, covenant,
or other agreement contained in this Agreement) in the event that any of
the conditions precedent to the obligations of such Party to consummate the
Merger cannot be satisfied or fulfilled by the date specified in Section
10.1(e).
10.2 EFFECT OF TERMINATION. In the event of the termination and
---------------------
abandonment of this Agreement pursuant to Section 10.1, this Agreement shall
become void and have no effect, except that (i) the provisions of this Section
10.2 and Article 11 and Section 8.5(b) shall survive any such termination and
abandonment, and (ii) a termination pursuant to Sections 10.1(b), 10.1(C) or
10.1(f) shall not relieve the breaching Party from Liability for an uncured
willful breach of a representation, warranty, covenant, or agreement giving rise
to such termination.
10.3 NON-SURVIVAL OF REPRESENTATIONS AND COVENANTS. The respective
---------------------------------------------
representations, warranties, obligations, covenants, and agreements of the
Parties shall not survive the Effective Time except this Section 10.3 and
Articles 1, 2, 3, 4 and 11.
ARTICLE 11
MISCELLANEOUS
-------------
11.1 DEFINITIONS.
-----------
(a) Except as otherwise provided herein, the capitalized terms
set forth below shall have the following meanings:
"1933 ACT" shall mean the Securities Act of 1933, as amended.
"1934 ACT" shall mean the Securities Exchange Act of 1934, as amended.
-47-
"ACQUISITION PROPOSAL" with respect to a Party shall mean any tender
offer or exchange offer or any proposal for a merger, acquisition of all of the
stock or assets of, or other business combination involving the acquisition of
such Party or any of its Subsidiaries or the acquisition of a substantial equity
interest in, or a substantial portion of the assets of, such Party or any of its
Subsidiaries.
"ADOLOR SUBLEASE" shall mean that certain Sublease Agreement dated May
15, 1996 between Zynaxis, Inc. and Adolor Corporation, as amended.
"AFFILIATE" of a Person shall mean: (i) any other Person directly, or
indirectly through one or more intermediaries, controlling, controlled by or
under common control with such Person; (ii) any officer, director, partner,
employer, or direct or indirect beneficial owner of any 10% or greater equity or
voting interest of such Person; or (iii) any other Person for which a Person
described in clause (ii) acts in any such capacity.
"AFFILIATE SHARES" shall mean the shares of Vaxcel Common Stock to be
issued to the holders of Zynaxis Common Stock and Zynaxis Preferred Stock in
accordance with Section 3.1 hereof who are "affiliates" of Zynaxis for purposes
of Rule 145 under the 1933 Act as set forth in Section 8.13 of the Zynaxis
Disclosure Memorandum.
"AGREEMENT" shall mean this Agreement and Plan of Merger and
Contribution, including the Exhibits and Disclosure Memoranda delivered pursuant
hereto and incorporated herein by reference.
"ARTICLES OF MERGER" shall mean the Articles of Merger to be executed
by Zynaxis and filed in the Department of State of the Commonwealth of
Pennsylvania relating to the Merger as contemplated by Section 1.5.
"ASSETS" of a Person shall mean all of the assets, properties,
businesses and rights of such Person of every kind, nature, character and
description, whether real, personal or mixed, tangible or intangible, accrued or
contingent, or otherwise relating to or utilized in such Person's business,
directly or indirectly, in whole or in part, whether or not carried on the books
and records of such Person, and whether or not owned in the name of such Person
or any Affiliate of such Person and wherever located.
"CERTIFICATE OF MERGER" shall mean the Certificate of Merger to be
executed by Zynaxis and filed with the Secretary of State of the State of
Georgia relating to the Merger as contemplated by Section 1.5.
"CHARTER AMENDMENTS" shall mean the proposals substantially in the
form attached hereto at Exhibit 5 to be submitted to the shareholders of Zynaxis
in connection with the transactions contemplated by this Agreement.
"CLOSING DATE" shall mean the date on which the Closing occurs.
-48-
"CONFIDENTIALITY AGREEMENT" shall mean that certain Confidentiality
Agreement, dated September 18, 1996, between Zynaxis and CytRx.
"CONSENT" shall mean any consent, approval, authorization, clearance,
exemption, waiver, or similar affirmation by any Person pursuant to any
Contract, Law, Order, or Permit.
"CONTRACT" shall mean any written or oral agreement, arrangement,
authorization, commitment, contract, indenture, instrument, lease, obligation,
plan, practice, restriction, understanding, or undertaking of any kind or
character, or other document to which any Person is a party or that is binding
on any Person or its capital stock, Assets or business.
"CONTRIBUTIONS" shall mean the contribution of the Cash Payment and the
Senior Credit Facility and conversion of the Zynaxis shares, as provided in
Section 1.1 hereof.
"DEFAULT" shall mean (i) any breach or violation of, default under,
contravention of, or conflict with, any Contract, Law, Order, or Permit, (ii)
any occurrence of any event that with the passage of time or the giving of
notice or both would constitute a breach or violation of, default under,
contravention of, or conflict with, any Contract, Law, Order, or Permit, or
(iii) any occurrence of any event that with or without the passage of time or
the giving of notice would give rise to a right of any Person to exercise any
remedy or obtain any relief under, terminate or revoke, suspend, cancel, or
modify or change the current terms of, or renegotiate, or to accelerate the
maturity or performance of, or to increase or impose any Liability under, any
Contract, Law, Order, or Permit, where, in any such event, such Default is
reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on a Party.
"DGCL" shall mean the Delaware General Corporation Law, as amended.
"ENVIRONMENTAL LAWS" shall mean all Laws relating to pollution or
protection of human health or the environment (including ambient air, surface
water, ground water, land surface, or subsurface strata) and which are
administered, interpreted, or enforced by the United States Environmental
Protection Agency and state and local agencies with jurisdiction over, and
including common law in respect of, pollution or protection of the
environment, including the Comprehensive Environmental Response Compensation
and Liability Act, as amended, 42 U.S.C. 9601 et seq. ("CERCLA"), the Resource
Conservation and Recovery Act, as amended, 42 U.S.C. 6901 et seq. ("RCRA"),
and other Laws relating to emissions, discharges, releases, or threatened
releases of any Hazardous Material, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport, or
handling of any Hazardous Material.
"EQUITY RIGHTS" shall mean all arrangements, calls, commitments, Contracts,
options, rights to subscribe to, scrip, understandings, warrants, or other
binding obligations of any character whatsoever relating to, or securities or
rights convertible into or exchangeable for, shares of the capital stock of a
Person or by which a Person is or may be bound to issue additional shares of
its capital stock or other Equity Rights.
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"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"EXCHANGE RATIO" shall mean: (i) the number of shares of Vaxcel Common
Stock held by CytRx immediately prior to the Closing, giving effect to the
issuance of shares to CytRx in connection with the Closing pursuant to Section
1.2 of this Agreement, divided by (ii) seven (7) and further divided by (iii)
---------- ------------------
the sum of (A) the number of shares of Zynaxis Common Stock outstanding
immediately prior to the Closing, giving effect to all issuances of common stock
to which Zynaxis is committed as of the time of Closing other than issuances to
occur upon the exercise of outstanding stock options and warrants including but
not limited to: (I) the delivery of Thirty Four Thousand Five Hundred Forty-
Eight (34,548) shares of common stock of Zynaxis to Xxxx Xxxxxxxx pursuant to
the settlement agreement set forth in the letter from Zynaxis to Xxxx Xxxxxxxx
dated October 10, 1996, and (II) the issuance of approximately Six Thousand
(6,000) additional shares of Zynaxis common stock to the Zynaxis 401(k) plan for
the fourth quarter of 1996, (B) two times the number of shares of Zynaxis
Preferred Stock outstanding as of the Closing, and (C) 1,320,706. The number
1,320,706 will be adjusted for splits and reverse splits of Vaxcel Common Stock,
e.g., if Vaxcel effects a 1-for-2 reverse stock split the number 1,320,706 shall
-----
be deemed changed to 660,353, etc. An example calculation of the Exchange Ratio
based on current information is attached as Exhibit 6.
"EXHIBITS" 1 through 19, inclusive, shall mean the Exhibits so marked,
copies of which are attached to this Agreement. Such Exhibits are hereby
incorporated by reference herein and made a part hereof, and may be referred to
in this Agreement and any other related instrument or document without being
attached hereto.
"GAAP" shall mean generally accepted accounting principles, consistently
applied during the periods involved.
"GBCC" shall mean the Georgia Business Corporation Code, as amended.
"HAZARDOUS MATERIAL" shall mean (i) any hazardous substance, hazardous
material, hazardous waste, regulated substance, or toxic substance (as those
terms are defined by any applicable Environmental Laws) and (ii) any chemicals,
pollutants, contaminants, petroleum, petroleum products, or oil (and
specifically shall include asbestos requiring abatement, removal, or
encapsulation pursuant to the requirements of governmental authorities and any
polychlorinated biphenyls).
"INTELLECTUAL PROPERTY" shall mean copyrights, patents, trademarks, service
marks, service names, trade names, applications therefor, technology rights and
licenses, computer software (including any source or object codes therefor or
documentation relating thereto), trade secrets, franchises, know-how,
inventions, and other intellectual property rights.
"INTERNAL REVENUE CODE" shall mean the Internal Revenue Code of 1986, as
amended, and the rules and regulations promulgated thereunder.
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"INVENTORY" shall mean (a) all inventory of Zynaxis and all goods intended
for sale or lease by Zynaxis, or for display or demonstration; (b) all work-in-
process; (C) all raw materials and other materials and supplies of every nature
and description used or which might be used in connection with the manufacture,
packing, shipping, advertising, selling, leasing or furnishing of such goods or
otherwise used or consumed in Zynaxis's business; and (d) all documents relating
to any of the foregoing.
"KNOWLEDGE" as used with respect to a Person (including references to such
Person being aware of a particular matter) shall mean the personal knowledge
after due inquiry of the chairman, president, chief financial officer, chief
accounting officer, chief operating officer, general counsel, any assistant or
deputy general counsel, or any senior, executive or other vice president of such
Person and the knowledge of any such persons obtained or which would have been
obtained from a reasonable investigation.
"LAW" shall mean any code, law (including common law), ordinance,
regulation, reporting or licensing requirement, rule, or statute applicable to a
Person or its Assets, Liabilities, or business, including those promulgated,
interpreted or enforced by any Regulatory Authority.
"LIABILITY" shall mean any direct or indirect, primary or secondary,
liability, indebtedness, obligation, penalty, cost or expense (including costs
of investigation, collection and defense), claim, deficiency, guaranty or
endorsement of or by any Person (other than endorsements of notes, bills,
checks, and drafts presented for collection or deposit in the ordinary course of
business) of any type, whether accrued, absolute or contingent, liquidated or
unliquidated, matured or unmatured, or otherwise.
"LIEN" shall mean any conditional sale agreement, default of title,
easement, encroachment, encumbrance, hypothecation, infringement, lien,
mortgage, pledge, reservation, restriction, security interest, title retention
or other security arrangement, or any adverse right or interest, charge, or
claim of any nature whatsoever of, on, or with respect to any property or
property interest, other than (i) Liens for current property Taxes not yet due
and payable, and (iii) Liens which do not materially impair the use of or title
to the Assets subject to such Lien.
"LIQUIDATION AGREEMENT" shall mean that certain agreement in the form
attached hereto as Exhibit 7 being entered into simultaneously with the
execution of this Agreement between Zynaxis and CytRx regarding the sale of
assets and settlement of liabilities of Zynaxis.
"LITIGATION" shall mean any action, arbitration, cause of action, claim,
complaint, criminal prosecution, governmental or other examination or
investigation, hearing, administrative or other proceeding relating to or
affecting a Party, its business, its Assets (including Contracts related to it),
or the transactions contemplated by this Agreement.
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"LOCK-UP SHARES" shall mean the shares of Vaxcel Common Stock to be issued
to the holders of Zynaxis Common Stock and Zynaxis Preferred Stock in accordance
with Section 3.1 hereof who are parties to the Shareholder Voting Agreement.
"MALVERN LEASE" shall mean that certain Agreement of Lease dated August 30,
1988 between Xxxxx & Associates and Zynaxis Cell Science, Inc., as amended.
"MATERIAL" for purposes of this Agreement shall be determined in light of
the facts and circumstances of the matter in question; provided that any
specific monetary amount stated in this Agreement shall determine materiality in
that instance.
"MATERIAL ADVERSE EFFECT" on a Party shall mean an event, change or
occurrence which, individually or together with any other event, change or
occurrence, has a material adverse impact on (i) the financial position,
business, or results of operations of such Party and its Subsidiaries, taken as
a whole, or (ii) the ability of such Party to perform its obligations under this
Agreement or to consummate the Merger or the other transactions contemplated by
this Agreement, provided that "Material Adverse Effect" shall not be deemed to
include the impact of (a) changes in Laws of general applicability or
interpretations thereof by courts or governmental authorities, (b) changes in
generally accepted accounting principles or regulatory accounting principles,
(C) actions and omissions of a Party (or any of its Subsidiaries) taken with the
prior informed written Consent of the other Party in contemplation of the
transactions contemplated hereby, and (d) the direct effects of compliance with
this Agreement on the operating performance of the Parties, including expenses
incurred by the Parties in consummating the transactions contemplated by this
Agreement.
"MERGER SHARES" shall mean the shares of Vaxcel Common Stock to be issued
to the holders of Zynaxis Common Stock and Zynaxis Preferred Stock in accordance
with Section 3.1 hereof.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"NASDAQ SMALLCAP MARKET" shall mean the SmallCap Market System of the
National Association of Securities Dealers Automated Quotations System.
"NOTE EXCHANGE AGREEMENT" shall mean that certain Note Exchange Agreement
on the form attached hereto as Exhibit 8 being entered into simultaneously with
the execution of this Agreement by and among Zynaxis, CytRx, Vaxcel, Euclid
Partners III, L.P. and S.R. One, Ltd.
"OPERATING PROPERTY" shall mean any property owned, leased, or operated by
the Party in question or by any of its Subsidiaries or in which such Party or
Subsidiary holds a security interest or other interest (including an interest in
a fiduciary capacity), and, where required by the context, includes the owner or
operator of such property, but only with respect to such property.
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"ORDER" shall mean any administrative decision or award, decree,
injunction, judgment, order, quasi-judicial decision or award, ruling, or writ
of any federal, state, local or foreign or other court, arbitrator, mediator,
tribunal, administrative agency, or Regulatory Authority.
"PARTICIPATION FACILITY" shall mean any facility or property in which the
Party in question or any of its Subsidiaries participates in the management and,
where required by the context, said term means the owner or operator of such
facility or property, but only with respect to such facility or property.
"PARTY" shall mean any of CytRx, Zynaxis, Vaxcel, or Vaxcel Merger Sub, and
"PARTIES" shall mean CytRx, Zynaxis, Vaxcel, and Vaxcel Merger Sub.
"PBCL" shall mean the Pennsylvania Business Corporation Law, as amended.
"PERMIT" shall mean any federal, state, local, and foreign governmental
approval, authorization, certificate, easement, filing, franchise, license,
notice, permit, or right to which any Person is a party or that is or may be
binding upon or inure to the benefit of any Person or its securities, Assets, or
business.
"PER SHARE PRICE" shall mean: (i) Four Million Dollars ($4,000,000.00),
divided by (ii) the sum of (A) the number of shares of Zynaxis Common Stock
----------
outstanding immediately prior to the Closing, giving effect to all issuances of
common stock to which Zynaxis is committed as of the time of Closing other than
issuances to occur upon the exercise of outstanding stock options and warrants
including but not limited to: (I) the delivery of Thirty Four Thousand Five
Hundred Forty-Eight (34,548) shares of common stock of Zynaxis to Xxxx Xxxxxxxx
pursuant to the settlement agreement set forth in the letter from Zynaxis to
Xxxx Xxxxxxxx dated October 10, 1996, and (II) the issuance of approximately Six
Thousand (6,000) additional shares of Zynaxis common stock to the Zynaxis 401(k)
plan for the fourth quarter of 1996, (B) two times the number of shares of
Zynaxis Preferred Stock outstanding immediately prior to the Closing, and (C)
1,320,706. The number 1,320,706 will be adjusted for splits and reverse splits
of Vaxcel Common Stock, e.g., if Vaxcel effects a 1-for-2 reverse stock split
----
the number 1,320,706 shall be deemed changed to 660,353, etc.
"PERSON" shall mean a natural person or any legal, commercial or
governmental entity, such as, but not limited to, a corporation, general
partnership, joint venture, limited partnership, limited liability company,
trust, business association, group acting in concert, or any person acting in a
representative capacity.
"PREFERRED STOCK AND WARRANT AGREEMENT" shall mean the Preferred Stock and
Warrant Agreement in the form attached hereto as Exhibit 9.
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"PROXY STATEMENT" shall mean the proxy statement used by Zynaxis to solicit
the approval of its shareholders of the transactions contemplated by this
Agreement, which shall include the prospectus of Vaxcel relating to the issuance
of the Vaxcel Common Stock to holders of Zynaxis Common Stock.
"REGISTRATION RIGHTS AGREEMENT" shall mean that certain Registration Rights
Agreement in the form attached hereto as Exhibit 10 to be entered into at the
Closing between CytRx and Vaxcel, pursuant to which CytRx and Vaxcel make
certain agreements regarding the registration for resale under the 1933 Act of
Shares of Vaxcel Common Stock held by CytRx.
"REGISTRATION STATEMENT" shall mean the Registration Statement(s) on Form
S-4, or other appropriate form, including any pre-effective or post-effective
amendments or supplements thereto, filed with the SEC by Vaxcel under the 1933
Act to register the issuance of the Merger Shares and to register the resale of
the Resale Shares..
"REGULATORY AUTHORITIES" shall mean, collectively, the SEC, the NASD, the
Federal Trade Commission, the United States Department of Justice, and all other
federal, state, county, local or other governmental or regulatory agencies,
authorities (including self-regulatory authorities), instrumentalities,
commissions, boards or bodies having jurisdiction over the Parties and their
respective Subsidiaries.
"REPRESENTATIVE" shall mean any investment banker, financial advisor,
attorney, accountant, consultant, or other representative engaged by a Person.
"SEC" shall mean the United States Securities and Exchange Commission.
"SEC DOCUMENTS" shall mean all forms, proxy statements, registration
statements, reports, schedules, and other documents filed, or required to be
filed, by a Party or any of its Subsidiaries with any Regulatory Authority
pursuant to the Securities Laws.
"SECRETECH LICENSE AGREEMENT" shall mean that certain License Agreement
dated July 1, 1987 between Southern Research Institute and Molecular Engineering
Associates, Ltd.
"SECURED LOAN AGREEMENT" shall mean that certain Secured Loan Agreement in
the form attached hereto as Exhibit 11 being entered into simultaneously with
the execution of this Agreement between CytRx and Zynaxis.
"SECURITIES LAWS" shall mean the 1933 Act, the 1934 Act, the Investment
Company Act of 1940, as amended, the Investment Advisors Act of 1940, as
amended, the Trust Indenture Act of 1939, as amended, and the rules and
regulations of any Regulatory Authority promulgated thereunder.
"SENIOR CREDIT FACILITY" shall mean, collectively, the Secured Loan
Agreement, the Senior Secured Note, the Zynaxis Pledge Agreement, the Zynaxis
Security Agreement, the
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Zynaxis Vaccine Technologies Guaranty, the Zynaxis Vaccine Technologies Security
Agreement and the Zynaxis Vaccine Technologies Collateral Assignment of License
Agreement.
"SENIOR SECURED NOTE" shall mean that certain Secured Promissory Note in
the form attached hereto as Exhibit 12 being entered into simultaneously with
the execution of this Agreement by Zynaxis, as the maker, and CytRx, as the
holder, outlining the terms governing the lending of up to Two Million Dollars
($2,000,000) by CytRx to Zynaxis.
"SHAREHOLDER VOTING AGREEMENT" shall mean the Shareholder Voting Agreement
in the form attached hereto as Exhibit 13 being entered into simultaneously with
the execution of this Agreement.
"SHAREHOLDERS' MEETING" shall mean the meeting of the shareholders of
Zynaxis to be held pursuant to Section 8.1, including any adjournment or
adjournments thereof.
"STATEMENT WITH RESPECT TO SHARES" shall mean the Statement With Respect to
Shares filed by Zynaxis in the Department of State of the Commonwealth of
Pennsylvania on April 6, 1995.
"SUBSIDIARIES" shall mean all those corporations, associations, or other
business entities of which the entity in question either (i) owns or controls
50% or more of the outstanding equity securities either directly or through an
unbroken chain of entities as to each of which 50% or more of the outstanding
equity securities is owned directly or indirectly by its parent (provided, there
shall not be included any such entity the equity securities of which are owned
or controlled in a fiduciary capacity), (ii) in the case of partnerships, serves
as a general partner, (iii) in the case of a limited liability company, serves
as a managing member, or (iv) otherwise has the ability to elect a majority of
the directors, trustees or managing members thereof.
"SURVIVING CORPORATION" shall mean Zynaxis as the surviving corporation
resulting from the Merger.
"TAX RETURN" shall mean any report, return, information return, or other
information required to be supplied to a taxing authority in connection with
Taxes, including any return of an affiliated or combined or unitary group that
includes a Party or its Subsidiaries.
"TAX" or "TAXES" shall mean any federal, state, county, local, or foreign
taxes, charges, fees, levies, imposts, duties, or other assessments, including
income, gross receipts, excise, employment, sales, use, transfer, license,
payroll, franchise, severance, stamp, occupation, windfall profits,
environmental, federal highway use, commercial rent, customs duties, capital
stock, paid-up capital, profits, withholding, Social Security, single business
and unemployment, disability, real property, personal property, registration, ad
valorem, value added, alternative or add-on minimum, estimated, or other tax or
governmental fee of any kind whatsoever, imposed or required to be withheld by
the United
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States or any state, county, local or foreign government or subdivision or
agency thereof, including any interest, penalties, and additions imposed thereon
or with respect thereto.
"TECHNOLOGY DEVELOPMENT AGREEMENT" shall mean that certain Technology
Development Agreement in the form attached hereto as Exhibit 14 being entered
into simultaneously with the execution of this Agreement between Vaxcel and
Zynaxis regarding the joint development of the technology that is the subject of
the Secretech License Agreement by Vaxcel and Zynaxis.
"TRANSACTION DOCUMENTS" shall mean this Agreement and the other documents
executed by any of CytRx, Vaxcel, Vaxcel Merger Sub or Zynaxis that are
referenced by this Agreement.
"VAXCEL CAPITAL STOCK" shall mean, collectively, the Vaxcel Common Stock
and any other class or series of capital stock of Vaxcel.
"VAXCEL COMMON STOCK" shall mean the $0.001 par value common stock of
Vaxcel.
"VAXCEL COMPANIES" shall mean, collectively, Vaxcel and all Vaxcel
Subsidiaries.
"VAXCEL DISCLOSURE MEMORANDUM" shall mean the written information entitled
"Vaxcel, Inc. Disclosure Memorandum" delivered prior to the date of this
Agreement to Zynaxis describing in reasonable detail the matters contained
therein and, with respect to each disclosure made therein, specifically
referencing each Section of this Agreement under which such disclosure is being
made. Information disclosed with respect to one Section shall not be deemed to
be disclosed for purposes of any other Section not specifically referenced with
respect thereto.
"VAXCEL FINANCIAL STATEMENTS" shall mean (i) the balance sheets of Vaxcel
as of December 31, 1995 and 1994, and the related statements of operations,
changes in shareholders' equity, and cash flows for each of the three fiscal
years ended December 31, 1995, 1994 and 1993, and (ii) the balance sheet of
Vaxcel as of September 30, 1996 and the related statements of operations,
changes in shareholders' equity, and cash flows with respect to the nine-month
period then ended.
"VAXCEL MERGER SUB COMMON STOCK" shall mean the $0.01 par value common
stock of Vaxcel Merger Sub.
"VAXCEL PREFERRED STOCK" shall mean the $.001 par value preferred stock of
Vaxcel.
"VAXCEL SUBSIDIARIES" shall mean the Subsidiaries of Vaxcel, which shall
include the Vaxcel Subsidiaries described in Section 6.4 and any corporation or
other organization acquired as a Subsidiary of Vaxcel in the future and held as
a Subsidiary by Vaxcel at the Effective Time.
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"WARRANT SHARES" shall mean the shares of Vaxcel Common Stock issuable upon
the exercise of warrants to purchase Vaxcel Common Stock to be assumed by Vaxcel
or issued by Vaxcel, as the case may be, in accordance with Sections 3.6 and 3.7
hereof.
"ZYNAXIS CAPITAL STOCK" shall mean, collectively, the Zynaxis Common Stock,
the Zynaxis Preferred Stock, and any other class or series of capital stock of
Zynaxis.
"ZYNAXIS COMMON STOCK" shall mean the $0.01 par value common stock of
Zynaxis.
"ZYNAXIS COMPANIES" shall mean, collectively, Zynaxis and all Zynaxis
Subsidiaries.
"ZYNAXIS DISCLOSURE MEMORANDUM" shall mean the written information entitled
"Zynaxis, Inc. Disclosure Memorandum" delivered prior to the date of this
Agreement to Vaxcel describing in reasonable detail the matters contained
therein and, with respect to each disclosure made therein, specifically
referencing each Section of this Agreement under which such disclosure is being
made. Information disclosed with respect to one Section shall not be deemed to
be disclosed for purposes of any other Section not specifically referenced with
respect thereto.
"ZYNAXIS FINANCIAL STATEMENTS" shall mean (i) the consolidated balance
sheets (including related notes and schedules, if any) of Zynaxis as of June 30,
1996, and as of December 31, 1995 and 1994, and the related statements of
operations, changes in stockholders' equity, and cash flows (including related
notes and schedules, if any) for the six months ended June 30, 1996, and for
each of the three fiscal years ended December 31, 1995, 1994 and 1993, as filed
by Zynaxis in SEC Documents, and (ii) the consolidated balance sheets of Zynaxis
(including related notes and schedules, if any) and related statements of
operations, changes in shareholders' equity, and cash flows (including related
notes and schedules, if any) included in SEC Documents filed with respect to
periods ended subsequent to June 30, 1996.
"ZYNAXIS PLEDGE AGREEMENT" shall mean that certain Pledge Agreement in the
form attached hereto as Exhibit 15 being entered into simultaneously with the
execution of this Agreement between Zynaxis, as pledgor, and CytRx, as pledgee,
pursuant to which Zynaxis pledges the stock of its Subsidiaries to CytRx as
security in connection with the lending of funds under the Senior Secured Note.
"ZYNAXIS PREFERRED STOCK" shall mean the no par value Series A Convertible
Preferred Stock of Zynaxis.
"ZYNAXIS SECURITY AGREEMENT" shall mean that certain Security Agreement in
the form attached hereto as Exhibit 16 being entered into simultaneously with
the execution of this Agreement between Zynaxis, as debtor, and CytRx, as
secured party, pursuant to which Zynaxis grants to CytRx a security interest in
certain of Zynaxis assets in connection with the lending of funds under the
Senior Secured Note.
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"ZYNAXIS STOCK PLAN" shall mean the Zynaxis, Inc. Amended and Restated 1989
Stock Option Plan.
"ZYNAXIS SUBSIDIARIES" shall mean the Subsidiaries of Zynaxis, which shall
include the Zynaxis Subsidiaries described in Section 5.4 and any corporation or
other organization acquired as a Subsidiary of Zynaxis in the future and held as
a Subsidiary by Zynaxis at the Effective Time.
"ZYNAXIS VACCINE TECHNOLOGIES COLLATERAL ASSIGNMENT OF LICENSE AGREEMENT"
shall mean that certain Collateral Assignment of License Agreement in the form
attached hereto as Exhibit 17 being entered into simultaneously with the
execution of this Agreement between CytRx and Zynaxis Vaccine Technologies,
Inc., pursuant to which Zynaxis Vaccine Technologies, Inc. grants to CytRx a
security interest in its license of certain technology from Southern Research
Institute.
"ZYNAXIS VACCINE TECHNOLOGIES GUARANTY" shall mean that certain Guaranty in
the form attached hereto as Exhibit 18 being entered into simultaneously with
the execution of this Agreement between Zynaxis Vaccine Technologies, Inc., as
guarantor and CytRx Corporation.
"ZYNAXIS VACCINE TECHNOLOGIES SECURITY AGREEMENT" shall mean that certain
Security Agreement in the form attached hereto as Exhibit 19 being entered into
simultaneously with the execution of this Agreement between Zynaxis Vaccine
Technologies, Inc., as guarantor and CytRx Corporation.
(b) The terms set forth below shall have the meanings ascribed
thereto in the referenced sections:
Cash Payment Section 1.1
Certificates Section 4.1
Closing Section 1.4
CytRx Warrant Section 1.2
Effective Time Section 1.5
ERISA Affiliate Section 5.14(C)
Exchange Agent Section 4.1
Merger Section 1.3
Non-Financing Warrants Section 3.7
Resale Shares Section 8.1
Tax Opinion Section 9.1(g)
Vaxcel Benefit Plans Section 6.14
Vaxcel Contracts Section 6.15
Vaxcel ERISA Plan Section 6.142
Vaxcel Pension Plan Section 6.14
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Zynaxis Benefit Plans Section 5.14
Zynaxis Contracts Section 5.15
Zynaxis ERISA Plan Section 5.14
Zynaxis Options Section 3.5
Zynaxis Pension Plan Section 5.14
Zynaxis SEC Reports Section 5.5(a)
(c) Any singular term in this Agreement shall be deemed to include the
plural, and any plural term the singular. Any masculine or neuter personal
pronoun shall be considered to mean the corresponding masculine, feminine or
neuter personal pronoun, as the context requires. Whenever the words "include,"
"includes" or "including" are used in this Agreement, they shall be deemed
followed by the words "without limitation."
11.2 EXPENSES
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(a) Except as otherwise provided in this Section 11.2, each of the
Parties shall bear and pay all direct costs and expenses incurred by it or on
its behalf in connection with the transactions contemplated hereunder, including
filing, registration and application fees, printing fees, and fees and expenses
of its own financial or other consultants, investment bankers, accountants, and
counsel, except that: (i) each of the Parties shall bear and pay one-half of the
filing fees payable in connection with the Registration Statement and the Proxy
Statement and printing costs incurred in connection with the printing of the
Registration Statement and the Proxy Statement; and (ii) Zynaxis shall pay all
fees and expenses of counsel to CytRx and Vaxcel. Notwithstanding the foregoing,
if this Agreement is terminated for any reason other than as set forth in
Section 11.2(b) below then the amount of fees and expenses of Xxxxxx & Bird paid
by Zynaxis through the date of termination shall be deducted from the balance
due under the Senior Credit Facility.
(b) Notwithstanding the foregoing,
(i) if this Agreement is terminated by CytRx pursuant to Section
10.1(d)(ii) (as relates to approval of Zynaxis's shareholders), or
(ii) if the Merger is not consummated as a result of the failure, due
to intentional action or inaction on the part of Zynaxis or any of its officers,
directors, employees or agents of Zynaxis to satisfy any of the conditions set
forth in Section 9.2, other than Section 9.2(d), or,
(iii)if this Agreement is terminated for any reason after the Board of
Directors of Zynaxis takes any action in reliance upon the first clause of the
second sentence of Section 8.7 or either of the parenthetical phrases in clauses
(iii) and (iv) of the penultimate sentence of Section 8.1,
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then Zynaxis shall promptly pay CytRx all the out-of-pocket costs and expenses
of CytRx and its Subsidiaries, including reasonable costs of counsel, investment
bankers, actuaries and accountants, incurred in connection with the transactions
contemplated by this Agreement.
(c) In addition to the foregoing, if, after the date of this
Agreement and within twelve (12) months following
(i) any termination of this Agreement
(1) by CytRx pursuant to Sections 10.1(b), 10.1(C), 10.1(f)
(but only on the basis of the failure of Zynaxis to satisfy any of the
conditions enumerated in Section 9.2, other than Section 9.2(d)), or
(2) by either Party pursuant to Section 10.1(d)(ii) (with
respect to approval of the shareholders of Zynaxis), or
(ii) failure to consummate the Merger by reason of any failure of
Zynaxis to satisfy the conditions enumerated in Section 9.2, other than Section
9.2(d), or 9.1(a) (as such section relates to approval by the shareholders of
Zynaxis),
any third-party shall acquire, merge with, combine with, purchase a substantial
part of the Assets of, or engage in any other business combination with, or
purchase any equity securities involving an acquisition of 20% or more of the
voting stock of, Zynaxis, or enter into any binding agreement to do any of the
foregoing (collectively, a "Business Combination"), such third-party that is a
party to the Business Combination shall pay to CytRx, prior to the earlier of
consummation of the Business Combination or execution of any letter of intent or
definitive agreement with Zynaxis relating to such Business Combination, an
amount in cash equal to the sum of
(x) the direct costs and expenses or portion thereof referred to in
subsection (a) above incurred by or on behalf of CytRx or Vaxcel in connection
with the transactions contemplated by this Agreement, plus
(y) 5% of the aggregate fair market value of the consideration
received by the shareholders of Zynaxis in such Business Combination, less
(z) any amounts previously paid by Zynaxis to CytRx or Vaxcel pursuant
to subsection (b) of this Section 11.2,
which sum represents additional compensation for CytRx's loss as the result of
the transactions contemplated by this Agreement not being consummated. In the
event such third-party shall refuse to pay such amounts within ten days of
demand therefor by CytRx, the amounts shall be an obligation of Zynaxis and
shall be paid by Zynaxis promptly upon notice to Zynaxis by CytRx.
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(d) The Parties acknowledge that the loss to either Party resulting
from breach of this Agreement by the other Party or other failure of the
transactions contemplated by this Agreement to be consummated is not susceptible
of ready measurement and, therefore, that the payments provided in this Section
11.2 are intended by the Parties to constitute liquidated damages for any breach
by a Party of the terms of this Agreement, and not a penalty.
11.3 BROKERS AND FINDERS. With the exception of the agreement established
-------------------
by a letter dated June 17, 1996 from QED Technologies, L.P., to CytRx
Corporation, as amended by that letter dated November 8, 1996 From Vaxcel, Inc.
to QED Technologies, L.P., for which Vaxcel shall be responsible, each of the
Parties represents and warrants that neither it nor any of its officers,
directors, employees, or Affiliates has employed any broker or finder or
incurred any Liability for any financial advisory fees, investment bankers'
fees, brokerage fees, commissions, or finders' fees in connection with this
Agreement or the transactions contemplated hereby. In the event of a claim by
any broker or finder based upon his or its representing or being retained by or
allegedly representing or being retained by Zynaxis or Vaxcel, each of Zynaxis
and Vaxcel, as the case may be, agrees to indemnify and hold the other Party
harmless of and from any Liability in respect of any such claim.
11.4 ENTIRE AGREEMENT. Except as otherwise expressly provided herein, this
----------------
Agreement (including the documents and instruments referred to herein)
constitutes the entire agreement between the Parties with respect to the
transactions contemplated hereunder and supersedes all prior arrangements or
understandings with respect thereto, written or oral (except, as to Section
8.5(b), for the Confidentiality Agreement). Nothing in this Agreement expressed
or implied, is intended to confer upon any Person, other than the Parties or
their respective successors, any rights, remedies, obligations, or liabilities
under or by reason of this Agreement.
11.5 AMENDMENTS. To the extent permitted by Law, this Agreement may be
----------
amended by a subsequent writing signed by each of the Parties upon the approval
of each of the Parties, whether before or after shareholder approval of this
Agreement has been obtained; provided, that after any such approval by the
holders of Zynaxis Capital Stock, there shall be made no amendment that reduces
or modifies in any material respect the consideration to be received by holders
of Zynaxis Capital Stock or pursuant to applicable Law requires the further
approval by such shareholders without the further approval of such shareholders.
11.6 WAIVERS.
--------
(a) Prior to or at the Effective Time, Vaxcel, acting through its
Board of Directors, chief executive officer or other authorized officer, shall
have the right to waive any Default in the performance of any term of this
Agreement by Zynaxis, to waive or extend the time for the compliance or
fulfillment by Zynaxis of any and all of its obligations under this Agreement,
and to waive any or all of the conditions precedent to the obligations of Vaxcel
under this Agreement, except any condition which, if not satisfied, would result
in the violation
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of any Law. No such waiver shall be effective unless in writing signed by a duly
authorized officer of Vaxcel.
(b) Prior to or at the Effective Time, Zynaxis, acting through its
Board of Directors, chief executive officer or other authorized officer, shall
have the right to waive any Default in the performance of any term of this
Agreement by Vaxcel, to waive or extend the time for the compliance or
fulfillment by Vaxcel of any and all of its obligations under this Agreement,
and to waive any or all of the conditions precedent to the obligations of
Zynaxis under this Agreement, except any condition which, if not satisfied,
would result in the violation of any Law. No such waiver shall be effective
unless in writing signed by a duly authorized officer of Zynaxis.
(c) The failure of any Party at any time or times to require
performance of any provision hereof shall in no manner affect the right of such
Party at a later time to enforce the same or any other provision of this
Agreement. No waiver of any condition or of the breach of any term contained in
this Agreement in one or more instances shall be deemed to be or construed as a
further or continuing waiver of such condition or breach or a waiver of any
other condition or of the breach of any other term of this Agreement.
11.7 ASSIGNMENT. Except as expressly contemplated hereby, neither this
----------
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any Party hereto (whether by operation of Law or otherwise) without
the prior written consent of the other Party. Subject to the preceding sentence,
this Agreement will be binding upon, inure to the benefit of and be enforceable
by the Parties and their respective successors and assigns.
11.8 NOTICES. All notices or other communications which are required or
-------
permitted hereunder shall be in writing and sufficient if delivered by hand, by
facsimile transmission, by registered or certified mail, postage pre-paid, or by
courier or overnight carrier, to the persons at the addresses set forth below
(or at such other address as may be provided hereunder), and shall be deemed to
have been delivered as of the date so delivered:
Zynaxis: Zynaxis, Inc.
000 Xxxxxxxxxxxx Xxxx
Xxxxxxx, Xxxxxxxxxxxx 00000
Telecopy Number: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxxxx
Chairman, President and
Chief Executive Officer
Copy to Counsel: Xxxxxx, Xxxxx & Bockius LLP
0000 Xxx Xxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000-0000
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Telecopy Number: (000) 000-0000
Attention: Xxxxx X. Poul
CytRx: CytRx Corporation
000 Xxxxxxxxxx Xxxxxxx
Xxxxxxxx, Xxxxxxx 00000
Telecopy Number: (000) 000-0000
Attention: Xxxx X. Xxxxxxx
Chairman, President and
Chief Executive Officer
Copy to Counsel: Xxxxxx & Bird
0000 Xxxx Xxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000-0000
Telecopy Number: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxx, Xx.
Vaxcel: Vaxcel, Inc.
000 Xxxxxxxxxx Xxxxxxx
Xxxxxxxx, Xxxxxxx 00000
Telecopy Number: (000) 000-0000
Attention: Xxxx Xxxxxx
Copy to Counsel: Xxxxxx & Bird
One Atlantic Center
0000 Xxxx Xxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000
Telecopy Number: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxx, Xx.
11.9 GOVERNING LAW. This Agreement shall be governed by and construed in
-------------
accordance with the Laws of the State of Georgia, without regard to any
applicable conflicts of Laws.
11.10 COUNTERPARTS. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
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11.11 CAPTIONS; ARTICLES AND SECTIONS. The captions contained in this
-------------------------------
Agreement are for reference purposes only and are not part of this Agreement.
Unless otherwise indicated, all references to particular Articles or Sections
shall mean and refer to the referenced Articles and Sections of this Agreement.
11.12 INTERPRETATIONS. Neither this Agreement nor any uncertainty or
---------------
ambiguity herein shall be construed or resolved against any Party, whether under
any rule of construction or otherwise. No Party to this Agreement shall be
considered the draftsman. The Parties acknowledge and agree that this Agreement
has been reviewed, negotiated, and accepted by all Parties and their attorneys
and shall be construed and interpreted according to the ordinary meaning of the
words used so as fairly to accomplish the purposes and intentions of all Parties
hereto.
11.13 SEVERABILITY. Any term or provision of this Agreement which is
------------
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
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IN WITNESS WHEREOF,"" each of the Parties has caused this Agreement to be
executed on its behalf and its corporate seal to be hereunto affixed and
attested by officers thereunto as of the day and year first above written.
ATTEST: VAXCEL, INC.
/s/ Xxxx X. Xxxxxxxx By: /s/ Xxxx X. Xxxxxx, III
-------------------- -------------------------------------------------
----------------- Xxxx X. Xxxxxx, III
Secretary President and Chief Executive Officer
[CORPORATE SEAL]
ATTEST: VAXCEL MERGER SUBSIDIARY, INC.
/s/ Xxxx X. Xxxxxxxx By: /s/ Xxxx X. Xxxxxx, III
-------------------- -------------------------------------------------
----------------- Xxxx X. Xxxxxx, III
Secretary President and Chief Executive Officer
[CORPORATE SEAL]
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ATTEST: ZYNAXIS, INC.
/s/ Xxxxxxx X. Xxxxxxxx By: /s/ Xxxxxx X. Xxxxxxxxx
----------------------- -------------------------------------
Secretary Xxxxxx X. Xxxxxxxxx
Chairman, President and Chief Executive Officer
[CORPORATE SEAL]
ATTEST: CYTRX CORPORATION
/s/ Xxxx X. Xxxxxxxx By: /s/ Xxxx X. Xxxxxxx
------------------------ -------------------------------------
Secretary Xxxx X. Xxxxxxx
Chairman, President and Chief Executive Officer
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