SHARE PURCHASE AGREEMENT
Among
INCYTE PHARMACEUTICALS, INC.,
HEXAGEN LIMITED
and
THE SHAREHOLDERS OF HEXAGEN LIMITED
21st September, 1998
TABLE OF CONTENTS
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ARTICLE I PURCHASE AND SALE.............................................. 1
1.1 Purchase and Sale of the Company Shares........................ 1
1.2 Shareholders' Warranty and Waiver.............................. 2
1.3 Purchase Price................................................. 2
1.4 Adjustments.................................................... 2
1.5 Escrow Shares.................................................. 2
1.6 Agreement of Shareholders...................................... 2
1.7 Shareholders' Representative................................... 3
ARTICLE II CLOSING........................................................ 5
2.1 Closing........................................ ............... 5
2.2 Actions at the Closing......................................... 5
ARTICLE III REPRESENTATIONS AND WARRANTIES OF EACH OF THE
SHAREHOLDERS................................................... 7
3.1 Authority...................................................... 7
3.2 No Conflict with Other Instruments............................. 7
3.3 Ownership of Securities........................................ 8
3.4 Sale Entirely for Own Account.................................. 8
3.5 Reliance Upon the Shareholder's Representations................ 8
3.6 Receipt of Information; Investment Experience.................. 8
3.7 Restricted Securities.......................................... 9
3.8 Legends........................................................ 9
3.9 Brokers or Finders............................................. 9
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY.................. 9
4.1 Organization and Qualification................................. 10
4.2 Capital Structure.............................................. 11
4.3 Subsidiaries; Equity Investments............................... 12
4.4 Authority...................................................... 12
4.5 No Conflict with Other Instruments............................. 12
4.6 Governmental Consents.......................................... 13
4.7 The Accounts................................................... 13
4.8 The Management Accounts........................................ 13
4.9 Accounting and Other Records................................... 14
4.10 Absence of Changes............................................. 14
4.11 Real Property.................................................. 16
4.12 Environmental Matters.......................................... 20
4.13 Taxes.......................................................... 20
4.14 Employees...................................................... 25
4.15 Compliance with Law............................................ 28
4.16 Litigation..................................................... 30
4.17 Contracts...................................................... 30
4.18 No Default..................................................... 31
4.19 Proprietary Rights............................................. 31
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4.20 Computer System and Software................................... 33
4.21 Insurance...................................................... 34
4.22 Brokers or Finders............................................. 34
4.23 Related Parties................................................ 35
4.24 Certain Advances............................................... 35
4.25 Underlying Documents........................................... 35
4.26 Banking Facilities............................................. 35
4.27 Insolvency..................................................... 36
4.28 No Misleading Statements....................................... 37
ARTICLE V REPRESENTATIONS AND WARRANTIES OF PURCHASER.................... 37
5.1 Organization................................................... 37
5.2 Authority...................................................... 37
5.3 No Conflict with Other Instruments............................. 37
5.4 Governmental Consents.......................................... 37
5.5 SEC Documents.................................................. 38
5.6 Financial Statements........................................... 38
5.7 Litigation..................................................... 38
5.8 Shares of Purchaser Common..................................... 38
5.9 No Misleading Statements....................................... 39
5.10 Brokers or Finders............................................. 39
5.11 Acquisition for Investment..................................... 39
ARTICLE VI ADDITIONAL AGREEMENTS............... .......................... 39
6.1 Stock Options.................................................. 39
6.2 Expenses....................................................... 40
6.3 Public Disclosure.............................................. 40
6.4 Reasonable Efforts............................................. 41
6.5 Conduct; Notification of Certain Matters....................... 41
6.6 Registration Rights............................................ 41
6.7 Additional Documents and Further Assurances.................... 41
6.8 Blue Sky Laws.................................................. 41
6.9 Nasdaq Listing................................................. 42
6.10 Indemnification................................................ 42
6.11 Tax Returns.................................................... 42
ARTICLE VII CONDITIONS TO THE CLOSING...................................... 43
7.1 Conditions to Obligations of Each Party to Effect the Closing.. 43
7.2 Additional Conditions to Obligations of the Shareholders....... 44
7.3 Additional Conditions to the Obligations of Purchaser.......... 44
ARTICLE VIII INDEMNIFICATION AND ESCROW..................................... 46
8.1 Survival of Representations and Warranties, Etc................ 46
8.2 Indemnification and Escrow Arrangements........................ 46
8.3 Claims Resulting From Breaches of Certain Representations and
Warranties..................................................... 51
ARTICLE IX TERMINATION, AMENDMENT AND WAIVER.............................. 52
9.1 Termination.................................................... 52
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9.2 Effect of Termination.......................................... 53
9.3 Amendment or Supplement........................................ 53
9.4 Extension of Time, Waiver...................................... 53
ARTICLE X GENERAL........................................................ 54
10.1 Notices........................................................ 54
10.2 Headings....................................................... 56
10.3 Counterparts................................................... 56
10.4 Entire Agreement; Assignment................................... 56
10.5 Severability................................................... 56
10.6 Other Remedies................................................. 56
10.7 Interpretation................................................. 56
10.8 Governing Law.................................................. 56
10.9 Appointment of Agent........................................... 57
10.10 Absence of Third-Party Beneficiary Rights...................... 57
10.11 Restrictive Trade Practices Act................................ 57
Exhibit A Form of Irrevocable Undertaking
Exhibit B Form of Escrow Agreement
Exhibit C Registration Rights
Exhibit D-1 Form of Amendments to Hexagen plc Unapproved Share Option
Plan 1996 (effective prior to Closing)
Exhibit D-2 Form of Amendments to Hexagen plc Unapproved Share Option
Plan 1996 (effective upon Closing)
Exhibit D-3 Form of Option Exchange Agreement
Exhibit D-4 Form of Replacement Option Certificate
Exhibit D-5 Form of Option Release Deed
Exhibit E Form of Restrictive Covenants Agreement
Schedule I Schedule of Consideration
Schedule II Schedule of Options to be Converted
Schedule III Computation of Purchaser Shares and Option Exchange Ratio
Schedule 2.2 Post-Closing Directors and Officers of the Company; Resignations
Schedule 7.3 Schedule of Shareholders and Employees to be Parties to
Restrictive Covenants Agreement and Employment Agreements
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SHARE PURCHASE AGREEMENT
THIS SHARE PURCHASE AGREEMENT (this "Agreement") dated as of the 21st
day of September, 1998, by and among INCYTE PHARMACEUTICALS, INC., a Delaware
corporation ("Purchaser"), HEXAGEN LIMITED, a company incorporated in England
and Wales (the "Company"), and the persons and entities listed on Schedule I
hereto (the "Shareholders").
W I T N E S S E T H:
WHEREAS, the Shareholders collectively own all of the issued and
outstanding share capital of the Company (collectively, the "Company Shares");
WHEREAS, the Company owns all of the issued and outstanding share
capital of Hexagen Technology Limited, a company incorporated in England and
Wales (the "Subsidiary");
WHEREAS, upon the terms and subject to the conditions set forth in this
Agreement, Purchaser wishes to purchase, and the Shareholders wish to sell, the
Company Shares for the consideration set forth below; and
WHEREAS, on August 14, 1998 (the "Announcement Date"), Purchaser and the
Company entered into an Agreement (the "Master Agreement") governing certain
actions to be taken prior to the Closing (as defined below) under this
Agreement;
WHEREAS, as of the Announcement Date, Shareholders holding at least 90%
of the Company Shares have entered into agreements in favor of Purchaser in the
form attached hereto as Exhibit A ("Irrevocables") pursuant to which, among
other things, such Shareholders have agreed to execute this Agreement following
the completion of certain events:
N o w, T h e r e f o r e, in consideration of the premises and of the
mutual agreements, provisions and covenants herein contained, Purchaser, the
Company and the Shareholders hereby agree as follows:
ARTICLE I
PURCHASE AND SALE
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1.1 Purchase and Sale of the Company Shares. Upon and subject to the
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terms and conditions of this Agreement, Purchaser hereby offers to purchase from
each Shareholder, and each Shareholder hereby undertakes to sell or procure the
sale of and transfer to Purchaser, all legal and beneficial interest in that
number of Company Shares as is set out against such Shareholder's name in
Schedule I hereto free from all liens, charges, encumbrances and equities of any
description together with all rights now or hereafter attaching thereto with
full title guarantee (as construed under English law). At the closing of the
transactions contemplated by this Agreement (the "Closing"), each Shareholder
shall deliver or procure delivery to Purchaser of certificates evidencing the
Company Shares accompanied by duly executed transfers of all the Company Shares
in favor of Purchaser.
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1.2 Shareholders' Warranty and Waiver. Each of the Shareholders warrants
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to Purchaser that such Shareholder is entitled to sell and transfer to Purchaser
the full legal and beneficial ownership of the Company Shares held by such
Shareholder and that such shares are free and clear of any and all Encumbrances
(as defined in Section 3.1 below). Each of the Shareholders hereby waives and
undertakes to procure the waiver of all pre-emption and similar rights over the
Company Shares or any of them to which such Shareholder or any other person
controlled by such Shareholder may be entitled under the Articles of Association
of the Company, the Subscription and Shareholders' Agreement relating to Hexagen
plc dated 11 July 1996, as amended by the 1996 Supplemental Agreement to the
Subscription and Shareholders' Agreement dated 4 September 1996 and the Second
Supplemental Agreement to the Subscription and Shareholders' Agreement dated 19
November 1996 (collectively, the "Shareholders' Agreement"), or otherwise in
relation to the sale and purchase of the same hereunder. Nothing in this
Agreement shall oblige Purchaser to buy any of the Company Shares or otherwise
complete this Agreement unless the sale and purchase of all the Company Shares
is completed simultaneously.
1.3 Purchase Price. The aggregate purchase price (the "Consideration")
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to be paid by Purchaser for the Company Shares shall be (i) $5,000,000 in cash
plus such amount of cash to be paid in lieu of fractional Purchaser Shares (the
"Cash Payment") and (ii) the number of shares (the "Purchaser Shares") of common
stock, $.001 par value, of Purchaser ("Purchaser Common") calculated as set
forth in Schedule III attached hereto. Cash to be paid in lieu of fractional
shares shall be calculated based on the average closing price of the Purchaser
Common on the Nasdaq National Market for the 30 consecutive trading day period
ending on the trading day immediately preceding the Announcement Date (the
"Purchaser Common Average Price").
1.4 Adjustments. If at any time during the period between the
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Announcement Date and the Closing, any change in the outstanding shares of
capital stock of Purchaser shall occur, including by reason of any
reclassification, recapitalization, stock split or combination, exchange or
readjustment of shares, or any stock dividend thereon with a record date during
such period, the number of shares of Purchaser Common constituting all or part
of the Consideration shall be appropriately adjusted.
1.5 Escrow Shares. A portion of the Purchaser Shares issued as a portion
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of the Consideration (the "Escrow Shares") shall be placed in escrow as
collateral for the indemnification obligations of the Shareholders pursuant to
Article VIII of this Agreement. The aggregate number of Escrow Shares shall be
as set forth on Schedule I hereto and shall be based upon the following formula:
the number of shares of Purchaser Common equal to the quotient of (a) $9,000,000
divided by (b) the Purchaser Common Average Price, rounded to the nearest whole
share.
1.6 Agreement of Shareholders. Each of the Shareholders hereby consents
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and agrees with the other Shareholders and Purchaser to the allocation of the
Consideration among the Shareholders in the manner set forth on Schedule I
hereto. Each of the Shareholders shall receive, or shall receive evidence of an
irrevocable instruction to Purchaser's Transfer Agent to issue, at the Closing
such number of Purchaser Shares that are not to be delivered to the Escrow Agent
(as defined in Section 8.2(a) below) pursuant to the provisions of Section 1.5
and Article VIII (the "Initial Shares") set forth opposite such Shareholder's
name on Schedule I hereto. The number of Escrow Shares to be delivered to the
Escrow Agent pursuant to the provisions of Section 1.5 and Article VIII on
behalf of each Shareholder is set forth opposite such Shareholder's name on
Schedule I hereto. The Initial Shares and the Escrow Shares together constitute
the Purchaser Shares.
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1.7 Shareholders' Representative.
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(a) In order to administer efficiently the transactions contemplated
hereby, including (i) the waiver of any condition to the obligations of the
Shareholders to consummate the transactions contemplated hereby, (ii) the
defense and/or settlement of any claims that may be made by Purchaser following
the Closing against the Escrow Fund (as defined in Section 8.2(a) below), and
(iii) the preparation of all documentation and conduct of all matters relating
to the Tax Returns (as defined in Section 4.13 below) and computations of the
Company and the Subsidiary pursuant to the provisions of Section 6.11 below, the
Shareholders hereby designate Stephen Bunting as their representative (the
"Shareholders' Representative").
(b) Each Shareholder irrevocably agrees that such Shareholder grants the
Shareholders' Representative full power and authority to act as agent and
attorney-in-fact for each Shareholder, for and on behalf of the Shareholders,
(i) to take all action necessary in connection with the waiver of any condition
to the obligations of the Shareholders to consummate the transactions
contemplated hereby, or the defense and/or settlement of any claims that may be
made by Purchaser following the Closing against the Escrow Fund, (ii) to give
and receive all notices required to be given or received by the Shareholders
under this Agreement or the Escrow Agreement, (iii) to authorize delivery to
Purchaser of shares of Purchaser Common from the Escrow Fund in satisfaction of
claims by Purchaser, to object to such deliveries, to agree to negotiate, enter
into settlements and compromises of, and demand arbitration and comply with
orders of courts and awards of arbitrators with respect to such claims, and (iv)
to take any and all additional action necessary or appropriate in the judgment
of the Shareholders' Representative for the accomplishment of the foregoing or
as is contemplated to be taken by or on behalf of the Shareholders by the terms
of this Agreement and the Escrow Agreement.
(c) The agency of the Shareholders' Representative may be changed by the
Shareholders from time to time upon not less than 30 days' prior written notice
to Purchaser; provided that the Shareholders' Representative may not be removed
unless holders of at least two-thirds in interest of the Escrow Fund agree to
such removal and to the identity of the substituted agent. In the event that the
Shareholders' Representative dies, becomes unable to perform his or her
responsibilities hereunder or resigns from such position, the Shareholders
holding, prior to Closing, a majority in interest of the Escrow Fund shall
select another representative to fill such vacancy and such substituted
representative shall be deemed to be the Shareholders' Representative for all
purposes of this Agreement and the documents delivered pursuant hereto. No bond
shall be required of the Shareholders' Representative, and the Shareholders'
Representative shall not receive compensation for his or her services. No
provision of this Agreement shall restrict in any way the ability or right of
the Shareholders' Representative to voluntarily resign from such position at any
time, and any such resignation shall be done without any liability to the
Shareholders' Representative.
(d) All decisions and actions by the Shareholders' Representative,
including without limitation any agreement between the Shareholders'
Representative and Purchaser relating to the defense and/or settlement of any
claims that may be made by Purchaser following the Closing against the Escrow
Fund, shall be binding upon all of the Shareholders and no Shareholder shall
have the right to object, dissent, protest or otherwise contest the same.
(e) By such Shareholder's execution of this Agreement, each Shareholder
agrees that:
(i) Purchaser shall be able to rely conclusively on the
instructions and decisions of the Shareholders' Representative as to
the settlement of any claims for indemnification of Purchaser
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and/or the Company pursuant to the Escrow Agreement or Article VIII
below or any other actions required or permitted to be taken by the
Shareholders' Representative hereunder, and no party hereunder shall
have any cause of action against Purchaser to the extent that Purchaser
has relied upon the instructions or decisions of the Shareholders'
Representative;
(ii) all actions, decisions and instructions of the Shareholders'
Representative shall be conclusive and binding upon all of the
Shareholders and no Shareholder shall have any cause of action against
the Shareholders' Representative for any action taken, decision made or
instruction given by the Shareholders' Representative under this
Agreement, except for fraud or willful breach of this Agreement by the
Shareholders' Representative;
(iii) notices or communications to or from the Shareholders'
Representative shall constitute notice to or from each of the
Shareholders for purposes of this Agreement and the Escrow Agreement;
(iv) the provisions of this Section 1.7 are independent and
severable, are irrevocable and coupled with an interest and shall be
enforceable notwithstanding any rights or remedies that any Shareholder
may have in connection with the transactions contemplated by this
Agreement;
(v) remedies available at law for any breach of the provisions of
this Section 1.7 are inadequate; therefore, Purchaser and the Company
shall be entitled to temporary and permanent injunctive relief without
the necessity of proving damages if either Purchaser or the Company
brings an action to enforce the provisions of this Section 1.7.
(vi) as between such Shareholder and the other Shareholders, the
Shareholders' Representative shall have full power to determine all
questions and doubts arising in relation to any of the provisions of
this Agreement and every such determination made in good faith shall be
conclusive and binding on the Shareholders and the Shareholders'
Representative may act on the opinion or advice of or information
obtained from any solicitor, attorney, banker, broker, accountant or
other expert and shall not be responsible for any loss occasioned by so
acting;
(vii) such Shareholder shall, together with all of the other
Shareholders, jointly and severally indemnify the Shareholders'
Representative from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses
or disbursements of any kind or nature whatsoever which may be imposed
on, incurred by, or asserted against the Shareholders' Representative by
Purchaser, the Company, other Shareholders, or any other person in
connection with this Agreement and in suing for and recovering any sum
due to the Shareholders or any of them under this Agreement;
(viii) in performing the functions specified in this Agreement
and the Escrow Agreement, the Shareholders' Representative shall not be
liable to any Shareholder in the absence of willful misconduct on the
part of the Shareholders' Representative; and
(ix) the provisions of this Section 1.7 shall be binding upon the
executors, heirs, legal representatives, personal representatives,
successor trustees, and successors of each Shareholder, and any
references in this Agreement to a Shareholder or the Shareholders shall
mean and include the successors to the Shareholder's rights hereunder,
whether pursuant to testamentary disposition, the laws of descent and
distribution or otherwise.
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(f) All fees and expenses incurred by the Shareholders' Representative
shall be paid out of amounts remaining in the Escrow Fund after satisfaction of
all claims of Purchaser against such fund. Upon application by the Shareholders'
Representative to the Escrow Agent and Purchaser prior to the satisfaction of
all claims of Purchaser against the Escrow Fund, Purchaser may in its sole and
absolute discretion authorize the Escrow Agent to release a portion of the
Escrow Fund to the Shareholders' Representative in reimbursement of fees and
expenses incurred prior to such time. In making such payment, any shares of
Purchaser Common to be distributed from the Escrow Fund shall be valued at the
closing price of the Purchaser Common on the Nasdaq National Market on the day
of distribution. Nothing in this Section 1.7(f) shall limit the obligations of
the Shareholders under Section 1.7(e)(vii). In carrying out his functions under
this Agreement, the Shareholders' Representative shall be permitted, in his
discretion, to solicit from each of the Shareholders an advancement of funds in
an amount sufficient to cover the anticipated expense associated with any
necessary or appropriate act hereunder, and each Shareholder, consistent with
such Shareholder's obligations pursuant to Section 1.7(e)(vii) above, shall
comply with such request.
ARTICLE II
CLOSING
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2.1 Closing. The Closing shall take place at the offices of Taylor
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Joynson Garrett, Carmelite, 50 Victoria Embankment, Blackfriars, London, England
as soon as practicable following satisfaction or waiver of all of the conditions
to the obligations of the parties to consummate the transactions contemplated
hereby in accordance with this Agreement or at such other time, place and date
as is mutually agreed to by the parties hereto. The date of the Closing is
referred to in this Agreement as the "Closing Date."
2.2 Actions at the Closing. At the Closing:
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(a) the Shareholders and/or the Company, as the case may be, shall
deliver to Purchaser the various certificates, instruments and documents
referred to in Section 7.3 below;
(b) Purchaser shall deliver to the Shareholders and/or the Company
the various certificates, instruments and documents referred to in Section 7.2
below;
(c) each Shareholder shall deliver or procure delivery to Purchaser of
certificates ("Certificates") evidencing the Company Shares accompanied by duly
executed transfers of all the Company Shares in favor of Purchaser (or its
nominee(s)), and, in connection therewith, each Shareholder hereby irrevocably
appoints, as of the time of Closing, any corporate officer of Purchaser and any
Executive Director of the Company as such Shareholder's attorney and irrevocably
instructs the attorney to execute all or any form(s) of transfer, surrender
and/or other document(s) at the attorney's direction in relation to the Company
Shares in favor of Purchaser or such other person or persons as Purchaser may
direct and to do all such acts and things as may in the opinion of such attorney
be reasonably necessary or reasonably expedient for the purposes of, or in
connection with, the acceptance of the offer made in Section 1.1 and to
surrender or vest in Purchaser or its nominee(s) the Company Shares, provided
that the terms of this clause shall not apply to any Shareholder who, by virtue
of his, her or its constitution, is expressly prohibited from granting a power
of attorney in such terms;
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(d) Purchaser shall deliver to each Shareholder or their respective
nominees a certificate for, or evidence of an irrevocable instruction to
Purchaser's Transfer Agent to issue, the number of Initial Shares set forth
opposite such Shareholders' name on Schedule I hereto and shall deliver to each
Shareholder a check, payable in Dollars, in the amount of the portion of the
Cash Payment set forth opposite such Shareholder's name on Schedule I hereto;
(e) Purchaser, the Shareholders' Representative and the Escrow Agent
shall execute and deliver the Escrow Agreement attached hereto as Exhibit B (the
"Escrow Agreement") and Purchaser shall deliver to the Escrow Agent a
certificate for, or an irrevocable instruction to Purchaser's Transfer Agent to
issue, the number of Escrow Shares being placed in escrow on the Closing Date
pursuant to Section 1.5 and Article VIII;
(f) the Shareholders shall procure that a board meeting of the Company
shall be held at which (i) such persons as Purchaser may nominate will be
appointed directors of the Company; (ii) there shall be submitted and accepted
the resignations referred to in Section 7.3(f); (iii) subject only to their
being duly stamped (where applicable), the transfers of the Company Shares
contemplated by this Agreement shall be approved and Purchaser and/or its
nominee(s) shall be registered as the holders of the Company Shares and new
share certificates shall be executed and issued accordingly; (iv) all existing
instructions to banks shall be cancelled and new instructions given in such form
as Purchaser may require; (v) the registered office of the Company will be
changed to Carmelite, 50 Victoria Embankment, Blackfriars, London EC4Y 0DX; and
(vi) the persons set forth on Schedule 2.2 hereto will be appointed officers of
the Company;
(g) Purchaser shall deliver to the Shareholders' Representative for the
benefit of the Shareholders:
(i) (A) the Certificate of Incorporation of Purchaser, certified
as of a recent date by the Secretary of State of the State of Delaware,
and (B) a certificate of said Secretary dated as of a recent date as to
the due incorporation and good standing of Purchaser and listing all
documents on file with said Secretary;
(ii) certificate of the Secretary or an Assistant Secretary of
Purchaser dated the Closing Date and certifying (A) that the Certificate
of Incorporation of Purchaser has not been amended since the date of the
last amendment referred to in the certificate delivered pursuant to
clause (i)(B) above, (B) that attached thereto is a true and correct
copy of the Bylaws of Purchaser as in effect on the Closing Date, (C)
that attached thereto is a true and correct copy of all resolutions
adopted by the Board of Directors of Purchaser authorizing the
execution, delivery and performance of this Agreement and the ancillary
agreements and transactions contemplated hereby and that such
resolutions have not been amended or modified and are in full force and
effect in the form adopted, and (D) to the incumbency and specimen
signature of each officer of Purchaser executing this Agreement and each
ancillary agreement to be executed by Purchaser pursuant to this
Agreement and any certificate or instrument furnished pursuant hereto;
and
(h) the Company and/or the Shareholders shall procure that the auditors
of the Company and the auditors of the Subsidiary shall deliver their written
resignation to Purchaser together with a statement in accordance with section
394 of the Companies Act 1985 (the "Companies Act") that there are no
circumstances connected with such resignation which they consider should be
brought to the attention of the Shareholders or creditors of the Company or the
Subsidiary, as the case may be, and that there are no fees or other payments due
to them from the Company or the Subsidiary.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
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OF EACH OF THE SHAREHOLDERS
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Each Shareholder severally and not jointly represents and warrants to
Purchaser that as to such Shareholder:
3.1 Authority. Such Shareholder has all power to execute and deliver
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this Agreement and to carry out and perform such Shareholder's respective
obligations under the terms of this Agreement and the related agreements
required to be entered into as conditions of Closing under Article VII hereof.
Such Shareholder has the full power to exchange, assign, transfer and deliver
his, her or its Company Shares hereunder, free and clear of all covenants,
conditions, voting trust arrangements, liens, encumbrances, equities, security
interests, restrictions, claims, charges, and other claims or rights of third
parties ("Encumbrances"). This Agreement, when executed and delivered by such
Shareholder, will constitute the valid and legally binding obligation of such
Shareholder, legally enforceable against such Shareholder in accordance with the
terms of this Agreement, subject to the effect of bankruptcy, insolvency,
reorganization, moratorium and other similar laws relating to or affecting the
rights of creditors generally, limitations imposed by English, U.S. federal or
state law or equitable principles upon the specific enforceability of any of the
remedies, covenants or other provisions of this Agreement, and upon the
availability of injunctive relief or other equitable remedies.
3.2 No Conflict with Other Instruments. The execution and delivery of,
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and the performance by such Shareholder of, its obligations under this Agreement
(including the Exhibits hereto), the related agreements required to be entered
into as conditions of Closing under Article VII hereof, and the transactions
contemplated hereby (i) will not result in any violation of, conflict with,
constitute a breach, violation or default (with or without notice or lapse of
time, or both) under (x) any provision of the Memorandum and Articles of
Association or other charter or governing document of such Shareholder (in the
event the Shareholder is not an individual) or (y) any agreement, arrangement,
order, judgment or decree of any court or any governmental agency, contract,
understanding, note, mortgage, indenture, lease, franchise, license, permit or
other instrument to which such Shareholder is a party or by which such
Shareholder or any of his or its properties or assets is bound, (ii) will not
conflict with, or result in any breach or violation of, any statute, judgment,
decree, order, rule or governmental regulation applicable to such Shareholder or
his or its properties or assets, or (iii) will not result in the imposition of
any Encumbrance upon the Company Shares owned by such Shareholder.
3.3 Ownership of Securities. In respect of the number of the Company
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Shares set out against each Shareholders' name in Schedule I hereto, such
Shareholder will sell such Company Shares pursuant to this Agreement with full
title guarantee (as construed under English law) and, upon consummation of the
purchase contemplated by this Agreement, Purchaser will acquire such Company
Shares free and clear of all Encumbrances with full title guarantee and with the
benefit of all other rights and advantages belonging to or accruing on such
Company Shares. Except for the Shareholders' Agreement, such Shareholder is not
a party to any voting trust, proxy, or other agreement or understanding between
or among any persons that affects or relates to the voting or giving of written
consent with respect to any outstanding security of the Company. Each
Shareholder hereby agrees to waive any rights which such Shareholder has, or
might have at any time in the future, against the Company or the Subsidiary
arising from the Shareholders' Agreement. Each Shareholder also confirms that
neither the Company nor the Subsidiary shall have any obligation to such
Shareholders under the Shareholders' Agreement.
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3.4 Sale Entirely for Own Account. This Agreement is made with such
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Shareholder in reliance upon such Shareholder's representation to Purchaser,
which by the execution of this Agreement such Shareholder hereby confirms, that
the Purchaser Shares to be received by each Shareholder will be acquired for
investment for the Shareholder's own account, not as a nominee or agent, and not
with a view to the resale or distribution of any part thereof, and that such
Shareholder has no present intention of selling, granting any participation in,
or otherwise distributing the same other than in each case pursuant to the
Registration Statement contemplated by the Registration Rights set forth in
Exhibit C hereto or pursuant to an appropriate exemption from registration under
applicable law. By executing this Agreement, such Shareholder further represents
that he, she or it does not have any contract, undertaking, agreement or
arrangement with any person to sell, transfer or grant participations to such
person or to any third person, with respect to any of the Purchaser Shares.
3.5 Reliance Upon the Shareholder's Representations. Such Shareholder
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understands that the Purchaser Shares are not registered under the United States
Securities Act of 1933 (the "Securities Act") on the ground that the sale
provided for in this Agreement and the issuance of securities hereunder is
exempt from registration under the Securities Act pursuant to Section 4(2)
thereof and/or Regulation S promulgated thereunder, and that Purchaser's
reliance on such exemption is based on such Shareholder's representations set
forth herein. Such Shareholder realizes that the basis for the exemption may not
be present if, notwithstanding such representations, such Shareholder has in
mind merely acquiring the Purchaser Shares for a fixed or determinable period in
the future, or for a market rise, or for sale if the market does not rise. Such
Shareholder has no such intention.
3.6 Receipt of Information; Investment Experience. Such Shareholder,
---------------------------------------------
either alone or with such Shareholder's purchaser representative (within the
meaning of Rule 501(h) promulgated under the Securities Act), believes it has
received all the information it considers necessary or appropriate for deciding
whether to acquire the Purchaser Shares. Such Shareholder further represents
that such Shareholder (or such Shareholder's purchaser representative) has had
adequate opportunity to obtain from representatives of Purchaser such
information, in addition to the representations set forth in this Agreement, as
is necessary to evaluate the merits and risks of such Shareholder's investment
in the Purchaser Shares. Such Shareholder, either alone or with such
Shareholder's purchaser representative, has sufficient experience in business,
financial and investment matters to be able to evaluate the risks involved in
the acquisition of the Purchaser Shares to be issued to such Shareholder
pursuant to the terms of this Agreement and to make an informed investment
decision with respect to such investment.
3.7 Restricted Securities. Such Shareholder understands that the
---------------------
Purchaser Shares may not be sold, transferred or otherwise disposed of without
registration under the Securities Act or an exemption therefrom, and that in the
absence of an effective registration statement covering the Purchaser Shares or
an available exemption from registration under the Securities Act, the Purchaser
Shares must be held indefinitely. In particular, such Shareholder is aware that
the Purchaser Shares may not be sold pursuant to Rule 144 promulgated under the
Securities Act unless all of the conditions of that Rule are met. In this
connection, such Shareholder represents that such Shareholder understands that
under Rule 144, the Purchaser Shares must be held for at least one year after
purchase thereof from Purchaser prior to resale (two years in the absence of
public current information about Purchaser) and that, under certain
circumstances, the conditions for use of Rule 144 include the availability of
public current information about Purchaser, that sales be effected through a
"broker's transaction" or in transactions with a "market maker," and that the
number of shares being sold not exceed specified limitations. Such public
current information about Purchaser for purposes of Rule 144 is now available,
but may not be in the future.
-8-
3.8 Legends. It is understood that the certificates evidencing the
-------
Purchaser Shares may bear one or all of the following legends:
(a) "The shares represented by this certificate have not been registered
under the United States Securities Act of 1933. They may not be sold, offered
for sale, pledged, hypothecated or otherwise transferred in the absence of a
registration statement in effect with respect to such shares under such Act or
an opinion of counsel or other evidence satisfactory to Incyte Pharmaceuticals,
Inc. and its counsel that such registration is not required."
(b) Any legend required by any other jurisdiction.
3.9 Brokers or Finders. Such Shareholder has not dealt with any broker
------------------
or finder in connection with the transactions contemplated by this Agreement.
Such Shareholder has not incurred, and shall not incur, directly or indirectly,
any liability for any brokerage or finders' fees or agents' commissions or any
similar charges in connection with this Agreement or any transaction
contemplated hereby.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
---------------------------------------------
Except as otherwise specifically set forth in the disclosure schedule
delivered by the Company to Purchaser at the time of execution of the Master
Agreement and signed by the Executive Directors of the Company in their
capacities as such (the "Original Disclosure Schedule"), as updated to reflect
events that occurred following the date of the Master Agreement (such Original
Disclosure Schedule, as so amended to the date hereof, the "Disclosure
Schedule") the Company represents and warrants to Purchaser as follows (where
any paragraph of this Article IV or any provision or disclosure made or referred
to in the Disclosure Schedule is qualified by the expression "to the knowledge
of the Company" or "the Company is not aware" or any similar expression, then
that expression shall be deemed to refer to the actual knowledge of Mark Bodmer,
Andrew Sandham, and Lynda Connon after reasonable inquiry):
4.1 Organization and Qualification.
------------------------------
(a) The Company is a private company limited by shares incorporated
under the laws of England and Wales. The Company has all requisite power and
authority to own, lease and operate its respective properties and to carry on
its business as now being conducted.
(b) Each of the Company and the Subsidiary (as defined in Section 4.3)
is qualified to conduct business in its jurisdiction of incorporation.
(c) True, complete and accurate copies, with respect to the Company and
the Subsidiary, of the respective Memoranda and Articles of Association, as
amended to the date hereof are annexed to the Disclosure Schedule. True,
complete and accurate copies, with respect to the Company and the Subsidiary, of
the respective minutes of all of directors' and shareholders' meetings, complete
and accurate as of the date hereof have been delivered to Purchaser and a list
of all such minutes setting forth the meeting, meeting date and number of pages
thereof is set forth in the Disclosure Schedule. The Memoranda and Articles of
Association are in full force and effect. Such documents contain full details of
the rights and restrictions attached to the share capital of both the Company
and the
-9-
Subsidiary, and all resolutions have been properly passed as resolutions of the
Company or the Subsidiary, as appropriate.
(d) The register of members and statutory books of both the Company and
the Subsidiary contain complete, true and accurate records of the members of
each of the Company and the Subsidiary, as appropriate and all the other
information which they are required to contain under the Companies Act, up to
the date of this Agreement, and comply with all the requirements of the
Companies Act and all returns, particulars, resolutions and other documents
required to be delivered by the Company and the Subsidiary to the Registrar of
Companies have been duly delivered within the required time limits and no fines
or penalties are outstanding or known to be due, except in each case where such
non-compliance would not have an Adverse Effect. As used in this Agreement, the
term "Adverse Effect" means an adverse effect on the Company and the Subsidiary,
taken as a whole, or on the conduct of the business of the Company and the
Subsidiary as conducted as of the date of this Agreement.
(e) Neither the Company nor the Subsidiary has received any notice of
any application or intended application for the rectification of its register of
members.
(f) The only directors of the Company and the Subsidiary are the persons
whose names are listed in Section 4.1(f) of the Disclosure Schedule and neither
the Company nor the Subsidiary has any alternate or shadow directors.
(g) Neither the Company nor the Subsidiary has provided any financial
assistance within section 151 of the Companies Act or otherwise directly or
indirectly for the purchase or the proposed purchase of its shares.
(h) Neither the Company nor the Subsidiary has purchased any of its
own shares.
(i) Neither the Company nor the Subsidiary has assets outside the United
Kingdom nor does either company have a branch, agency or place of business or
any permanent establishment (as that expression is defined in the relevant
double taxation relief orders current at the date of this agreement) outside the
United Kingdom and are not required to be qualified to do business outside the
United Kingdom.
4.2 Capital Structure.
-----------------
(a) The authorized share capital of the Company consists of 23,355,672
cumulative convertible preferred ordinary shares of 5p nominal value per share
("Preferred Ordinary Shares"), 5,000,000 'A' ordinary shares of 5p nominal value
per share ("'A'" Ordinary Shares"), and 3,339,668 ordinary shares of 5p nominal
value per share ("Ordinary Shares"). As of the Announcement Date, there were in
issue 22,355,331 Preferred Ordinary Shares, 5,000,000 'A' Ordinary Shares, and
366,210 Ordinary Shares. Between the Announcement Date and the date of this
Agreement, no shares of the Company were issued other than Ordinary Shares
issued upon the exercise of outstanding Company Options referred to in Section
4.2(b) below. Each Preferred Ordinary Share and each 'A' Ordinary Share is
convertible into one Ordinary Share in accordance with the Company's Articles of
Association. The Preferred Ordinary Shares, 'A' Ordinary Shares and Ordinary
Shares are referred to herein collectively as the "Company Shares." The rights,
preferences and privileges of the Company Shares are as set forth in the
Company's Memorandum and Articles of Association.
-10-
(b) As of the Announcement Date, there were outstanding Company Options
to acquire 3,133,540 Ordinary Shares.
(c) Other than as described in paragraphs (a) and (b) above, there are
no other shares or other equity securities of the Company and no other options,
warrants, calls, conversion rights, commitments or agreements of any character
to which the Company is a party or by which the Company may be bound that do or
may obligate the Company to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares in the Company's share capital or
securities convertible into or exchangeable for the Company's share capital or
that do or may obligate the Company to grant, extend or enter into any such
option, warrant, call, conversion right, commitment or agreement.
(d) All issued Company Shares are, and any of the Company Shares issued
upon exercise of the Company Options (subject to receipt of the exercise prices
as provided therein) will be, validly issued and fully paid and not subject to
any rights of pre-emption (other than those set forth in the Company's Articles
of Association). All outstanding securities of the Company have been issued in
compliance with applicable laws and regulations.
(e) Schedule 4.2 contains complete and accurate lists of the holders of
outstanding Company Shares, the number of shares owned of record by each such
holder, and the number of shares subject to and the holders of outstanding
Company Options, including in each case (other than in the case of Company
Options held by employees of the Company) the addresses of such holders as
extracted from the register of members of the Company. Schedule 4.2 is true,
complete and accurate on the date hereof and, if required, an updated Schedule
4.2 to be attached hereto will be true, complete and accurate as of the Closing
Date. Such Schedule 4.2 identifies the vesting schedule, applicable legends, and
repurchase rights or other risks of forfeiture of any outstanding security of
the Company.
(f) Schedule 4.2 contains a true, complete and accurate list of each
stock option plan, stock appreciation rights or other equity-related stock
incentive plan of the Company.
(g) Of the issued and outstanding Company Shares, no shares are subject
to redemption and, except as described in Schedule 4.2, no shares are subject to
repurchase. There is no right of first refusal, co-sale right, right of
participation, right of first offer, option or other restriction on transfer
applicable to any Company Shares.
(h) Except for the Shareholders' Agreement, the Company is not a party
to or subject to any agreement or understanding, and, to the knowledge of the
Company, there is no voting trust, proxy, or other agreement or understanding
between or among any persons that affects or relates to the voting or giving of
written consent with respect to any outstanding security of the Company, the
election of directors, the appointment of officers or other actions of the board
of directors of the Company (the "Company Board") or the management of the
Company.
4.3 Subsidiaries; Equity Investments. Other than the Subsidiary, the
Company does not have and has never had any other subsidiaries or companies
controlled by the Company and does not own and has never owned any equity
interest in, or controlled, directly or indirectly, any other corporation,
partnership, joint venture, trust, firm or other entity. The Subsidiary is a
private company limited by shares incorporated under the laws of England and
Wales. The Company owns all of the issued share capital of the Subsidiary, free
and clear of any claims, liens or encumbrances, and no options, warrants or
other rights to acquire shares of the Subsidiary are outstanding.
-11-
4.4 Authority. The Company has all requisite corporate power and
---------
authority to enter into this Agreement and, subject only to the requisite
approval of this Agreement by the Company's shareholders in accordance with the
Shareholders' Agreement, to perform its obligations hereunder and consummate the
transactions contemplated hereby. The execution and delivery of this Agreement,
the performance by the Company of its obligations hereunder and the consummation
of the transactions contemplated hereby have been duly and validly authorized by
all necessary corporate action on the part of the Company, including approval of
the Company Board, subject only to the requisite approval of this Agreement by
the Company's shareholders in accordance with the Shareholders' Agreement. This
Agreement is a valid and binding obligation of the Company.
4.5 No Conflict with Other Instruments. The execution, delivery and
----------------------------------
performance of this Agreement and the transactions contemplated hereby (a) will
not result in any violation of, conflict with, constitute a breach, violation or
default (with or without notice or lapse of time, or both) under, give rise to a
right of termination, cancellation, forfeiture or acceleration of any obligation
or loss of any benefit under, or result in the creation or encumbrance on any of
the properties or assets of the Company or the Subsidiary pursuant to (i) any
provision of the Company's or the Subsidiary's Memorandum and Articles of
Association or (ii) any agreement, contract, understanding, note, mortgage,
indenture, lease, franchise, license, permit or other instrument to which the
Company or the Subsidiary is a party or by which the properties or assets of the
Company or the Subsidiary is bound, or (b) to the knowledge of the Company,
conflict with or result in any breach or violation of any statute, judgment,
decree, order, rule or governmental regulation applicable to the Company or the
Subsidiary or their respective properties or assets, except, in the case of
clauses (a)(ii) and (b) for any of the foregoing that could reasonably be
expected not to, individually or in the aggregate, have a material adverse
effect on the Company and the Subsidiary, taken as a whole, or that could
reasonably be expected not to result in the creation of any material lien,
charge or encumbrance upon any assets of the Company or the Subsidiary or that
could not prevent, materially delay or materially burden the transactions
contemplated by this Agreement. As used in this Agreement, any reference to any
event, change or effect being "material" or "materially adverse" or having a
"material adverse effect" on or with respect to an entity (or group of entities,
taken as a whole) means such event, change or effect is material or materially
adverse, as the case may be, to the business, condition (financial or
otherwise), properties, assets, liabilities, or results of operations of such
entity (or, if with respect thereto, of such group of entities taken as a
whole).
4.6 Governmental Consents. No consent, approval, order or authorization
---------------------
of, or registration, declaration of, or qualification or filing with, any court,
administrative agency, commission, regulatory authority or other governmental or
administrative body or instrumentality, whether domestic or foreign, is required
by or with respect to the Company or the Subsidiary in connection with the
execution, delivery and performance of this Agreement by the Company or the
consummation by the Company of the transactions contemplated hereby, except for
such consents, approvals, orders, authorizations, registrations, declarations,
qualifications or filings as may be required under federal or state securities
laws in connection with the transactions contemplated hereby.
-12-
4.7 The Accounts.
------------
(a) A true, complete and accurate copy of the Accounts is annexed to the
Disclosure Schedule. The Accounts were prepared under the historical cost
convention, and complied with and were prepared in accordance with all
applicable Accounting Requirements. For the purposes of this Agreement
"Accounts" means the audited accounts of the Company and the Subsidiary for the
financial year ending on the Accounts Date including the auditors' and
directors' reports, the audited balance sheets as at the Accounts Date, the
audited profit and loss accounts for such period and the notes thereto,
"Accounts Date" means 31 December 1997 and "Accounting Requirements" means the
accounting requirements of the Companies Act, SAAPs, FRSs, abstracts of the
Urgent Issues Task Force, any other requirement of a United Kingdom accounting
body having mandatory effect and other generally accepted accounting principles
and practices in the United Kingdom.
(b) The Accounts:
(i) make proper provision for, reserve for or disclose, as
appropriate, all liabilities, whether actual, contingent, unquantified
or disputed, all capital commitments, whether actual or contingent, and
all bad or doubtful debts of the Company and the Subsidiary as at the
Accounts Date in each case, in accordance with, and to the extent
required by, applicable Accounting Requirements; and
(ii) make proper provision for or reserve for deferred Taxation
in accordance with, and to the extent required by, applicable Accounting
Requirements.
4.8 The Management Accounts. A true, complete and accurate copy of the
-----------------------
Management Accounts is annexed to the Disclosure Schedule. The Management
Accounts fairly presented the financial condition of the Company and the
Subsidiary as of the Management Accounts Date and the results of operations of
the Company and the Subsidiary for the six-month period then ended, except that
such financial statements are subject to normal and recurring year-end
adjustments. No changes in accounting policies or practices have been made in
the Management Accounts compared with the Accounts. For the purposes of this
Agreement "Management Accounts" means the management accounts of the Company and
the Subsidiary comprising the balance sheets as at the Management Accounts Date
and the profit and loss accounts for the months commencing on the day
immediately following the Accounts Date and ending on the Management Accounts
Date and "Management Accounts Date" means 30 June 1998.
4.9 Accounting and Other Records. All the accounts, books, ledgers and
----------------------------
financial and other records of whatsoever kind of each of the Company and the
Subsidiary (including all invoices) have been kept in accordance with sections
221 and 222 of the Companies Act and are in the possession of the relevant
company or under its control. Neither the Company nor the Subsidiary has any of
its records, systems, controls, data or information, recorded, stored,
maintained, operated or otherwise wholly or partly dependent on or held by any
means (including any electronic, mechanical or photographic process whether
computerized or not) which (including all means of access thereto and therefrom)
are not under the exclusive ownership and direct control of either the Company
or the Subsidiary, as the case may be.
4.10 Absence of Changes. Since the Management Accounts Date, except as
------------------
otherwise contemplated by this Agreement or set forth in the Disclosure
Schedule, the Company and the Subsidiary have conducted their respective
businesses only in the ordinary and usual course without any interruption
-13-
in the nature, scope or manner of the respective businesses, thereby maintaining
the same as going concerns and, without limiting the generality of the
foregoing:
(a) There have been no changes in the condition (financial or
otherwise), business, net worth, assets, properties, employees, operations,
obligations or liabilities of the Company and the Subsidiary, taken as a whole,
which, in the aggregate, have had or may be reasonably expected to have a
material adverse effect on the Company and the Subsidiary, taken as a whole;
(b) Neither the Company nor the Subsidiary has issued, or authorized for
issuance, or entered into any commitment to issue, any equity security, bond,
note or other security;
(c) Neither the Company nor the Subsidiary has incurred additional debt
for borrowed money, or incurred any obligation or liability, except in the
ordinary course of business consistent with past practice and, in any event, not
in excess of (pound)10,000;
(d) Neither the Company nor the Subsidiary has discharged any obligation
or liability, or discharged, settled or satisfied any claim, lien or
encumbrance, except for current liabilities in the ordinary course of business
consistent with past practice and, in any event, not in excess of (pound)12,500
for any single occurrence or (pound)30,000 in the aggregate;
(e) The Company has not declared or made any dividend, payment or other
distribution (within the meaning of that expression as contained in section 209
or 210 or 418 of the Income and Corporation Taxes Act 1988 ("ICTA"));
(f) The Company has not purchased, redeemed or otherwise acquired or
committed itself to acquire, directly or indirectly, any of its shares;
(g) Neither the Company nor the Subsidiary has conveyed or disposed of,
or agreed to convey or dispose of, by sale, assignment, lease, license or
otherwise, or mortgaged, pledged or otherwise encumbered, any of its intangible
assets or properties, including without limitation its Proprietary Rights (as
defined in Section 4.19);
(h) Neither the Company nor the Subsidiary has mortgaged, pledged,
or otherwise encumbered any of its tangible assets or properties;
(i) Neither the Company nor the Subsidiary has disposed of, or agreed to
dispose of, by sale, lease, license or otherwise, any tangible asset or
property, except in the ordinary course of business consistent with past
practice;
(j) Neither the Company nor the Subsidiary has written off any debts, no
debt has been released by the Company or the Subsidiary on terms that the debtor
pays less than the book value of its debt, and no debt owing to either the
Company or the Subsidiary has proved to any extent to be irrecoverable;
(k) Neither the Company nor the Subsidiary has purchased or agreed to
purchase or otherwise acquire any securities of any corporation, partnership,
joint venture, firm or other entity;
(l) Neither the Company nor the Subsidiary has made any expenditure or
commitment for the purchase, acquisition, construction or improvement of a
capital asset, except in the ordinary course of
business consistent with past practice and, in any event, not in excess of
(pound)6,000 for any single item or (pound)15,000 in the aggregate;
(m) Neither the Company nor the Subsidiary has entered into any contract
or commitment (whether in respect of capital expenditure or otherwise) on terms
which will allow for less than full recovery by the Company or the Subsidiary of
costs and overheads or which is of a long-term nature, or which involves or
could involve an obligation in excess of (pound)10,000; and for this purpose a
long-term contract or commitment is one which will not be performed in
accordance with its terms within three months after the date it was entered into
or undertaken or which is incapable of termination by the Company or the
Subsidiary, as the case may be, on three months' notice or less;
(n) Neither the Company nor the Subsidiary has adopted or amended any
bonus, incentive, profit-sharing, stock option, stock purchase, pension,
retirement, deferred-compensation, severance, life insurance, medical or other
benefit plan, agreement, trust, fund or arrangement for the benefit of employees
of any kind whatsoever, nor entered into or amended any agreement relating to
employment, services as an independent contractor or consultant, or severance or
termination pay, nor agreed to do any of the foregoing;
(o) Neither the Company nor the Subsidiary has effected or agreed to
effect any change in its directors, officers or any of those Company employees
listed in Section 4.10 of the Disclosure Schedule;
(p) Neither the Company nor the Subsidiary has effected or committed
itself to effect any amendment or modification to its Memorandum or Articles of
Association;
(q) Neither the Company nor the Subsidiary has made any disposal or
deemed disposal which might give rise to a liability for corporation tax on
chargeable gains;
(r) The businesses of the Company and the Subsidiary have not been
materially or adversely affected by the loss of any source of supply which (i)
in the financial year immediately preceding the Accounts Date accounted for five
percent (5%) or more of aggregate amount paid by the Company or the Subsidiary
in such period in relation to the goods, services or equipment supplied to the
Company or the Subsidiary as appropriate, or (ii) was a supplier of goods,
services or equipment to the Company or the Subsidiary in respect of which there
is no other readily available source of supply by five percent (5%) or more or
(iii) is otherwise material to the business of the Company or the Subsidiary;
(s) Neither the Company nor the Subsidiary has disposed of or agreed to
dispose of any asset for a consideration payable by installments where any
installment remains unpaid;
(t) All cash and payments of any kind received by the Company or the
Subsidiary have been credited to the relevant company's accounts with its
bankers;
(u) Each of the Company and the Subsidiary has paid its creditors in
accordance with the same policy as that adopted throughout the financial year
ended on the Accounts Date;
(v) None of the assets of the Company or the Subsidiary has been
diminished by the wrongful act of any person; and
-15-
(w) There has not been any material change in the working capital
requirements of either the Company or the Subsidiary.
Except as set forth in Section 4.10 of the Disclosure Schedule (relating to cash
expended for the operations of the Company) and except for the effect of any
transactions or actions taken with the prior written consent of Purchaser, the
value of the net tangible assets of the Company and the Subsidiary as at Closing
(as set forth in the Company's and the Subsidiary's accounting records) will not
(subject to any adjustments shown in the Management Accounts) be less than as at
the Accounts Date.
4.11 Real Property.
-------------
(a) The Property
------------
(i) The Leasehold Property (the "Property") known as Unit 214
Cambridge Science Park, Milton Road, Cambridge is held pursuant to a
Lease ("the Lease") dated 8th May 1992 and made between Equitable Life
Assurance Society (the "Landlord") (1) and Computer Centre
(Peterborough) Limited (2) for a term of 15 years from 25th March 1992
at an initial yearly rent of (pound)180,000, and a current yearly rent
of the same amount, and subject to rent reviews at the end of the fifth
and tenth years of the term it comprises the only real property in which
the Company or the Subsidiary has an interest and which is used in
connection with their business.
(ii) The Property is occupied or used under the Lease and the
terms of that lease permit occupation or use for a purpose appropriate
to a Science Park in one or more of the following uses:
(A) Scientific research with associated offices, restaurant, and
support facilities and buildings ancillary to such purposes.
(B) Scientific research associated with industrial production.
(C) Light industrial production of a kind which is dependent on
regular consultation with either or both of the following:
(1) The tenant's own research development and design
staff established in the Cambridge Study Area,
(2) The scientific staff or facilities of Cambridge
University or of local scientific institutions.
(D) Ancillary buildings and works appropriate to the use of the
demised premises as an integral part of a Science Park.
(iii) The Subsidiary is the legal and beneficial owner of the
Property.
(b) Encumbrances
------------
(i) The Property is free from any mortgage, debenture, charge, or
other encumbrance securing the repayment of monies or other obligation
or liability of the Company or the Subsidiary and so far as the Company
is aware of any other person.
-16-
(ii) The Subsidiary has not created any further subtenancy or
license of its interest in the Property and there are no persons other
than the Company and the Subsidiary in occupation of the Property.
(iii) So far as the Company is aware the Property is not subject
to any outgoings other than the usual general rates and water rates and
insurance premiums, rent and service charges reserved by the Lease.
(iv) The Company is not aware that the Property is subject to any
restrictive covenants, stipulations, easements, profits, or wayleaves,
licenses, grants, restrictions, overriding interests or other rights
vested in third parties, and has not entered into any agreement or
commitment to give or create any of the foregoing.
(v) So far as the Company is aware where any such matters as are
referred to in the last four Warranties have been disclosed in the
Disclosure Schedule, the obligations and liabilities imposed and arising
under them on the Company and/or the Subsidiary have been fully observed
and performed, and any payments in respect of them due and payable by
the Company and/or the Subsidiary have been duly paid.
(vi) The Property is not subject to any option, right of
pre-emption or right of first refusal.
(vii) No notice restricting the use and enjoyment of the Property
by the Subsidiary has been received by the Subsidiary.
(viii) So far as the Company is aware, there are no outstanding
actions, disputes, claims or demands between the Subsidiary and any
third party affecting the Property, or any boundary walls and fences, or
with respect to any of the rights appurtenant to the Property as set out
in the Lease.
(c) Planning Matters
----------------
(i) The Property is not being or intended or required by the
Company and the Subsidiary to be used other than for the permitted user
thereof as defined in the Lease for the purposes of the Town and Country
Planning Act 1990, the Planning (Listed Buildings and Conservation
Areas) Act 1990 and the Planning (Consequential Provisions) Act 1990,
the orders and regulations made thereunder and all legislation of a like
nature (the "Planning Acts").
(ii) So far as the Company is aware, planning permission has been
obtained, or is deemed to have been granted, for the purposes of the
Planning Acts with respect to all existing development on the Property.
(iii) Building regulation consents have been obtained where
necessary with respect to all development, alterations and improvements
to the Property carried out by the Subsidiary.
(iv) Insofar as it relates to the Property compliance is being
made with the Agreement made under section 52 of the Town and Country
Planning Act 1971 dated 26 June 1984 between South Cambridgeshire
District Council (1) and the Master Fellows & Scholars of Trinity
College (2) with respect to the Property.
-17-
(v) So far as the Company is aware and except as described in the
Disclosure Schedule the Company has satisfied any development charges,
monetary claims and liabilities on the Company and/or the Subsidiary
affecting the Property under the Planning Acts or any other such
legislation.
(d) Statutory Obligations
---------------------
(i) The Company and the Subsidiary have received no notice of any
breach of any statutory or bye-law obligations in relation to the
Property nor notice of any breach of any European Community regulations
or directives in relation to the Property.
(ii) The Company and the Subsidiary have received no notice of
any outstanding and unobserved or unperformed obligation with respect to
the Property necessary to comply with the requirements (whether formal
or informal) of any competent authority exercising statutory or
delegated powers.
(e) Condition of the Property
-------------------------
(i) The Company and the Subsidiary have received no notice of any
breach of the covenants on its behalf contained in the Lease relating to
the repair and maintenance of the Property.
(ii) The Property has the benefit of the fire certificate which
is listed in the Disclosure Schedule and the Company and the Subsidiary
have received no notice of any breach of any of the conditions attached
thereto.
(f) Leasehold Property
------------------
(i) The Subsidiary has paid all rent and service charges demanded
and has received no notice from the Landlord of any breaches of the
covenants on its part and the conditions contained in the Lease and the
last demand (or receipt for rent if issued) was unqualified and the
Company and the Subsidiary have not received notice that the Landlord
has any intention of forfeiting the Lease.
(ii) All licenses, consents and approvals required of the
Subsidiary from the Landlord and any superior landlord under the Lease
where required have been obtained, and the covenants on the part of the
tenant contained in such licenses, consents and approvals have been duly
performed and observed by the Subsidiary.
(iii) There are no rent reviews currently in progress under of
the Lease, but the rent review due in 1997 has never been activated.
(iv) The Company is not aware of any outstanding, unobserved or
unperformed obligations necessary to comply with any notice or other
requirement given by or on behalf of the Landlord under the Lease.
(v) The Subsidiary has not served any notice on the Landlord
claiming any breach by the Landlord of its obligations under the Lease,
nor so far as the Company is aware is there any current dispute with the
Landlord regarding the observance of obligations under the Lease
(whether by the Landlord or the Company and/or the Subsidiary).
-18-
(g) Guarantees
----------
There are no actual or contingent liabilities on the part of the
Company or on the part of the Subsidiary arising directly or indirectly
out of any agreement, lease, underlease, tenancy, sub- tenancy,
conveyance, transfer, license or any other deed or document, including
(but without limitation) any actual or contingent liability arising
directly or indirectly out of:
(i) any estate or interest held by the Company as original
lessee or underlessee; or
(ii) any guarantee given by the Company in relation to a lease
or underlease; or
(iii) any other covenant made by the Company in favor of any
lessor or head lessor.
4.12 Environmental Matters.
---------------------
(a) To the knowledge of the Company and to the extent applicable to the
Company's and the Subsidiary's operations and activities, the Company and the
Subsidiary are, and at all times have been, in compliance with all applicable
national or local statutes, orders, rules, ordinances, regulations, codes and
policies and all judicial or administrative interpretations thereof
(collectively, "Environmental Laws") relating to pollution or protection of the
environment or occupational health and safety, including, without limitation,
Environmental Laws relating to exposures, emissions, discharges, releases or
threatened releases of Hazardous Substances (as defined below) into or on land,
ambient air, surface water, groundwater, personal property or structures
(including the protection, cleanup, removal, remediation or damage thereof), or
otherwise related to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport, discharge or handling of Hazardous Substances, or
related to health and safety of employees and other persons, except where such
non-compliance would not have an Adverse Effect. Neither the Company nor the
Subsidiary has received any notice of any investigation, claim or proceeding
against the Company or the Subsidiary relating to any violation or alleged
violation on the part of the Company or the Subsidiary under any Environmental
Law, and the Company is not aware of any fact or circumstance that could involve
the Company or the Subsidiary as a party in any litigation, proceeding,
investigation or claim under any Environmental Law. As used in this Agreement,
"Hazardous Substances" means any pollutant, contaminant, material, substance,
waste, chemical or compound that is regulated, restricted or prohibited by any
Environmental Law or designated by any governmental agency to be hazardous,
toxic, radioactive, biohazardous or otherwise a danger to health or the
environment.
(b) Neither the Company nor the Subsidiary has disposed of any Hazardous
Substances on or about any properties at any time owned, leased or occupied by
the Company or the Subsidiary in a manner that would give rise to liability of
the Company or the Subsidiary under any Environmental Law. Neither the Company
nor the Subsidiary has itself disposed of any materials at any site being
investigated or remediated for contamination or possible contamination of the
environment.
(c) To the knowledge of the Company, the Company and the Subsidiary have
all permits, licenses and approvals required by Environmental Laws for their use
and occupancy of, and for all their operations and activities conducted on, the
Properties, and to the knowledge of the Company each of the Company and the
Subsidiary is in full compliance with all such permits, licenses and approvals,
except where such non-compliance would not have an Adverse Effect.
-19-
4.13 Taxes.
-----
(a) Each of the Company and the Subsidiary has filed all Tax Returns (as
defined below) that it was required to file within the requisite time limits and
so far as the Company and the Subsidiary are aware all such Tax Returns were
correct and complete in all material respects and were properly made. Each of
the Company and the Subsidiary has paid all Taxes (as defined below) that are
shown to be due on any such Tax Returns within the time limits set out by law
and the provisions and reserves for Taxes set forth in the Accounts are
sufficient to pay all unpaid Taxes of the Company or the Subsidiary attributable
to all periods ended on or before the Accounts Date, and all Taxes attributable
to the period from and after the Accounts Date and continuing through the
Closing Date are attributable to the operation of the Company and the Subsidiary
in the ordinary course of business of the Company and the Subsidiary. The amount
of the provision for deferred Tax in respect of the Company and the Subsidiary
contained in the Accounts was calculated in accordance with the accountancy
practices generally accepted in the United Kingdom and commonly adopted by
companies carrying on businesses similar to those carried on by the Company and
the Subsidiary. All Taxes that the Company or the Subsidiary is or was required
by law to withhold or collect have been duly withheld or collected and, to the
extent required, have been paid to the proper Taxation Authority.
(b) For purposes of this Agreement, "Taxes" means all taxes, charges,
fees, levies, duties, imposts or other similar assessments or liabilities,
including without limitation income, corporation, PAYE, capital gains, value
added taxes, and customs duties and excise duties (but excluding stamp duty)
imposed by the United Kingdom, Germany or any jurisdiction elsewhere in the
world, and any interest, fines or penalties resulting from, attributable to or
incurred in connection with any tax or any contest or dispute thereof and
"Taxation" shall be construed accordingly. For purposes of this Agreement, "Tax
Returns" means all returns, declarations, notices, clearances, or other
information required to be supplied to a Taxation Authority in connection with
Taxes, and "Taxation Authority" means the Inland Revenue, HM Customs and Excise
and any other governmental, state, federal or other fiscal, revenue customs or
excise authority, department, agency, body or office whether in the United
Kingdom or elsewhere in the world having authority or jurisdiction to impose or
assess in relation to the Company or the Subsidiary for any Taxes.
(c) The Company and the Subsidiary have delivered to Purchaser correct
and complete copies of all income Tax Returns, examination reports and
statements of deficiencies assessed against or agreed to by the Company and the
Subsidiary, and Section 4.13 of the Disclosure Schedule contains a list
identifying all such copies so delivered. No investigation or other inquiry of
any Tax Returns of the Company or the Subsidiary by any Taxation Authority is
currently in progress or, to the knowledge of the Company, threatened or
contemplated. There are no matters likely to affect the liability of the Company
or the Subsidiary (whether accrued, contingent or future) to taxation of any
nature whatsoever or to other sums imposed, charged, assessed, levied or payable
or withdrawal of any relief are disputed with the relevant tax authorities.
Neither the Company nor the Subsidiary is under any liability to pay any fine,
penalty or interest charge by virtue of the provisions of the Taxes Management
Act 1970 or Value Added Tax Act 1994 or similar provisions in other countries.
(d) The amount of tax chargeable to the Company and the Subsidiary
during any accounting period ending before the Accounts Date was not dependent
on any concession, agreement or other formal arrangement with any Taxation
Authority where such concessions, agreements, or arrangements are in writing.
(e) Since the Accounts Date and before the Closing:
-20-
(i) no accounting period of the Company or the Subsidiary has
ended;
(ii) to the knowledge of the Company, no disposal has taken place
or other event occurred which will or may have the effect of
crystallizing a liability to Taxation which should have been included in
the provision for deferred Taxation contained in the Accounts if such
disposal or other event had been planned or predicted at the Accounts
Date; and
(iii) neither the Company nor the Subsidiary has been a party to
any transaction for which any tax clearance provided for by statute has
been obtained or was available.
(f) Each of the Company and the Subsidiary is a registered and taxable
person for the purposes of value added tax, has complied with the requirements
of the Value Added Tax Act 1994 and all applicable regulations or notices made
or issued thereunder, is not in arrears with any payments or returns due, has
maintained in all material respects full, complete, correct and up to date
records, invoices and other documents (as the case may be) appropriate or
requisite for the purposes thereof, and has not been required by the
Commissioners of Customs and Excise to give security.
(g) Neither the Company nor the Subsidiary is, and neither has at any
time been or been treated as, a member of a group of companies or consortium or
associated with any company other than the Company or the Subsidiary for the
purposes of Section 43 of the Value Added Tax Act 1994 and no application for it
to be so treated has at any time been made.
(h) Each of the Company and the Subsidiary has properly operated the Pay
As You Earn System and has deducted tax as required by law from all payments
from which it is required to deduct tax whether made to its employees or
ex-employees or any persons required to be treated as such and accounted to the
Inland Revenue therefor and for all tax chargeable on benefits provided for
officers and employees.
(i) All National Insurance contributions (both employer's and
employee's) in respect of employees, officers of the Company and the Subsidiary
and any person(s) who should have been treated as such for these purposes have
been duly paid.
(j) Save as disclosed in the Tax Returns, since the Accounts Date,
neither the Company nor the Subsidiary has made and neither the Company nor the
Subsidiary is under a contractual obligation or future liability to make or
provide any individual payment or consideration in excess of (pound)2,500 which
could be disallowed as a deduction in computing the profits of the Company or
the Subsidiary or as a charge on the Company's or the Subsidiary's income for
taxation purposes.
(k) To the knowledge of the Company, neither the Company nor the
Subsidiary has made any borrowings in a foreign currency such that on repayment
a charge to corporation tax might arise on any profit or gain accruing in
relation or by reference to any such repayment.
(l) On a sale of any fixed asset (including, without limitation,
machinery and plant) at the value thereof shown in the Accounts no balancing
charge for the purposes of the Capital Allowances Act 1990 will be incurred
which has not been taken into account for deferred tax purposes in accordance
with the accountancy practices generally accepted in the United Kingdom and
commonly adopted by companies carrying on businesses similar to those carried on
by the Company or Subsidiary. Since the Accounts Date, neither the Company nor
the Subsidiary have entered into any transactions in respect of which capital
allowances may be restricted or disallowed.
-21-
(m) Except to the extent there is a deferred tax provision the book
value of each of the chargeable assets for capital gains purposes of the Company
and the Subsidiary in, or adopted for the purpose of, the Accounts does not
exceed the amount deductible pursuant to Section 38 of the Taxation of
Chargeable Gains Act 1992 ("TCGA") and is such that on the disposal or deemed
disposal of the assets (or any of them) at that value no chargeable gain would
arise, accrue or crystallize in accordance with the accountancy practices
generally accepted in the United Kingdom and commonly adopted by companies
carrying on businesses similar to those carried on by the Company and the
Subsidiary.
(n) To the knowledge of the Company, neither the Company nor the
Subsidiary has made any disposal which has required or would or might require
any computation under Section 42 of the TCGA.
(o) Neither the Company nor the Subsidiary has to the knowledge of the
Company disposed of or acquired (whether or not to the knowledge of the Company)
any asset such that Section 17 or Section 18 of the TCGA might apply in
determining the consideration given or received on such disposal or acquisition.
(p) Neither the Company nor the Subsidiary has been a party to or
involved in any scheme effected or arrangement made whereby on a disposal of an
asset by the Company or the Subsidiary Sections 29 and 30 of the TCGA may be
applicable. Neither the Company nor the Subsidiary have, and will not on Closing
have, any distributable profits which would be chargeable profits as defined in
Section 31 of the TCGA if a disposal within Section 30 of the TCGA were to take
place on or after Closing.
(q) Neither the Company nor the Subsidiary has made any claim under the
provisions of any of Sections 152(1) or 153 of the TCGA or Section 165 of the
TCGA or Section 175 of the TCGA.
(r) Neither the Company nor the Subsidiary has been a party to or a
member of a group of companies which has undertaken any share for share
exchange, any scheme of amalgamation or reconstruction such as are mentioned in
Sections 135 or 136 of the TCGA or Section 139 of the TCGA or Section 343 of the
ICTA, or exempt distribution as defined in Section 214(4) of the ICTA.
(s) No asset of either the Company or the Subsidiary shall be deemed
under Section 179 of the TCGA 1992 to have been disposed of and reacquired by
virtue of or in consequence of the entry into or performance of this Agreement
or any other event since the Accounts Date.
(t) To the knowledge of the Company, neither the Company nor the
Subsidiary has received any asset by way of gift as mentioned in Section 282 of
the TCGA.
(u) To the knowledge of the Company, no distribution within the meaning
of any of Sections 209, 210, 211 and 418 of the Taxes Act 1988 has been made or
will be deemed to have been made by the Company or the Subsidiary (except for
dividends and interest shown in the Accounts and the previous audited accounts
of the Company or the Subsidiary) nor has the Company or the Subsidiary issued
any securities within the meaning of Part VI of the Taxes Act 1988 which remain
in issue and where the interest payable thereon falls to be treated as a
distribution.
(v) Neither the Company nor the Subsidiary has at any time:
(i) reduced its share capital or repurchased, repaid or redeemed
shares of any class of its share capital or capitalized any profits or
reserves or share premium account in the form of,
-22-
or in paying up any amounts unpaid on, any shares, debentures or other
securities or agreed or resolved to do any of the foregoing; or
(ii) provided capital to any company on terms whereby the company
so capitalized has in consideration thereof issued shares, loan stock or
other securities where the terms of any such capitalization were
otherwise than by way of a bargain made at arms' length or where the
shares, loan stock or other securities acquired are shown in the
Accounts at a value in excess of their market value at the time of
acquisition; or
(iii) issued any share capital to which the provisions of Section
249 ICTA could apply nor owns any such share capital.
(w) To the knowledge of the Company, neither the Company nor the
Subsidiary has entered into any transaction which has given or will or may give
rise to a charge to taxation under the provisions of the Inheritance Tax Act
1984.
(x) All documents in the possession of the Company and the Subsidiary to
which the Company or the Subsidiary, as appropriate, is a party which are
necessary to prove the title of the Company or the Subsidiary to its assets or
by virtue of which the Company or the Subsidiary has any right have been
properly stamped and for the avoidance of doubt this includes adjudication if
appropriate and no such documents which are outside the United Kingdom would
attract stamp duty if they were brought into the United Kingdom and all
transactions to which the Company and the Subsidiary are/were a party and
relating to chargeable securities of the Company or the Subsidiary have been
completed by duly stamped documents of transfer within the meaning of Section
87(5) of the Finance Act 1986 and neither the Company nor the Subsidiary is
liable to stamp duty reserve tax.
(y) Neither the Company nor the Subsidiary is under any present or
future liability to make and has not since the Accounts Date made or received or
surrendered or purported to receive or surrender any amount by way of group
relief (under any of the provisions of Sections 402, 403 and 407 to 413
(inclusive) of the ICTA or by way of advance corporation tax (under Section 240
of the ICTA) nor made any payment for such surrender nor made any election under
Section 247 of the ICTA. All claims by the Company and the Subsidiary for group
relief were valid when made and are now, to the knowledge of the Company, valid.
There is no arrangement or agreement in existence which, whether or not taken
together of the entry into of this Agreement or the Closing, would or may result
in the provisions of Section 410 or Section 240(11) of the ICTA applying to
either the Company or Subsidiary. Neither the Company or Subsidiary have
received any payment in respect of group relief or the surrender of Advance
Corporation Tax which, whether or not as a result of the entry into of this
Agreement or the Closing, is or may be liable to be refunded in whole or in
part.
(z) Neither the Company nor the Subsidiary is under any actual liability
to taxation in respect of any other company (other than the Company or the
Subsidiary) which at any time has been a member of the same group or consortium
as the Company and the Subsidiary or any associated company of the Company and
the Subsidiary for taxation purposes. No Taxation is or may become payable by
the Company or the Subsidiary pursuant to Section 189 of the TCGA in respect of
any transaction or event occurring on or prior to Completion.
(aa) To the knowledge of the Company no consideration due to the Company
or the Subsidiary have become irrecoverable with the meaning of Section 48 of
the TCGA so as to entitle either the Company or the Subsidiary to an adjustment.
-23-
(ab) There are no disputes or negotiations with H.M. Treasury or the
Inland Revenue present or pending in connection with Sections 739 to 742
(inclusive) of the ICTA or Section 770 of the ICTA and neither the Company nor
the Subsidiary has transferred part or all of any trade carried on outside the
United Kingdom to a company not resident in the United Kingdom.
(ac) Neither the Company nor the Subsidiary is a party to any
transaction or arrangement under which it may be required to pay for any asset
or any services or facilities of any kind or amount which is in excess of the
market value of that asset or services or facilities or will receive any payment
for an asset or any services or facilities of any kind that it has supplied or
provided or is liable to supply or provide which is less than the market value
of that asset or services or facilities.
(ad) Each of the Company and the Subsidiary has at all times been
resident for taxation purposes in the United Kingdom, is not chargeable to tax
or similar duties or imposts in any jurisdiction other than the United Kingdom
and has not made and is not entitled to make any claim under Part XVIII of the
ICTA and has never had any permanent establishment in any other country.
(ae) To the knowledge of the Company, neither the Company nor the
Subsidiary has entered into or been a party to any scheme or arrangement
containing pre-ordained steps and designed wholly for the purposes of avoiding
or deferring taxation within the principle of Furniss v. Dawson and no scheme or
transaction of any nature has been carried out by or proposed in relation to the
Company or the Subsidiary which has given rise to a charge to taxation under
Part XVII of the ICTA.
(af) Neither the Company nor the Subsidiary is, nor has been at any time
since incorporation, a close company for taxation purposes.
4.14 Employees.
---------
(a) A complete and accurate list setting forth all employees, scientific
advisors, contractors and consultants of the Company and the Subsidiary as of
the date hereof, together with their titles or positions, dates of hire, regular
work location and current compensation, current salary and benefits, age, notice
period, confidentiality obligations and all other terms and conditions of
employment or engagement, including any additional terms and conditions of
employment or engagement, whether contained in a Company or staff handbook or
otherwise, is included in Section 4.14(a) of the Disclosure Schedule.
(b) Section 4.14(b) of the Disclosure Schedule sets forth all employment
contracts or other agreements between the Company or the Subsidiary and any
officer or, employee or any other scientific advisor, contractor, consultant or
person relating to the performance of services, and copies of all such
agreements have been delivered to Purchaser.
(c) There are no outstanding offers of employment or engagement made to
any person by the Company or the Subsidiary and there is no one who has accepted
an offer of employment or engagement made by the Company or the Subsidiary who
has not yet taken up that employment or engagement.
(d) No director, employee, scientific advisor, contractor or
consultant of the Company or the Subsidiary:
(i) has given or received notice terminating his or her
employment or engagement or altering its terms, and no such person will
be entitled as a result of the entering into of this
-24-
Agreement and the sale of the Company Shares to Purchaser to give notice
of termination or to claim for any payment or benefit or to treat
himself as being released from any obligation and, to the actual
knowledge of the Company, no such person is planning to terminate his or
her employment as of or shortly after the Closing; or
(ii) is currently on sick leave which (as of the date of this
Agreement) has been for more than 14 consecutive days; or
(iii) is currently on maternity leave.
(e) As of the Management Accounts Date, there were no outstanding
arrears of salary, wages, holiday pay or other remuneration due to any director,
consultant, employee, contractor or scientific advisor of the Company or the
Subsidiary other than as set forth in the Management Accounts.
(f) Except as set forth in Section 4.14(f) of the Disclosure Schedule,
since the Management Accounts Date (i) no change has been made in the rate or
basis of remuneration, fee or other benefits provided for or paid to any
director, consultant, employee, contractor or scientific advisor of the Company
or the Subsidiary and (ii) no change has been made in any other terms of
employment or engagement of any such director, consultant, employee, contractor
or scientific advisor.
(g) Neither the Company nor the Subsidiary has entered into any
agreement or given any assurance (whether legally binding or not) regarding any
future variation in any contract of employment or other agreement in respect of
any of their directors, employees, consultants, contractors or scientific
advisors or any agreement imposing an obligation on the Company or the
Subsidiary to increase the basis and/or rates of remuneration or payment and/or
the provision of other benefits to or on behalf of its directors, employees,
consultants, contractors or scientific advisors at any future date.
(h) All employees of the Company and the Subsidiary who require a work
permit will have a valid work permit in force at the Closing.
(i) Within the period of twelve months prior to the date of this
Agreement the Company has not been a party to any relevant transfer as defined
in the Transfer of Undertakings (Protection of Employment) Regulations 1981 (as
amended) nor has the Company failed to comply with any duty to inform and
consult any appropriate representatives of any employees pursuant to such
legislations.
(j) Neither the Company nor the Subsidiary is liable to pay any
industrial levy nor do they have any outstanding undischarged liability to pay
any governmental or regulatory authority in any jurisdiction, other than as
provided in the Accounts, nor any taxation, contribution or other impost arising
in connection with the employment or engagement by the Company or the Subsidiary
of employees, directors, consultants, contractors, or scientific advisers, other
than Pay As You Earn in the United Kingdom in respect of employees and Value
Added Tax in respect of consultants, contractors and advisors registered for
Value Added Tax.
(k) The Company is not aware of any facts or matters affecting any
employee of the Company or the Subsidiary which might reasonably be considered
grounds for dismissing such employee or warning such employee that the
continuation of any conduct or behavior may lead to dismissal.
(l) No grievance or complaint of sex, race or disability discrimination,
whether formal or informal, is pending in an administrative or litigation
proceeding nor, to the Company's knowledge, has
-25-
been raised by any employee, director or consultant or former employee, director
or consultant of the Company or the Subsidiary in the twelve months prior to
Closing.
(m) Neither the Company nor the Subsidiary has made any loans to or
entered into any credit transaction with any of its directors or to any
employee.
(n) Other than the Company's 1996 Unapproved Company Share Option Plan
(the "Company Option Plan"), a copy of which has been delivered to Purchaser,
neither the Company nor the Subsidiary has any deferred compensation, pension,
health, profit sharing, bonus, stock purchase, stock option, hospitalization,
insurance, severance, redundancy, workers' compensation, supplemental
unemployment benefits, vacation benefits, disability benefits, or any other
employee benefit or otherwise) or welfare benefit plan or obligation covering
any of its officers or employees ("Employee Plans") or any informal
understanding with respect to the foregoing.
(o) The Company Option Plan has been maintained in material compliance
with its governing rules or terms, and all applicable requirements as to the
filing of reports, documents and notices with governmental or regulatory
agencies and the furnishing of documents to participants or beneficiaries have
been satisfied. No employee, former employee or relative or dependent of such
employee or other participants in the Company Option Plan has made any claim
against the Company or the Subsidiary in respect thereof.
(p) Neither the Company nor the Subsidiary has entered into any union
membership, security of employment, redundancy, recognition or other collective
agreement (whether legally binding or not) with a trade union, works council,
staff association, employee representatives or other organization or body of
employees, nor has the Company or the Subsidiary done any act which might be
construed as recognition.
(q) There are no controversies or labor or trade disputes or union
organization activities pending or, to the knowledge of the Company, threatened
between the Company or the Subsidiary and any of their respective employees nor
are there facts known to the Company which might indicate that there may be any
such dispute or activities.
(r) To the actual knowledge of the Company, none of the employees of the
Company or the Subsidiary belongs to any union or collective bargaining unit or
is represented by any works council, staff association or other body
representing employees relating to their activities as employees of the Company
or the Subsidiary.
(s) Each of the Company and the Subsidiary has complied with its
obligations under all applicable foreign, state and federal equal employment
opportunity and other laws and regulations related to employment or working
conditions including, but not limited to, the Equal Pay Act 1970, Article 119 of
the Treaty of Rome, the Sex Discrimination Act 1975, the Race Relations Act
1976, the Trade Union and Labour Relations (Consolidation) Act 1992, the Trade
Union Reform and Employment Rights Act 1993, the Disability Discrimination Act
1995 and the Employment Rights Act 1996.
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4.15 Compliance with Law.
-------------------
(a) All licenses, franchises, permits, approvals, clearances, consents,
certificates and other evidences of authority of the Company and the Subsidiary
that are necessary for the carrying on of their respective businesses
("Permits") are in full force and effect and, to the knowledge of the Company,
neither the Company nor the Subsidiary is in violation of any Permit in any
material respect. The Permits are not subject to any unusual or onerous
conditions. The businesses of the Company and the Subsidiary have been conducted
in accordance with their respective Memoranda and Articles of Association and,
except where such non-compliance would not have an Adverse Effect, all
applicable laws, regulations, orders and other requirements of governmental
authorities (whether in the United Kingdom or any other jurisdiction).
(b) To the knowledge of the Company, there are no investigations,
proceedings, inquiries, communications or other circumstances which indicate
that any Permits may be revoked, cancelled, superseded, modified or not renewed.
(c) No outstanding notices in relation to any statutory obligation have
been served on either the Company or the Subsidiary in respect of any of its
assets or in respect of any contravention or non-compliance with or alleged
contravention or non-compliance with any obligation or otherwise.
(d) Neither the Company nor the Subsidiary is a party to any agreement,
arrangement or concerted practice and is not carrying on any practice which in
whole or in part:
(i) is or requires to be registered under the Restrictive
Trade Practices Act 1976;
(ii) contravenes Articles 85 or 86 of the Treaty of Rome or
Articles 53 or 54 of the Agreement constituting the European Economic
Area or which has been notified to the European Commission or EFTA
Surveillance Authority for a negative clearance or exemption or which
ought to have been so notified;
(iii) contravenes or is invalidated by the provisions of the
Resale Prices Act 1976;
(iv) constitutes an anti-competitive practice as defined in the
Competition Act 1980;
(v) contravenes the Fair Trading Act 1973 or the Data
Protection Act 1984; or
(vi) contravenes or is invalidated by any anti-trust, fair
trading, consumer protection, sectoral regulation or similar legislation
in any jurisdiction where the Company or the Subsidiary has any assets
or carries on business.
(e) Neither the Company nor the Subsidiary has been a party to any
acquisition, merger or joint venture which was or was required to be notified to
the European Commission under Council Regulation 4064/89 or to the EFTA
Surveillance Authority or the European Commission under Article 57 of the
Agreement constituting the European Economic Area.
(f) To the knowledge of the Company, there is not in existence any
practice of the Company or the Subsidiary which is or has been under
investigation by or on behalf of the Office of Fair Trading, the Monopolies and
Mergers Commission, the Secretary of State for Trade and Industry or the
-27-
Commission of the European Communities or the EFTA Surveillance Authority or any
authority having jurisdiction in anti-trust, monopoly, competition or consumer
protection matters.
(g) Neither the Company nor the Subsidiary has received any process,
notice or communication (formal or informal) by or on behalf of the Office of
Fair Trading, the Monopolies and Mergers Commission, the Secretary of State for
Trade and Industry, the Commission of the European Communities or the EFTA
Surveillance Authority or any authority having jurisdiction in anti-trust,
monopoly, competition or consumer protection matters in relation to any aspect
of the business of the Company or the Subsidiary or any agreement or arrangement
to which it is or is alleged to be a party, and no circumstances exist which may
or might give rise to the Company or the Subsidiary receiving any such process,
notice or communication.
(h) Neither the Company nor the Subsidiary is, nor has it been, in
receipt of any state aid within the meaning of Article 92 of the Treaty of Rome.
(i) To the knowledge of the Company, there have not been and are not
pending, or in existence, any investigations or inquiries by, or on behalf of,
any governmental or administrative or other body in respect of any of the
affairs of the Company or the Subsidiary.
(j) Neither the Company nor the Subsidiary has paid any commission or
made any payment whether to secure business or otherwise to any person, firm or
company which in the hands of such person, firm or company would in accordance
with the relevant law give rise to legal liability.
(k) No director, officer, agent, employee or other person acting on
behalf of the Company or the Subsidiary has been party to the use of any assets
of the Company or the Subsidiary for unlawful contributions, gifts,
entertainment or other unlawful expenses relating to political or other
activity, or to the establishment or maintenance of any unlawful or unrecorded
fund of monies or other assets, or to the making of any false or fictitious
entries in the books or records of the Company or the Subsidiary, or to the
making of any unlawful payment.
(l) All statements and declarations made to HM Customs & Excise or any
other customs authority, including all import declarations, made by or on behalf
of the Company or the Subsidiary have been true, complete and accurate in all
material respects.
4.16 Litigation. There is no claim, dispute, action, proceeding, notice,
----------
order, suit, appeal or investigation, at law or in equity, pending or, to the
knowledge of the Company, threatened, against the Company or the Subsidiary or
any pension scheme of either the Company or the Subsidiary or any of their
respective directors, officers, employees, former employees or agents, or
involving any of their respective assets or properties, before any court,
agency, authority, arbitration panel or other tribunal. The Company is not aware
that there are any facts which, if known to shareholders, customers, suppliers,
governmental authorities or other persons, would result in any such claim (other
than customary and normal returns of product in the ordinary course of business
consistent with past practice), dispute, action, proceeding, suit or appeal or
investigation that would have or would reasonably be likely to have a material
adverse effect on the Company or the Subsidiary. Neither the Company nor the
Subsidiary is subject to any order, writ, injunction or decree of any court,
agency, authority, arbitration panel or other tribunal, nor is the Company or
the Subsidiary in default with respect to any notice, order, writ, injunction or
decree.
-28-
4.17 Contracts. Section 4.17 of the Disclosure Schedule contains a
---------
complete and accurate list of each contract and agreement in the following
categories to which the Company or the Subsidiary is a party, or by which the
Company or the Subsidiary is bound in any respect: (a) agreements for the
purchase, sale, lease or other disposition of equipment, goods, materials,
supplies, or capital assets, or for the performance of services which are not
terminable without penalty on 30 days' notice and as to which there are
obligations remaining to be performed by the Company or the Subsidiary, in any
case involving more than (pound)7,500; (b) contracts or agreements for the joint
performance of work or services, and all other joint venture, collaboration,
research, or other agreements, and grant requests or proposals for research and
development contracts not otherwise listed in Section 4.14 of the Disclosure
Schedule or in the Intellectual Property Disclosure Schedule (as defined in
Section 4.19); (c) management or employment contracts, consulting or scientific
advisory contracts, collective bargaining contracts, termination and severance
agreements not otherwise listed in Section 4.14 of the Disclosure Schedule; (d)
notes, mortgages, deeds of trust, loan agreements, security agreement,
guarantees, debentures, indentures, credit agreements and other evidences of
indebtedness; (e) warrants, repurchase or other contracts or agreements relating
to the issuance of capital stock or other equity interests of the Company or the
Subsidiary; (f) contracts or agreements with third parties who act as agents,
brokers, consignees, sale representatives or distributors; (g) contracts or
agreements with any director, officer, employee, consultant or shareholder
(other than in their capacities as employees of the Company) not otherwise
listed in Section 4.14 or Section 4.23 of the Disclosure Schedule; (h) powers of
attorney or similar authorizations granted by the Company or the Subsidiary to
third parties; (i) licenses, sublicenses, royalty agreements and other contracts
or agreements to which the Company or the Subsidiary is a party, or otherwise
subject, relating to technical assistance or to Proprietary Rights not otherwise
set forth in the Intellectual Property Disclosure Schedule; (j) personal
property or capital equipment leases and other rental, use or service
arrangements of the Company or the Subsidiary involving payment obligations in
excess of (pound)25,000 and which cannot be terminated without penalty on 30
days' notice; and (k) other contracts material to the business of the Company.
There are no other outstanding agreements, arrangements or contracts to
which either the Company or the Subsidiary is a party in any of the foregoing
categories, other than those attached to the Disclosure Schedule. Section 4.17
of the Disclosure Schedule sets forth a summary, identifying the parties and
briefly stating the nature of the discussions, of any negotiations or offers or
the like that are reasonably likely to result in the Company or the Subsidiary
entering into any agreement or arrangement of a kind described in this Section.
Neither the Company nor the Subsidiary has nor, to the knowledge of the
Company, has any of the employees of the Company or the Subsidiary entered into
any contract or agreement containing covenants limiting the right of the Company
or the Subsidiary to compete in any business or with any person. As used in this
Agreement, the terms "contract" and "agreement" include every contract and
agreement, and every legally enforceable commitment, understanding and promise,
in each case whether written or oral.
-29-
4.18 No Default.
----------
(a) To the knowledge of the Company, each of the contracts, agreements
or other instruments listed in Sections 4.14, 4.17, 4.19 and 4.23 of the
Disclosure Schedule is a legal, binding and enforceable obligation by or against
the Company or the Subsidiary, as the case may be, subject to the effect of
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
federal or state laws affecting the rights of creditors and the effect or
availability of rules of law governing specific performance, injunctive relief
or other equitable remedies. To the knowledge of the Company, no party with whom
the Company or the Subsidiary has an agreement or contract is in default
thereunder or has breached any term or provision thereof which is material to
the conduct of the business of the Company or the Subsidiary, as the case may
be.
(b) Neither the Company nor the Subsidiary has assigned or licensed any
of its rights under, and each of the Company and the Subsidiary has performed,
or is now performing, the obligations of, and each of the Company and the
Subsidiary is not in material default (or would by the lapse of time and/or the
giving of notice be in default) in respect of, any contract, agreement or
commitment binding upon it or its assets or properties and material to the
conduct of its business. No third party has notified the Company or the
Subsidiary of any claim, dispute or controversy with respect to any of the
contracts of the Company or the Subsidiary, as the case may be, nor has the
Company or the Subsidiary received notice or warning of alleged nonperformance,
delay in delivery or other noncompliance by the Company or the Subsidiary, as
the case may be, with respect to its obligations under any of those contracts,
nor, to the knowledge of the Company as of the date hereof, are there any facts
which exist indicating that any of those contracts may be totally or partially
terminated or suspended by the other parties thereto.
4.19 Proprietary Rights.
------------------
(a) Section 4.19 of the Disclosure Schedule sets forth a complete and
accurate list (the "Intellectual Property Disclosure Schedule") of all patents
and applications for patents, trademarks, trade names, service marks, and
copyrights, and applications therefor, owned or used by the Company or the
Subsidiary or in which it has any rights or licenses. Such list specifies, as
applicable: (i) the title of the patent, trademark trade name, service mark,
copyright or application therefor; (ii) the jurisdiction by or in which such
patent, trademark, trade name, service mark or copyright exists and has been
issued or registered or in which an application has been filed, including the
registration or application numbers; and (iii) all Licenses (copies of which
have been delivered to Purchaser). For the purposes of this Agreement,
"Licenses" means all licenses, sub-licenses, agreements, permissions,
undertakings and understandings pursuant to which any third party is licensed or
authorized to use any Proprietary Rights (as defined below) of the Company or
the Subsidiary or pursuant to which the Company or the Subsidiary is authorized
to use the Proprietary Rights of any third party (but not including any off-the-
shelf shrink wrap license) and "Licensors" means the licensors under the
Licenses.
(b) The Company has delivered to Purchaser, and the Intellectual
Property Disclosure Schedule sets forth a complete and accurate list of, all
agreements of the Company and the Subsidiary (other than the employment
agreements referred to in Section 4.19(h) below) by which any officer, employee
or consultant of the Company or the Subsidiary has assigned or conveyed to the
Company or the Subsidiary title and ownership to patents, patent applications,
trade secrets, and inventions developed or used by the Company or the Subsidiary
in their respective businesses.
(c) Each of the Company and the Subsidiary owns or possesses or has the
right to obtain valid and enforceable licenses or other rights to use all
patents, trademarks, trade secrets, service marks, trade
-30-
names, copyrights, inventions, products and processes under development,
databases, drawings, designs, proprietary know-how or information, other
confidential information, or other rights with respect thereto (collectively
referred to as "Proprietary Rights"), used or currently proposed to be used in
the business of the Company or the Subsidiary and material to the conduct of
their respective businesses as they have been and are now being conducted;
provided that, with respect to patents and trademarks the foregoing
representation is only made to the knowledge of the Company. The Company or the
Subsidiary has the rights to use, sell, license, sublicense, assign, transfer,
convey or dispose of such Proprietary Rights and the products, processes and
materials covered thereby, except as the rights of the Company or the Subsidiary
may be limited under the terms of their respective Licenses to third-party
Proprietary Rights.
(d) To the knowledge of the Company, the operations of the Company and
the Subsidiary do not conflict with or infringe, and no one has asserted to the
Company or the Subsidiary that such operations conflict with or infringe, any
Proprietary Rights owned, possessed or used by any third party. There are no
claims, disputes, actions, proceedings, suits or appeals pending against the
Company or the Subsidiary with respect to any Proprietary Rights, and, to the
knowledge of the Company, none has been threatened against the Company or the
Subsidiary. To the knowledge of the Company, there are no facts or alleged facts
which would reasonably serve as a basis for any claim that the Company or the
Subsidiary does not have the right to use and to transfer the right to use, free
of any rights or claims of others, all Proprietary Rights in the development,
manufacture, use, sale or other disposition of any or all products or services
presently being used, furnished or sold in the conduct of the business of the
Company or the Subsidiary as it has been and is now being conducted. To the
knowledge of the Company, the Proprietary Rights referred to in the preceding
sentence are free of any unresolved ownership disputes with respect to any third
party and to the knowledge of the Company there is no unauthorized use,
infringement or misappropriation of any of such Proprietary Rights by any third
party, including any employee or former employee of the Company or the
Subsidiary, nor, to the knowledge of the Company, is there any breach of any
license, sublicense or other agreement authorizing another party to use such
Proprietary Rights. Neither the Company nor the Subsidiary has entered into any
agreement granting any third party the right to bring infringement actions with
respect to, or otherwise to enforce rights with respect to, any such Proprietary
Right.
(e) The Company has delivered to Purchaser a complete file history of
the Company's patents and patent applications, and there are no other
proceedings before any patent or trademark authority or otherwise relating to
Proprietary Rights owned or used by the Company or the Subsidiary to which the
Company or the Subsidiary is a party. The Company or the Subsidiary has the
exclusive right to file, prosecute and maintain any such applications for
patents, copyrights or trademarks and the patents and registrations that issue
therefrom.
(f) Each of the Company and the Subsidiary has taken all measures it
deems reasonable and appropriate to maintain the confidentiality of the
Proprietary Rights used or proposed to be used in the conduct of its business
the value of which to the Company and the Subsidiary is contingent upon
maintenance of the confidentiality thereof. Without limitation, each of the
Company and the Subsidiary has complied in all material respects with all
express and/or implied obligations of confidentiality in relation to Proprietary
Rights owned by third parties.
(g) Each of the Company and the Subsidiary has secured valid written
assignments from all consultants and employees who contributed to the creation
or development of the Company's or the Subsidiary's Proprietary Rights of the
rights to such contributions that the Company or the Subsidiary does not already
own by operation of law and no employee or consultant retains any interest or
right in relation to such Proprietary Rights.
-31-
(h) Each employee and officer of and consultant to the Company and the
Subsidiary has executed an employment agreement (each of which is listed in
Section 4.14 of the Disclosure Schedule) containing nondisclosure and similar
terms. To the knowledge of the Company, no employee or officer of or consultant
to the Company or the Subsidiary is in violation of any term of any employment
contract, proprietary information and inventions agreement, non-competition
agreement, or any other contract or agreement relating to the relationship of
any such employee or consultant with the Company, the Subsidiary or any previous
employer (including without limitation any academic institution).
4.20 Computer System and Software.
----------------------------
(a) Each of the Company and the Subsidiary is the beneficial owner free
from Encumbrances or is the lessee of all the items of equipment, hardware,
firmware and accessories relating to the Computer System and no other person
(other than the lessor, as applicable) has any claims or rights in respect
thereof. For the purposes of this Agreement, "Computer System" means the
computer systems, including all its equipment, hardware, firmware, software and
accessories used in the business of the Company and/or the Subsidiary.
(b) Except in respect of Software licensed from third parties that is
listed in the Intellectual Property Disclosure Schedule, the Company is the
beneficial owner free from Encumbrances of all Software and all Software was
either developed by the Company's or the Subsidiary's employees in the course of
their employment or by third parties pursuant to agreements under which all
rights in the Software are vested in the Company or the Subsidiary as
appropriate. For the purposes of this Agreement, "Software" means all computer
programs and all related object code and source code and databases used by the
Company and the Subsidiary in connection with their business.
(c) Insofar as any Software has been licensed by the Company or the
Subsidiary from any third parties:
(i) each of the Licenses is in full force and effect and entitles
the Company or the Subsidiary to operate the relevant Software in the
way in which the Company or the Subsidiary has operated it prior to the
date of this Agreement;
(ii) neither the Company nor the Subsidiary is in dispute with
any Licensor and has not done, or omitted to do, any act which might
entitle any Licensor to terminate any of the Licenses.
(d) There are in existence maintenance and support agreements in respect
of all equipment, hardware, furniture, software and accessories used in the
Computer System, and neither the Company nor the Subsidiary has done, or omitted
to do, any act which might entitle the provider of the maintenance and support
services to terminate such agreements or to withhold or refuse to supply any
services thereunder; and neither the Company nor the Subsidiary is in dispute
with such provider regarding its maintenance and support obligations.
(e) The Computer System comprises equipment, hardware, firmware,
software including source code and object code, supporting materials and
accessories which are necessary to enable the Company and the Subsidiary to
carry on their respective businesses in the same manner and to the same extent
as they have been carried on prior to Closing and the rights to use the Computer
System or any part thereof will not be adversely affected by the transactions
effected by this Agreement.
-32-
4.21 Insurance. The Company and the Subsidiary and all of their
---------
respective assets are insured against such risks and in such sums as are
disclosed in the Disclosure Schedule. All premiums due in respect of such
insurances have been fully paid or have been paid in accordance with the
obligations stated in the insurance policies; and the next renewal date for each
of such insurances is a date at least 30 days after the date of Closing. To the
Company's knowledge, nothing has been done or omitted to be done which could
make any policy of insurance void or voidable, or which is likely to result in
an increase in premium; and none of such insurances is subject to any special or
unusual terms or restrictions or to the payment of any premium in excess of the
normal rate. To the Company's knowledge, (i) each such insurance policy is
enforceable and in full force and effect; (ii) such policy will continue to be
enforceable and in full force and effect immediately following the Closing in
accordance with the terms thereof as in effect prior to the Closing; (iii)
neither the Company nor the Subsidiary is in breach or default (including with
respect to the payment of premiums or the giving of notices) under such policy,
and no event has occurred which, with notice or the lapse of time, would
constitute such a breach or default or permit termination, modification or
acceleration, under such policy; and (iv) neither the Company nor the Subsidiary
has received any notice from the insurer disclaiming coverage or reserving
rights with respect to a particular claim or such policy in general. There are
no claims arising against the Company or the Subsidiary by an employee, a worker
or any other third party, in respect of any accident or injury, and to the
Company's knowledge there are no unreported accidents or incidents that would
give rise to such a claim, which are not fully covered by insurance.
4.22 Brokers or Finders. Neither the Company nor the Subsidiary nor any
------------------
of their respective officers, directors, employees or shareholders has employed
any broker or finder or incurred any liability for any brokerage, finder's or
similar fees or commissions in connection with this Agreement or the
transactions contemplated hereby.
4.23 Related Parties. No officer or director of the Company, or any
---------------
affiliate of the Company or any such person (other than a venture capital
investor holding Preferred Ordinary Shares), has, either directly or indirectly,
(a) an interest in any corporation, partnership, firm or other person or entity
which furnishes or sells services or products which are similar to those
furnished or sold by the Company or the Subsidiary, (b) a beneficial interest in
any contract or agreement to which the Company or the Subsidiary is a party or
by which the Company or the Subsidiary may be bound, or (c) an interest in any
of the assets used by the Company or the Subsidiary. Neither the Company nor the
Subsidiary has guaranteed, or has incurred any Encumbrance on any of its assets
to secure, any obligation of any director, officer, employee, consultant or
shareholder of the Company.
4.24 Certain Advances. There are no loans by the Company or the
----------------
Subsidiary to any directors, officers, employees, consultants or shareholders of
the Company or the Subsidiary, or owing by any affiliate of any director or
officer of the Company or the Subsidiary, other than advances in the ordinary
course of business consistent with past practice to officers and employees for
reimbursable business expenses which are not in excess of (pound)1,000 for any
one individual.
4.25 Underlying Documents. Copies of any underlying documents listed or
--------------------
described as having been disclosed to Purchaser pursuant to this Agreement have
been furnished to Purchaser. All such documents furnished or made available to
Purchaser are true and correct copies, and there are no amendments or
modifications thereto, that have not been disclosed in writing to Purchaser.
-33-
4.26 Banking Facilities.
------------------
(a) Other than in the ordinary course of business and consistent with
past practice neither the Company nor the Subsidiary has lent any money which
has not been repaid, or owns the benefit of any debt (whether or not due for
repayment), other than debts which have arisen in the ordinary course of
business and consistent with past practice, and the Company has not made any
loan or quasi-loan contrary to any legislation of England and Wales. Neither the
Company nor the Subsidiary has outstanding, nor has agreed to issue, any loan
capital, nor has it factored any of its debts, or engaged in financing of a type
which would not require to be shown or reflected in the Accounts nor borrowed
any money which it has not repaid, except for borrowings not exceeding the
amounts shown in the Accounts. Section 4.26 of the Disclosure Schedule
identifies:
(i) Each bank, savings and loan or similar financial institution
in which the Company or the Subsidiary has an account or safety deposit
box and the numbers of the accounts or safety deposit boxes maintained
by the Company or the Subsidiary thereat and the credit or debit
balances thereon as at the business day prior to the date of this
Agreement;
(ii) The names of all persons authorized to draw on each such
account or to have access to any such safety deposit box facility,
together with a description of the authority (and conditions thereof, if
any) or each such person with respect thereto; and
(iii) All security held by banks or financial institutions to
secure loans, facilities or arrangements made to the Company or the
Subsidiary.
(b) Except as fully disclosed in the Disclosure Schedule, neither the
Company nor the Subsidiary has incurred any indebtedness in the nature of bank
borrowings which it has not repaid in full or satisfied.
(c) Except as fully disclosed in the Disclosure Schedule, neither the
Company nor the Subsidiary has bank overdraft facilities, acceptance credits or
other borrowing facilities outstanding or available to it.
4.27 Insolvency.
----------
(a) No order has been made, petition presented, resolution passed or
meeting convened for the winding up of either the Company or the Subsidiary or
for an administration order in respect of the Company or the Subsidiary; no
receiver, receiver and manager, administrative receiver or liquidator has been
appointed of the business or the whole or any part of the assets or undertaking
of the Company or the Subsidiary; and there are no circumstances likely to give
rise to the appointment of any such receiver, receiver and manager,
administrative receiver or liquidator.
(b) There are no unfulfilled or unsatisfied judgments or court orders
outstanding against the Company or the Subsidiary or by which either may be
affected.
(c) No distress, distraint, charging order, garnishee order, execution
or other process which a court or a similar body may use to enforce payment of a
debt has been levied or applied for in respect of the whole or any part of the
property, assets or undertaking of either the Company or the Subsidiary.
-34-
(d) In relation to any property or assets held by the Company or the
Subsidiary under any hire, hire purchase, conditional or credit sale, leasing or
retention of title agreement or otherwise belonging to a third party, no event
has occurred which entitles, or which upon intervention or notice by the third
party may entitle, the third party to repossess the property or assets concerned
or to terminate the agreement or any license in respect thereof.
(e) Neither the Company nor the Subsidiary has stopped payment nor is
either the Company or the Subsidiary insolvent or unable to pay its debts for
the purposes of section 123 of the Insolvency Act 1986.
(f) To the knowledge of the Company, neither the Company nor the
Subsidiary has been a party to any transaction with any third party which, in
the event of such third party going into liquidation or an administration order
or a bankruptcy order being made in relation to it or to him, would constitute
(in whole or in part) a transaction at an undervalue, a preference, an invalid
floating charge or an extortionate credit transaction or part of a general
assignment of debts, under sections 238 to 245 and sections 339 to 344 of the
Insolvency Act 1986.
(g) No person who at present is a director or officer of the Company or
the Subsidiary is, or at any time was, subject to any disqualification order
under the Act or under any legislation relating to the disqualification of
directors and officers, or, to the knowledge of the Company, was the subject of
any investigation or proceedings capable of leading to a disqualification order
being made. To the knowledge of the Company, no person who at any time since the
date of incorporation of either the Company or the Subsidiary was a director or
officer of the Company or the Subsidiary is, or at any time was, subject to any
disqualification order under the Act or under any legislation relating to the
disqualification of directors and officers, or was the subject of any
investigation or proceedings capable of leading to a disqualification order
being made.
4.28 No Misleading Statements. No representation or warranty made
------------------------
herein, in the Disclosure Schedule or in the Appendices, Schedules and Exhibits
attached hereto by the Company contains any untrue statement of a material fact
or omits a material fact necessary in order to make the statements contained
herein or therein, in the light of the circumstances under which they are made,
not misleading.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PURCHASER
-------------------------------------------
Purchaser represents and warrants to each Shareholder as follows:
5.1 Organization. Purchaser is a corporation duly incorporated, validly
------------
existing and in good standing under the laws of Delaware and has all requisite
corporate power and authority to own, lease and operate its properties and to
carry on its business as now being conducted.
5.2 Authority. Purchaser has all requisite corporate power and authority
---------
to enter into this Agreement and to perform its obligations hereunder and
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement, the performance by Purchaser of its obligations hereunder and
the consummation of the transactions contemplated hereby have been duly and
validly authorized by all necessary corporate action on the part of Purchaser.
This Agreement is a valid and binding obligation of Purchaser.
-35-
5.3 No Conflict with Other Instruments. The execution, delivery and
----------------------------------
performance of this Agreement (including the Exhibits hereto), the related
agreements required to be entered into as conditions of Closing under Article
VII hereof, and the transactions contemplated hereby (a) will not result in any
violation of, conflict with, constitute a breach, violation or default (with or
without notice or lapse of time, or both) under, give rise to a right of
termination, cancellation, forfeiture or acceleration of any obligation or loss
of any benefit under, or result in the creation or encumbrance on any of the
properties or assets of Purchaser or any of its subsidiaries, pursuant to (i)
any provision of Purchaser's Certificate of Incorporation or Bylaws, or (ii) any
agreement, contract, understanding, note, mortgage, indenture, lease, franchise,
license, permit or other instrument to which Purchaser or any of its
subsidiaries is a party or by which the properties or assets of Purchaser or any
of its subsidiaries is bound, or (b) to the knowledge of Purchaser after
reasonable inquiry, conflict with or result in any breach or violation of any
statute, judgment, decree, order, rule or governmental regulation applicable to
Purchaser or any of its subsidiaries or their respective properties or assets,
except, in the case of clauses (a)(ii) and (b) for any of the foregoing that
would not, individually or in the aggregate, have a material adverse effect on
Purchaser and its subsidiaries, taken as a whole, or that could not result in
the creation of any material lien, charge or encumbrance upon any assets of
Purchaser or any of its subsidiaries or that could not prevent, materially delay
or materially burden the transactions contemplated by this Agreement.
5.4 Governmental Consents. No consent, approval, order or authorization
---------------------
of, or registration, declaration or filing with, any governmental authority is
required by or with respect to Purchaser in connection with the execution and
delivery of this Agreement by Purchaser or the consummation by Purchaser of the
transactions contemplated hereby, except for (a) such consents, approvals,
orders, authorizations, registrations, declarations, qualifications or filings
as may be required under federal or state securities laws in connection with the
transactions set forth herein or which the failure to obtain would not have a
material adverse effect on the consummation by Purchaser of the transactions
contemplated hereby and (b) the listing of the Purchaser Shares to be issued
pursuant hereto on The Nasdaq Stock Market ("Nasdaq").
5.5 SEC Documents. Purchaser has furnished to the Company and each
-------------
Shareholder complete and accurate copies of the following documents
("Purchaser's SEC Filings") that have been filed with the United States
Securities and Exchange Commission (the "SEC") under the United States
Securities Exchange Act of 1934 and the rules and regulations promulgated
thereunder (the "Exchange Act"): Purchaser's Annual Report on Form 10-K for the
year ended December 31, 1997, Purchaser's Quarterly Reports on Form 10-Q for the
quarter ended March 31, 1998, Purchaser's Current Report on Form 8-K dated June
12, 1998, and Purchaser's Proxy Statement for its Annual Meeting of Stockholders
held on June 15, 1998. As of their respective filing dates, Purchaser's SEC
Filings complied in all material respects with the requirements of the Exchange
Act and, as of their respective filing dates, Purchaser's SEC Filings did not
contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made therein, in the light of the circumstances
under which they were made, not misleading.
5.6 Financial Statements. As of their respective filing dates, each of
--------------------
the consolidated financial statements (including, in each case, any related
notes) contained in Purchaser's SEC Filings complied as to form in all material
respects with the applicable published rules and regulations of the SEC with
respect thereto, was prepared in accordance with GAAP applied on a consistent
basis throughout the periods involved (except as may be indicated in the notes
to such financial statements, or, in the case of unaudited statements, as
permitted for presentation in quarterly reports on Form 10-Q) and fairly
presented, in all material respects, the consolidated financial position of
Purchaser and its subsidiaries
-36-
as of the respective dates thereof and the consolidated results of operations
and cash flows of Purchaser and its subsidiaries for the periods indicated,
except that the unaudited interim financial statements were or are subject to,
normal and recurring year-end audit adjustments. Since March 31, 1998, there has
been no material adverse change in the financial condition of Purchaser and its
subsidiaries, taken as a whole.
5.7 Litigation. Except as disclosed in Purchaser's SEC Filings, there is
----------
no (a) claim, action, suit or proceeding pending or, to the knowledge of
Purchaser threatened against or relating to Purchaser or its subsidiaries before
any court or governmental or regulatory authority or body or arbitration
tribunal, or (b) outstanding judgment, order, writ, injunction or decree, or
application, request or motion therefor, of any court, governmental agency or
arbitration tribunal in a proceeding to which Purchaser or any subsidiary of
Purchaser was or is a party except, in the case of clauses (a) and (b) above,
such as would not, individually and in the aggregate, either impair Purchaser's
ability to consummate the Merger or have a material adverse effect on Purchaser
and its subsidiaries taken as a whole.
5.8 Shares of Purchaser Common. The Purchaser Shares have been duly
--------------------------
authorized and, when issued as contemplated hereby at the Closing, will be
validly issued, fully paid and nonassessable. The shares of Purchaser Common to
be issued pursuant to the Converted Company Options (as defined in Section 6.1
below) will, when issued and delivered to the holders thereof on payment of the
consideration provided for therein, be duly authorized, validly issued, fully
paid and nonassessable.
5.9 No Misleading Statements. No representation or warranty made herein
------------------------
or in the Appendices, Schedules and Exhibits attached hereto by Purchaser
contains any untrue statement of a material fact or omits a material fact
necessary in order to make the statements contained herein or therein, in the
light of the circumstances under which they are made, not misleading.
5.10 Brokers or Finders. Neither Purchaser nor any of its officers,
------------------
directors or employees has employed any broker or finder or incurred any
liability for any brokerage, finder's or similar fees or commissions in
connection with this Agreement or the transactions contemplated hereby.
5.11 Acquisition for Investment. Purchaser is acquiring the Company
--------------------------
Shares for its own account and not with the present view to sell such the
Company Shares in connection with the distribution thereof.
-37-
ARTICLE VI
ADDITIONAL AGREEMENTS
---------------------
6.1 Stock Options.
-------------
(a) The Company shall have taken or caused to be taken such action as
may be required under the Company Option Plan or otherwise to amend the Company
Option Plan, effective prior to the date of this Agreement, as set forth in
Exhibit D-1 hereto and to amend the Company Option Plan, effective as of the
Closing, as set forth in Exhibit D-2 hereto. Prior to the Closing, the Company
shall have taken or caused to be taken such action as may be required under each
other outstanding option or other right to acquire Company Shares granted to
consultants of the Company under any stock option or purchase plan, program or
similar arrangement of the Company other than the Company Option Plan (each, a
"Company Consultant Option"), to cause the Company Consultant Options to be
governed by the rules of the Company Option Plan, as amended in the manner and
effective as of the dates specified in the preceding sentence, and to cause each
holder of a Company Consultant Option to enter into an Option Exchange
Agreement, effective as of the Closing, in the form attached as Exhibit D-3
hereto, with Purchaser. The options to acquire Company Shares issued under the
Company Option Plan ("Company Employee Options") and Company Consultant Options
are referred to collectively as the "Company Options."
(b) As of the Closing, each Company Employee Option, whether or not then
exercisable or vested, will be converted into an option (a "Converted Company
Option") to purchase shares of Purchaser Common. Each Converted Company Option
shall be governed by the rules of the Company Option Plan, as amended effective
as of the Closing, including the vesting provisions set forth in Rule 3 thereof,
but upon the Closing shall be exercisable for that number of whole shares of
Purchaser Common as is equal to the product of the number of Company Shares
subject to such Company Option multiplied by the Exchange Ratio, as calculated
pursuant to Schedule III attached hereto, rounded down to the nearest whole
number, and shall have an exercise price per share of Purchaser Common equal to
the quotient obtained by dividing the exercise price per share (in U.S. dollars,
converted in accordance with Section 10.7 hereof) of the Company Shares subject
to such Company Option by the Exchange Ratio, rounded up to the nearest whole
cent. The number of shares of Purchaser Common and the per share exercise price
of each Converted Company Option is set forth on Schedule II hereto.
(c) Holders of Company Employee Options will not be entitled to acquire
Company Shares after the Closing. No further stock awards, stock options or
stock appreciation rights shall be granted under the Company Option Plan and any
other employee stock option plans of the Company subsequent to the Closing.
(d) As soon as practicable after the Closing, Purchaser shall issue to
each holder of a Converted Company Option a Replacement Option Certificate in
the form of Exhibit D-4 hereto evidencing the conversion of the Company Option
pursuant to the provisions set forth above, in exchange for an Option Release
Deed in the form of Exhibit D-5 hereto executed by each holder of a Converted
Company Option.
(e) Except as contemplated by the Option Exchange Agreements with
respect to Company Consultant Options, the Company shall take all actions
necessary to ensure that none of Purchaser, the Company or any of their
respective subsidiaries is or will be bound by any Company Options, other
options, warrants, rights or agreements that would entitle any person, other
than Purchaser or its
-38-
affiliates, to own, immediately after the Closing, any of the issued shares of
the Company or the Subsidiary or to receive any payment in respect thereof other
than as provided in this Section 6.1.
(f) Purchaser shall reserve as of the time of Closing a sufficient
number of shares of Purchaser Common to permit full issuance of all of the
shares of Purchaser Common underlying the Converted Company Options to be issued
and to be issued pursuant to the Option Exchange Agreements.
(g) Purchaser agrees to file a registration statement on Form S-8 no
later than sixty (60) days after the Closing relating to the shares of Purchaser
Common underlying the Converted Company Options and to be issued pursuant to the
Option Exchange Agreements and shall use commercially reasonable efforts to
maintain the effectiveness (and current status) of such registration statement
for so long as such Converted Company Options and obligations to issue shares of
Purchaser Common pursuant to the Option Exchange Agreements remain outstanding.
6.2 Expenses. All fees and expenses incurred in connection with the
--------
transactions contemplated hereby including, without limitation, all legal,
accounting, financial advisory, consulting and all other fees and expenses of
third parties incurred by a party in connection with the negotiation and
effectuation of the terms and conditions of this Agreement and the transactions
contemplated hereby, shall be the obligation of the respective party incurring
such fees and expenses; provided, however, that if the purchase and sale of the
Company Shares is consummated, the Company shall not incur financial advisory,
brokers', finders', legal and accounting fees and expenses in connection with
the transactions contemplated hereby in excess of the amounts set forth in
Section 6.2 of the Disclosure Schedule, and any fees and expenses incurred by
the Company in excess of such amount shall be recovered by Purchaser pursuant to
the Escrow Agreement, without regard to the last sentence of Section 8.2(a).
6.3 Public Disclosure. Unless otherwise required by law (including,
-----------------
without limitation, securities laws) or, as to Purchaser, by the rules and
regulations of Nasdaq, prior to the Closing, no disclosure (whether or not in
response to an inquiry) of the discussions or subject matter of this Agreement
or the transactions contemplated hereby shall be made by any party hereto unless
approved by Purchaser and the Company prior to release, provided that such
approval shall not be unreasonably withheld.
6.4 Reasonable Efforts. Subject to the terms and conditions of this
------------------
Agreement, each of the parties hereto shall use all commercially reasonable
efforts to take promptly, or cause to be taken promptly, all actions, and to do
promptly, or cause to be done promptly all things reasonably necessary, proper
or advisable under applicable laws and regulations to consummate and make
effective the transactions contemplated hereby, to obtain all necessary waivers,
consents and approvals, to effect all necessary registrations and filings and to
remove any injunctions or other impediments or delays, legal or otherwise, in
order to consummate and make effective the transactions contemplated by this
Agreement for the purpose of securing to the parties hereto the benefits
contemplated by this Agreement; provided that neither the Company nor Purchaser
shall be required to agree to any divestiture by Purchaser or the Company, as
may be applicable, or any of Purchaser's or the Company's subsidiaries or
affiliates of shares of capital stock or of any business, assets or properties
of Purchaser or its affiliates or the Company, its subsidiaries or its
affiliates, or the imposition of any material limitation on the ability of any
of them to conduct their businesses or to own or exercise control of such
assets, properties and stock.
6.5 Conduct; Notification of Certain Matters. Each of Purchaser, the
----------------------------------------
Company and the Shareholders shall use all commercially reasonable efforts to
not take, or fail to take, any action that
-39-
from the date hereof through the Closing would cause or constitute a breach of
any of its respective representations, warranties, agreements and covenants set
forth in this Agreement. The Shareholders and the Company shall give prompt
written notice to Purchaser, and Purchaser shall give prompt written notice to
the Company and the Shareholders' Representative, on behalf of the Shareholders,
of (a) the occurrence or non-occurrence of any event, the occurrence or
non-occurrence of which causes or is likely to cause any representation or
warranty of the Shareholders or the Company, on the one hand, or Purchaser, on
the other hand, contained in this Agreement to be untrue or inaccurate in any
material respect at or prior to the Closing and (b) any failure of the
Shareholders, the Company or Purchaser, as the case may be, to comply with or
satisfy in any material respect any covenant, condition or agreement to be
complied with or satisfied by it hereunder; provided, however, that the delivery
of any notice pursuant to this Section 6.5 shall not limit or otherwise affect
the other party's right to rely on the representations and warranties herein or
any the other remedies available to the party receiving such notice.
6.6 Registration Rights. Purchaser and the Shareholders agree that the
-------------------
rights and obligations of Purchaser and the Shareholders with respect to
registration under the Securities Act of the Purchaser Shares shall be as set
forth in Exhibit C attached hereto.
6.7 Additional Documents and Further Assurances. Each party hereto, at
-------------------------------------------
the reasonable request of the other party hereto, shall execute and deliver such
other instruments and do and perform such other acts and things as may be
reasonably necessary or desirable for effecting completely the consummation of
this Agreement and the transactions contemplated hereby.
6.8 Blue Sky Laws. Purchaser shall take such steps as may be necessary
-------------
to comply with the securities and blue sky laws of all jurisdictions which are
applicable to the issuance of the shares of Purchaser Common pursuant hereto.
The Company shall use all reasonable efforts to assist Purchaser as may be
reasonably necessary to comply with the securities and blue sky laws of all
jurisdictions which are applicable in connection with the issuance of the shares
of Purchaser Common pursuant hereto.
6.9 Nasdaq Listing. Purchaser shall authorize for listing on the Nasdaq
--------------
National Market the shares of Purchaser Common issuable pursuant hereto, and
those required to be reserved for issuance, in connection with the Converted
Company Options.
6.10 Indemnification. Purchaser shall guarantee and shall cause the
---------------
Company to maintain and perform in the same manner the Company's existing
indemnification provisions with respect to present and former directors and
officers of the Company for all losses, claims, damages, expenses or liabilities
arising out of actions or omissions or alleged actions or omissions occurring at
or prior to the Closing to the extent permitted or required under applicable law
and the Company's Memorandum and Articles of Association in effect as of the
date hereof (to the extent consistent with applicable law), for a period of not
less than six (6) years after the Closing. In the event that Purchaser (i)
causes the Company to consolidate with or merge into any other entity and the
Company is not the continuing or surviving corporation or entity of such
consolidation or merger, or (ii) causes the Company to transfer or convey all or
substantially all of the Company's properties and assets to any entity, then and
in each such case, to the extent necessary to effect the purposes of this
Section 6.10, proper provision shall be made so that the successors and assigns
of the Company assume the obligations set forth in this Section 6.10 and none of
the actions described in clause (i) or (ii) shall be taken until such provision
is made.
6.11 Tax Returns.
-----------
-40-
(a) Purchaser or its duly authorized agents shall prepare all
documentation and shall have conduct of all matters (including correspondence)
relating to the Tax Returns (as defined in Section 4.13(a) above) and
computations of the Company and the Subsidiary for all accounting periods
commencing on or after January 1, 1998 and including the accounting period in
which the Closing occurs.
(b) For the six month period immediately following the Closing (the
"Shareholders' Responsibility Period"), as representative for the Shareholders,
the Shareholders' Representative or his duly authorized agents shall prepare the
Tax Returns and computations of the Company and the Subsidiary for all
accounting periods up to and including the accounting period for the year ended
December 31, 1997 and submit them to Purchaser. After the expiration of the
Shareholders' Responsibility Period, to the extent that the Tax Returns and
computations referred to earlier in this Section 6.11(b) have not already been
submitted, Purchaser or its duly authorized agents shall prepare the Tax Returns
and computations of the Company and the Subsidiary for all accounting periods up
to and including the accounting period for the year ended December 31, 1997 and
submit them to the Shareholders' Representative.
(c) Purchaser shall procure that the Tax Returns and computations
mentioned in Section 6.11(b) shall be authorized, signed and submitted to HM
Inspector of Taxes without amendment or with such amendments as Purchaser and
the Shareholders' Representative agree are reasonably necessary and shall give
the Shareholders' Representative or his duly authorized agents all such
assistance as may reasonably be required to agree those Tax Returns and
computations with HM Inspector of Taxes.
(d) During the Shareholders' Responsibility Period, the Shareholders'
Representative or his duly authorized agents shall prepare all documentation and
shall have conduct of all matters (including correspondence) relating to the Tax
Returns and computations of the Company and the Subsidiary for all accounting
periods up to and including the accounting period for the year ended December
31, 1997 provided that the Shareholders' Representative shall not without the
prior written consent of Purchaser (not to be unreasonably withheld or delayed)
transmit any written communication to HM Inspector of Taxes or agree any Tax
Return or computation with HM Inspector of Taxes. After the expiration of the
Shareholders' Responsibility Period, Purchaser or its duly authorized agents
shall prepare all documentation and shall have conduct of all matters (including
correspondence) relating to the Tax Returns and computations of the Company and
the Subsidiary for all accounting periods up to and including the accounting
period for the year ended December 31, 1997 provided that Purchaser shall not
without the prior written consent of the Shareholders' Representative (not be
unreasonably withheld or delayed) transmit any written communication to HM
Inspector of Taxes or agree any Tax Return or computation with HM Inspector of
Taxes.
(e) Purchaser shall procure that the Company and the Subsidiary afford
such access to their books, accounts and records during the Shareholders'
Responsibility Period as is necessary and reasonable to enable the Shareholders'
Representative or his duly authorized agents to prepare the Tax Returns and
computations of the Company and the Subsidiary for all accounting periods up to
and including the accounting period for the year ended December 31, 1997 and for
the conduct of all matters relating to them in accordance with this Section
6.11.
(f) During the Shareholders' Responsibility Period, the Shareholders'
Representative shall take all reasonable steps to ensure that the Tax Returns
and computations of the Company and the Subsidiary for all accounting periods up
to and including the accounting period for the year ended December 31,
-41-
1997 are as soon as reasonably practicable prepared and so far as reasonably
practicable agreed with HM Inspector of Taxes.
ARTICLE VII
CONDITIONS TO THE CLOSING
-------------------------
7.1 Conditions to Obligations of Each Party to Effect the Closing. The
-------------------------------------------------------------
respective obligations of each party to this Agreement to consummate the Closing
and the transactions contemplated by this Agreement shall be subject to the
satisfaction at or prior to the Closing of the following conditions:
(a) Illegality. There shall not have been any statute, rule or
----------
regulation enacted, promulgated or deemed applicable to the transactions
contemplated by this Agreement by any court of competent jurisdiction or any
commission, governmental body, regulatory agency, authority or tribunal (a
"Governmental Entity") that prevents the consummation of the Closing or the
transactions contemplated by this Agreement or has the effect of making the
purchase of Company Shares illegal.
(b) Absence of Litigation. No action, suit or proceeding concerning
---------------------
Purchaser, the Company, the Subsidiary or any of the Shareholders shall be
pending by or before any court of competent jurisdiction or Governmental Entity
wherein an unfavorable judgment, order, decree, stipulation or injunction would
(i) prevent consummation of any of the transactions contemplated by this
Agreement or (ii) cause any of the transactions contemplated by this Agreement
to be rescinded following consummation.
(c) U.K. Tax Clearance. The Shareholders shall have received a letter,
------------------
dated prior to the Closing Date, from HM Inland Revenue, giving clearance for
the transactions contemplated by this Agreement pursuant to Section 138 of the
TCGA and Section 707 of the ICTA.
(d) Re-registration. All action necessary to re-register the Company as
---------------
a private limited company shall have been taken, as provided in the Master
Agreement, and a certificate of registration of the Company as a private company
shall have been issued by the Register of Companies under Section 55 of the
Companies Act, and a true and correct copy thereof shall have been delivered to
Purchaser prior to the Closing.
(e) Nasdaq Listing. The shares of Purchaser Common issuable pursuant
--------------
hereto, and those required to be reserved for issuance in connection with the
Converted Company Options, shall have been authorized for trading on the Nasdaq
National Market effective upon the Closing Date.
7.2 Additional Conditions to Obligations of the Shareholders. The
--------------------------------------------------------
obligations of the Shareholders to consummate the Closing and the transactions
contemplated by this Agreement shall be subject to the satisfaction at or prior
to the Closing of each of the following conditions, any of which may be waived,
in writing, exclusively by the Shareholders' Representative:
(a) Representations and Warranties. The representations and warranties
------------------------------
of Purchaser contained in this Agreement shall be true and correct on the date
hereof and on and as of the Closing Date, as though made on and as of the
Closing Date (except for representations and warranties made as of a specified
date, which need be true and correct only as of the specified date), except for
changes contemplated by this Agreement and except for such inaccuracies that,
considered collectively, have not
-42-
had and would not reasonably be expected to have a material adverse effect on
Purchaser (it being understood that, for purposes of determining the accuracy of
such representations and warranties, all "material adverse effect" and other
materiality qualifications contained in such representations and warranties
shall be disregarded and that a reduction in the trading price of the Purchaser
Common on the Nasdaq National Market, whether occurring at any time or from time
to time, shall not in itself constitute a material adverse change in the
financial condition of Purchaser).
(b) Agreements and Covenants. Purchaser shall have performed or complied
------------------------
in all material respects with all agreements and covenants required by this
Agreement and the Master Agreement to be performed or complied with by it on or
prior to the Closing.
(c) Officer's Certificate. Purchaser shall have furnished the Company
---------------------
and the Shareholders with a certificate dated the Closing Date signed on behalf
of it by the Chief Executive Officer or President to the effect that the
conditions set forth in Sections 7.2(a) and (b) have been satisfied.
7.3 Additional Conditions to the Obligations of Purchaser. The
-----------------------------------------------------
obligations of Purchaser to consummate the Closing and the transactions
contemplated by this Agreement shall be subject to the satisfaction at or prior
to the Closing of each of the following conditions, any of which may be waived,
in writing, exclusively by Purchaser:
(a) Representations and Warranties. The representations and warranties
------------------------------
of the Shareholders and the Company contained in this Agreement shall be true
and correct on the date hereof and on and as of the Closing Date, as though made
on and as of the Closing Date (except for representations and warranties made as
of a specified date, which need be true and correct only as of the specified
date), except for changes contemplated by this Agreement and except for such
inaccuracies that, considered collectively, have not had and would not
reasonably be expected to have a material adverse effect on the Company (it
being understood that, for purposes of determining the accuracy of such
representations and warranties, all "material adverse effect" and other
materiality qualifications contained in such representations and warranties
shall be disregarded).
(b) Agreements and Covenants. The Shareholders and the Company shall
------------------------
have performed or complied in all material respects with all agreements and
covenants required by this Agreement and the Master Agreement to be performed or
complied with by them on or prior to the Closing.
(c) Absence of Litigation. No action, suit or proceeding concerning the
---------------------
Company, the Subsidiary or any of the Shareholders shall be pending or
threatened in writing by or before any court of competent jurisdiction or
Governmental Entity wherein an unfavorable judgment, order, decree, stipulation
or injunction would affect materially and adversely the right of the Company or
the Subsidiary to own, operate or control any of its assets or operations, and
no such judgment, order, decree, stipulation or injunction shall be in effect.
(d) Seller's Certificates. Each of the Shareholders shall have furnished
---------------------
Purchaser with a certificate dated the Closing Date to the effect that each of
the conditions set forth in Sections 7.3(a), (b) and (c) applicable to such
person has been satisfied and the Company shall have furnished Purchaser with a
certificate dated the Closing Date signed on behalf of it by the Chief Executive
Officer or the President to the effect that each of the conditions set forth in
Sections 7.3(a), (b) and (c) applicable to the Company has been satisfied.
-43-
(e) Third Party Consents. Purchaser shall have been furnished with
--------------------
evidence satisfactory to it that the Company has obtained the consents,
approvals, assignments and waivers set forth in Section 7.3(e) of the Disclosure
Schedule.
(f) Resignations. Purchaser shall have received the resignations of the
------------
directors and officers of the Company listed on Schedule 2.2, to be effective
immediately upon the Closing, each in a form acceptable to Purchaser accompanied
by the appropriate Companies House Form.
(g) Escrow Agreement. Purchaser, the Escrow Agent referred to in
----------------
Section 8.2(a) and the Shareholders' Representative shall have entered into the
Escrow Agreement in substantially the form attached hereto as Exhibit B.
(h) Restrictive Covenants Agreement. The persons listed on Schedule 7.3
-------------------------------
hereto shall have entered into a restrictive covenants agreement with Purchaser,
effective as of the Closing, in the form set forth as Exhibit E.
(i) Employment Agreements. The persons listed on Schedule 7.3 hereto
---------------------
shall have entered into employment agreements with the Company, effective as of
the Closing, in form and substance reasonably satisfactory to such employees and
Purchaser.
(j) Amendment of Celltech Agreement. The agreement dated 21 June 1996
-------------------------------
among the Company, Celltech Group PLC and Celltech Therapeutics Limited shall
have been amended to eliminate paragraph 4 thereof and to terminate all
obligations of the Company under such paragraph 4.
(k) Corporate Records. Purchaser shall have received the statutory books
-----------------
of the Company and the Subsidiary complete and accurate up to Closing and any
company seal(s), certificates of incorporation, certificates of incorporation on
change of name, and all unused share certificates of the Company and the
Subsidiary.
(l) Financial Statements. Purchaser shall have received the management
--------------------
accounts of the Company and the Subsidiary comprising the balance sheets as at
August 31, 1998 and the profit and loss accounts for the months commencing on
the day immediately following the Management Accounts Date and ending on August
31, 1998.
-44-
ARTICLE VIII
INDEMNIFICATION AND ESCROW
--------------------------
8.1 Survival of Representations and Warranties, Etc.
------------------------------------------------
(a) All of the Shareholders' and the Company's representations and
warranties in this Agreement or in any instrument delivered pursuant to this
Agreement shall survive the Closing and continue until 5:00 p.m., California
time, on the first anniversary of the Closing Date (the "Expiration Date"). For
purposes of this Agreement, each statement or other item of information set
forth in the Disclosure Schedule or in any update to the Disclosure Schedule
shall be deemed to be a representation and warranty made by the Company in this
Agreement that such statement or item of information is true and correct. The
waiver of any condition based on the accuracy of any representation or warranty,
or the performance or compliance of any covenant or obligation, will not affect
the right to indemnification set forth in this Article VIII, and nothing in this
Section 8.1 shall be deemed to limit any right or remedy for fraud with respect
to the representations and warranties set forth in Article IV. All
representations and warranties made by Purchaser in this Agreement or in any
instrument delivered pursuant to this Agreement shall terminate and expire as of
the Closing, and any liability of Purchaser hereunder with respect to such
representations and warranties shall thereupon cease, except in the event of
fraud by Purchaser with respect thereto.
(b) The representations, warranties, covenants and obligations of the
Shareholders, and the rights and remedies that may be exercised by Purchaser,
shall not be limited or otherwise affected by or as a result of any information
furnished to, or any investigation conducted for or on behalf of, or any
knowledge acquired by, Purchaser or its officers, directors, employees,
stockholders or agents as to the accuracy or inaccuracy of any such
representation or warranty, except as otherwise expressly provided in this
Agreement in relation to the Disclosure Schedule.
-45-
8.2 Indemnification and Escrow Arrangements.
---------------------------------------
(a) Escrow Fund and Indemnification. Subject to the limitations set
-------------------------------
forth herein, by approval and adoption of this Agreement, each of the
Shareholders agrees to indemnify Purchaser for such Shareholder's pro rata
portion of claims, losses, liabilities, damages, deficiencies, costs and
expenses, including reasonable attorneys' fees and expenses, and expenses of
investigation and defense (calculated after deduction for insurance proceeds
recovered or recoverable) incurred by Purchaser directly or indirectly
(including, after the Closing, by the Company or the Subsidiary) as a result of
any inaccuracy or breach of a representation or warranty of the Shareholders or
the Company contained herein or in any Schedules or Exhibits delivered pursuant
to this Agreement, any failure by the Shareholders or the Company to perform or
comply with any covenant contained herein, or in the Master Agreement
(hereinafter individually a "Loss" and collectively "Losses"). For purposes of
this Article VIII and the determination of whether a Loss has occurred in
accordance with the preceding sentence, the representations and warranties of
the Company contained herein shall be deemed to have been made as of the
Announcement Date rather than as of the date of this Agreement (other than those
made as of a specified date, which shall be made as of such specified dates) and
all of such representations and warranties may be deemed to be modified by the
Original Disclosure Schedule, as such Original Disclosure Schedule may be
updated to reflect events that occurred following the Announcement Date and that
were permitted or contemplated by Section 2 of the Master Agreement (and, except
for such updates, shall not otherwise be deemed to be modified by the Disclosure
Schedule). The Shareholders acknowledge that such Losses, if any, would relate
to unresolved contingencies existing at the Closing, which if resolved at the
Closing would have led to a reduction in the aggregate Consideration. At the
Closing, the Shareholders will be deemed to have received and deposited with the
Escrow Agent (as defined below) the Escrow Shares (plus any additional shares as
may be issued upon any stock split, stock dividend or recapitalization effected
by Purchaser after the Closing), without any act of any Shareholder. As soon as
practicable after the Closing, the Escrow Shares will be deposited with First
Trust of California, National Association (or other institution acceptable to
Purchaser and the Shareholders' Representative), as Escrow Agent (the "Escrow
Agent"), such deposit to constitute an escrow fund (the "Escrow Fund") to be
governed by the terms set forth herein and in the Escrow Agreement. The Escrow
Fund shall be available to compensate Purchaser for any Losses. The Escrow Fund
shall be held as a trust fund and shall not be subject to any lien, attachment,
trustee process or any other judicial process of any creditor of any party, and
shall be held and disbursed solely for the purposes and in accordance with the
terms of this Article VIII and the Escrow Agreement. The right of Purchaser
after the Closing to assert indemnification claims and receive indemnification
payments from the Escrow Fund pursuant to this Article VIII shall be the sole
and exclusive right and remedy exercisable by Purchaser with respect to any
inaccuracy or breach in any representation, warranty, or covenant contained in
this Agreement or in any instrument delivered pursuant to this Agreement or in
connection with the transactions contemplated hereby; provided, however, that
this limitation shall not apply to any misrepresentation or breach of warranty
constituting fraud, as to which fraudulent acts the Shareholders shall be liable
for all Losses with respect thereto (subject in all cases to the provisions of
Section 8.2(i)). Purchaser may not receive any shares from the Escrow Fund
unless and until Officer's Certificates (as defined in Section 8.2(d) below)
identifying Losses, the aggregate cumulative amount of which exceed
(pound)62,500, have been delivered to the Escrow Agent as provided in Section
8.2(d); in such case, Purchaser may recover from the Escrow Fund the entire
amount of the cumulative Losses. For the avoidance of doubt, the Company shall
not be liable in respect of any inaccuracy or breach in any representation,
warranty or covenant contained in this Agreement, howsoever caused, or in any
instrument delivered pursuant to this Agreement or in connection with the
transactions contemplated hereby.
-46-
(b) Escrow Period; Distribution upon Termination of Escrow Periods.
--------------------------------------------------------------
Subject to the following requirements, the Escrow Fund shall be in existence
immediately following the Closing and shall terminate at 5:00 p.m., California
time, on the Expiration Date (the "Escrow Period"); provided that the Escrow
Period shall not terminate with respect to such amount (or some portion
thereof), that is necessary in the reasonable judgment of Purchaser, subject to
the objection of the Shareholders' Representative and the subsequent arbitration
of the matter in the manner provided in Section 8.2(f) hereof, to satisfy any
unsatisfied Losses concerning facts and circumstances existing prior to the
termination of the Escrow Period specified in any Officer's Certificate
delivered to the Escrow Agent prior to termination of the Escrow Period. As soon
as any such Loss has been resolved, the Escrow Agent shall deliver to the
Shareholders the remaining portion of the Escrow Fund not required to satisfy
any other such unresolved Loss. Deliveries of Escrow Shares to the Shareholders
pursuant to this Section 8.2(b) shall be made in proportion to their respective
original contributions to the Escrow Fund.
(c) Protection of Escrow Fund.
-------------------------
(i) The Escrow Agent shall hold and safeguard the Escrow Fund during the
Escrow Period, shall treat such fund as a trust fund in accordance with the
terms of this Agreement and not as the property of Purchaser and shall hold and
dispose of the Escrow Fund only in accordance with the terms of Section 1.7(f)
and this Article VIII.
(ii) Any shares of Purchaser Common or other equity securities issued or
distributed by Purchaser (including shares issued upon a stock split) in respect
of shares of Purchaser Common in the Escrow Fund at the time of issuance or
distribution shall be added to the Escrow Fund and become a part thereof. Cash
dividends on shares of Purchaser Common in the Escrow Fund shall not be added to
the Escrow Fund but shall be distributed to the recordholders thereof.
(iii) Each Shareholder shall have voting rights and cash dividend
distribution rights with respect to the shares of Purchaser Common contributed
to the Escrow Fund on behalf of such Shareholder (and on any voting securities
added to the Escrow Fund in respect of such shares of Purchaser Common Stock).
(d) Claims Upon Escrow Fund.
-----------------------
(i) Upon receipt by the Escrow Agent at any time on or before 5:00 p.m.
California time on the Expiration Date of a certificate signed by any officer of
Purchaser (an "Officer's Certificate"): (A) stating that Purchaser has paid or
properly accrued or reasonably anticipates that it will have to pay or accrue
Losses and specifying an aggregate amount thereof, and (B) specifying in
reasonable detail the individual items of Losses included in the amount so
stated, the date each such item was paid or properly accrued, or the basis for
such anticipated liability, and the nature of the misrepresentation, breach of
warranty or covenant to which such item is related and to the extent known a
reasonable summary of the facts underlying the claim, and if no objection is
received from the Shareholders' Representative in accordance with Section
8.2(e), the Escrow Agent shall, subject to the provisions of Section 8.2(e)
hereof, deliver to Purchaser out of the Escrow Fund, as promptly as practicable,
shares of Purchaser Common Stock held in the Escrow Fund in an amount equal to
such Losses.
(ii) For the purposes of determining the number of shares of Purchaser
Common to be delivered to Purchaser pursuant to Section 8.2(d)(i) hereof, the
shares of Purchaser Common shall be valued at the Purchaser Common Average
Price. Purchaser shall certify such fair market value in a certificate
-47-
signed by Purchaser and shall deliver such certificate to the Escrow Agent at
the time the Escrow Agreement shall be executed.
(e) Objections to Claims. At the time of delivery of any Officer's
--------------------
Certificate to the Escrow Agent, a duplicate copy of such certificate shall be
delivered to the Shareholders' Representative in the manner contemplated by
Section 10.1 and for a period of 30 days after such delivery, the Escrow Agent
shall make no delivery to Purchaser of any Escrow Shares pursuant to Section
8.2(d) hereof unless the Escrow Agent shall have received written authorization
from the Shareholders' Representative to make such delivery. After the
expiration of such 30-day period, the Escrow Agent shall make delivery of shares
of Purchaser Common from the Escrow Fund in accordance with Section 8.2(d)
hereof, provided that no such payment or delivery may be made if the
Shareholders' Representative shall object in a written statement to the claim
made in the Officer's Certificate, and such statement shall have been delivered
to the Escrow Agent prior to the expiration of such 30-day period.
(f) Resolution of Conflicts; Arbitration.
------------------------------------
(i) In case the Shareholders' Representative shall object in writing to
any claim or claims made in any Officer's Certificate, the Shareholders'
Representative and Purchaser shall attempt in good faith to agree upon the
rights of the respective parties with respect to each of such claims. If the
Shareholders' Representative and Purchaser should so agree, a memorandum setting
forth such agreement shall be prepared and signed by both parties and shall be
furnished to the Escrow Agent. The Escrow Agent shall be entitled to rely on any
such memorandum and distribute shares of Purchaser Common from the Escrow Fund
in accordance with the terms thereof.
(ii) If no such agreement can be reached after good faith negotiation,
either Purchaser or the Shareholders' Representative may demand arbitration of
the matter unless the amount of the damage or loss is at issue in pending
litigation with a third party, in which event arbitration shall not be commenced
until such amount is ascertained or both parties agree to arbitration; and in
either such event the matter shall be settled by arbitration conducted by three
arbitrators. Purchaser and the Shareholders' Representative shall each select
one arbitrator, and the two arbitrators so selected shall select a third
arbitrator, each of which arbitrators shall be independent and have at least ten
years relevant experience. The arbitrators shall set a limited time period and
establish procedures designed to reduce the cost and time for discovery while
allowing the parties an opportunity, adequate in the sole judgment of the
arbitrators, to discover relevant information from the opposing parties about
the subject matter of the dispute. The arbitrators shall rule upon motions to
compel or limit discovery and shall have the authority to impose sanctions,
including attorneys' fees and costs, to the extent as a court of competent law
or equity, should the arbitrators determine that discovery was sought without
substantial justification or that discovery was refused or objected to without
substantial justification. The decision of a majority of the three arbitrators
as to the validity and amount of any claim in such Officer's Certificate shall
be binding and conclusive upon the parties to this Agreement, and
notwithstanding anything in Section 8.2(e) hereof, the Escrow Agent shall be
entitled to act in accordance with such decision and make or withhold payments
out of the Escrow Fund in accordance therewith. Such decision shall be written
and shall be supported by written findings of fact and conclusions which shall
set forth the award, judgment, decree or order awarded by the arbitrators. The
fees and expenses of the three arbitrators and the costs of the arbitrators
shall be borne by the non-prevailing party to the arbitration. For purposes of
the foregoing, in any arbitration hereunder in which any claim or the amount
stated in the Officer's Certificate is at issue, Purchaser shall be deemed to be
the non-prevailing party in the event that the arbitrators award Purchaser less
than the sum of one-half (1/2) of the disputed amount plus any amounts not in
dispute; otherwise, the Shareholders as represented by the Shareholders'
Representative shall be
-48-
deemed to be the non-prevailing party. In all other instances, the arbitrators
shall make a ruling as to which of the parties shall be deemed the
non-prevailing party.
(iii) Judgment upon any award rendered by the arbitrators may be entered
in any court having jurisdiction. Any such arbitration shall be held in New
York, New York in accordance with the Center for Public Resources Rules for
Non-Administered Arbitration of Business Disputes. The arbitration shall be
governed by the provisions of the United States Arbitration Act, 9 U.S.C. ss.
1-16.
(iv) The parties hereto acknowledge that it is their intention in
entering into this Agreement and establishing the dispute resolution mechanism
contemplated by this Section 8.2(f) that all disputes under this Agreement
following the Closing and relating to claims under Section 8.2(d) shall be
resolved by good faith negotiation and arbitration in the manner contemplated by
this Section 8.2(f). In the period prior to Closing, disputes under this
Agreement may be resolved by any legal means available to the parties.
(g) Actions of the Shareholders' Representative. A decision, act,
-------------------------------------------
consent or instruction of the Shareholders' Representative shall constitute a
decision of all the Shareholders for whom a portion of the Escrow Shares
otherwise issuable to them are deposited in the Escrow Fund and shall be final,
binding and conclusive upon each of the Shareholders, and the Escrow Agent and
Purchaser may rely upon any such decision, act, consent or instruction of the
Shareholders' Representative as being the decision, act, consent or instruction
of each Shareholder. The Escrow Agent and Purchaser are hereby relieved from any
liability to any person for any acts done by them in accordance with such
decision, act, consent or instruction of the Shareholders' Representative.
(h) Third-Party Claims. In the event Purchaser becomes aware of a
------------------
third-party claim which Purchaser believes may result in a demand against the
Escrow Fund, Purchaser shall promptly notify the Shareholders' Representative of
such claim, and the Shareholders' Representative, as representative for the
Shareholders, shall be entitled, at his expense (which expense shall pursuant to
and subject to the limitations set forth in Section 1.7(f) be payable out of the
Escrow Fund), to participate in any defense of such claim. If the amount in
controversy in connection with any third-party claim shall be less than the
value of the Escrow Shares remaining in the Escrow Fund (determined in
accordance with Section 8.2(d)) and the Shareholders' Representative
acknowledges in writing to Purchaser that if the allegations in such claim are
in fact true then any liability arising from the adjudication or other
settlement of such claim would be for the account of the Shareholders and would
be a valid claim against the Escrow Fund, then the Shareholders' Representative
shall be entitled to assume the defense of such claim and, if at the time any
settlement of such claim shall be proposed, the amount in controversy shall
continue to be less than the value of the Escrow Shares remaining in the Escrow
Fund (determined in accordance with Section 8.2(d)), shall have the power to
settle such claim in an amount not to exceed such remaining value. If the
Shareholders' Representative is not entitled to or chooses not to assume the
defense of any such claim, Purchaser shall consult with and attempt to solicit
the consent of the Shareholders' Representative prior to and in connection with
any settlement of any such claim, but Purchaser shall have the right in its sole
discretion to settle any such claim. If any such claim is, however, settled
without the consent of the Shareholders' Representative and Purchaser seeks to
recover the amount of the settlement by claiming against the Escrow Fund, the
settlement of any such claim with third-party claimants shall not alone be
determinative of the amount of any claim against the Escrow Fund and the
Shareholders' Representative may dispute such amount through the process
provided by Section 8.2(f). In the event that the Shareholders' Representative
has consented in writing to any such settlement and acknowledged that the claim
by Purchaser is a valid claim against the Escrow Fund, the Shareholders'
Representative shall have no power or authority to object under any provision
-49-
of this Article VIII to the amount of any claim by Purchaser against the Escrow
Fund with respect to such settlement.
(i) Claims Resulting From Breaches of Shareholder Representations. If
-------------------------------------------------------------
any claims for indemnity by Purchaser hereunder shall be based upon a Loss
resulting from the inaccuracy of one or more of the representations of a
Shareholder under Article III, then, notwithstanding the terms of Section
8.2(a), the claim against the Escrow Fund shall not be paid on a pro rata basis
from the Escrow Shares allocated to all of the Shareholders, but instead shall
be deemed paid out of the Escrow Shares allocated to the breaching Shareholder.
Any such disproportionate distribution of Escrow Shares shall be duly noted in
the records of the Escrow Agent and shall be reflected in the final distribution
of Escrow Shares to the Shareholders upon the termination of the Escrow Period.
Furthermore, if any claims for indemnity by Purchaser hereunder shall be based
upon a Loss that is not limited to the Escrow Fund resulting from a fraudulent
action on the part of a Shareholder, all claims hereunder by Purchaser with
respect to such Loss shall be made against the Shareholder engaging in the
fraudulent action and not against the other Shareholders.
(j) Change of Trade. The Shareholders shall not be liable for any claims
---------------
(or portion thereof) for indemnity under the warranties in Section 4.13 or for a
claim arising pursuant to Section 8.3 to the extent that such claims (or portion
thereof) arise or are exacerbated as a result of any change in the nature or
conduct of the trade or business of the Subsidiary after the Closing.
8.3 Claims Resulting From Breaches of Certain Representations and
-------------------------------------------------------------
Warranties.
----------
(a) Subject to Section 8.3(b) below, Purchaser shall be deemed to have a
claim for the purposes of this Article VIII if and to the extent that:
(i) any expenditure incurred by the Subsidiary in any acounting
period up to and including the year ended December 31, 1997 is not
available for set-off against the investment income received by the
Subsidiary in any accounting period up to and including the year ended
December 31, 1997; and/or
(ii) the Subsidiary agrees with HM Inspector of Taxes in its tax
computation for the year ended December 31, 1996 that it has fewer than
(pound)614,831 Schedule D, Case I trading losses as at December 31, 1996
that are available for carry forward or carry back.
For the purposes of a claim pursuant to this Section 8.3, it shall not
be a defense to any claim that Purchaser knew or ought to have known about the
subject of the claim by reason of anything disclosed in the Original Disclosure
Schedule or the Disclosure Schedule.
(b) For the purposes of this Section 8.3, the amount of the Loss arising
as a result of a claim under Section 8.3(a) shall be:
(i) in the case of a claim pursuant to Section 8.3(a)(i), the
amount of tax that actually becomes payable by the Subsidiary as a
result of the non-availability of expenditure for set-off against the
investment income received by the Subsidiary in any accounting period up
to and including the year ended December 31, 1997; and/or
(ii) in the case of a claim pursuant to Section 8.3(a)(ii), the
amount of tax that would have been saved but for the non-availability
for carry forward or carry back of Schedule D, Case
-50-
I trading losses (assuming for purposes of this Section 8.3(b)(ii) only
that there would have been sufficient future trading profits against
which such trading losses could have been offset in full had such
trading losses been available).
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
---------------------------------
9.1 Termination. This Agreement may be terminated and the
-----------
transactions contemplated hereby abandoned at any time prior to the Closing:
(a) By mutual written consent of the Company and Purchaser;
(b) By Purchaser or the Company if: (i) the Closing has not occurred by
October 30, 1998 (provided that the right to terminate this Agreement under this
clause (i) shall not be available to any party whose willful failure to fulfill
any obligation hereunder has been the cause of, or resulted in, the failure of
the Closing to occur on or before such date); (ii) there shall be a final
non-appealable order, decree or ruling of a court of competent jurisdiction in
effect preventing consummation of the transactions contemplated hereby; or (iii)
there shall be any statute, rule, regulation or non-appealable order enacted,
promulgated or issued or deemed applicable to the transactions contemplated
hereby by any governmental entity that would make consummation of such
transactions illegal;
(c) By Purchaser or the Company if there shall be any action taken, or
any statute, rule, regulation or order enacted, promulgated or issued or deemed
applicable to the transactions contemplated hereby by any governmental entity,
which would: (i) prohibit Purchaser's or the Company's ownership or operation of
any portion of the business of the Company or (ii) compel Purchaser or the
Company to dispose of or hold separate, as a result of the transactions
contemplated hereby, any portion of the business or assets of the Company or
Purchaser; in either case, the unavailability of which assets or business would
have a material adverse effect on Purchaser or would reasonably be expected to
have a material adverse effect on Purchaser's ability to realize the benefits
expected from the transactions contemplated hereby.
(d) By Purchaser if it is not in material breach of its representations,
warranties or obligations under this Agreement and there has been a breach of
any representation, warranty, covenant or agreement contained in this Agreement
on the part of the Shareholders or the Company or if any representation or
warranty of the Shareholders or the Company shall have become untrue, in either
case such that the conditions set forth in Section 7.3 would not be satisfied;
provided, however, if such breach or breaches are capable of being cured prior
to the Closing, such breaches shall not have been cured within 30 days of
delivery to the Company and the Shareholders' Representative of written notice
of such breach or breaches (but no such cure period shall be required if such
breach by its nature cannot be cured);
(e) By the Company if it and the Shareholders are not in material breach
of its representations, warranties or obligations under this Agreement and there
has been a breach of any representation, warranty, covenant or agreement
contained in this Agreement on the part of Purchaser or if any representation or
warranty of Purchaser shall have become untrue, in either case such that the
conditions set forth in Section 7.2 would not be satisfied; provided, however,
if such breach or breaches are capable of being cured prior to the Closing, such
breaches shall not have been cured within 30 days of delivery
-51-
to Purchaser of written notice of such breach or breaches (but no such cure
period shall be required if such breach by its nature cannot be cured);
Where action is taken to terminate this Agreement pursuant to this
Section 9.1, it shall be sufficient for such action to be authorized by the
Board of Directors (as applicable) of the party taking such action.
9.2 Effect of Termination. In the event of termination of this Agreement
---------------------
as provided in Section 9.1, this Agreement shall forthwith become void and there
shall be no liability or obligation on the part of Purchaser or the
Shareholders, or their respective subsidiaries, officers, directors or
stockholders, provided that, the provisions of Section 6.2 and Article IX of
this Agreement shall remain in full force and effect and survive any termination
of this Agreement and provided that nothing herein shall relieve any party from
liability for any willful or intentional breach of its representations,
warranties, covenants or agreements in this Agreement.
9.3 Amendment or Supplement. This Agreement may not be amended or
-----------------------
supplemented except by an instrument in writing signed by or on behalf of
Purchaser, the Company and the Shareholders' Representative (on behalf of the
Shareholders).
9.4 Extension of Time, Waiver. At any time prior to the Closing,
-------------------------
Purchaser, on the one hand, and the Company and the Shareholders'
Representative, on behalf of the Shareholders, on the other hand, may, to the
extent legally allowed:
(a) Extend the time for the performance of any of the
obligations or other acts of the other party hereto,
(b) Waive any inaccuracies in the representations and
warranties made to such party contained herein or in any document
delivered pursuant hereto, and
(c) Waive compliance with any of the agreements or conditions for
the benefit of such party contained herein; provided, that no failure or
delay by any party hereto in exercising any right hereunder shall
operate as a waiver thereof nor shall any single or partial exercise
thereof preclude any other or further exercise thereof or the exercise
of any other right hereunder.
Any agreement on the part of any party hereto to any such extension or waiver
shall be valid if set forth in an instrument in writing signed on behalf of such
party.
ARTICLE X
GENERAL
-------
10.1 Notices. Any notice, request, instruction or other document to be
-------
given hereunder by any party to the other shall be in writing and shall be
deemed to have been given or made if in writing and (a) delivered personally, as
of the date of such delivery, (b) by telecopy as of the date of receipt of
confirmation of transmission (provided that such telecopy was promptly confirmed
by personal delivery, first class mail, or courier), or (c) by internationally
recognized delivery service guaranteeing delivery in two business days or less,
with the price of delivery paid by the sender, as of the date of such delivery,
to the parties at the following addresses and numbers:
-52-
(i) If to Purchaser:
Incyte Pharmaceuticals, Inc.
3174 Porter Drive
Palo Alto, CA 94304
Attn: Chief Executive Officer
Fax: 001-650-845-4574
with a copy to:
Pillsbury Madison & Sutro LLP
235 Montgomery Street
San Francisco, CA 94104
Attn: Stanton D. Wong
Fax: 001-415-983-7396
and to
Taylor Joynson Garrett
Carmelite
50 Victoria Embankment
Blackfriars
London, England EC4Y 0DX
Attn: David N. Kent
Fax: 011-44-171-936-2666
(ii) If to the Company:
Hexagen Limited
214 Cambridge Science Park
Milton Road
Cambridge, England CB4 4WA
Attn: Chief Executive Officer
Fax: 011-44-1223-424855
with a copy to:
Venture Law Group
2800 Sand Hill Road
Menlo Park, CA 94025
Attn: Steven J. Tonsfeldt
Fax: 001-650-233-8386
-53-
and to
Cameron McKenna
Mitre House
160 Aldersgate Street
London, England EC1A 4DD
Attn: Richard H. Tyler
Fax: 011-44-171-367-2000
(iii) If to the Shareholders' Representative:
Stephen W. Bunting, Ph.D.
Director
Abingworth Management Limited
38 Jermyn Street
London, England SW1Y 6DN
Fax: 011-44-171-287-0480
with a copy to:
Testa, Hurwitz & Thibeault, LLP
High Street Tower
125 High Street
Boston, MA 02110
Attn: Daniel P. Finkelman
Fax: 001-617-248-7100
(iv) If to any Shareholder:
To such Shareholder at the address set forth
on Schedule I
or to such other address as may be designated in writing by the parties, by a
notice given as aforesaid.
10.2 Headings. The headings of the several sections of this Agreement
--------
are inserted for convenience of reference only and are not intended to affect
the meaning or interpretation of this Agreement.
10.3 Counterparts. This Agreement may be executed in counterparts, and
------------
when so executed each counterpart shall be deemed to be an original, and said
counterparts together shall constitute one and the same instrument.
10.4 Entire Agreement; Assignment. This Agreement, the Schedules and
----------------------------
Exhibits hereto (including the Disclosure Schedule), and the documents and
instruments and other agreements among the parties hereto referenced herein
(including the Master Agreement and together with the Confidentiality Agreement
between Purchaser and the Subsidiary effective as of September 18, 1997): (a)
constitute the entire agreement among the parties with respect to the subject
matter hereof and supersede all prior agreements and understandings, both
written and oral, among the parties with respect
-54-
to the subject matter hereof and (b) shall not be assigned by operation of law
or otherwise except as mutually agreed in writing between the parties, except
that Purchaser may transfer or assign its rights, interests or obligations
hereunder in whole or in part to one or more direct or indirect subsidiaries of
Purchaser upon notice to the Company and the Shareholders, provided that no such
transfer or assignment shall relieve Purchaser of any of its obligations
hereunder. This Agreement will be binding upon and inure to the benefit of the
parties and their respective heirs, executors, administrators, successors and
permitted assigns.
10.5 Severability. In the event that any provision of this Agreement or
------------
the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as reasonably
to effect the intent of the parties hereto. The parties further agree to replace
such void or unenforceable provision of this Agreement with a valid and
enforceable provision that will achieve, to the extent possible, the economic,
business and other purposes of such void or unenforceable provision.
10.6 Other Remedies. Except as otherwise provided herein, any and all
--------------
remedies herein expressly conferred upon a party will be deemed cumulative with
and not exclusive of any other remedy conferred hereby, or by law or equity upon
such party, and the exercise by a party of any one remedy will not preclude the
exercise of any other remedy.
10.7 Interpretation. References in this Agreement to "(pound)" or
--------------
"Pounds" and "p" or "pence" shall mean the lawful currency of England and Wales
and references to "$" or "Dollars" shall mean the lawful currency of the United
States. For any conversion between the currencies the exchange rate shall be
$1.63 to (pound)1.00.
10.8 Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of California, USA, except the provisions
of Sections 1.7 and 10.11 hereof, which shall be governed by and construed in
accordance with English law (and in respect of such Sections as shall be
governed by English law, each party to this Agreement submits to the exclusive
jurisdiction of the English courts (subject in all cases to the terms of Section
8.2(f)(iv))), in each case, regardless of the laws that might otherwise govern
under applicable principles of conflicts of laws thereof.
10.9 Appointment of Agent. Subject to the terms of Section 1.7 and
--------------------
Article VIII, the Shareholders hereby irrevocably appoint the Shareholders'
Representative as their agent to accept service of legal proceedings in
connection with all matters arising out of this Agreement and the transactions
contemplated by this Agreement and agree that any writ, judgment or other notice
of legal process in connection with any such legal action or proceedings shall
be sufficiently served if delivered to such person.
-55-
10.10 Absence of Third-Party Beneficiary Rights. No provision of this
-----------------------------------------
Agreement is intended, or will be interpreted, to provide to or create for any
third-party beneficiary rights or any other rights of any kind in any client,
customer, affiliate, shareholder, employee, partner or any party hereto or any
other person or entity, and all provisions hereof will be personal solely
between the parties to this Agreement, except that the provisions of Section
6.10 shall be for the benefit of, and enforceable by, the indemnified parties
referred to therein.
10.11 Restrictive Trade Practices Act. Where this Agreement is or forms
-------------------------------
part of an agreement which is subject to registration under the Restrictive
Trade Practices Act 1976, as amended, of England ("RTPA"), no restriction
accepted or information provision made under that agreement shall be given
effect to or enforced until the day after particulars of the agreement shall
have been furnished to the Director General of Fair Trading under section 24 of
the RTPA. If any party shall wish to furnish such particulars, the other parties
will render such cooperation and undertake such action as may reasonably be
required of them for such purpose so that particulars may be furnished as soon
as practicable following the signature of this Agreement and each of the parties
consents to the disclosure of all information so furnished. In this Section, the
words and terms "agreement" and "subject to registration" shall have the
meanings respectively given to them by the RTPA and the reference to
"restrictions accepted" or "information provisions made" under the agreement
shall be to restrictions accepted or information provisions made by virtue of
which the agreement is subject to registration.
IN WITNESS WHEREOF, Purchaser and the Company have caused this Agreement
to be executed, and this Agreement has been executed and delivered as a deed by
the Shareholders, all as of the date first above written.
INCYTE PHARMACEUTICALS, INC.
By /s/ Denise M. Gilbert
--------------------------------------
Title Executive Vice President and CFO
-----------------------------------
HEXAGEN LIMITED
By /s/ Mark W. Bodmer
--------------------------------------
Title Chief Executive
-----------------------------------
-56-
SHAREHOLDERS:
Executed as a deed by
ANDREW AMBLER
in the presence of:
/s/ Andrew Ambler /s/ Andrew P. Sandham
Name Andrew P. Sandham
-------------------------------------
Address 49e Fen End Over, Camb. CB4 5NE
----------------------------------
Occupation Company Director
-------------------------------
Executed as a deed by
NAVEED ANWAR
in the presence of:
/s/ Naveed Anwar /s/ Andrew P. Sandham
Name Andrew P. Sandham
-------------------------------------
Address 49e Fen End Over, Camb. CB4 5NE
----------------------------------
Occupation Company Director
-------------------------------
Executed as a deed by
INES BARROSO
in the presence of:
/s/ Ines Barroso /s/ Mark W. Bodmer
Name Mark W. Bodmer
-------------------------------------
Address 37A Madingley Road, Cambridge CB3
----------------------------------
OBL
------------------------------------------
Occupation Company Director
-------------------------------
Executed as a deed by
MARK BODMER
in the presence of:
/s/ Mark Bodmer /s/ Andrew P. Sandham
Name Andrew P. Sandham
------------------------------------
Address 49e Fen End Over, Camb. CB4 5NE
----------------------------------
Occupation Company Director
------------------------------
Executed as a deed by
LYNDA CONNON
in the presence of:
/s/ Lynda Connon /s/ Mark W. Bodmer
Name Mark W. Bodmer
------------------------------------
Address 37A Madingley Road, Cambridge CB3
---------------------------------
OBL
-----------------------------------------
Occupation Company Director
------------------------------
Executed as a deed by
RACHAEL CUBBERLEY
in the presence of:
/s/ Rachael Cubberley /s/ Mark W. Bodmer
Name Mark W. Bodmer
------------------------------------
Address 37A Madingley Road, Cambridge CB3
---------------------------------
OBL
-----------------------------------------
Occupation Company Director
------------------------------
Executed as a deed by
DARREN CUTHBERT-HEAVENS
in the presence of:
/s/ Darren Cuthbert-Heavens /s/ Mark W. Bodmer
Name Mark W. Bodmer
------------------------------------
Address 37A Madingley Road, Cambridge CB3
---------------------------------
OBL
-----------------------------------------
Occupation Company Director
------------------------------
Executed as deed by
ANNE ELLIOT
in the presence of:
/s/ Anne Elliot /s/ Mark W. Bodmer
Name Mark W. Bodmer
------------------------------------
Address 37A Madingley Road, Cambridge CB3
---------------------------------
OBL
-----------------------------------------
Occupation Company Director
------------------------------
Executed as a deed by
JAMIE FOSTER
in the presence of:
/s/ Jamie Foster /s/ Mark W. Bodmer
Name Mark W. Bodmer
------------------------------------
Address 37A Madingley Road, Cambridge CB3
---------------------------------
OBL
-----------------------------------------
Occupation Company Director
------------------------------
Executed as a deed by
MIKE GILCHRIST
in the presence of:
/s/ Mike Gilchrist /s/ Mark W. Bodmer
Name Mark W. Bodmer
------------------------------------
Address 37A Madingley Road, Cambridge CB3
---------------------------------
OBL
-----------------------------------------
Occupation Company Director
------------------------------
Executed as a deed by
SIMON KELLEY
in the presence of:
/s/ Simon Kelley /s/ Mark W. Bodmer
Name Mark W. Bodmer
------------------------------------
Address 37A Madingley Road, Cambridge CB3
---------------------------------
OBL
-----------------------------------------
Occupation Company Director
------------------------------
Executed as a deed by
ALLISON KINGSBURY
in the presence of:
/s/ Allison Kingsbury /s/ Mark W. Bodmer
Name Mark W. Bodmer
------------------------------------
Address 37A Madingley Road, Cambridge CB3
---------------------------------
OBL
-----------------------------------------
Occupation Company Director
------------------------------
Executed as a deed by
INGE LOUDON VAN-BAKEL
in the presence of:
/s/ Inge Loudon Van-Bakel /s/ Mark W. Bodmer
Name Mark W. Bodmer
------------------------------------
Address 37A Madingley Road, Cambridge CB3
---------------------------------
OBL
-----------------------------------------
Occupation Company Director
------------------------------
Executed as a deed by
GARETH MASLEN
in the presence of:
/s/ Gareth Maslen /s/ Mark W. Bodmer
Name Mark W. Bodmer
------------------------------------
Address 37A Madingley Road, Cambridge CB3
---------------------------------
OBL
-----------------------------------------
Occupation Company Director
------------------------------
Executed as a deed by
GOS MICKLEM
in the presence of:
/s/ Gos Micklem /s/ Mark W. Bodmer
Name Mark W. Bodmer
------------------------------------
Address 37A Madingley Road, Cambridge CB3
---------------------------------
OBL
-----------------------------------------
Occupation Company Director
------------------------------
Executed as a deed by
MIKE PALMER
in the presence of:
/s/ Mike Palmer /s/ Mark W. Bodmer
Name Mark W. Bodmer
------------------------------------
Address 37A Madingley Road, Cambridge CB3
---------------------------------
OBL
-----------------------------------------
Occupation Company Director
Executed as a deed by
JANE REED
in the presence of:
/s/ Jane Reed /s/ Mark W. Bodmer
Name Mark W. Bodmer
------------------------------------
Address 37A Madingley Road, Cambridge CB3
---------------------------------
OBL
-----------------------------------------
Occupation Company Director
------------------------------
Executed as a deed by
ANDREW SANDHAM
in the presence of:
/s/ Andrew Sandham /s/ Mark W. Bodmer
Name Mark William Bodmer
------------------------------------
Address 37A Madingley Road, Cambridge CB3
---------------------------------
OBL
-----------------------------------------
Occupation Company Director
------------------------------
Executed as a deed by
ALAN SCHAFER
in the presence of:
/s/ Alan Schafer /s/ Jamie W. Foster
Name Jamie W. Foster
------------------------------------
Address 10 Trafalgar Road, Cambridge CB4
---------------------------------
IEU
-----------------------------------------
Occupation Scientist
------------------------------
Executed as a deed by
PETER SWARBRICK
in the presence of:
/s/ Peter Swarbrick /s/ Mark W. Bodmer
Name Mark W. Bodmer
------------------------------------
Address 37A Madingley Road, Cambridge CB3
---------------------------------
OBL
-----------------------------------------
Occupation Company Director
------------------------------
Executed as a deed by
KAREN THOMAS
in the presence of:
/s/ Karen Thomas /s/ Mark W. Bodmer
Name Mark W. Bodmer
------------------------------------
Address 37A Madingley Road, Cambridge CB3
---------------------------------
OBL
-----------------------------------------
Occupation Company Director
------------------------------
Executed as a deed by
DAVID TOWNLEY
in the presence of:
/s/ David Townley /s/ Mark W. Bodmer
Name Mark W. Bodmer
------------------------------------
Address 37A Madingley Road, Cambridge CB3
---------------------------------
OBL
-----------------------------------------
Occupation Company Director
------------------------------
Executed as a deed by
TOM WEAVER
in the presence of:
/s/ Tom Weaver /s/ Mark W. Bodmer
Name Mark W. Bodmer
------------------------------------
Address 37A Madingley Road, Cambridge CB3
---------------------------------
OBL
-----------------------------------------
Occupation Company Director
Executed as a deed by
POLLY WELLER
in the presence of:
/s/ Polly Weller /s/ Mark W. Bodmer
Name Mark W. Bodmer
------------------------------------
Address 37A Madingley Road, Cambridge CB3
---------------------------------
OBL
-----------------------------------------
Occupation Company Director
------------------------------
Executed as a deed by
P. V. ALLEN
for and on behalf of CELLTECH plc
/s/ P. V. Allen
Executed as a deed by
RUDOLF BALLING
in the presence of:
/s/ Rudolf Balling /s/ Heidi Peczkowski
Name Heidi Peczkowski
-----------------------------------
Address Mittenkeimerstr 15,
85386 Ecking,
--------------------------------
Germany
----------------------------------------
Occupation Secretary TSF/156
-----------------------------
Executed as a deed by
PETER GOODFELLOW
in the presence of:
/s/ Peter Goodfellow /s/ Sally Miles
Name Sally Miles
-----------------------------------
Address Smith Kline Beecham,
Third Avenue, Harlow, Essex
--------------------------------
Occupation Secretary
-----------------------------
Executed as a deed by
A. P. SANDHAM as attorney
for and on behalf of ABINGWORTH
BIOVENTURES SICAV
/s/ A. P. Sandham
Executed as a deed by
A. P. SANDHAM as attorney
for and on behalf of APAX PARTNERS & CO. VENTURES LIMITED IL V-B
/s/ A. P. Sandham
Executed as a deed by
A. P. SANDHAM as attorney
for and on behalf of ATLAS VENTURES
EUROPE FUND B.V.
/s/ A. P. Sandham
Executed as a deed by
A. P. SANDHAM as attorney
for and on behalf of CODON TRUST
COMPANY LIMITED as trustee of
SCHRODER VENTURES
INTERNATIONAL LIFE SCIENCE FUND
TRUST
/s/ A. P. Sandham
Executed as a deed by
A. P. SANDHAM as attorney
for and on behalf of NEA VENTURES 1996
L.P.
/s/ A. P. Sandham
Executed as a deed by
A. P. SANDHAM as attorney
for and on behalf of NEW ENTERPRISE
ASSOCIATES VI LP
/s/ A. P. Sandham
Executed as a deed by
A. P. SANDHAM as attorney
for and on behalf of SUK VF IV NOMINEES
LIMITED
/s/ A. P. Sandham
Executed as a deed by
A. P. SANDHAM as attorney
for and on behalf of SCHRODER VENTURE
MANAGERS INC. as general partner of
SCHRODER VENTURES INTER-
NATIONAL LIFE SCIENCES FUND LP1
/s/ A. P. Sandham
Executed as a deed by
A. P. SANDHAM as attorney
for and on behalf of SCHRODER VENTURE
MANAGERS LIMITED as Manager of
SCHRODER VENTURES
INTERNATIONAL LIFE SCIENCES FUND
CO-INVESTMENT SCHEME
/s/ A. P. Sandham
Executed as a deed by
A. P. SANDHAM as attorney
for and on behalf of SCHRODER VENTURE
MANAGERS INC. as general partner of
SCHRODER VENTURES
INTERNATIONAL LIFE SCIENCES FUND
LP2
/s/ A. P. Sandham
Exhibit B
---------
ESCROW AGREEMENT
----------------
THIS ESCROW AGREEMENT, made as of the ____ day of September, 1998, by and
among INCYTE PHARMACEUTICALS, INC., a Delaware corporation ("Purchaser"), and
Stephen W. Bunting, Ph.D., as Shareholders' Representative ("Shareholders'
Representative") for each of the former shareholders (the "Shareholders") of
HEXAGEN LIMITED, a company incorporated in England and Wales (the "Company"),
and U.S. Bank Trust N.A., San Francisco, California ("Escrow Agent"),
W I T N E S S E T H:
WHEREAS, Purchaser, the Company and the Shareholders have entered into a
Share Purchase Agreement of even date herewith (the "Share Purchase Agreement")
pursuant to which Purchaser will purchase all of the issued and outstanding
share capital of the Company from the Shareholders, a copy of which Share
Purchase Agreement has been delivered to the Escrow Agent; and
WHEREAS, Section 8.2 of the Share Purchase Agreement provides that the
Shareholders will deposit with the Escrow Agent that number of shares of
Purchaser's Common Stock issued to the Shareholders (the "Escrow Shares") in
connection with the Purchase as is determined in accordance with Section 1.5 of
the Share Purchase Agreement (plus any additional shares as may be issued upon
any stock split, stock dividend or recapitalization effected by Purchaser with
respect to the Escrow Shares after the closing under the Share Purchase
Agreement) into an escrow for the purpose of securing Purchaser's claims for
indemnification pursuant to Article VIII of the Share Purchase Agreement; and
WHEREAS, the Escrow Agent is willing to act as escrow agent for Purchaser
and the Shareholders on the terms and conditions hereinafter set forth:
NOW THEREFORE, in consideration of the mutual covenants, agreements and
conditions set forth herein, the parties hereto agree as follows:
1. Definitions. Capitalized terms not otherwise defined in this Escrow
-----------
Agreement shall have the meanings set forth in the Share Purchase Agreement.
2. Consent of Shareholders. By virtue of each of the Shareholders'
-----------------------
entering into the Share Purchase Agreement, each of the Shareholders has
consented: (a) to the indemnification of Purchaser as set forth in Article VIII
of the Share Purchase Agreement, (b) to be bound by the terms of this Escrow
Agreement, (c) to be a party hereto with the same force and effect as if they
were signatories hereto, including, without limitation, the appointment of the
Shareholders' Representative as their representative for purposes of this
Escrow Agreement and as attorney-in-fact and agent for and on behalf of each
Shareholder, and (d) to the taking by the Shareholders' Representative of any
and all actions and the making of any decisions required or permitted to be
taken or made by such Shareholders' Representative under this Escrow Agreement
and the Share Purchase Agreement.
B-1
3. Establishment of Escrow. At the Closing, the Shareholders shall
-----------------------
be deemed to have received and deposited with the Escrow Agent the Escrow Shares
(plus any additional shares as may be issued upon any stock split, stock
dividend or recapitalization effected by Purchaser with respect to the Escrow
Shares after the Closing), without any act of any Shareholder. As soon as
practicable after the Closing, a certificate for the Escrow Shares, registered
in the name of the Escrow Agent or its nominee, will be deposited by Purchaser
with the Escrow Agent, such deposit to constitute an escrow fund (the "Escrow
Fund"). The Escrow Fund shall be held by the Escrow Agent in escrow subject to
the terms and conditions set forth herein and in the Share Purchase Agreement.
Purchaser shall pay all costs and fees of the Escrow Agent in connection with
this Escrow Agreement, as set forth on the Depository Escrow Fee Schedule
attached hereto (the "Fee Schedule").
4. Escrow Provisions. The provisions of the escrow shall be as set forth
-----------------
in Article VIII of the Share Purchase Agreement, the Fee Schedule and the
General Provisions for Corporate Escrow Agreements attached hereto (the "General
Provisions"). In the event of any conflict between Article VIII of the Share
Purchase Agreement and the General Provisions or the Fee Schedule, the General
Provisions and the Fee Schedule shall govern.
5. Miscellaneous.
-------------
(a) This Escrow Agreement shall be governed by the laws of the State of
California without regard to principles of conflicts of laws.
(b) Any notice, request, instruction or other document to be given
hereunder by any party to the other shall be in writing and delivered personally
or sent by certified mail, postage prepaid by telecopy, or by courier service,
as follows:
If to Purchaser:
Incyte Pharmaceuticals, Inc.
3174 Porter Drive
Palo Alto, CA 94304
Attn: Chief Executive Officer
Fax: 001-650-845-4166
with a copy to:
Pillsbury Madison & Sutro LLP
235 Montgomery Street
San Francisco, CA 94104
Attn: Stanton D. Wong
Fax: 001-415-983-7396
B-2
and to:
Taylor Joynson Garrett
Carmelite
50 Victoria Embankment
Blackfriars
London, England EC4Y 0DX
Attn: David Kent
Fax: 011-44-171-936-2666
If to Shareholders' Representative, as Attorney-in-Fact for the
Shareholders:
Stephen W. Bunting, Ph.D.
Director
Abingworth Management Limited
38 Jermyn Street
London, England EC1A 4DD
Attn: Richard H. Tyler
Fax: 011-44-171-367-2000
with a copy to:
Venture Law Group
2800 Sand Hill Road
Menlo Park, CA 94025
Attn: Steven J. Tonsfeldt
Fax: 001-650-854-1121
and to
Cameron McKenna
Mitre House
160 Aldersgate Street
London, England EC1A 4DD
Attn: Richard H. Tyler
Fax: 011-44-171-367-2000
If to Escrow Agent:
U.S. Bank Trust N.A.
Escrow Services
One California Street, 4th Floor
San Francisco, CA 94111
Attention: Ms. Mary Lou Fuette
Fax: 001-415-273-4593
or to such other persons as may be designated in writing by the parties, by a
notice given as aforesaid.
B-3
(c) Attorneys' Fees. If any legal action is brought for the enforcement
---------------
of this Escrow Agreement, the successful or prevailing party or parties shall be
entitled to recover reasonable attorneys' fees and other costs incurred in such
action or proceeding, in addition to any other relief to which it may be
entitled.
IN WITNESS WHEREOF, the parties have executed this Escrow Agreement as
of the date first written above.
INCYTE PHARMACEUTICALS, INC.
By
----------------------------------
Title
--------------------------------
SHAREHOLDERS' REPRESENTATIVE, as Attorney-
in-Fact for Shareholders
By
----------------------------------
Title
--------------------------------
"ESCROW AGENT"
U.S. Bank Trust N.A.
By
----------------------------------
Title
--------------------------------
B-4
EXHIBIT C
---------
REGISTRATION RIGHTS
-------------------
1. Definitions.
-----------
1.1 The term "Holder" means any person owning or having the right to
acquire Registrable Securities (initially, each Shareholder (as defined in the
Share Purchase Agreement)) or any assignee thereof in accordance with Section 8
hereof.
1.2 The terms "register," "registered" and "registration" refer to a
registration effected by preparing and filing a registration statement or
similar document in compliance with the Securities Act, and the declaration or
ordering of effectiveness of such registration statement or document;
1.3 The term "Registrable Securities" means (i) forty percent (40%) of the
Purchaser Shares held by each Shareholder (rounded up to the nearest whole
share), and (ii) Purchaser Common issued prior to the Effective Date (as defined
in Section 2.1 below) as a dividend or other distribution with respect to, or in
exchange for or in replacement of, the Purchaser Shares, excluding in all cases,
however, any Registrable Securities sold by a person in a transaction in which
such person's registration rights are not assigned; provided, however, that any
Purchaser Shares previously sold to the public pursuant to a registered public
offering or pursuant to Rule 144 under the Securities Act shall cease to be
Registrable Securities.
1.4 All other capitalized terms not otherwise defined herein shall have
the meanings ascribed to them in the Share Purchase Agreement to which this
Exhibit C is attached.
2. Registration.
------------
2.1 Incyte shall prepare and file with the SEC a registration statement on
Form S-3 for an offering to be made on a continuous basis pursuant to Rule 415
under the Securities Act covering the then outstanding Registrable Securities
then held by each Holder (the "Registration Statement"), and shall use
reasonable efforts to cause the Registration Statement to be declared effective
on or prior to the date (the "Effective Date") that is 180 days after the
Closing Date (as such term is defined in the Share Purchase Agreement).
2.2 A Holder may inform Incyte in writing that such Holder wishes to
exclude all or a portion of such Holder's Registrable Securities from the
Registration Statement.
2.3 The registration of the Registrable Securities provided for in this
Section 2 shall not be underwritten.
C-1
3. Obligations of Incyte. Incyte shall, as expeditiously as reasonably
---------------------
possible:
3.1 Prepare and file with the SEC the Registration Statement and use its
reasonable efforts to cause the Registration Statement to become effective on
or prior to the Effective Date, and keep the Registration Statement continuously
effective under the Securities Act until the earlier to occur of (a) the
expiration of 180 days after the Effective Date, (b) the date on which each
Holder can sell all of such Holder's Registrable Securities pursuant to Rule 144
under the Securities Act during any three-month period, or (c) such time as all
of the Registrable Securities shall have been sold or otherwise disposed of by
the Holders (such period is hereinafter referred to as the "Effectiveness
Period"). In the event that, in the reasonable judgment of Incyte, it is
advisable to postpone the filing or effectiveness of the Registration Statement
or, if effective, to suspend use of the prospectus relating to the Registration
Statement for a discrete period of time, but not in excess of 60 days (a
"Deferral Period"), due to pending material corporate developments or similar
material events that have not yet been publicly disclosed and as to which Incyte
believes public disclosure will be prejudicial to Incyte, Incyte shall deliver
a certificate in writing, signed by its Chief Executive Officer or Chief
Financial Officer, to each Holder, to the effect of the foregoing and, upon
receipt of such certificate, each Holder agrees not to dispose of such Holder's
Registrable Securities covered by the Registration Statement (other than in
transactions exempt from the registration requirements under the Securities Act)
until such Holders are advised in writing by Incyte that use of the prospectus
may be resumed; provided, however, that executive officers and directors of
Incyte shall be prohibited from selling shares of Incyte Common Stock prior to
the Deferral Period and there shall be no more than one Deferral Period prior
to the Effectiveness Period and the aggregate number of days included in all
Deferral Periods during the Effectiveness Period shall not exceed 60 days. The
Effectiveness Period shall be extended for a period of time equal to any
Deferral Period that occurs during the Effectiveness Period.
3.2 Prepare and file with the SEC such amendments and supplements to the
Registration Statement and the prospectus used in connection with the
Registration Statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by the
Registration Statement.
3.3 Furnish to the Holders covered by the Registration Statement such
numbers of copies of a prospectus, including a preliminary prospectus, in
conformity with the requirements of the Securities Act, and such other
documents as they may reasonably request in order to facilitate the disposition
of such Registrable Securities.
3.4 Use all reasonable efforts to register and qualify the securities
covered by the Registration Statement under such other securities or Blue Sky
laws of such United States jurisdictions as shall be reasonably requested by the
Holders thereof and keep such registrations and qualifications in effect during
the Effectiveness Period, provided that Incyte shall not be required in
connection therewith or as a condition thereto to qualify to do business or to
file a general consent to service of process in any such states or
jurisdictions.
C-2
4. Obligations of the Holders; Procedures for Sales of Purchaser Shares
--------------------------------------------------------------------
Under the Registration Statement.
- --------------------------------
4.1 It shall be a condition precedent to the obligations of Incyte to
take any action pursuant to this Exhibit C that the selling Holders shall
furnish to Incyte such information regarding themselves, the Registrable
Securities held by them, and the intended method of disposition of such
securities as shall be required to effect the registration of the
Registrable Securities. Incyte agrees to permit all customary methods of
disposition (other than underwritten offerings) to be included in the plan of
distribution described in the Registration Statement and, to the extent
permitted by law and reasonably concurred with by counsel for Incyte, the plan
of distribution for any Holder that is a partnership may include distributions
to partners of such partnership.
4.2 For any offer or sale of any of the Registrable Securities under the
Registration Statement by a Holder in a transaction that is not exempt under
the Securities Act, the Holder, in addition to complying with any other
federal securities laws, shall deliver a copy of the final prospectus
(together with any amendment of or supplement to such prospectus) of Incyte
covering the Registrable Securities, in the form furnished to the Holder by
Incyte, to the purchaser of any of the Registrable Securities on or before the
settlement date for the purchase of such Registrable Securities.
4.3 Upon the receipt by a Holder of any notice from Incyte of (1) the
existence of any fact or the happening of any event as a result of which the
prospectus included in the Registration Statement, as the Registration Statement
is then in effect, contains an untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading, (2) the
issuance by the SEC of any stop order or injunction suspending or enjoining the
use or the effectiveness of the Registration Statement or the initiation of any
proceedings for that purpose, or the taking of any similar action by the
securities regulators of any state or other jurisdiction, or (3) the request by
the SEC or any other federal or state governmental agency for amendments or
supplements to the Registration Statement or related prospectus or for
additional information related thereto, such Holder shall forthwith discontinue
disposition of such Holder's Registrable Securities covered by the Registration
Statement or related prospectus (other than in transactions exempt from the
registration requirements under the Securities Act) until such Holder's receipt
of the supplemented or amended prospectus or until such Holder is advised in
writing by Incyte that the use of the applicable prospectus may be resumed. In
such a case, Incyte shall as promptly as practicable (i) prepare an amendment
to correct or update the prospectus, (ii) use its reasonable efforts to remove
the impediments referred to in subclause (2) above, or (iii) comply with the
requests referred to in subclause (3) above, and the Effectiveness Period shall
be extended by the number of days from and including the date of the giving of
such notice to and including the date when each Holder shall have received a
copy of the supplemented or amended prospectus or when such Holder is advised
in writing by Incyte that the use of the applicable prospectus may be resumed.
5. Expenses. Incyte shall bear and pay all expenses incurred by Incyte in
--------
connection with any registration, filing or qualification of Registrable
Securities with respect to the Registration Statement for each Holder thereof
(which right may be assigned as provided in Section 8 hereof), including
(without limitation) all registration, filing and qualification fees, printers'
and accounting fees relating or apportionable thereto, fees and disbursements
of counsel for Incyte, blue sky fees and expenses, including fees and
disbursements of counsel related to all blue sky matters, the expenses of
providing materials pursuant to Section 3.3 hereof, but excluding the fees and
disbursements of counsel for the selling Holders, stock transfer taxes that may
be payable by the selling Holders, and all underwriting, brokerage or other
discounts and commissions relating to Registrable Securities, which shall be
borne by the Holders.
C-3
6. Delay of Registration. No Holder shall have any right to obtain or
---------------------
seek an injunction restraining or otherwise delaying the Registration Statement
as the result of any controversy that might arise with respect to the
interpretation or implementation of this Exhibit C.
7. Indemnification. In the event any Registrable Securities are
---------------
included in the Registration Statement under this Exhibit C:
7.1 To the extent permitted by law, Incyte will indemnify and hold
harmless each Holder of such Registrable Securities, the officers and directors
of each such Holder, and each person, if any, who controls such Holder within
the meaning of the Securities Act or the Exchange Act, against any losses,
claims, damages or liabilities (joint or several) to which they may become
subject under the Securities Act, the Exchange Act or other federal or state
law, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any of the following statements,
omissions or violations (collectively, a "Violation"): (i) any untrue statement
or alleged untrue statement of a material fact contained in the Registration
Statement, including any preliminary prospectus or final prospectus contained
therein or any amendments or supplements thereto, (ii) the omission or alleged
omission to state therein a material fact required to be stated therein, or
necessary to make the statements therein not misleading, or (iii) any violation
or alleged violation by Incyte of the Securities Act, the Exchange Act, any
state securities law or any rule or regulation promulgated under the Securities
Act, the Exchange Act or any state securities law; and Incyte will reimburse
each such Holder, officer or director, or controlling person for any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that the indemnity agreement contained in this Section 7.1 shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of Incyte (which consent
shall not be unreasonably withheld), nor shall Incyte be liable in any such
case for any such loss, claim, damage, liability or action to the extent that it
arises out of or is based upon a Violation which occurs in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by any such Holder, officer, director, or controlling
person.
7.2 To the extent permitted by law, each selling Holder will indemnify
and hold harmless Incyte, each of its directors, each of its officers who have
signed the Registration Statement, each person, if any, who controls Incyte
within the meaning of the Securities Act, and any other Holder selling
securities in the Registration Statement or any of its directors or officers or
any person who controls such Holder, against any losses, claims, damages or
liabilities (joint or several) to which Incyte or any such director, officer or
controlling person, or other such Holder or director, officer or controlling
person may become subject, under the Securities Act, the Exchange Act or other
federal or state law, insofar as such losses, claims, damages or liabilities
(or actions in respect thereto) arise out of or are based upon any
Violation, in each case to the extent (and only to the extent) that such
Violation occurs in reliance upon and in conformity with written information
furnished by such Holder expressly for use in connection with such registration;
and each such Holder will reimburse any legal or other expenses reasonably
incurred by Incyte or any such director, officer, controlling person, or other
Holder, director, officer or controlling person in connection with investigating
or defending any such loss, claim, damage, liability, or action; provided,
however, that the indemnity agreement contained in this Section 7.2 shall not
apply to amounts paid in settlement of any such loss, claim, damage, liability
or action if such settlement is effected without the consent of the Holder,
which consent shall not be unreasonably withheld; provided, that in no event
shall any indemnity under this Section 7.2 exceed the gross proceeds received by
such Holder from the sale of Registrable Securities as contemplated hereunder.
C-4
7.3 Promptly after receipt by an indemnified party under this Section 7 of
notice of the commencement of any action (including any governmental action),
such indemnified party will, if a claim in respect thereof is to be made against
any indemnifying party under this Section 7, deliver to the indemnifying party a
written notice of the commencement thereof and the indemnifying party shall
have the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
the defense thereof with counsel mutually satisfactory to the parties; provided,
however, that an indemnified party shall have the right to retain its own
counsel, with the fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action, if materially prejudicial to its ability to defend such action, shall
relieve such indemnifying party of any liability to the indemnified party under
this Section 7, but the omission so to deliver written notice to the
indemnifying party will not relieve it of any liability that it may have to any
indemnified party otherwise than under this Section 7.
7.4 The obligations of Incyte and the Holders under this Section 7 shall
survive the completion of any offering of Registrable Securities in the
Registration Statement under this Agreement, and otherwise.
8. Assignment of Registration Rights. The rights to cause Incyte to
---------------------------------
register Registrable Securities pursuant to this Exhibit C may be assigned by
any Holder (i) who transfers Registrable Securities with a value (based on the
closing price of the Common Stock as of the trading day immediately prior to the
date of transfer) of at least $250,000 or, if less, all of his, her or its
shares of Registrable Securities or (ii) in a transfer that does not require the
amendment or supplement of the Registration Statement and prospectus; provided,
in each case, Incyte is, within a reasonable time after such transfer,
furnished with written notice of the name and address of such transferee or
assignee and the securities with respect to which such registration rights are
being assigned; and provided, further, that such assignment shall be effective
only if immediately following such transfer the further disposition of such
securities by the transferee or assignee is restricted under the Securities Act.
Notwithstanding the foregoing, a Holder that is a partnership may assign its
rights hereunder to its partners in connection with a distribution of
Registrable Securities to such partners without limitation on the amount of
Registrable Securities being transferred. For the purposes of determining the
number of shares of Registrable Securities held by a transferee or assignee,
the holdings of transferees and assignees of a partnership who are partners or
retired partners of such partnership (including spouses and ancestors, lineal
descendants and siblings of such partners or spouses who acquire Registrable
Securities by gift, will or intestate succession) shall be aggregated together
and with the partnership; provided that all assignees and transferees who would
not qualify individually for assignment of registration rights shall have a
single attorney-in-fact for the purpose of exercising any rights, receiving
notices or taking any action under this Section 8.
9. Termination of Registration Rights. Incyte's obligations pursuant to
----------------------------------
this Exhibit C (other than those in Section 7) shall terminate as to any Holder
of Registrable Securities on the earlier of (i) when the Holder can sell all of
such Holder's Registrable Securities pursuant to Rule 144 under the Securities
Act during any three-month period or (ii) on expiration of the
Effectiveness\Period.
C-5
10. Waivers. The observance of any term of this Exhibit C may be waived
-------
(either generally or in a particular instance and either retroactively or
prospectively) only with the written consent of Incyte and the holders of a
majority of the Registrable Securities then outstanding. Any amendment or waiver
effected in accordance with this paragraph shall be binding upon each holder of
any Registrable Securities then outstanding, each future holder of all such
Registrable Securities, and Incyte.
C-6
Schedule III to Share Purchase Agreement
----------------------------------------
Calculations related to Share Purchase Agreement:
Capitalized terms used but not otherwise defined herein have the meanings
attributed to them in the Share Purchase Agreement.
Section 1.3:
- -----------
Total Number of Purchaser Shares ("PS") =
( S * TC) - CC
-------
S+O rounded to the nearest whole share
------------------
P
Where S = the number of outstanding Company Shares as of the Closing Date
O = the number of Ordinary Shares of the Company subject to options
outstanding as of the Closing Date
P = Purchaser Common Average Price (as defined in Section 1.3)
TC = $45,000,000
CC = $5,000,000
Section 6.1:
- -----------
The Exchange Ratio equals OS divided by O, rounded to five decimal places,
Where OS = the total number of shares of Purchaser Common subject to
Converted Company Options.
( O ) * TC
-------
O + S
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P
Share Purchase Agreement - Incyte Pharmaceuticals Inc. and Hexagen Ltd.
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