EXHIBIT 2.1
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AGREEMENT AND PLAN OF MERGER
by and between
ALBANY MOLECULAR RESEARCH, INC.
and
ENZYMED, INC.
Dated as of September 8, 1999
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AGREEMENT AND PLAN OF MERGER
TABLE OF CONTENTS
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ARTICLE I --THE MERGER................................................... 1
1.1 The Merger....................................................... 1
1.1.1 The Merger................................................. 1
1.1.2 Effect of the Merger....................................... 2
1.1.3 Consummation of the Merger................................. 2
1.1.4 Certificate of Incorporation............................... 2
1.1.5 By-Laws.................................................... 2
1.1.6 Directors and Officers..................................... 2
1.1.7 Merger Consideration....................................... 2
1.2 Exchange Procedures.............................................. 5
1.3 Fractional Shares................................................ 6
1.4 Escrow of Shares; Escrow Agreement............................... 6
1.5 Effect of Stockholder Approval; Representative................... 7
1.6 Closing.......................................................... 7
ARTICLE II--REPRESENTATIONS AND WARRANTIES OF ENZYMED.................... 8
2.1 Making of Representations and Warranties......................... 8
2.2 Organization and Qualifications of EnzyMed....................... 8
2.3 Subsidiaries..................................................... 8
2.4 Capital Stock; Beneficial Ownership.............................. 8
2.5 Authority of EnzyMed............................................. 9
2.6 Real and Personal Property....................................... 10
2.7 Financial Statements............................................. 11
2.8 Taxes............................................................ 12
2.9 Accounts Receivable; Accounts Payable............................ 13
2.10 Absence of Certain Changes....................................... 13
2.11 Ordinary Course.................................................. 14
2.12 Banking Relations................................................ 15
2.13 Intellectual Property............................................ 15
2.14 Contracts........................................................ 17
2.15 Litigation....................................................... 18
2.16 Compliance with Laws............................................. 18
2.17 Insurance........................................................ 18
2.18 Warranty or Other Claims......................................... 19
2.19 Powers of Attorney............................................... 19
2.20 Finder's Fee..................................................... 19
2.21 Corporate Records; Copies of Documents........................... 19
2.22 Employees; Labor Relations....................................... 19
2.23 Employee Benefit Programs........................................ 20
(i)
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2.24 Hazardous Waste, Etc.............................................. 22
2.25 Year 2000 Compliance.............................................. 23
2.26 List of Certain Employees; Customers, Suppliers and Vendors....... 24
2.27 Transactions with Affiliates...................................... 24
2.28 Disclosure........................................................ 24
ARTICLE III--COVENANTS OF ENZYMED......................................... 24
3.1 Making of Covenants and Agreements................................ 24
3.2 Tax Returns....................................................... 24
3.3 Pooling Accounting................................................ 25
3.4 Affiliate Agreements.............................................. 25
3.5 Indebtedness...................................................... 25
3.6 Cooperation of EnzyMed............................................ 25
ARTICLE IV--REPRESENTATIONS AND WARRANTIES OF BUYER....................... 26
4.1 Making of Representations and Warranties.......................... 26
4.2 Organization...................................................... 26
4.3 Authority......................................................... 26
4.4 Capitalization.................................................... 27
4.5 Litigation........................................................ 27
4.6 Finder's Fee...................................................... 27
4.7 Buyer's Public Information........................................ 27
4.8 Buyer Common Shares............................................... 28
4.9 Absence of Certain Changes........................................ 28
4.10 Compliance with Laws.............................................. 28
4.11 Disclosure........................................................ 28
4.12 Year 2000 Compliance.............................................. 28
ARTICLE V--COVENANTS OF BUYER............................................. 28
5.1 Affiliate Agreements.............................................. 28
5.2 Pooling Accounting................................................ 29
5.3 Continuity of Business Enterprise................................. 29
5.4 Nasdaq Filing..................................................... 29
5.5 Preservation of Business.......................................... 29
5.6 Corporate Changes................................................. 29
ARTICLE VI --CONDITIONS................................................... 29
6.1 Conditions to the Obligations of Buyer............................ 29
6.2 Conditions to the Obligations of EnzyMed.......................... 32
ARTICLE VII --SURVIVAL; INDEMNIFICATION................................... 33
7.1 Survival of Representations, Warranties, Etc...................... 33
(ii)
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7.2 Indemnification by the Stockholders............................... 33
7.3 Limitations on Indemnification.................................... 34
7.3.1 General Threshold........................................... 34
7.3.2 General Maximum Indemnification............................. 34
7.3.3 Time Limits for Claims...................................... 34
7.3.4 Dollar-for-Dollar and Fraud Claims.......................... 34
7.4 Indemnification by Buyer.......................................... 35
7.5 Notice; Defense of Claims......................................... 35
7.6 Escrow Shares..................................................... 36
7.7 Remedies.......................................................... 36
7.8 Directors'and Officers'Insurance.................................. 37
7.8.1 Insurance................................................... 37
7.8.2 Successors.................................................. 37
7.8.3 Survival of Indemnification................................. 37
ARTICLE VIII. TERMINATION OF AGREEMENT................................... 37
8.1 Termination....................................................... 37
8.2 Effect of Termination............................................. 38
8.3 Right to Proceed.................................................. 38
ARTICLE IX --MISCELLANEOUS................................................ 38
9.1 Fees and Expenses................................................. 38
9.2 Governing Law..................................................... 39
9.3 Notices........................................................... 39
9.4 Entire Agreement.................................................. 40
9.5 Assignability; Binding Effect..................................... 40
9.6 Captions and Gender............................................... 40
9.7 Execution in Counterparts......................................... 40
9.8 Amendments........................................................ 41
9.9 Publicity and Disclosures......................................... 41
(iii)
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is entered into as of
September 8, 1999 by and between Albany Molecular Research, Inc., a Delaware
corporation ("Buyer"), and EnzyMed, Inc., a Delaware corporation ("EnzyMed").
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, the issued and outstanding capital stock of EnzyMed consists of
1,993,987 shares of EnzyMed's Common Stock, par value $.001 per share (the
"EnzyMed Common Stock"), 437,370 shares of EnzyMed's Series A Convertible
Preferred Stock, par value $.001 per share (the "EnzyMed Series A Preferred
Stock"), 666,632 shares of EnzyMed's Series B Convertible Preferred Stock, par
value $.001 per share (the "EnzyMed Series B Preferred Stock"), and 587,500
shares of EnzyMed's Series C Convertible Preferred Stock, par value $.001 per
share (the "EnzyMed Series C Preferred Stock") (all of said shares in the
aggregate being referred to herein as the "EnzyMed Shares"); and
WHEREAS, Buyer and EnzyMed desire to effect a combination of their
respective businesses through a merger of EnzyMed, with and into Buyer in
accordance with applicable laws;
WHEREAS, the Boards of Directors of Buyer and EnzyMed each have determined
that it is in the best interests of their respective stockholders for EnzyMed to
merge with and into Buyer upon the terms in and subject to the conditions of
this Agreement;
WHEREAS, for federal income tax purposes, it is intended that the Merger
(as defined in Section 1.1) shall qualify as a reorganization within the meaning
of Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code");
and
WHEREAS, for accounting purposes, the parties hereto intend to treat the
Merger as a "pooling of interests" transaction in accordance with the guidelines
and prescriptions set forth in Accounting Principles Board Opinion ▇▇. ▇▇ ("▇▇▇
▇▇").
NOW, THEREFORE, based upon the above premises and in consideration of the
mutual representations, warranties, covenants and agreements set forth herein,
the parties hereby agree as follows:
ARTICLE -- THE MERGER
1.1 The Merger.
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1.1.1 The Merger. On the terms and subject to the conditions set
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forth in this Agreement, at the Effective Time (as defined in Section 1.1.3
hereof), in accordance with this Agreement and the Delaware General Corporation
Law (the "Delaware Law"), EnzyMed shall merge with and into Buyer (the
"Merger"), the separate existence of EnzyMed shall cease and Buyer shall
continue, as the surviving corporation under the corporate name Albany Molecular
Research, Inc. Buyer, in its capacity as the corporation surviving the Merger,
is sometimes referred to herein as the "Surviving Corporation," and Buyer and
EnzyMed are sometimes referred to collectively herein as the "Constituent
Corporations."
1.1.2 Effect of the Merger. At and after the Effective Time, the
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Merger shall have the effects set forth in Sections 259 and 261 of the Delaware
Law, and all other applicable laws.
1.1.3 Consummation of the Merger. On the Closing Date (as defined
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in Section 1.6 hereof), the parties hereto shall cause a Certificate of Merger
to be filed with the Secretary of State of Delaware, in such form as required
by, and executed in accordance with, Section 251 of the Delaware Law. The Merger
shall be effective as of the date of filing of the Certificate of Merger (the
"Effective Time").
1.1.4 Certificate of Incorporation. From and after the Effective
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Time, the Certificate of Incorporation of Buyer, as in effect immediately prior
to the Effective Time, shall be and become the Certificate of Incorporation of
the Surviving Corporation, and shall thereafter continue in effect until amended
as provided therein and in accordance with the Delaware Law.
1.1.5 By-Laws. The By-Laws of Buyer, as in effect immediately prior
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to the Effective Time, shall be the By-Laws of the Surviving Corporation, and
shall thereafter continue in effect until amended as provided therein and in
accordance with the Delaware Law.
1.1.6 Directors and Officers. The directors and officers of Buyer
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holding office immediately prior to the Effective Time shall, from and after the
Effective Time, be the directors and officers of the Surviving Corporation,
until their respective successors shall have been duly elected or appointed and
qualified or until their earlier death, resignation or removal in accordance
with the Surviving Corporation's Certificate of Incorporation and By-Laws.
1.1.7 Merger Consideration. The manner of converting or canceling
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shares, options and warrants of EnzyMed in the Merger shall be as follows:
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(a) EnzyMed Common Stock. At the Effective Time, each share of
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EnzyMed Common Stock that is issued and outstanding immediately prior to the
Effective Time (other than any Dissenting Shares as provided in Section
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1.1.7(g)) will, by virtue of the Merger, and without the need for any further
action on the part of the holder thereof, be converted into a number of shares
of Buyer's common stock, par value $.01 per share ("Buyer Common Stock"), that
is equal to the Stock Conversion Number (as defined in Section 1.1.7(i)),
subject to the provisions of Section 1.3 regarding the elimination of fractional
shares. All of the shares of Buyer Common Stock issued in connection with the
Merger shall collectively be referred to herein as the "Buyer Common Shares."
(b) EnzyMed Series A Preferred Stock. At the Effective Time, each
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one-half of one share of EnzyMed Series A Preferred Stock that is issued and
outstanding immediately prior to the Effective Time (other than any Dissenting
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Shares as provided in Section 1.1.7(g)) will, by virtue of the Merger, and
without the need for any further action on the part of the holder thereof, be
converted into a number of shares of Buyer Common Stock that is equal to the
Stock Conversion Number, subject to the provisions of Section 1.3 regarding the
elimination of fractional shares.
(c) EnzyMed Series B Preferred Stock. At the Effective Time, each
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share of EnzyMed Series B Preferred Stock that is issued and outstanding
immediately prior to the Effective Time (other than any Dissenting Shares as
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provided in Section 1.1.7(g)) will, by virtue of the Merger, and without the
need for any further action on the part of the holder thereof, be converted into
a number of shares of Buyer Common Stock that is equal to the Stock Conversion
Number, subject to the provisions of Section 1.3 regarding the elimination of
fractional shares.
(d) EnzyMed Series C Preferred Stock. At the Effective Time, each
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share of EnzyMed Series C Preferred Stock that is issued and outstanding
immediately prior to the Effective Time (other than any Dissenting Shares as
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provided in Section 1.1.7(g)) will, by virtue of the Merger, and without the
need for any further action on the part of the holder thereof, be converted into
a number of shares of Buyer Common Stock that is equal to the Stock Conversion
Number, subject to the provisions of Section 1.3 regarding the elimination of
fractional shares.
(e) EnzyMed Options. At the Effective Time, each option to purchase
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shares of EnzyMed Common Stock (each, an "Option") that is outstanding
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immediately prior to the Effective Time (not to exceed options to purchase
839,944 shares in the aggregate) will, by virtue of the Merger and at the
Effective Time and without the need for any further action on the part of any
holder thereof, be assumed by Buyer and converted into an option (a "Buyer
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Option") to purchase that number of shares of Buyer Common Stock determined by
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multiplying the number of shares of EnzyMed Common Stock that are subject to
such Option immediately prior to the Effective Time by the Stock Conversion
Number, at an exercise price per share of Buyer Common Stock equal to the
exercise price per share of EnzyMed Common Stock that was in effect for such
Option immediately prior to the Effective
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Time divided by the Stock Conversion Number, the quotient of which will be
rounded up to the nearest cent; provided, however, that if the foregoing
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calculation would result in an assumed and converted Option being converted into
a Buyer Option that, after aggregating all of the shares of Buyer Common Stock
issuable upon the exercise of such Buyer Option, would be exercisable for a
fraction of a share of Buyer Common Stock, then the number of shares of Buyer
Common Stock subject to such Buyer Option will be rounded down to the nearest
whole number of shares of Buyer Common Stock. Except as set forth on Schedule
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1.1.7(e) hereto, none of the Options that are unvested as of the Effective Time
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shall become vested as a result of the execution and delivery of this Agreement
or the consummation of the Merger. The terms, exercisability, vesting schedule,
status as an "incentive stock option" under Section 422 of the Code (if
applicable) or as a non-qualified stock option, and all other terms and
conditions of each Option, as amended (including without limitation the
provisions of EnzyMed's 1994 Stock Option Plan that forms part of the terms and
conditions of such Option) that is converted into a Buyer Option in the Merger
will (except as otherwise provided in the terms of such Options), to the extent
permitted by law, be unchanged and continue in effect after the Effective Time
of the Merger. The pre-Merger employment by EnzyMed or other service of the
holder of each Option to EnzyMed shall be credited to such holder for purposes
of applying any vesting schedule based on the duration of such holder's
employment or other service contained in the Buyer Option issued to such holder
upon the conversion of such Option in the Merger in order to determine the
number of shares of Buyer Common Stock that are exercisable under such Buyer
Option at any point in time. This Section 1.1.7(e) is intended to meet the
requirements of Section 424(a) of the Code and shall be interpreted consistent
with such intent.
(f) Registration on Form S-8. Prior to the Effective Time, Buyer
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shall take all corporate action necessary to reserve for issuance a sufficient
number of shares of Buyer Common Stock for delivery upon exercise of the Options
assumed in accordance with Section 1.1.7(e). As soon as practicable after the
Effective Time, but in no event later than 40 days after the Effective Time,
Buyer will cause the shares of Buyer Common Stock that are subject to issuance
upon exercise of the Buyer Options and that are issued upon the conversion of
Options under Section 1.1.7(e) to be registered on a registration statement (or
to be issued pursuant to a then-effective registration statement) on Form S-8
(or successor form) promulgated by the Securities and Exchange Commission
("SEC") under the Securities Act of 1933 (the "1933 Act"), and will use its best
efforts to maintain the effectiveness of such Form S-8 registration statement or
registration statements for so long as such Buyer Options remain outstanding and
Buyer Common Stock is registered under the Securities Exchange Act of 1934, as
amended (the "1934 Act"). Notwithstanding the foregoing, Buyer shall not be
obligated to register or maintain the registration under the 1933 Act of the
issuance of any shares of Buyer Common Stock that are subject to a Buyer Option
held by a person who is ineligible to have such person's securities registered
on Form S-8 (or any successor form); provided, however, that Buyer agrees to
register such ineligible shares on the registration statement on Form S-3 filed
pursuant to the Registration Rights Agreement (as provided for in Section 6.2(g)
hereof).
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(g) EnzyMed Dissenting Shares. Holders of EnzyMed Shares (as defined
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in the preamble hereof) who have complied with all requirements for perfecting
shareholder appraisal rights, as set forth in Section 262 of the Delaware Law
shall be entitled to their rights under the Delaware Law with respect to such
shares ("Dissenting Shares"), and Dissenting Shares will not be converted into
shares of Buyer Common Stock in the Merger. EnzyMed Shares that are outstanding
immediately prior to the Effective Time of the Merger and with respect to which
dissenting stockholders' rights to dissent under the Delaware Law have either
(a) not been properly exercised and perfected or (b) with the consent of EnzyMed
and Buyer, been withdrawn, will, when such dissenting stockholders' rights can
no longer be legally exercised under the Delaware Law, be converted into Buyer
Common Stock as provided in Section 1.1.7 hereof.
(h) Adjustments for Capital Changes. Notwithstanding the provisions
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of Section 1.1.7, if at any time after the date this Agreement is duly executed
by all parties and prior to the Effective Time, Buyer recapitalizes, either
through a subdivision (or stock split) of any of its outstanding shares of Buyer
Common Stock into a greater number of such shares, or a combination (or reverse
stock split) of any of its outstanding shares of Buyer Common Stock into a
lesser number of such shares, or reorganizes, reclassifies or otherwise changes
its outstanding shares of Buyer Common Stock into the same or a different number
of shares of other classes (other than through a subdivision or combination of
shares provided for in the preceding clause), or declares a dividend on its
outstanding shares payable in shares of Buyer Common Stock, in shares or
securities convertible into shares of Buyer Common Stock or in cash or other
property (each, a "Capital Change"), then the Buyer Average Price Per Share (as
defined below) will be proportionally and equitably adjusted.
(i) Definitions. For purposes of this Section 1.1.7 the following
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definitions apply :
"Stock Conversion Number" means the quotient obtained by dividing (a) $5.00
by (b) the Buyer Average Price Per Share, which quotient shall be rounded up to
the nearest one hundred thousandth of a cent (seven (7) decimal places).
"Buyer Average Price Per Share" means $30.7912.
1.2 Exchange Procedures.
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(a) At or as soon as practicable after the Effective Time, Buyer shall
make available, and each stockholder of EnzyMed (each, a "Stockholder," and
collectively, the "Stockholders") will be entitled to receive, upon surrender to
Buyer of one or more certificates representing any EnzyMed Shares ("EnzyMed
Certificates") for cancellation with a letter of transmittal in the form
attached hereto as Exhibit 1.2, certificates representing the number of Buyer
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Common Shares ("Buyer Certificates") that such Stockholder is entitled to
receive pursuant to Section 1.1.7 hereof; provided, however, that the Buyer
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Certificates representing the Buyer Common Shares described in Section 7.6
hereof (the "Escrow Shares")
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shall be held in escrow in accordance with Section 1.4 of this Agreement. The
Buyer Common Shares and any cash paid in lieu of fractional Buyer Common Shares
(the "Merger Consideration") that each Stockholder shall be entitled to receive
pursuant to the Merger shall be deemed to have been issued at the Effective
Time. No interest shall accrue on the Merger Consideration. If the Merger
Consideration (or any portion thereof) is to be delivered to any person other
than the person in whose name the EnzyMed Certificates surrendered in exchange
therefor is registered, it shall be a condition to such exchange that the person
requesting such exchange shall pay to Buyer any transfer or other taxes required
by reason of the payment of the Merger Consideration to a person other than the
registered holder of the EnzyMed Certificate(s) so surrendered, or shall
establish to the satisfaction of Buyer that such tax has been paid or is not
applicable. Notwithstanding the foregoing, neither Buyer nor any other party
hereto shall be liable to a holder of EnzyMed Shares for any Merger
Consideration delivered to a public official pursuant to applicable abandoned
property, escheat and similar laws. Any holder of EnzyMed Shares whose EnzyMed
Certificate(s) have been lost or stolen shall comply with the instructions set
forth in the letter of transmittal (attached hereto as Exhibit 1.2) in order to
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receive the Merger Consideration.
(b) After the Effective Time, there shall be no transfers of any
EnzyMed Shares on the stock transfer books of the Surviving Corporation. If,
after the Effective Time, EnzyMed Certificates are presented to the Buyer, they
shall be canceled and exchanged in accordance with Sections 1.1.7 and 1.2
hereof, subject to Section 1.1.7(g) with respect to Dissenting Shares and
Section 1.4 with respect to Escrow Shares.
1.3 Fractional Shares. No fractional Buyer Common Shares will be issued
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in connection with the Merger, but in lieu thereof, the holder of any EnzyMed
Shares who would otherwise be entitled to receive a fraction of a Buyer Common
Share (after aggregating all Buyer Common Shares being issued to such holder in
the Merger) shall receive from Buyer promptly after the Effective Time, an
amount of cash equal to such fraction multiplied by the Buyer Average Price Per
Share.
1.4 Escrow of Shares; Escrow Agreement. At the Effective Time (as that
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term is defined in Section 1.1.3) of the Merger, Buyer will withhold from the
shares of Buyer Common Stock to be issued to Stockholders in the Merger on
conversion of their EnzyMed Shares pursuant to Section 1.1.7 above a number of
such shares of Buyer Common Stock that is equal to ten percent (10%) of the
total number of shares of Buyer Common Stock to which the EnzyMed Shares have
been converted pursuant to Section 1.1.7, rounded down to the nearest whole
number of shares to be issued to each Stockholder (such withheld shares of Buyer
Common Stock being hereinafter referred to as the "Escrow Shares") and will
deliver certificates representing such Escrow Shares to State Street Bank and
Trust Company or a similar institution, as escrow agent (the "Escrow Agent"),
together with related stock transfer powers, to be held by the Escrow Agent as
security for the Stockholders' indemnification obligations under Section 7.2 and
pursuant to the provisions of an escrow agreement in substantially the form of
Exhibit 1.4 attached hereto (the "Escrow Agreement") to be entered into on or
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prior to the Closing by Buyer, the Escrow Agent and the Representative (as
defined
6
below). The Escrow Shares will be withheld from each Stockholder pro rata in the
same proportion as the total number of shares of Buyer Common Stock issuable to
such Stockholder under Section 1.1.7 bears to the total number of shares of
Buyer Common Stock issued to all Stockholders under Section 1.1.7, will be
represented by a certificate or certificates issued in the names of each of the
Stockholders in proportion to their respective interests therein and will be
held by the Escrow Agent during that time period commencing on the Effective
Time and ending on the first (1st) anniversary of the Effective Time or on such
later date as may be provided in the Escrow Agreement in order to permit the
resolution of any claim made prior to the first (1st) anniversary of the
Effective Time (the "Escrow Period").
1.5 Effect of Stockholder Approval; Representative. Upon the approval of
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the Merger, each of the Stockholders of EnzyMed will be conclusively deemed to
have consented to, approved and agreed to be personally bound by: (i) the
Escrow Agreement; (ii) a Stockholder Indemnification Agreement by and between
Buyer and such Stockholder (as provided for in Section 6.1(q)); (iii) the
appointment of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ as the representative of Stockholders (the
"Representative") under the Escrow Agreement and as the attorney-in-fact and
agent for and on behalf of each Stockholder as provided in the Escrow Agreement;
and (iv) the taking by the Representative of any and all actions and the making
of any decisions required or permitted to be taken by the Representative under
such Stockholder's Stockholder Indemnification Agreement and/or the Escrow
Agreement, including, without limitation, the exercise of the power to: (a)
authorize delivery to Buyer of Escrow Shares in satisfaction of indemnity claims
by Buyer with respect to Buyer Indemnified Losses pursuant to Article VII
hereof, such Stockholder's Stockholder Indemnification Agreement and/or the
Escrow Agreement; (b) agree to, negotiate, enter into settlements and
compromises of, demand arbitration of, and comply with orders of courts and
awards of arbitrators with respect to, such claims; (c) arbitrate, resolve,
settle or compromise any claim for Buyer Indemnified Losses made pursuant to
Article VII and such Stockholder's Stockholder Indemnification Agreement; and
(d) take all actions necessary in the judgment of the Representative for the
accomplishment of the foregoing. The Representative will have authority and
power to act on behalf of each Stockholder with respect to the Escrow Agreement
and the disposition, settlement or other handling of all Buyer Indemnified
Losses under Article VII hereof and such Stockholder's Stockholder
Indemnification Agreement or governed by the Escrow Agreement, and all rights or
obligations arising under the Escrow Agreement so long as all Stockholders are
treated in the same manner. The Stockholders will be bound by all actions taken
and documents executed by the Representative in connection with the Escrow
Agreement, and Buyer will be entitled to rely on any action or decision of the
Representative. In performing the functions specified in this Agreement, such
Stockholder's Stockholder Indemnification Agreement and the Escrow Agreement,
the Representative will not be liable to any Stockholder in the absence of gross
negligence or willful misconduct on the part of the Representative. Any out-of-
pocket costs and expenses reasonably incurred by the Representative in
connection with actions taken pursuant to the terms of the Escrow Agreement will
be paid by the Stockholders to the Representative out of the Escrow Shares pro
rata in proportion to their respective percentage interests in the Escrow
Shares, to the extent that any Escrow Shares continue to be owned by
Stockholders following expiration of
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the Escrow Period and satisfaction of all claims made or asserted by Buyer under
the Escrow Agreement.
1.6 Closing. The transactions contemplated by this Agreement shall be
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consummated at the closing (the "Closing") which will take place at the offices
of ▇▇▇▇▇▇▇, Procter & ▇▇▇▇ LLP, Exchange Place, Boston, Massachusetts on October
19, 1999, or at such other place or earlier or later date or time as may be
fixed by mutual agreement of Buyer and EnzyMed (the "Closing Date").
ARTICLE -- REPRESENTATIONS AND WARRANTIES OF ENZYMED
2.1 Making of Representations and Warranties. As a material inducement to
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Buyer to enter into this Agreement and consummate the transactions contemplated
hereby, EnzyMed hereby makes to Buyer the representations and warranties
contained in this Section 2. No Stockholder, as such, shall have any right of
indemnity or contribution from EnzyMed with respect to the breach of any
representation or warranty under this Agreement.
2.2 Organization and Qualifications of EnzyMed. EnzyMed is a corporation
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duly organized, validly existing and in good standing under the laws of the
state of Delaware with full corporate power and authority to own or lease its
properties and to conduct its business in the manner and in the places where
such properties are owned or leased or such business is currently conducted or
currently proposed to be conducted. The copies of the Certificate of
Incorporation of EnzyMed as amended to date, certified by the appropriate
governmental officer, and By-laws, as amended to date, certified by the
Assistant Secretary of EnzyMed, and heretofore delivered to Buyer's counsel, are
complete and correct, and no amendments thereto are pending. EnzyMed is not in
violation of any provision of its Certificate of Incorporation or By-laws.
EnzyMed is duly qualified to do business as a foreign corporation in each
jurisdiction set forth on Schedule 2.2 hereto.
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2.3 Subsidiaries. EnzyMed has no subsidiaries and does not own any
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securities issued by any other business organization or governmental authority.
EnzyMed does not own and does not have any direct or indirect interest in or
control over any corporation, partnership, joint venture or entity of any kind.
2.4 Capital Stock; Beneficial Ownership. The authorized capital stock of
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EnzyMed consists of (a) 10,000,000 shares of Common Stock, par value $.001 per
share, of which 1,993,987 shares are duly and validly issued, outstanding, fully
paid and non-assessable and of which 5,877,141 shares are authorized but
unissued, (b) 1,000,0000 shares of which are designated as Series A Convertible
Preferred Stock, par value $.001 per share, of which 437,370 shares are duly and
validly issued, outstanding, fully paid and non-assessable and of
8
which 562,630 shares are authorized but unissued, (c) 1,000,000 shares of which
are designated as Series B Convertible Preferred Stock, par value $.001 per
share, of which 666,632 shares are duly and validly issued, outstanding, fully
paid and non-assessable and of which 333,368 shares are authorized but unissued,
(d) 1,500,000 shares of which are designated as Series C Convertible Preferred
Stock, par value $.001 per share, of which 587,500 shares are duly and validly
issued, outstanding, fully paid and non-assessable and of which 912,500 shares
are authorized but unissued and (e) 6,500,000 shares of which are undesignated
preferred stock, par value $.001 per share, of which no shares are issued and
outstanding. Except as set forth on Schedule 2.4 hereto, there are no
------------
outstanding options, warrants, rights, commitments, preemptive rights or
agreements of any kind for the issuance or sale of, or outstanding securities
convertible into, any additional shares of capital stock of any class of
EnzyMed. None of the capital stock of EnzyMed has been issued in violation of
any federal or state securities law. There are no voting agreements, trusts,
proxies or other agreements, instruments or undertakings with respect to the
voting of the capital stock of EnzyMed to which EnzyMed or, to EnzyMed's
knowledge, any Stockholder is a party. The Stockholders own of record all of
the outstanding shares of capital stock of EnzyMed, which consists solely of the
EnzyMed Shares set forth on Schedule 2.4 hereto (together with any shares issued
------------
by EnzyMed pursuant to the exercise of Options prior to the Effective Time).
2.5 Authority of EnzyMed. EnzyMed has full right, authority and power to
--------------------
enter into this Agreement and each agreement, document and instrument to be
executed and delivered by EnzyMed pursuant to this Agreement and, subject to the
approval of this Agreement by the Stockholders of EnzyMed, to carry out the
transactions contemplated hereby. The execution, delivery and performance by
EnzyMed of this Agreement and of each such other agreement, document and
instrument have been duly authorized by the Board of Directors of EnzyMed and no
other action on the part of EnzyMed or its stockholders or otherwise will be
required in connection therewith. This Agreement and each agreement, document
and instrument executed and delivered by EnzyMed pursuant to this Agreement
constitutes, or when executed and delivered will constitute, valid and binding
obligations of EnzyMed enforceable in accordance with their terms except (i) as
to the effect, if any, of applicable bankruptcy and other similar laws affecting
the rights of creditors generally and (ii) the remedy of specific performance
and injunctive relief may be subject to equitable defenses and to the discretion
of the court before which such proceeding therefor may be brought; provided,
however, that the Certificate of Merger will not be effective until filed with
the Delaware Secretary of State. The execution, delivery and performance by
EnzyMed of this Agreement and of each such agreement, document and instrument:
(i) do not and will not violate any provision of the
Certificate of Incorporation or By-laws of EnzyMed;
(ii) do not and will not violate any laws of the United
States, or any state or other jurisdiction (domestic or foreign) applicable to
EnzyMed or require EnzyMed to obtain any approval, consent or waiver of, or make
any filing with, any person or entity (governmental or otherwise) that has not
been obtained or made except for the filing of the Certificate of Merger with
the Delaware Secretary of State, and the filing of appropriate documents with
the relevant authorities of all states in which EnzyMed is qualified to do
business, if any; and
9
(iii) do not and will not result in a breach of, constitute
a default under, accelerate any obligation under, or give rise to a right of
termination of any indenture or loan or credit agreement or any other agreement,
contract, instrument, mortgage, lien, lease, permit, authorization, order, writ,
judgment, injunction, decree, determination or arbitration award to which
EnzyMed is a party or by which the property of EnzyMed is bound or affected, or
result in the creation or imposition of any mortgage, pledge, lien, security
interest or other charge or encumbrance on any of the assets or property of
EnzyMed or on the EnzyMed Shares and which is material to the business or
financial condition of EnzyMed.
2.6 Real and Personal Property.
--------------------------
(a) Owned Real Property. EnzyMed does not own any real property.
-------------------
(b) Leased Real Property. All of the real property leased by
--------------------
EnzyMed, as tenant or lessee, is identified on Schedule 2.6(b) hereto
---------------
(collectively referred to herein as the "Leased Real Property"). EnzyMed hereby
makes the following representations and warranties with respect to the Leased
Real Property:
(i) EnzyMed holds a good, clear, valid and enforceable
leasehold interest in the Leased Real Property;
(ii) There are no material defects in the physical
condition of any improvements constituting a part of the Leased Real Property,
including, without limitation, structural elements, mechanical systems, roofs or
parking and loading areas, and all of such improvements are in good operating
condition and repair (other than normal wear and tear);
(iii) The copies of the lease (the "Lease") for the Leased
Real Property delivered by EnzyMed to Buyer are complete, accurate, true and
correct;
(iv) The Lease is in full force and effect and has not
been modified, amended, or altered, in writing or otherwise;
(v) All material obligations of the landlord or lessor
under the Lease which have accrued have been performed, and to the knowledge of
EnzyMed, no landlord or lessor is in default under the Lease;
(vi) All material obligations of EnzyMed under the Lease
which have accrued have been performed, and EnzyMed is not in default under the
Lease, and no circumstance presently exists which, with notice or the passage of
time, or both, would give rise to a default by EnzyMed; and
10
(vii) EnzyMed has obtained or will obtain prior to the Closing
any consent of the landlord or lessor under the Lease to the extent required in
connection with the Merger.
(c) Personal Property. A description of EnzyMed's fixtures,
-----------------
machinery, equipment and other tangible personal property (other than personal
property individually valued at less than $1,000) is contained on Schedule
--------
2.6(c) hereto. Except as described on Schedule 2.6(c) hereto, EnzyMed has good
------ ---------------
and marketable title to all of its personal property. Except as disclosed on
Schedule 2.6(c) hereto, none of such personal property or assets is subject to
---------------
any mortgage, pledge, lien, conditional sale agreement, security agreement,
encumbrance or other charge. All material leasehold improvements, furnishings,
machinery, equipment and other tangible personal property of EnzyMed are in good
repair (normal wear and tear excepted), and substantially comply with all
applicable laws, ordinances and regulations, and such machinery and equipment
and other tangible personal property is in good working order (normal wear and
tear excepted).
2.7 Financial Statements.
--------------------
(a) EnzyMed has delivered to Buyer the following financial
statements, copies of which are attached hereto as Schedule 2.7:
------------
(i) Balance sheets of EnzyMed at December 31, 1998 (the
"Base Balance Sheet") and December 31, 1997 and statements of operations and
cash flows for the years then ended, audited by KPMG LLP.
(ii) An unaudited balance sheet of EnzyMed at June 30, 1999
and statements of operations and cash flows for the six-month period then ended,
certified by the controller of EnzyMed.
Except as set forth on Schedule 2.7 hereto, said financial statements have been
------------
prepared in accordance with generally accepted accounting principles applied
consistently during the periods covered thereby, are complete and correct in all
material respects, and present fairly in all material respects the financial
condition of EnzyMed at the dates of said statements and the results of its
operations and its cash flows for the periods covered thereby.
(b) Except as reflected on the Base Balance Sheet or Schedule 2.7
------------
hereto, as of the date of the Base Balance Sheet, EnzyMed had no liabilities of
any nature, whether accrued, absolute, contingent or otherwise, required by
generally accepted accounting principles to be reflected thereon (including,
without limitation, liabilities as guarantor or otherwise with respect to
obligations of others, or potential liabilities for taxes due or then accrued or
to become due or contingent or liabilities relating to activities of EnzyMed or
the conduct of its business prior to the date of the Base Balance Sheet
regardless of whether claims in respect thereof had been asserted as of such
date).
11
(c) Except as reflected on the Base Balance Sheet, EnzyMed's
unaudited balance sheet at June 30, 1999, or Schedule 2.7 hereto, as of the date
------------
hereof and as of the Closing, EnzyMed does not and will not have liabilities of
any nature, whether accrued, absolute, contingent or otherwise, which would be
required by generally accepted accounting principles to be reflected thereon
(including, without limitation, liabilities as guarantor or otherwise with
respect to obligations or others, or liabilities for taxes due or then accrued
or to become due or contingent potential liabilities relating to activities of
EnzyMed or the conduct of its business prior to the date hereof or the Closing,
regardless of whether claims in respect thereof had been asserted as of such
date).
2.8 Taxes.
-----
(a) Except as set forth on Schedule 2.8 hereto, EnzyMed has paid
------------
or caused to be paid all federal, state, local, foreign and other taxes,
including, without limitation, income taxes, estimated taxes, alternative
minimum taxes, excise taxes, sales taxes, use taxes, value-added taxes, gross
receipts taxes, franchise taxes, capital stock taxes, employment and payroll-
related taxes, withholding taxes, stamp taxes, transfer taxes, windfall profit
taxes, environmental taxes and property taxes, whether or not measured in whole
or in part by net income, and all deficiencies, or other additions to tax,
interest, fines and penalties owed by it (collectively, "Taxes"), required to be
paid by EnzyMed through the date hereof whether disputed or not.
(b) EnzyMed has in accordance with applicable law filed all
federal, state, local and foreign tax returns required to be filed by it through
the date hereof, and all such returns correctly and accurately, in all material
respects, set forth the amount of any Taxes relating to the applicable period. A
list of all federal, state, local and foreign income tax returns filed with
respect to EnzyMed for taxable periods since its inception are set forth on
Schedule 2.8 hereto, and said Schedule indicates those returns that have been
------------
audited or currently are the subject of an audit. EnzyMed has delivered to Buyer
correct and complete copies of all federal, state, local and foreign income tax
returns listed on said Schedule, and of all examination reports and statements
of deficiencies assessed against or agreed to by EnzyMed with respect to said
returns. EnzyMed is not required to file a foreign tax return, or to pay any
Stockholders' foreign taxes, in connection with the business conducted by
EnzyMed.
(c) Neither the Internal Revenue Service nor any other
governmental authority is now asserting or, to the knowledge of EnzyMed,
threatening to assert against EnzyMed any deficiency or claim for additional
Taxes. No claim has ever been made by an authority in a jurisdiction where
EnzyMed does not file reports and returns that EnzyMed is or may be subject to
taxation by that jurisdiction. There are no security interests on any of the
assets of EnzyMed that arose in connection with any failure (or alleged failure)
to pay any Taxes. EnzyMed has not entered into a closing agreement pursuant to
Section 7121 of the Internal Revenue Code of 1986, as amended, (the "Code").
12
(d) Except as set forth on Schedule 2.8 hereto, there has not
------------
been any audit of any tax return filed by EnzyMed for any tax period, no audit
of any tax return of EnzyMed is in progress, and EnzyMed has not been notified
by any tax authority that any such audit is contemplated or pending. No
extension of time with respect to any date on which a tax return was or is to be
filed by EnzyMed is in force, and no waiver or agreement by EnzyMed is in force
for the extension of time for the assessment or payment of any Taxes.
(e) EnzyMed has not been (and has no liability for unpaid Taxes
because it once was) a member of an "affiliated group" (as defined in Section
1504(a) of the Code). EnzyMed has never filed, nor has it been required to file,
a consolidated, combined or unitary tax return with any other entity. EnzyMed
does not own, nor has it ever owned, a direct or indirect interest in any trust,
partnership, corporation or other entity, nor is any such interest necessary to
conduct the business of EnzyMed.
(f) EnzyMed is not a "foreign person" within the meaning of
Section 1445 of the Code and Treasury Regulations Section 1.1445-2.
(g) Except as set forth on Schedule 2.8 hereto, EnzyMed is not a
------------
party to any contract, agreement, plan or arrangement that, individually or
collectively, could give rise to any payment that would not be deductible by
reason of Section 162 or 280G of the Code.
(h) For purposes of this Agreement, all references to Sections
of the Code shall include any predecessor provisions to such Sections.
2.9 Accounts Receivable; Accounts Payable. Except as set forth on
-------------------------------------
Schedule 2.9 hereto, all of the accounts receivable of EnzyMed are valid and
------------
enforceable claims, are subject to no set-off or counterclaim, and, to the
knowledge of EnzyMed, are fully collectable in the normal course of business,
after deducting the allowance for doubtful accounts stated in the Base Balance
Sheet in accordance with generally accepted accounting principles. Since the
date of the Base Balance Sheet, EnzyMed has collected its accounts receivable in
the ordinary course and in a manner which is consistent with past practices and
has not accelerated any such collections. Except as set forth on Schedule 2.9
------------
hereto, all accounts payable and notes payable of EnzyMed arose in bona fide
arms' length transactions in the ordinary course of business and no such account
payable or note payable is delinquent by more than sixty (60) days in its
payment. Since the date of the Base Balance Sheet, EnzyMed has paid its
accounts payable in the ordinary course and in a manner which is consistent with
its past practices.
2.10 Absence of Certain Changes. Except as set forth on Schedule 2.10
-------------------------- -------------
hereto, since the date of the Base Balance Sheet, there has been:
(i) no change in the condition, financial or otherwise, of
EnzyMed or in the assets, liabilities, properties, business or prospects of
EnzyMed which change by itself or in conjunction with all other such
changes, whether or not
13
arising in the ordinary course of business, has had or is reasonably likely
to have a material adverse effect on EnzyMed;
(ii) no mortgage, encumbrance or lien placed on any of the
properties of EnzyMed;
(iii) no declaration, setting aside or payment of any
dividend or other distribution with respect to, or any direct or indirect
redemption or acquisition of, any shares of any capital stock of any class
of EnzyMed or any options, warrants or other rights to acquire, or
securities convertible into or exchangeable for, any such capital stock;
(iv) no waiver of any valuable right of, or cancellation
of any debt or claim for more than $10,000 held by, EnzyMed;
(v) no incurrence or modification of any contingent
liability with respect to the obligations of others, and no incurrence or
modification of any other contingent or fixed obligations or liabilities
except in the ordinary course of business consistent with past practice
other than obligations and liabilities not exceeding $10,000 in the
aggregate;
(vi) no increase of more than $10,000, direct or indirect,
in the compensation paid or payable to any officer, director, employee,
agent or stockholder other than salary increases in the ordinary course of
business consistent with past practice of EnzyMed;
(vii) no material loss, destruction or damage to any
property of EnzyMed, whether or not insured;
(viii) no notice of any claim of unfair labor practices or
labor dispute or work stoppage involving EnzyMed and no change in senior
personnel of EnzyMed;
(ix) no acquisition or disposition of any assets (or any
contract or arrangement therefor) of more than $10,000 each, or $25,000 in
the aggregate, nor any other transaction by EnzyMed other than in the
ordinary course of business;
(x) no payment or discharge of a material lien or
liability of EnzyMed which is not recorded in the latest balance sheet
included on Schedule 2.7 hereto;
------------
(xi) no employment agreements entered into by EnzyMed and
no obligation or liability incurred by EnzyMed to any of its officers,
directors, stockholder or employees, or any loans or advances made by
EnzyMed to any of its
14
officers, directors, stockholders or employees, except normal compensation
and expense allowances payable to officers or employees;
(xii) no change in accounting methods or practices, credit
practices or collection policies used by EnzyMed; and
(xiii) no agreement or understanding whether in writing or
otherwise, that would result in any of the transactions or events or
require EnzyMed to take any of the actions specified in paragraphs (i)
through (xii) above.
2.1 Ordinary Course. Since the date of the Base Balance Sheet, EnzyMed
---------------
has conducted its business and operations in all material respects only in the
ordinary course and consistently with its prior practices.
2.1 Banking Relations. All of the arrangements which EnzyMed has with any
-----------------
banking institution are completely and accurately described on Schedule 2.12
-------------
hereto, indicating with respect to each of such arrangements the type of
arrangement maintained (such as checking account, borrowing arrangements, safe
deposit box, etc.) and the person or persons authorized in respect thereof.
2.1 Intellectual Property.
---------------------
(a) Except as set forth on Schedule 2.13 hereto, EnzyMed owns all
-------------
right, title and interest in and to all patents, copyrights, technology,
software, software tools, know-how, processes, trade secrets, trademarks,
service marks, trade names and other proprietary rights used in the conduct of
EnzyMed's business as conducted to the date hereof or contemplated, free and
clear of all liens, claims and encumbrances (including without limitation
distribution rights) (all of which are referred to as "Proprietary Rights"). The
foregoing representation as it relates to Third Party Technology (as hereinafter
defined) is limited to EnzyMed's interest pursuant to the Third Party Licenses
(as hereinafter defined), all of which are valid and enforceable and in full
force and effect and which grant EnzyMed such right to Third Party Technology as
are employed in or necessary to the business of EnzyMed as conducted or
currently proposed to be conducted prior to the Closing Date.
(b) Schedule 2.13 hereto contains an accurate and complete
-------------
description of (i) all patents, trademarks (with separate listings of registered
and unregistered trademarks), trade names, and registered copyrights in or
related to products owned by EnzyMed (the "EnzyMed Products"), all applications
and registration statements therefor, and a list of all licenses and other
agreements relating thereto, and (ii) a list of all licenses and other
agreements currently in effect with third parties (the "Third Party Licenses")
relating to any software, technology, know-how, or processes that EnzyMed is
licensed or otherwise authorized by such third parties to use, market,
distribute or incorporate into its products or processes (such software,
technology, know-how and processes are collectively referred to as the "Third
Party Technology"). All of EnzyMed's trademark or trade name registrations
15
related to the EnzyMed Products and all of EnzyMed's copyrights in any of the
EnzyMed Products are valid and in full force and effect; and consummation of the
transactions contemplate hereby will not alter or impair any such rights. There
is no material default by any party to any Third Party License and all of
EnzyMed's right thereunder are freely assignable. To the knowledge of EnzyMed,
the licensors under such Third Party Licenses have and had all requisite power
and authority to grant the rights purported to be conferred thereby. True and
complete copies of such Third Party Licenses, and any amendments thereto, have
been provided to Buyer.
(c) No claims have been asserted against EnzyMed or, to the
knowledge of EnzyMed, any of the Stockholders (and EnzyMed is not aware of any
claims which are likely to be asserted against EnzyMed) by any person
challenging the use or distribution by EnzyMed of any patents, trademarks, trade
names, copyrights, trade secrets, software, technology, know-how or processes
utilized by it (including, without limitation, the Third Party Technology) or
challenging or questioning the validity or effectiveness of any license or
agreement relating thereto (including, without limitation, the Third Party
Licenses). To the knowledge of EnzyMed, there is no valid basis for any claim of
the type specified in the immediately preceding sentence which could in any way
relate to or interfere with the continued enhancement and exploitation by
EnzyMed of any of the EnzyMed Products. To the knowledge of EnzyMed, none of the
EnzyMed Products nor the use of any patents, trademarks, trade names,
copyrights, software, technology, know-how or processes by EnzyMed in its
current business infringes on the rights of, constitutes misappropriation of, or
in any way involves unfair competition with respect to, any proprietary
information or intangible property right of any third person or entity,
including without limitation any trade secret, copyright, trademark or trade
name or patent.
(d) All licenses or other agreements currently in effect
pursuant to which EnzyMed has granted rights to others in Proprietary Rights
owned or licensed by EnzyMed are listed on Schedule 2.13 hereto. All of such
-------------
licenses or agreements are in full force and effect, there is no default by any
party thereto and all of EnzyMed's rights thereunder are freely assignable. True
and complete copies of all such licenses or other agreements, and any amendments
thereto, have been provided to Buyer. Except as set forth on Schedule 2.13
-------------
hereto, EnzyMed has not granted any third party any right to manufacture,
reproduce, distribute, market or exploit any of the EnzyMed Products or any
adaptations, translations or derivative works based on the EnzyMed Products or
any portion thereof. Except with respect to the rights of third parties to the
Third Party Technology, to the knowledge of EnzyMed, no third party has any
right to manufacture, reproduce, distribute, market or exploit any underlying
works or materials of which any of the EnzyMed Products are a "derivative work"
as that term is defined in the United States Copyright Act, Title 17, U.S.C.
Section 101.
(e) Except as set forth on Schedule 2.13 hereto, to the knowledge
-------------
of EnzyMed, no designs, drawings, specifications, source code, object code,
documentation, flow charts or diagrams incorporating, embodying or reflecting
any of the EnzyMed Products
16
at any stage of their development (the "EnzyMed Components") were written,
developed, created or discovered in whole or in part by any employee of EnzyMed
with the assistance of any third party or entity or were created by third
parties (including, without limitation, each of the Stockholders) who have not
assigned ownership of their rights to EnzyMed. EnzyMed has at all times used
commercially reasonable efforts to treat the EnzyMed Products and the EnzyMed
Components as containing trade secrets and have not disclosed or otherwise dealt
with such items in such a manner as to cause the loss of such trade secrets by
release into the public domain.
(f) To the knowledge of EnzyMed, no employee of EnzyMed is in
violation of any term of any employment contract, patent disclosure agreement or
any other contract or agreement relating to the relationship of any such
employee with EnzyMed or, to the knowledge of EnzyMed, any other party,
including, without limitation, any previous employer, because of the nature of
the business conducted by EnzyMed or proposed to be conducted by EnzyMed.
(g) Each person presently or previously employed by EnzyMed
(including independent contractors, if any) in a research and development or
other technical position has executed a confidentiality and non-disclosure
agreement in substantially the same form as the form previously provided to
Buyer or its representatives. Such confidentiality and non-disclosure agreements
constitute valid and binding obligations of EnzyMed and such person, enforceable
in accordance with their respective terms. To the knowledge of EnzyMed, neither
the execution or delivery of such agreements, nor the carrying on of EnzyMed's
business by such persons as employees, nor the conduct of EnzyMed's business as
currently anticipated, will conflict with or result in a breach of the terms,
conditions or provisions of or constitute a default under any contract, covenant
or instrument currently in effect under which any of such persons is obligated.
EnzyMed is not knowingly making unauthorized use of any confidential information
or trade secrets of any person, including, without limitation, any former
employer or any past or present employee of EnzyMed. Neither EnzyMed nor, to the
knowledge of EnzyMed, any of EnzyMed's employees have any agreements or
arrangements with any persons other than EnzyMed related to confidential
information or trade secrets of such persons or restricting any such employee's
ability to engage in business activities of any nature.
(h) No product liability or warranty claims which individually
or in the aggregate could exceed Five Thousand Dollars ($5,000) have been
communicated to or threatened against EnzyMed nor, to the knowledge of EnzyMed,
is there any specific situation, set of facts or occurrence that provides a
basis for such claim.
2.1 Contracts. Except for contracts, commitments, plans, agreements and
---------
licenses (true and complete copies of which have been delivered to Buyer, except
with respect to the collaboration and license contracts and Merck contract
described on Schedule 2.14 hereto as exceptions to subparagraphs (iii), (viii)
-------------
and (xi) below) described on Schedule 2.14 hereto, EnzyMed is not a party to or
-------------
subject to:
17
(i) any plan or contract providing for bonuses, pensions,
options, stock purchases, deferred compensation, retirement payments, profit
sharing, collective bargaining or the like, or any contract or agreement with
any labor union;
(ii) any employment contract or contract for personal
services;
(iii) any contract or agreement relating to capital
expenditures in excess of $10,000 per annum;
(iv) any other contracts or agreements creating any
obligations of EnzyMed of $25,000 or more per annum with respect to any such
contract or agreement not specifically disclosed elsewhere in this Agreement;
(v) any contract or agreement for more than $10,000 which
by its terms does not terminate or is not terminable without penalty by such
entity or any successor or assignee on or at any time after the Closing Date;
(vi) any contract for more than $10,000 not made in the
ordinary course of business;
(vii) any contract currently in effect containing covenants
limiting the freedom of EnzyMed to compete in any line of business or with any
person or entity;
(viii) any license agreement for more than $10,000 (as
licensor or licensee);
(ix) any indenture, mortgage, promissory note, loan
agreement, guaranty or other agreement or commitment for the borrowing of money
for more than $10,000 each, or $25,000 in the aggregate;
(x) any contract or agreement with any officer, employee,
director or stockholder of EnzyMed or with any persons or organizations
controlled by or affiliated with any of them; or
(xi) any joint venture, partnership or similar agreement.
EnzyMed is not in default under any such contracts, commitments, plans,
agreements or licenses described in said Schedule, and EnzyMed does not have any
knowledge of conditions or facts which with notice or passage of time, or both,
would constitute a default.
2.1 Litigation. There is no litigation or governmental or administrative
----------
proceeding or investigation pending or, to the knowledge of EnzyMed, threatened
against EnzyMed or
18
any affiliate of EnzyMed which may have a material adverse effect on EnzyMed's
properties, assets, financial condition or business or which would prevent or
hinder the consummation of the transactions contemplated by this Agreement.
2.16 Compliance with Laws. EnzyMed is in compliance with all applicable
--------------------
statutes, ordinances, orders, judgments, decrees and rules and regulations
promulgated by any federal, state, municipal or other governmental authority
which apply to EnzyMed or to the conduct of its business except where the
failure of EnzyMed to so comply would not have a material adverse effect on
EnzyMed, and EnzyMed has not received notice of a violation or alleged violation
of any such statue, ordinance, order, rule or regulation.
2.17 Insurance. The only insurance policies maintained by EnzyMed are
---------
disclosed on Schedule 2.17 hereto, and such insurance policies are in full force
-------------
and effect, all premiums with respect thereto (with existing premium costs as
disclosed on Schedule 2.17 hereto) are currently paid, and EnzyMed is in
-------------
compliance in all material respects with the terms thereof. Said insurance is
adequate and customary for the business engaged in by EnzyMed and is sufficient
for compliance by EnzyMed with all requirements of law and all agreements and
leases to which EnzyMed is a party.
2.18 Warranty or Other Claims. There are no existing or, to the knowledge
------------------------
of EnzyMed, threatened product liability, warranty or other similar claims, or
any facts upon which a material claim of such nature could be based, against
EnzyMed for products or services which are defective or fail to meet any product
or service warranties. No claim has been asserted against EnzyMed for
renegotiation or price redetermination of any business transaction, and, to the
knowledge of EnzyMed, there are no facts upon which any such claim could
reasonably be based.
2.19 Powers of Attorney. EnzyMed has not granted powers of attorney which
------------------
are presently outstanding, except powers of attorney granted to EnzyMed's patent
counsel for purposes of handling patent and trademark matters on behalf of
EnzyMed.
2.20 Finder's Fee. EnzyMed has not incurred or become liable for any
------------
broker's commission or finder's fee relating to or in connection with the
transactions contemplated by this Agreement.
2.21 Corporate Records; Copies of Documents. The corporate record books of
--------------------------------------
EnzyMed accurately record, in all material respects, all corporate action taken
by its stockholders and board of directors. The copies of the corporate records
of EnzyMed, as delivered to Buyer or Buyer's counsel pursuant to this Agreement,
are true and complete copies of the originals of such documents. EnzyMed has
made available for inspection and copying by Buyer and its counsel complete and
correct copies of all documents referred to in this Section or in the Schedules
delivered to Buyer pursuant to this Agreement.
19
2.22 Employees; Labor Relations. As of the date hereof, EnzyMed employs
--------------------------
the number of full-time and part-time employees and the number of scientists
holding doctorate degrees as are indicated on Schedule 2.22 hereto. EnzyMed is
-------------
not delinquent in payments to any of its employees or agents for any wages,
salaries, commissions, bonuses or other direct compensation for any services
performed for it to the date hereof or amounts required to be reimbursed to such
employees. There are no charges of employment discrimination or unfair labor
practices or strikes, slowdowns, stoppages of work, or any other concerted
interference with normal operations existing, pending or, to the knowledge of
EnzyMed, threatened against or involving EnzyMed. No question concerning
representation exists respecting any group of employees of EnzyMed. Except as
set forth on Schedule 2.22 hereto, there are no claims or charges relating to or
-------------
alleging violations of any federal, state or local employment laws, including
without limitation laws relating to discrimination, harassment, family leave or
wage payments, existing, pending or, to the knowledge of EnzyMed, threatened
against EnzyMed nor, to the knowledge of EnzyMed, has there occurred any event
or does there exist any condition on the basis of which any such claim is
reasonably likely to be asserted. EnzyMed is, and at all times since its
inception has been, in compliance in all material respects with the requirements
of the Immigration Reform Control Act of 1986. There are no changes (including,
without limitation, resignations) pending or, to the knowledge of EnzyMed,
threatened with respect to the senior management or key supervisory personnel of
EnzyMed nor has EnzyMed received any notice or information concerning any
prospective change with respect to the senior management or key supervisory
personnel of EnzyMed.
2.23 Employee Benefit Programs.
-------------------------
(a) Schedule 2.23 hereto sets forth a list of every Employee
-------------
Program (as defined below) that has been maintained (as such term is further
defined below) by EnzyMed at any time during the three-year period ending on the
date hereof.
(b) Each Employee Program which has been maintained by EnzyMed
and which has at any time been intended to qualify under Section 401(a) or
501(c)(9) of the Code, has received a favorable determination or approval letter
from the Internal Revenue Service ("IRS") regarding its qualification under such
section and has, in fact, been qualified under the applicable section of the
Code from the effective date of such Employee Program through and including the
Closing (or, if earlier, the date that all of such Employee Program's assets
were distributed). Except for amendments made to the Code for which the remedial
amendment period has not expired, no event or omission has occurred which would
cause any such Employee Program to lose its qualification under the applicable
Code section.
(c) Except as set forth on Schedule 2.23 hereto, there has not
-------------
been any failure of any party to comply with any laws applicable with respect to
the Employee Programs that have been maintained by EnzyMed which is reasonably
likely to have a material adverse effect on EnzyMed. With respect to any
Employee Program now or heretofore maintained by EnzyMed, there has occurred no
"prohibited transaction," as defined in Section
20
406 of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), or Section 4975 of the Code, or breach of any duty under ERISA or
other applicable law (including, without limitation, any health care
continuation requirements or any other tax law requirements, or conditions to
favorable tax treatment, applicable to such plan), which could result, directly
or indirectly (including without limitation through any obligation of
indemnification or contribution), in any taxes, penalties or other liability to
EnzyMed or any Affiliate (as defined below) which is reasonably likely to have a
material adverse effect on EnzyMed. No litigation, arbitration, or governmental
administrative proceeding (or investigation) or other proceeding (other than
those relating to routine claims for benefits) is pending or, to the knowledge
of EnzyMed, threatened with respect to any such Employee Program which is
reasonably likely to have a material adverse effect on EnzyMed.
(d) EnzyMed has not incurred any liability under Title IV of ERISA
which will not be paid in full prior to the Closing. There has been no
"accumulated funding deficiency" (whether or not waived) with respect to any
Employee Program ever maintained by EnzyMed and subject to Code Section 412 or
ERISA Section 302. With respect to any Employee Program maintained by EnzyMed
and subject to Title IV of ERISA, there has been no (nor will be any as a result
of the transaction contemplated by this Agreement) (i) "reportable event,"
within the meaning of ERISA Section 4043, or the regulations thereunder (for
which notice the notice requirement is not waived under 29 C.F.R. Part 2615) and
(ii) event or condition which presents a material risk of plan termination or
any other event that may cause EnzyMed to incur liability or have a lien imposed
on its assets under Title IV of ERISA. All payments and/or contributions
required to have been made (under the provisions of any agreements or other
governing documents or applicable law) with respect to all Employee Programs
heretofore maintained by EnzyMed, for all periods prior to the Closing, either
have been made or have been accrued (and all such unpaid but accrued amounts are
described on Schedule 2.23 hereto). Except as described on Schedule 2.23
------------- -------------
hereto, no Employee Program maintained by EnzyMed and subject to Title IV of
ERISA (other than a Multiemployer Plan) has any "unfunded benefit liabilities"
within the meaning of ERISA Section 4001(a)(18), as of the Closing Date.
EnzyMed has never maintained a Multiemployer Plan. Except as described on
Schedule 2.23 hereto, none of the Employee Programs ever maintained by EnzyMed
-------------
has ever provided health care or any other non-pension benefits to any employees
after their employment was terminated (other than as required by part 6 of
subtitle B of title I of ERISA or the Iowa Extension of Coverage law, as
applicable) or has ever promised to provide such post-termination benefits.
(e) With respect to each Employee Program maintained by EnzyMed within
the three years preceding the date hereof, complete and correct copies of the
following documents (if applicable to such Employee Program) have previously
been delivered to Buyer: (i) all documents embodying or governing such Employee
Program, and any funding medium for the Employee Program (including, without
limitation, trust agreements) as they may have been amended to the date hereof;
(ii) the most recent IRS determination or approval letter with respect to such
Employee Program under Code Section 401 or 501(c)(9), and any applications for
determination or approval subsequently filed with the IRS; (iii) the three most
recently
21
filed IRS Forms 5500, with all applicable schedules attached thereto; (iv) the
summary plan description for such Employee Program (or other descriptions of
such Employee Program provided to employees) and all modifications thereto; (v)
any insurance policy (including any fiduciary liability insurance policy)
related to such Employee Program; (vi) any documents evidencing any loan to an
Employee Program that is a leveraged employee stock ownership plan; and (vii)
with respect to any Multiemployer Plan, any participation or adoption agreement
relating to EnzyMed's participation in or contributions under such plan;
(f) Except as set forth on Schedule 2.23 hereto, each Employee
-------------
Program maintained by EnzyMed as of the date hereof is subject to termination by
the Board of Directors of EnzyMed without any further liability or obligation on
the part of EnzyMed to make further contributions to any trust maintained under
any such Employee Program following such termination.
(g) For purposes of this Section 2.23:
(i) "Employee Program" means (A) all employee benefit plans
within the meaning of ERISA Section 3(3), including, but not limited to,
multiple employer welfare arrangements (within the meaning of ERISA Section
3(40)), plans to which more than one unaffiliated employer contributes and
employee benefit plans (such as foreign or excess benefit plans) which are
not subject to ERISA; and (B) all stock option plans, bonus or incentive
award plans, severance pay policies or agreements, deferred compensation
agreements, supplemental income arrangements, vacation plans, and all other
employee benefit plans, agreements and arrangements not described in (A)
above. In the case of an Employee Program funded through an organization
described in Code Section 501(c)(9), each reference to such Employee
Program shall include a reference to such organization;
(ii) an entity "maintains" an Employee Program if such
entity sponsors, contributes to or provides (or has promised to provide)
benefits under such Employee Program, or has any obligation (by agreement
or under applicable law) to contribute to or provide benefits under such
Employee Program, or if such Employee Program provides benefits to or
otherwise covers employees of such entity (or their spouses, dependents or
beneficiaries);
(iii) An entity is an "Affiliate" of EnzyMed for purposes of
Section 2.23 if it would have ever been considered a single employer with
EnzyMed under ERISA Section 4001(b) or part of the same "controlled group"
as EnzyMed for purposes of ERISA Section 302(d)(8)(C); and
(iv) "Multiemployer Plan" means a (pension or non-pension)
employee benefit plan to which more than one employer contributes and which
is maintained pursuant to one or more collective bargaining agreements.
22
2.2 Hazardous Waste, Etc.
--------------------
(a) Except as set forth on Schedule 2.24 hereto, (i) EnzyMed has
-------------
never generated, transported, used, stored, treated, disposed of, or managed any
Hazardous Waste (as defined below); (ii) to the knowledge of EnzyMed, no
Hazardous Material (as defined below) has ever been or is threatened to be
spilled, released, or disposed of at any site presently or formerly operated,
leased, or used by EnzyMed, or has ever come to be located in the soil or
groundwater at any such site as a result of EnzyMed's operations; (iii) no
Hazardous Material has ever been transported from any site presently or formerly
operated, leased, or used by EnzyMed for treatment, storage, or disposal at any
other place; (iv) EnzyMed does not presently own, operate, lease, or use, and
has not previously operated, leased, or used any site on which underground
storage tanks are or were located; and (v) no lien has ever been imposed by any
governmental agency on any property, facility, machinery, or equipment owned,
operated, leased, or used by EnzyMed in connection with the presence of any
Hazardous Material.
(b) Except as set forth on Schedule 2.24 hereto, to the knowledge
-------------
of EnzyMed, (i) EnzyMed does not have any liability under, nor has EnzyMed
violated in any material respect, any Environmental Law (as defined below),
which liability or violation is reasonably likely to have a material adverse
effect on EnzyMed; (ii) EnzyMed, any property owned, operated, leased, or used
by it, and any facilities and operations thereon are presently in compliance in
all material respects with all applicable Environmental Laws; and (iii) EnzyMed
has not entered into or been subject to any judgment, consent decree, compliance
order, or administrative order with respect to any environmental or health and
safety matter or received any request for information, notice, demand letter,
administrative inquiry, or formal or informal complaint or claim with respect to
any environmental or health and safety matter or the enforcement of any
Environmental Law.
(c) Except as set forth on Schedule 2.24 hereto, to the knowledge
-------------
of EnzyMed, no site owned, operated, leased or used by EnzyMed contains any
asbestos or asbestos-containing material, any polychlorinated biphenyls (PCBs)
or equipment containing PCBs, or any urea formaldehyde foam insulation.
(d) EnzyMed has provided to Buyer copies of all documents,
records, and information known and available to it concerning any environmental
or health and safety matter relevant to EnzyMed, whether generated by EnzyMed or
others, including, without limitation, environmental audits, environmental risk
assessments, site assessments, documentation regarding off-site disposal of
Hazardous Materials, spill control plans, and reports, correspondence, permits,
licenses, approvals, consents and other authorizations related to environmental
or health and safety matters issued by any governmental agency.
(e) For purposes of this Section 2.24, (i) "Hazardous Material"
shall mean and include any hazardous waste, hazardous material, hazardous
substance, petroleum product, oil, toxic substance, pollutant, or contaminant,
as defined or regulated under any
23
Environmental Law, or any other substance which may pose a threat to the
environment or to human health or safety; (ii) "Hazardous Waste" shall mean and
include any hazardous waste as defined or regulated under any Environmental Law
(including, without limitation, medical waste); (iii) "Environmental Law" shall
mean any environmental or health and safety-related law, regulation, rule,
ordinance, or by law at the federal, state, or local level, whether existing as
of the date hereof, previously enforced, or subsequently enacted; and (iv)
"EnzyMed" shall mean and include EnzyMed, any predecessor and all other entities
for whose conduct EnzyMed is or may be held responsible under any Environmental
Law.
2.25 Year 2000 Compliance. All computer software products, which are
--------------------
critical in regards to business operations, that are owned by EnzyMed,
exclusively licensed to EnzyMed, licensed, sold or otherwise distributed to
others by EnzyMed when operated properly ("Software") are Year 2000 Compliant or
will be Year 2000 Compliant by November 30, 1999. As used herein, "Year 2000
Compliant" shall mean with respect to any such Software, the ability of such
Software to perform the following date-related functions: (i) consistently
handle date information before, during and after January 1, 2000, including, but
not limited to, accepting date input, providing date output and performing
calculations on dates or portions of dates; (ii) function accurately in
accordance with the documentation relating to the applicable software and
without interruption before, during and after January 1, 2000, without any
change in operations associated with the transition to a new century and the
absence of a leap-year; (iii) respond to two-digit date input in a way that
resolves any ambiguity as to the century; and (iv) store and provide output of
date information in ways that are unambiguous as to century.
2.26 List of Certain Employees; Customers, Suppliers and Vendors. Schedule
----------------------------------------------------------- --------
2.26 hereto contains a list of all officers, managers, employees, consultants,
----
independent contractors, brokers and sales persons of EnzyMed who, individually,
have received compensation for the fiscal year ended December 31, 1998, or for
the seventh month period ended July 31, 1999 in excess of $40,000, including the
current job title and aggregate annual compensation of each such individual.
Schedule 2.26 hereto sets forth a list of all customers, suppliers and vendors
-------------
of EnzyMed with whom during the fiscal year ended December 31, 1998, or during
the seven month period ended July 31, 1999, EnzyMed received or made payments
aggregating $25,000 or more, showing, with respect to each, the name, address
and dollar volume involved. Except as set forth on Schedule 2.26 hereto, since
-------------
December 31, 1998, no customer, supplier or vendor with whom EnzyMed has
conducted more than $10,000 in business in any fiscal year has canceled or
otherwise terminated or reduced its business with EnzyMed or materially and
adversely modified its relationship with EnzyMed nor, to the knowledge of
EnzyMed, does any such customer, supplier or vendor have any plan or intention
to do so.
2.27 Transactions with Affiliates. Except as set forth on Schedule 2.27
---------------------------- -------------
hereto, there are no loans, leases or other continuing transactions between
EnzyMed and any present or former stockholder, director or officer of EnzyMed,
or, to the knowledge of EnzyMed, any member of such officer's, director's or
stockholder's immediate family, or any person
24
controlled by such officer, director or stockholder or his or her immediate
family. Except as set forth on Schedule 2.27 hereto, no stockholder, director or
-------------
officer of EnzyMed nor, to the knowledge of EnzyMed, any of their respective
spouses or family members, owns directly or indirectly on an individual or joint
basis any material interest in, or serves as an officer or director or in
another similar capacity of, any competitor or supplier of EnzyMed, or any
organization which has a material contract or arrangement with EnzyMed.
2.2 Disclosure. The representations, warranties and statements contained
----------
in this Agreement and in the certificates, exhibits and schedules delivered to
Buyer when taken together do not contain any untrue statement of a material
fact, and, do not omit to state a material fact required to be stated therein or
necessary in order to make such representations, warranties or statements not
misleading in light of the circumstances under which they were made.
ARTICLE III -- COVENANTS OF ENZYMED
3.1 Making of Covenants and Agreements. EnzyMed hereby make the
----------------------------------
respective covenants and agreements set forth in this Article III.
3.2 Tax Returns. EnzyMed, with the approval of Buyer and in accordance
-----------
with applicable law, shall (i) promptly prepare and file on or before the due
date or any extension thereof all federal, state, local and foreign tax returns
required to be filed by EnzyMed with respect to taxable periods of EnzyMed that
include any period ending on or before the Closing Date and (ii) pay all Taxes
of EnzyMed attributable to periods ending on or before the Closing Date.
3.3 Pooling Accounting. EnzyMed agrees not to knowingly take any action
------------------
that would adversely affect the ability of Buyer to treat the Merger as a
pooling of interests.
3.4 Affiliate Agreements. EnzyMed shall use reasonable efforts to obtain
--------------------
prior to Closing an executed Affiliate Agreement in substantially the form
attached hereto as Exhibit 3.4 (an "EnzyMed Affiliate Agreement") from each of
-----------
its affiliates with respect to the transfer of Buyer Common Shares. The term
"affiliate" for purposes of this Section 3.4 means any officer, director or
holder of more than ten percent (10%) of the outstanding shares of any class of
capital stock of EnzyMed. Set forth on Schedule 3.4 hereto is a list of names
------------
of those persons who are, in EnzyMed's reasonable judgment after consultation
with legal counsel, affiliates of EnzyMed. EnzyMed shall provide Buyer or
Buyer's counsel such information and documents as Buyer shall reasonably request
for purposes of reviewing such list. Buyer shall be entitled to place legends
on the certificates evidencing any Buyer Common Shares to be issued to EnzyMed's
affiliates pursuant to the terms of this Agreement and the Certificate of
Merger, and to issue appropriate stop transfer instructions to the transfer
agent for Buyer, consistent with the terms of such EnzyMed Affiliate Agreements,
whether or not such EnzyMed Affiliate Agreements are actually delivered to
Buyer.
25
3.5 Indebtedness. EnzyMed shall use reasonable efforts to cause EnzyMed
------------
to have debt (exclusive of accounts payable, accrued expenses and deferred
revenue) (as determined in accordance with generally accepted accounting
principles) as of the Closing Date not in excess of $300,000, if the Closing
occurs prior to September 25, 1999, $500,000, if the Closing occurs on or after
September 25, 1999 and prior to October 25, 1999, $700,000, if the Closing
occurs on or after October 25, 1999 and prior to November 25, 1999, or $900,000,
if the Closing occurs on or after November 25, 1999; provided, however, that
each of the foregoing amounts shall be reduced by the amount of any proceeds
received by EnzyMed between the date hereof and the Closing Date upon the
exercise of any Options net of any withholding taxes or other expenses incurred
by EnzyMed relating to any such exercises.
3.6 Cooperation of EnzyMed. EnzyMed shall cooperate with all reasonable
----------------------
requests of Buyer and the Buyer's counsel in connection with the consummation of
the transactions contemplated hereby, including, without limitation, providing
the Buyers with all access or information necessary to permit the Buyers to
verify the amounts certified by EnzyMed pursuant to Section 6.1(l) hereof, and
the making of any filings required in connection of the transactions
contemplated hereby, including, without limitation, any filings under the ▇▇▇▇-
▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended, and the rules and
regulations promulgated thereunder (the "HSR Act").
ARTICLE IV -- REPRESENTATIONS AND WARRANTIES OF BUYER
4.1 Making of Representations and Warranties. As a material inducement to
----------------------------------------
EnzyMed to enter into this Agreement and consummate the transactions
contemplated hereby, Buyer hereby makes the representations and warranties to
EnzyMed contained in this Article IV.
4.2 Organization. Buyer is a corporation duly organized, validly existing
------------
and in good standing under the laws of the State of Delaware with full corporate
power and authority to own or lease its properties and to conduct its business
in the manner and in the places where such properties are owned or leased or
such business is conducted by it. The copies of the Certificate of Incorporation
of Buyer, as amended to date, certified by the appropriate governmental officer,
and the By-laws, as amended to date, certified by the Secretary of Buyer, and
heretofore delivered to EnzyMed's counsel, are complete and correct, and no
amendments thereto are pending. Buyer is not in violation of any provision of
its Certificate of Incorporation or By-laws. Buyer is duly licensed and
qualified to transact business in each jurisdiction in which the property owned,
leased or operated by it or the nature of its business makes such licensing or
qualification necessary.
4.3 Authority. Buyer has full right, authority and power to enter into
---------
this Agreement and each agreement, document and instrument to be executed and
delivered by Buyer pursuant to this Agreement and to carry out the transactions
contemplated hereby. The
26
execution, delivery and performance by Buyer of this Agreement and each such
other agreement, document and instrument have been duly authorized by all
necessary corporate action of Buyer and no other action on the part of Buyer is
required in connection therewith. This Agreement and each other agreement,
document and instrument executed and delivered by Buyer pursuant to this
Agreement constitute, or when executed and delivered will constitute, valid and
binding obligations of Buyer enforceable in accordance with their terms. The
execution, delivery and performance by Buyer of this Agreement and each such
agreement, document and instrument:
(i) does not and will not violate any provision of the
Certificate of Incorporation or by-laws of Buyer;
(ii) does not and will not violate any laws of the United
States or of any state or any other jurisdiction applicable to Buyer or,
assuming no breach in the representations set forth in any Stockholder's
Stockholder Indemnification Agreement, require Buyer to obtain any approval,
consent or waiver of, or make any filing with, any person or entity
(governmental or otherwise) which has not been obtained or made other than the
filing of an application for the listing of the Buyer Common Stock with The
Nasdaq Stock Market, Inc., the filing of the Certificate of Merger with the
Delaware Secretary of State and any filing required under the HSR Act; and
(iii) does not and will not result in a breach of,
constitute a default under, accelerate any obligation under, or give rise to a
right of termination of any indenture, loan or credit agreement, or any other
agreement, mortgage, lease, permit, order, judgment, decree or arbitration award
to which Buyer is a party and which is material to the business or financial
condition of Buyer.
4.4 Capitalization. The authorized capital stock of Buyer consists of
--------------
50,000,000 shares of common stock, par value $.01 per share, and 2,000,000
shares of preferred stock, par value $.01 per share, of which 13,534,753 shares
of common stock are duly and validly issued, outstanding, fully paid and non-
assessable and no shares of preferred stock have been issued.
4.5 Litigation. There is no litigation or governmental or administrative
----------
proceeding or investigation pending or, to its knowledge, threatened against
Buyer which would prevent or hinder the consummation of the transactions
contemplated by this Agreement or have a material adverse effect on Buyer.
4.6 Finder's Fee. Buyer has not incurred or become liable for any
------------
broker's commission or finder's fee relating to or in connection with the
transactions contemplated by this Agreement.
4.7 Buyer's Public Information. Buyer has heretofore furnished to EnzyMed
--------------------------
information regarding Buyer, including its Prospectus dated February 4, 1999,
Annual Report
27
on Form 10-K for the fiscal year ended December 31, 1998, its Proxy Statement
with respect to the 1999 Annual Meeting of Stockholders and its Quarterly
Reports on Form 10-Q for the quarters ended March 31, 1999 and June 30, 1999,
each as filed with the Securities and Exchange Commission ("SEC") (as any such
documents have been amended since their original filing, the "Buyer SEC
Documents"). As of their respective filing dates, the Buyer SEC Documents did
not contain any untrue statements of material facts or omit to state material
facts required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading. The
balance sheets of Buyer at December 31, 1998 (the "Buyer Base Balance Sheet")
and December 31, 1997 and statements of operations and cash flows for the years
then ended, audited by KPMG LLP, and the unaudited balance sheet of Buyer at
June 30, 1999 and statements of operations and cash flows for the six-month
period then ended, all as contained in the Buyer SEC Documents, have been
prepared in accordance with generally accepted accounting principles applied
consistently during the periods covered thereby, are complete and correct in all
material respects, and present fairly in all material respects the financial
condition of Buyer at the dates of said statements and the results of its
operations and its cash flows for the periods covered thereby. Except as
reflected on the Buyer Base Balance Sheet, as of the date of the Buyer Base
Balance Sheet, Buyer had no liabilities of any nature, whether accrued or
absolute, required by generally accepted accounting principles to be reflected
thereon, regardless of whether claims in respect thereof had been asserted as of
such date. Except as reflected on the Buyer Base Balance Sheet or the Buyer's
unaudited balance sheet at June 30, 1999, as of the date hereof and as of the
Closing, Buyer does not and will not have liabilities of any nature, whether
accrued or absolute, which would be required by generally accepted accounting
principles to be reflected thereon, regardless of whether claims in respect
thereof had been asserted as of such date.
4.8 Buyer Common Shares. Buyer has a sufficient number of authorized but
-------------------
unissued shares of its Common Stock available for issuance to the Stockholders
and the holders of Options to be assumed and converted in the merger, upon
exercise of Buyer Options, in accordance with the provisions of this Agreement.
The Buyer Common Shares to be issued pursuant to this Agreement will, when so
delivered (upon the receipt of any exercise price therefore, if applicable), be
duly and validly issued, fully paid and nonassessable.
4.9 Absence of Certain Changes. Since the date of the Buyer Base Balance
--------------------------
Sheet, there has been no change in the condition, financial or otherwise, of
Buyer or in the assets, liabilities, properties, business or prospects of Buyer
which change by itself or in conjunction with all other such changes, whether or
not arising in the ordinary course of business, has had or is reasonably likely
to have a material adverse effect on Buyer.
4.10 Compliance with Laws. Buyer is in compliance with all applicable
--------------------
statutes, ordinances, orders, judgments, decrees and rules and regulations
promulgated by any federal, state, municipal or other governmental authority
which apply to Buyer or to the conduct of its business except where the failure
of Buyer to so comply would not have a material adverse
28
effect on Buyer, and Buyer has not received notice of a violation or alleged
violation of any such statue, ordinance, order, rule or regulation.
4.11 Disclosure. The representations, warranties and statements contained
----------
in this Agreement and in the certificates, exhibits and schedules delivered to
EnzyMed when taken together do not contain any untrue statement of a material
fact, and do not omit to state a material fact required to be stated therein or
necessary in order to make such representations, warranties or statements not
misleading in light of the circumstances under which they were made.
4.12 Year 2000 Compliance. All computer software products, which are
--------------------
critical in regards to business operations, that are owned by Buyer, exclusively
licensed to Buyer, licensed, sold or otherwise distributed to others by Buyer
when operated properly ("Software") are Year 2000 Compliant or will be Year 2000
Compliant by November 30, 1999.
ARTICLE V -- COVENANTS OF BUYER
5.1 Affiliate Agreements. Buyer shall use reasonable efforts to obtain
--------------------
prior to Closing an executed Affiliate Agreement in substantially the form
attached hereto as Exhibit 5.1 (a "Buyer Affiliate Agreement") from each of its
-----------
affiliates with respect to the transfer of Buyer Common Shares. Set forth on
Schedule 5.1 hereto is a list of names of those persons who are, in Buyer's
------------
reasonable judgment after consultation with legal counsel, affiliates of Buyer.
Buyer shall provide EnzyMed such information and documents as EnzyMed shall
reasonably request for purposes of reviewing such list.
5.2 Pooling Accounting. Buyer will use its best efforts to cause the
------------------
business combination to be effected by the Merger to be accounted for as a
pooling of interests. Buyer will use its best efforts to cause its Affiliates
not to take any action that would adversely affect the ability of Buyer to
account for the business combination to be effected by the Merger as a pooling
of interests.
5.3 Continuity of Business Enterprise. Buyer will continue at least one
---------------------------------
historic business line of EnzyMed, or use at least a significant portion of
EnzyMed's historic business assets in a business, in each case within the
meaning of Treasury Regulation (S)1.368-1(d). Buyer has not taken or agreed to
take any action that would prevent the Merger from constituting a tax-free
reorganization qualifying under the provisions of Section 368(a) of the Code,
and will not take any action that would be reasonably likely to adversely affect
the status of the Merger as a reorganization under Section 368 of the Code.
5.4 Nasdaq Filing. Following the Closing, Buyer shall promptly file with
-------------
The Nasdaq Stock Market, Inc. a Nasdaq National Market Notification Form For
Listing of
29
Additional Shares covering the shares of Buyer Common Stock issued in the Merger
and the shares of Buyer Common Stock issuable upon exercise of the Buyer
Options.
5.5 Preservation of Business. From the Date hereof through the Closing
------------------------
Date, Buyer shall use all reasonable efforts to preserve intact its present
business organization and preserve its regular services to, and maintain its
significant business relationships with, customers, suppliers and all others
having business dealings with it in an effort to protect its goodwill and
ongoing business from being impaired in any material respect.
5.6 Corporate Changes. Buyer shall not (i) amend its certificate of
-----------------
incorporation or by-laws in a manner which would be inconsistent with the
consummation of the transactions contemplated hereby, (ii) agree to any merger
in which it is not the surviving entity or any consolidation, sale of all or
substantially all of its assets or any other similar reorganization, arrangement
or business combination in which it is not the surviving entity or (iii) enter
into or modify any contract in a manner that will or is reasonably likely to
materially and adversely affect the consummation of the transactions
contemplated hereby.
ARTICLE VI -- CONDITIONS
6.1 Conditions to the Obligations of Buyer. The obligation of Buyer to
--------------------------------------
consummate this Agreement and the transactions contemplated hereby are subject
to the fulfillment, prior to or at the Closing, of the following conditions
precedent:
(a) Representations; Warranties; Covenants. Each of the
--------------------------------------
representations and warranties of EnzyMed contained in Article II shall be true
and correct, as though made on and as of the Closing Date; and EnzyMed shall, on
or before the Closing, have performed all of its covenants and agreements
hereunder which by the terms hereof are to be performed and satisfied on or
before the Closing.
(b) No Material Change. There shall have been no material adverse
------------------
change in the financial condition, prospects, properties, assets, liabilities,
business or operations of EnzyMed since the date hereof.
(c) Certificate from Officers. EnzyMed shall have delivered to
-------------------------
Buyer a certificate of the Chief Executive Officer of EnzyMed dated as of the
Closing Date to the effect that the statements set forth in paragraphs (a) and
(b) above in this Section 6.1 are true and correct.
(d) Opinion of Counsel. At the Closing, Buyer shall have received
from ▇▇▇▇▇, Brown, Koehn, Shors & ▇▇▇▇▇▇▇, P.C., counsel for EnzyMed, an opinion
as of said date, substantially in the form attached hereto as Exhibit 6.1(d).
--------------
30
(e) No Litigation. There shall have been no determination by Buyer,
-------------
acting in good faith, that the consummation of the transactions contemplated by
this Agreement has become inadvisable or impracticable by reason of the
institution or realistic threat by any person or any federal, state, foreign or
other governmental authority of litigation, proceedings or other action against
Buyer, EnzyMed or any Stockholder.
(f) Consents. EnzyMed shall have made all filings with and
--------
notifications of governmental authorities, regulatory agencies and other
entities required to be made by such entity in connection with the execution and
delivery of this Agreement, the performance of the transactions contemplated
hereby; and EnzyMed shall have received all authorizations, waivers, consents
and permits, in form and substance reasonably satisfactory to Buyer, from all
third parties, including, without limitation, applicable governmental
authorities, regulatory agencies, lessors, lenders and contract parties required
to permit the continuation of the business of EnzyMed by Buyer and the
consummation of the transactions contemplated by this Agreement.
(g) FIRPTA Withholding. At or prior to the Closing, Buyer shall have
------------------
received from EnzyMed, a "transferor's certificate of non-foreign status" as
provided in the Treasury Regulations under Section 1445 of the Code
substantially in the form attached hereto as Exhibit 6.1(g).
--------------
(h) Employment Agreement. ▇▇▇▇ ▇. ▇▇▇▇▇ shall have executed and
--------------------
delivered to Buyer an Employment Agreement in substantially the form of Exhibit
-------
6.1(h) attached hereto.
------
(i) Consulting Agreement. Each of ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Ph.D. and ▇▇▇▇▇▇▇
--------------------
▇▇▇▇▇, Ph.D. shall have executed and delivered to Buyer a Consulting Agreement
in substantially the form of Exhibit 6.1(i) attached hereto.
--------------
(j) Pooling Matters. (i) Each affiliate of EnzyMed shall have
---------------
executed and delivered to Buyer an EnzyMed Affiliate Agreement; and (ii) Buyer
shall have been advised by KPMG LLP (or its successor), its independent
auditors, that the Merger will qualify as a "pooling of interests" under APB 16.
(k) Escrow Agreement. The Buyer, Escrow Agent and the Representative
----------------
shall have executed and delivered to the Buyer, the Escrow Agreement in
substantially the form of Exhibit 1.4 attached hereto.
-----------
(l) Indebtedness. As of the Closing Date, EnzyMed shall have debt
------------
(exclusive of accounts payable, accrued expenses and deferred income) (as
determined in accordance with generally accepted accounting principles) not in
excess of $300,000, if the Closing occurs prior to September 25, 1999, $500,000,
if the Closing occurs on or after September 25, 1999 and prior to October 25,
1999, $700,000, if the Closing occurs on or after October 25, 1999 and prior to
November 25, 1999, or $900,000, if the Closing occurs
31
on or after November 25, 1999; provided, however, that each of the foregoing
amounts shall be reduced by the amount of any proceeds received by EnzyMed
between the date hereof and the Closing Date upon the exercise of any Options
net of any withholding taxes or other expenses incurred by EnzyMed relating to
any such exercises. EnzyMed shall have delivered to Buyer a certificate of the
Chief Executive Officer or controller of EnzyMed dated as of the Closing Date
certifying that EnzyMed is in compliance as of such date with the condition set
forth in this Section 6.1(l).
(m) Dissenting Shares. Of the total EnzyMed Shares outstanding
-----------------
immediately prior to the Effective Time of the Merger, no more than ten percent
(10%) will be Dissenting Shares.
(n) HSR Act. Any applicable waiting period, if any, under the HSR Act
-------
(including any extensions thereof) shall have expired or been terminated.
(o) Proceeding Satisfactory to Buyer. All proceedings to be taken by
--------------------------------
EnzyMed in connection with the consummation of the Closing and the other
transactions contemplated hereby and all certificates, opinions, instruments and
other documents required to effect the transaction contemplated hereby
reasonably requested by Buyer shall be reasonably satisfactory in form and
substance to Buyer and its counsel.
(p) Stockholder Approval. This Agreement shall have been legally
--------------------
approved and adopted by the requisite votes or consents of EnzyMed's
Stockholders.
(q) Stockholder Indemnification Agreements. Holders of EnzyMed Shares
--------------------------------------
constituting not less than ninety percent (90%) of the outstanding capital stock
of EnzyMed on the Closing Date (which in the case of shares of EnzyMed Series A
Preferred Stock, EnzyMed Series B Preferred Stock EnzyMed or Series C Preferred
Stock shall be measured based on the total number of shares of EnzyMed Common
Stock such EnzyMed Shares are convertible into) shall have executed and
delivered to Buyer a Stockholder Indemnification Agreement in substantially the
form of Exhibit 6.1(q)(i) attached hereto; provided, however, that Messrs.
-----------------
▇▇▇▇▇, Dordick and ▇▇▇▇▇ shall have executed and delivered to Buyer a
Stockholder Indemnification Agreement in substantially the form of Exhibit
-------
6.1(q)(ii) attached hereto.
----------
(r) Termination of Existing Registration and Preemptive Rights. Buyer
----------------------------------------------------------
shall have received on or prior to the Closing Date evidence that each of the
agreements granting registration rights or preemptive rights to stockholders of
EnzyMed shall have been terminated effective upon the consummation of the
Merger, which such evidence shall be reasonably satisfactory to Buyer.
6.2 Conditions to the Obligations of EnzyMed. EnzyMed's obligation to
----------------------------------------
consummate this Agreement and the transactions contemplated hereby is subject to
the fulfillment, prior to or at the Closing, of the following conditions
precedent:
32
(a) Representations; Warranties; Covenants. Each of the
--------------------------------------
representations and warranties of Buyer contained in Article IV shall be true
and correct as though made on and as of the Closing Date in all material
respects; Buyer shall, on or before the Closing, have performed all of its
covenants and agreements hereunder which by the terms hereof are to be performed
on or before the Closing; and Buyer shall have delivered to EnzyMed a
certificate of the Chief Financial Officer of Buyer dated as of the Closing Date
to such effect.
(b) Opinion of Counsel. At the Closing, EnzyMed shall have received
------------------
from ▇▇▇▇▇▇▇, Procter & ▇▇▇▇ LLP, counsel for Buyer, an opinion as of said
date, in substantially the form attached hereto as Exhibit 6.2(b).
--------------
(c) No Litigation. There shall have been no determination by EnzyMed,
-------------
acting in good faith, that the consummation of the transactions contemplated by
this Agreement has become inadvisable or impracticable by reason of the
institution or realistic threat by any person or any federal, state, foreign or
other governmental authority of litigation, proceedings or other action against
Buyer, EnzyMed or any Stockholder.
(d) Consents. The Buyer shall have made all filings with and
--------
notifications of governmental authorities, regulatory agencies and other
entities required to be made by such entities in connection with the execution
and delivery of this Agreement, the performance of the transactions contemplated
hereby and the continued operation of the business of EnzyMed to be acquired by
Buyer subsequent to the Closing; and the Buyer shall have received all
authorizations, waivers, consents and permits, in form and substance reasonably
satisfactory to EnzyMed, from all third parties, including, without limitation,
applicable governmental authorities, regulatory agencies, lessors, lenders and
contract parties required to permit the continuation of the business of EnzyMed
by Buyer and the consummation of the transactions contemplated by this
Agreement.
(e) Employment Agreement. The Buyer shall have executed and delivered
--------------------
to ▇▇▇▇ ▇. ▇▇▇▇▇ an Employment Agreement in substantially the form of Exhibit
-------
6.1(h) attached hereto.
------
(f) Escrow Agreement. The Buyer, Escrow Agent and the Representative
----------------
shall have executed and delivered to the Representative, the Escrow Agreement in
substantially the form of Exhibit 1.4 attached hereto.
-----------
(g) Registration Rights Agreement. The Buyer shall have executed and
-----------------------------
delivered to EnzyMed, the Registration Rights Agreement in substantially the
form of Exhibit 6.2(g) attached hereto.
--------------
(h) HSR Act. Any applicable waiting period, if any, under the HSR Act
-------
(including any extensions thereof) shall have expired or been terminated.
33
(i) Stockholder Approval. This Agreement shall have been legally
--------------------
approved or adopted by the requisite votes or consents of EnzyMed's
Stockholders.
(j) Proceeding Satisfactory to EnzyMed. All proceedings to be taken
----------------------------------
by Buyer in connection with the consummation of the Closing and the other
transactions contemplated hereby and all certificates, opinions, instruments and
other documents required to effect the transaction contemplated hereby
reasonably requested by EnzyMed shall be reasonably satisfactory in form and
substance to EnzyMed and its counsel.
ARTICLE VII -- SURVIVAL; INDEMNIFICATION
7.1 Survival of Representations, Warranties, Etc. All representations,
--------------------------------------------
warranties, agreements, covenants and obligations herein or in any schedule or
certificate delivered by any party incident to the transactions contemplated
hereby material and may be relied upon by the party receiving the same and shall
survive the Closing regardless of any investigation by such party and shall not
merge into the performance of any obligation by any party hereto, subject to the
provisions of this Article VII.
7.2 Indemnification by the Stockholders. Subsequent to the Closing Date,
-----------------------------------
the Buyer (the "Buyer Indemnified Party") shall be indemnified and held harmless
from and against and in respect of all losses, liabilities, obligations,
damages, deficiencies, actions, suits, proceedings, demands, assessments,
orders, judgments, fines, penalties, costs and expenses (including the
reasonable fees, disbursements and expenses of attorneys, accountants and
consultants) of any kind or nature whatsoever (whether or not arising out of
third-party claims and including all amounts paid in investigation, defense or
settlement of the foregoing) (a "Loss" or "Losses") sustained, suffered or
incurred by or made against the Buyer Indemnified Party, arising out of or based
upon: (a) any breach of any representation or warranty made by EnzyMed pursuant
to Section 2 of this Agreement; (b) any breach of any covenant agreement made by
EnzyMed in this Agreement or any Schedule hereto; (c) any breach of any
representation or warranty made by EnzyMed in this Agreement or any Schedule
hereto or in any certificate delivered pursuant to Section 6.1 in connection
with the Closing; or (d) any breach by a Stockholder of any representation or
warranty made by such Stockholder in such Stockholder's Stockholder
Indemnification Agreement, any of which are not waived at the Closing (claims
under clauses (a) through (d) hereinafter collectively referred to as "Buyer
Indemnifiable Losses").
7.3 Limitations on Indemnification.
------------------------------
7.3.1 General Threshold. Subject to Section 7.3.4, the Buyer
-----------------
Indemnified Party shall not be entitled to indemnification in respect of Buyer
Indemnifiable Losses except to the extent the cumulative amount of all Buyer
Indemnifiable Losses exceeds $100,000 (the "Buyer Deductible"), which excess
cumulative amount shall be recoverable in accordance with the terms hereof.
34
7.3.2 General Maximum Indemnification. Subject to the exceptions set
-------------------------------
forth in Section 7.3.4 and the limitations set forth in Section 7.3.1, no
Stockholder shall be obligated pursuant to such Stockholder's Stockholder
Indemnification Agreement under any circumstance to indemnify Buyer Indemnified
Parties in respect of Buyer Indemnifiable Losses to the extent the cumulative
amount of all Buyer Indemnifiable Losses exceeds each such Stockholder's Escrow
Shares. For purposes of determining the value of the Buyer Common Stock used to
satisfy an obligation hereunder under this Section 7.3, the closing price of the
Buyer Common Stock on the Closing Date.
7.3.3 Time Limits for Claims. Subject to the exceptions set forth in
----------------------
Section 7.3, no claim for indemnification may be made by any Buyer Indemnified
Party in respect of Buyer Indemnifiable Losses unless the written notice
required by Section 7.5 with respect to such Losses shall have been received by
the Representative on a date prior to the first anniversary of the Closing Date;
provided, however, that if prior to the applicable date of expiration a specific
-------- -------
state of facts shall have become known which may constitute or give rise to any
Buyer Indemnifiable Loss as to which indemnity may be payable and the Buyer
Indemnified Party shall have given notice of such facts to the Stockholders,
made a claim for indemnification and, except with respect to third party claims,
pursued such claim within six months thereafter, then the right to
indemnification with respect thereto shall remain in effect until such matter
shall have been finally determined and disposed of, and any indemnification due
in respect thereof shall have been paid.
7.3.4 Dollar-for-Dollar and Fraud Claims. Notwithstanding anything
----------------------------------
herein to the contrary, the Buyer Indemnified Party shall not be subject to any
limitation whether pursuant to Section 7.3 or otherwise, and shall be entitled
to dollar-for-dollar recovery, in seeking indemnification from the Stockholders
with respect to (a) Losses arising from EnzyMed and the Stockholders incurring
legal fees and expenses in excess of $50,000 relating to the transactions
contemplated hereby, (b) Losses arising from EnzyMed having debt (as determined
in the same manner as under Section 3.5) as of the Closing Date in excess of the
maximum amount permitted under Section 3.5, (c) fraud or an intentional
misrepresentation on the part of EnzyMed, (d) losses involving a breach of the
representations and warranties contained in Sections 2.4, 2.8 or 2.20 or (e)
losses involving a breach of the representations and warranties contained in
Sections 1(a) or 1(b) of each Stockholder's Stockholder Indemnification
Agreement or fraud or an intentional misrepresentation on the part of any
Stockholder (for which the Buyer Indemnified Party shall have recourse solely
against such Stockholder); provided, however, that no Stockholder shall be
obligated pursuant to Section 7.3.4(d) with respect to any losses involving a
breach of the representations and warranties contained in Section 2.8 to
indemnify Buyer Indemnified Parties in respect of Buyer Indemnifiable Losses to
the extent the cumulative amount of all Buyer Indemnifiable Losses with respect
thereto exceeds the value of the shares of Buyer Common Stock received by such
Stockholder in the Merger.
7.4 Indemnification by Buyer. Buyer agrees, in all cases subject to the
------------------------
limitations set forth in this Article VII, subsequent to the Closing Date to
indemnify and hold harmless
35
the Stockholders ("Stockholder Indemnified Parties") from and against and in
respect of all Losses sustained, suffered or incurred by or made against any of
them arising out of or based upon (a) any breach of any representation or
warranty made by Buyer in this Agreement or in any Schedule hereto or in any
certificate delivered pursuant to Section 6.2 in connection with the Closing;
and (b) any breach of any covenant or agreement made by Buyer in this Agreement
or in any Schedule hereto (such claims under clauses (a) and (b) being
hereinafter collectively referred to as "Stockholder Indemnifiable Losses").
7.5 Notice; Defense of Claims. Except for Buyer Indemnified Losses under
-------------------------
the Escrow Agreement (which shall be administered exclusively in accordance with
the terms and procedures set forth in the Escrow Agreement), promptly after
receipt by an indemnified party of notice of any claim, liability or expense to
which the indemnification obligations hereunder would apply, the indemnified
party shall give notice thereof in writing to the indemnifying party, but the
omission to so notify the indemnifying party promptly will not relieve the
indemnifying party from any liability except to the extent that the indemnifying
party shall have been prejudiced as a result of the failure or delay in giving
such notice. Such notice shall state the information then available regarding
the amount and nature of such claim, liability or expense and shall specify the
provision or provisions of this Agreement under which the liability or
obligation is asserted. If within 30 days after receiving such notice the
indemnifying party gives written notice to the indemnified party stating that
(i) it would be liable under the provisions hereof for indemnity in the amount
of such claim, liability or expense if such claim were successful and (ii) that
it disputes and intends to defend against such claim, liability or expense at
its own cost and expense, then counsel for the defense shall be selected by the
indemnifying party (subject to the consent of the indemnified party which
consent shall not be unreasonably withheld) and the indemnified party shall not
be required to make any payment with respect to such claim, liability or expense
as long as the indemnifying party is conducting a good faith and diligent
defense at its own expense; provided, however, that the assumption of defense of
-------- -------
any such matters by the indemnifying party shall relate solely to the claim,
liability or expense that is subject or potentially subject to indemnification.
The indemnifying party shall have the right, with the consent of the indemnified
party, which consent shall not be unreasonably withheld, to settle all
indemnifiable matters related to claims by third parties which are susceptible
to being settled provided its obligation to indemnify the indemnifying party
therefor will be fully satisfied. The indemnifying party shall keep the
indemnified party apprised of the status of the claim, liability or expense and
any resulting suit, proceeding or enforcement action, shall furnish the
indemnified party with all documents and information that the indemnified party
shall reasonably request and shall consult with the indemnified party prior to
acting on major matters, including settlement discussions. Notwithstanding
anything herein stated to the contrary, the indemnified party shall at all times
have the right to fully participate in such defense at its own expense directly
or through counsel; provided, however, if the named parties to the action or
-------- -------
proceeding include both the indemnifying party and the indemnified party and
representation of both parties by the same counsel would be inappropriate under
applicable standards of professional conduct, the indemnified party shall be
entitled to retain separate counsel, the expense of which shall be paid by the
indemnifying party provided that such counsel is selected by the indemnifying
36
party and such counsel is reasonably acceptable to the indemnified party. If no
such notice of intent to dispute and defend is given by the indemnifying party,
or if such defense is not being or ceases to be conducted, the indemnified party
shall, at the reasonable expense of the indemnifying party, undertake the
defense of (with counsel selected by the indemnified party), and shall have the
right to compromise or settle (exercising reasonable business judgment), such
claim, liability or expense. If such claim, liability or expense is one that by
its nature cannot be defended solely by the indemnifying party, then the
indemnified party shall make available all information and assistance that the
indemnifying party may reasonably request and shall cooperate with the
indemnifying party in such defense.
7.6 Escrow Shares. At the Effective Time, the Escrow Shares shall be
-------------
deposited in escrow with the Escrow Agent by Buyer as provided in Section 1.4
hereof as a mechanism to satisfy potential claims for indemnification by Buyer
under Sections 7.2 and 7.3 of this Article VII. Except as provided in Section
7.3.4, any liability of the Stockholders for indemnification for Buyer
Indemnifiable Losses under Section 7.2, subject to the limitations described in
Section 7.3 hereof, shall be satisfied exclusively from Escrow Shares.
7.7 Remedies. The indemnification provisions of this Article VII are the
--------
sole and exclusive remedy from and after the Effective Time of any party to this
Agreement for a breach of any representation, warranty or covenant contained
herein. Notwithstanding the preceding sentence, each of the parties acknowledges
and agrees that the other parties hereto would be damaged irreparably in the
event any of the provisions of this Agreement are not performed in accordance
with their specific terms or otherwise are breached. Accordingly, each of the
parties hereto agrees the other parties hereto shall be entitled to an
injunction to prevent breaches of the provisions of this Agreement and to
enforce specifically this Agreement and the terms and provisions hereof
(including the indemnification provisions hereof) in any competent court having
jurisdiction over the parties, in addition to any other remedy to which they may
be entitled at law or in equity.
7.8 Directors' and Officers' Insurance.
----------------------------------
7.8.1 Insurance. For a period of six years after the Effective Time,
---------
Buyer shall cause to be maintained in effect a policy of directors' and
officers' liability insurance covering each person who is now or has been at any
time prior to the Effective Time an officer or director of EnzyMed; provided,
that if Buyer cannot maintain such liability insurance at a cost annually to
Buyer of not greater than 200 percent of the annual premiums for such directors'
and officers' liability insurance in effect on the Closing Date, which existing
premium costs are disclosed on Schedule 2.17 hereto, Buyer shall maintain or
-------------
obtain as much of such insurance as can be so maintained or obtained at a cost
equal to 200 percent of such annual premium cost.
7.8 Successors. In the event Buyer or any of its successors or
----------
assigns (i) consolidates with or merges into any other person or entity and
shall not be the continuing or surviving corporation or entity of such
consolidation or merger or (ii) transfers all or
37
substantially all of its properties and assets to any person or entity, then and
in either such case, proper provisions shall be made so that the successors and
assigns of Buyer shall assume the obligations set forth in this Section 7.8.
7.8.3 Survival of Indemnification. To the fullest extent not
---------------------------
prohibited by law, from and after the Effective Time, all rights to
indemnification as of the date hereof in favor of the employees, agents,
directors and officers of EnzyMed in their capacities as such prior to the
Effective Time, as provided in its certificate of incorporation and by-laws of
EnzyMed in effect on the date thereof, shall survive the Merger and shall
continue in full force and effect in accordance with their terms.
ARTICLE VIII. TERMINATION OF AGREEMENT
8.1 Termination. This Agreement may be terminated any time prior to the
-----------
Closing Date as follows:
(a) With the mutual consent of Buyer and EnzyMed;
(b) By either Buyer or EnzyMed, if the Closing has not occurred
on or before 90 days after the date hereof (the "Closing Deadline");
(c) By Buyer, if there has been a material misrepresentation or
breach of warranty on the part of EnzyMed in the representations and warranties
contained herein or a material breach of covenants on the part of any
Stockholder or EnzyMed and the same has not been cured within 30 days after
notice thereof. In the event of any termination pursuant to this Section 8.1(c),
written notice setting forth the reasons therefor shall forthwith be given by
Buyer to EnzyMed.
(d) By EnzyMed if there has been a material misrepresentation or
breach of warranty on the part of Buyer in the representations and warranties
contained herein or a material breach of covenants on the part of Buyer and the
same has not been cured within 30 days after notice thereof. In the event of any
termination pursuant to this Section 8.1(d), written notice setting forth the
reasons therefor shall forthwith be given by EnzyMed to Buyer.
Notwithstanding anything herein to the contrary, the right to terminate
this Agreement under Section 8.1 shall not be available to any party to the
extent the failure of such party, respectively, to fulfill any of its
obligations under this Agreement has been the cause of, or resulted in, the
failure of the Closing to occur on or before such date (as a result, for
example, of an action or failure to act causing a failure of a condition
precedent).
8.2 Effect of Termination. All obligations of the parties hereunder shall
---------------------
cease upon any termination pursuant to Section 8.1, provided, however, that (i)
the provisions of this Article VII hereof shall survive any termination of this
Agreement in any event; (ii) nothing
38
herein shall relieve any party from any liability for a material error or
omission in any of its representations or warranties contained herein or a
material failure to comply with any of its covenants, conditions or agreements
contained herein, provided, further, that no party shall have any liability for
any such material error or omission or failure to comply other than for willful
errors or omissions or failures to comply; and (iii) any party may proceed as
further set forth in Section 8.3 below.
8.3 Right to Proceed. Anything in this Agreement to the contrary
----------------
notwithstanding, if any of the conditions specified in Section 6.1 hereof have
not been satisfied, Buyer shall have the right to proceed with the transactions
contemplated hereby without waiving any of its rights hereunder, and if any of
the conditions specified in Section 6.2 hereof have not been satisfied, EnzyMed
shall have the right to proceed with the transactions contemplated hereby
without waiving any of the Stockholders' rights hereunder.
ARTICLE IX -- MISCELLANEOUS
9.1 Fees and Expenses.
-----------------
(a) Except as set forth herein, each of the parties will bear its
own expenses in connection with the negotiation and the consummation of the
transactions contemplated by this Agreement, except that Buyer agrees to be
responsible for the reasonable legal fees and expenses and reasonable accounting
fees of EnzyMed and the Stockholders relating to the Merger and the transactions
contemplated hereby up to an amount not to exceed $50,000 in the aggregate.
Under no circumstances shall Buyer be responsible for the payment of any
broker's commissions of finder's fees incurred by EnzyMed or any Stockholder.
(b) Buyer shall not be responsible for the payment of any costs
incurred by the Stockholders, whether at or subsequent to the Closing, in
connection with the transfer of the EnzyMed Shares to Buyer as contemplated by
this Agreement, including without limitation, all sales, use, excise, real
property and other transfer taxes and charges applicable to such transfer; all
recording charges and fees applicable to the recordation of deeds and mortgages
and other instruments of transfer; and all costs of obtaining or transferring
permits, registrations, applications and other tangible and intangible
properties.
9.2 Governing Law. This Agreement shall be construed under and governed
-------------
by the internal laws of the State of Delaware without regard to its conflict of
laws provisions. The parties hereto hereby irrevocably and unconditionally
consent to the exclusive jurisdiction of the courts of the State of Delaware and
the United States District Court for the District of Delaware for any action,
suit or proceeding arising out of or relating to this Agreement and the
transaction contemplated hereby, and agree not to commence any such action, suit
or proceeding except in such courts. The parties hereto further hereby
irrevocably and unconditionally waive any objection to the laying of venue of
any action, suit or proceeding arising out of or relating to this Agreement and
the transaction contemplated hereby in courts
39
referenced in this Section 9.2 under the applicable circumstances, and hereby
further irrevocably and unconditionally waive and agree not to plead or claim in
any such court that any such action, suit or proceeding brought in any such
court has been brought in an inconvenient forum. Each of the parties hereto
further agrees that service of any process, summons, notice or document by U.S.
registered mail to its address set forth herein shall be effective service of
process for any action, suit or proceeding brought against it in any such court.
9.3 Notices. Any notice, request, demand or other communication required
-------
or permitted hereunder shall be in writing and shall be deemed to have been
given if delivered or sent by facsimile transmission, upon receipt, if sent by
overnight courier, upon the day following the day sent, or if sent by registered
or certified mail, upon the sooner of the date on which receipt is acknowledged
or the expiration of three days after deposit in United States Post Office
facilities properly addressed with postage prepaid. All notices to a party will
be sent to the addresses set forth below or to such other address or person as
such party may designate by notice to each other party hereunder:
TO BUYER: Albany Molecular Research, Inc.
--------
▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇▇▇▇, Procter & ▇▇▇▇ LLP
Exchange Place
Boston, MA 02109-2881
Attn: ▇▇▇▇▇▇ ▇. Cable, P.C.
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
TO ENZYMED: EnzyMed, Inc.
----------
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇-▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇ ▇. ▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇▇, Brown, Koehn, Shors & ▇▇▇▇▇▇▇, P.C.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Facsimile: 515-243-0654
Any notice given hereunder may be given on behalf of any party by his counsel or
other authorized representatives.
40
9.4 Entire Agreement. This Agreement, including the Schedules and
----------------
Exhibits referred to herein and the other writings specifically identified
herein or contemplated hereby, is complete, reflects the entire agreement of the
parties with respect to its subject matter, and supersedes all previous written
or oral negotiations, commitments and writings; provided, however, that
paragraphs 6, 8, 9, 10 and 11 of that certain letter from Buyer to EnzyMed dated
as of July 30, 1999 shall remain in full force and effect notwithstanding the
execution of this Agreement. No promises, representations, understandings,
warranties and agreements have been made by any of the parties hereto except as
referred to herein or in such Schedules and Exhibits or in such other writings;
and all inducements to the making of this Agreement relied upon by either party
hereto have been expressed herein or in such Schedules or Exhibits or in such
other writings.
9.5 Assignability; Binding Effect. Prior to the Closing, this Agreement
-----------------------------
shall only be assignable by Buyer to a corporation, partnership or limited
liability company controlling, controlled by or under common control with Buyer
upon written notice to EnzyMed and no such assignment shall release Buyer of its
obligations hereunder. After the Closing, Buyer's rights and obligations
hereunder shall be freely assignable. This Agreement may not be assigned by
EnzyMed or any of the Stockholders without the prior written consent of Buyer.
This Agreement shall be binding upon and enforceable by, and shall inure to the
benefit of, the parties hereto and their respective successors and permitted
assigns.
9.6 Captions and Gender. The captions in this Agreement are for
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convenience only and shall not affect the construction or interpretation of any
term or provision hereof. The use in this Agreement of the masculine pronoun in
reference to a party hereto shall be deemed to include the feminine or neuter,
as the context may require.
9.7 Execution in Counterparts. For the convenience of the parties and to
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facilitate execution, this Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same document.
9.8 Amendments. This Agreement may not be amended or modified, nor may
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compliance with any condition or covenant set forth herein be waived, except by
a writing duly and validly executed by each party hereto, or in the case of a
waiver, the party waiving compliance.
9.9 Publicity and Disclosures. No press releases or public disclosure,
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either written or oral, of the transactions contemplated by this Agreement,
shall be made by a party to this Agreement without the prior knowledge and
written consent of Buyer and EnzyMed.
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41
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be
executed as of the date set forth above by their duly authorized
representatives.
BUYER: ALBANY MOLECULAR RESEARCH, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇, Ph.D
------------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇, Ph.D.
Title: Chairman and Chief Executive Officer
ENZYMED: ENZYMED, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇
Title: President and Chief Executive Officer
LIST OF EXHIBITS AND SCHEDULES
SCHEDULES
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Schedule 1.1.7(e) - Accelerated Options
Schedule 2.2 - Foreign Qualification
Schedule 2.4 - Capitalization
Schedule 2.6(b) - Leased Real Property
Schedule 2.6(c) - Personal Property
Schedule 2.7 - Financial Statements
Schedule 2.8 - Tax Returns
Schedule 2.9 - Accounts Payable
Schedule 2.10 - Adverse Changes
Schedule 2.12 - Banking Relations
Schedule 2.13 - Intellectual Property
Schedule 2.14 - Contracts
Schedule 2.17 - Insurance
Schedule 2.22 - Employees; Labor Relations
Schedule 2.23 - Employee Benefit Plans
Schedule 2.24 - Hazardous Waste
Schedule 2.26 - Employees, Suppliers and Customers
Schedule 2.27 - Transactions with Affiliates
Schedule 3.4 - EnzyMed Affiliates
Schedule 5.1 - Buyer Affiliates
EXHIBITS
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Exhibit 1.2 - Form of Letter of Transmittal
Exhibit 1.4 - Form of Escrow Agreement
Exhibit 3.4 - Form of EnzyMed Affiliate Agreement
Exhibit 5.1 - Form of Buyer Affiliate Agreement
Exhibit 6.1(d) - Form of Opinion of ▇▇▇▇▇, Brown, Koehn, Shors
& ▇▇▇▇▇▇▇,P.C.
Exhibit 6.1(g) - Form of Transferor's Certificate of
Non-Foreign Status
Exhibit 6.1(h) - Form of Employment Agreement
Exhibit 6.1(i) - Form of Consulting Agreement
Exhibit 6.1(q)(i) - Form of Stockholder Indemnification Agreement
Exhibit 6.1(q)(ii) - Form of Stockholder Indemnification Agreement
(Messrs. ▇▇▇▇▇, Dordick and ▇▇▇▇▇)
Exhibit 6.2(b) - Form of Opinion of ▇▇▇▇▇▇▇, Procter & ▇▇▇▇
LLP
Exhibit 6.2(g) - Form of Registration Rights Agreement
